Tax Appeals/ Assessments

FAQ on Tax Appeals/ Assessment

What is an assessment?

An assessment is the Tax department’s legal notice issued to an assessee in default for an outstanding tax liability.

In what circumstances the A.O may issue notice u/s 142(1)?

For the purpose of making an assessment, the A.O may serve a notice u/s 142(1) to any person who has not file his return within the time allowed u/s 139(1), directing him to file his return of income in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed.

It is to be noted that notice u/s 142(1) can be issued before or after the end of the assessment year.

Further, the A.O may ask the assessee to produce such books and documents or furnish in writing the relevant information as per his requirement.

When can the A.O direct for Special Tax Audit u/s 142(2A)?

The A.O can direct the assessee at any stage of the proceeding to get his accounts audited from an accountant as per section 288(2) if he consider it necessary, in the interest of the revenue after having regard to the nature and complexity of the accounts.

Whether Special Audit can be ordered even if the accounts have been already audited as per the provisions of Income Tax Act?

Yes, special audit may be directed even if accounts are already audited.

When is an intimation u/s 143(1) (Summary Assessment) sent by the I.T Department?

Section 143(1) provides that the return filed either u/s 139(1) or u/s 142(1) is processed by the department to compute any sum payable or refundable to the assessee after making adjustments for any arithmetical errors or incorrect claims as apparent from the return and for any TDS, advance tax paid or self – assessment tax. An intimation is then sent to the assessee specifying the sum payable or refundable and such intimation is a deemed notice of demand.

What is the time limit of sending the intimation?

The intimation shall be sent before the expiry of one year from the end of the assessment year in which the income was assessable. In other words, before the expiry of one year from the end of the financial year in which the return was filed.

Whether intimation u/s 143(1) can be sent / rectified after the issuance of notice u/s 143(2)?

No, in any case, intimation u/s 143(1) cannot be issued after the issuance of notice u/s 143(2).

In what circumstances, a case can be selected for scrutiny assessment u/s 143(3)?

The A.O may issue a notice u/s 143(2) to the assessee if in his return he has either understated the income or has computed excessive loss or has underpaid his tax. The notice u/s 143(2) is pre – requisite to be issued before a case is being selected for scrutiny assessment u/s 143(3).

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What is the time limit of issuing the notice u/s 143(2)?

The notice u/s 143(2) must be served on the assessee before the expiry of 6 months (i.e. 30th September) from the relevant assessment year.

What are the general requirements that the A.O may ask when a case is selected for scrutiny?

Generally, in scrutiny case u/s 143(2), the A.O requires the following-

  • Books of Accounts
  • Bank Statements or Pass Books
  • Confirmation, certificates of loans, if any
  • Party wise details of Purchases and Sales
  • Names and addresses of Sundry Debtors and Creditors

Whether an assessment of the same assessee for the same assessment year can be validly made twice?

In general, the assessee can’t be assessed twice in respect of the same income for the same assessment year except under specific provisions like reassessment u/s 147 and 148.

Whether assessee can file a Writ against an assessment order?

An assessee may file an appeal if he is not satisfied with the order but he is not permitted to file a Writ petition for the same.

When can an A.O make a Best Judgement Assessment u/s 144?

The A.O make a Best Judgement Assessment u/s 144 if the assessee fails to furnish his return u/s 139(1) or 139(4) or 139(5), or fails to comply with the terms of notice issued either u/s 142(1) or 143(2). The A.O shall determine his tax payable after taking into account all the material fact which he had gathered only after giving the assessee an opportunity of being heard.

Can an assessee file an appeal in case of Best Judgement Assessment?

In case of Best Judgement Assessment, an assessee has the right to file an appeal u/s 246A or to make an application for revision u/s 264 to the CIT.

What is the time limit for completion of Best Judgement Assessment?

The order of Best Judgement Assessment should be passed within 2 years from the end of the assessment year in which the income was first assessable.

What is the procedure for filling an appeal before CIT(A)?

The appeal should be filed in Form No. 35 within 30 days of receipt of Assessment order and Demand Notice, before the CIT (A).

Whether the assessee is required to pay both tax and interest on returned income before filling an appeal before CIT(A)?

The assessee is required to pay tax on the admitted income before filling appeal. However it is not mandatory to pay interest.

What is the time limit for disposal of appeal by CIT(A)?

Where it is possible, CIT(A) may hear and decide within a period of 1 year from the end of the financial year in which such appeal has been filed.

What remedial action is available to an assessee if he is not satisfied with the order of CIT(A)?

The assessee can file a second appeal before the Income – tax Appellate Tribunal(ITAT) if he is not satisfied with the order of CIT(A).

What is the time limit of filling an appeal before the ITAT?

The appeal should be filed within 30 days of receipt of the order from the CIT (A).

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