What is Assessments?
An assessment is the process by which tax authorities evaluate and verify the income, deductions, exemptions, and tax liabilities of a taxpayer based on the returns filed. It ensures that the taxpayer has accurately disclosed their financial details and paid the correct amount of tax.
Key Aspects of Tax Assessment:
Purpose:
To ensure taxpayers comply with the tax laws.
To verify the accuracy of income and deductions declared by the taxpayer.
Types of Assessments:
Self-Assessment (Section 140A): Taxpayers calculate their own tax liability and pay it before filing their returns.
Summary Assessment (Section 143(1)): This is an automated process where tax returns are matched against data from the tax department's records, and adjustments are made for errors or discrepancies.
Scrutiny Assessment (Section 143(3)): A detailed examination conducted by the tax officer if the return is selected for scrutiny to ensure the accuracy of claims and disclosures.
Best Judgment Assessment (Section 144): Conducted when a taxpayer fails to file returns or provide the required information, and the tax officer assesses the liability based on available data.
Reassessment or Income Escaping Assessment (Section 147): Initiated if the tax department finds that some income has been underreported or escaped assessment.
Protective Assessment: Used in special cases where the liability of the taxpayer is uncertain or under dispute.
Assessment Year:
Assessments are carried out in the assessment year (AY), which follows the financial year during which the income was earned.
Process:
Filing of tax returns by the taxpayer.
Verification by the tax department through automated systems or manual reviews.
Issuance of notices (if required) for additional information.
Final assessment with tax payable, refundable, or no additional action required.
Outcome:
The tax authorities may accept the filed return, demand additional tax, or issue refunds based on the assessment.