Every democratic country has three wings – the legislators, the administrators, and the judiciary. As has always been the case with any law, once it is enacted by the law-makers / legislators, it is expected that the public at large must abide by it. In order to ensure that the law is being followed, there are administrators, and in case of disagreement between the two, there is judiciary to resolve these issues.
In the context of income tax as well, the law (Income Tax Act, 1961) has prescribed a set of rules and compliances. It is expected of people to honestly follow the same. At the same time, an administrative body – the Income Tax Department – has been set up in order to ensure correct implementation of the law.
Once a tax return is filed by a taxpayer, it is picked up for processing. It may be accepted as it is. On the other hand, should the department feel the need, it can make some inquiries from the taxpayer regarding various incomes declared / not declared by him. These inquiries are conducted as part of assessment proceedings. The law provides for various kinds of assessment proceedings, the manner in which they must be conducted, and the time frame within which they must be initiated and completed. A good knowledge on the subject can be gathered from commerce course at Super 20 Training Institute. Nevertheless, an overview is provided below.
The main type of assessment proceeding is Scrutiny assessment. Some key aspects are:
- Requisite notice must be issued in order to initiate the same
- Such notice can be issued within 6 months from the end of the financial year in which return is filed
- The time frame to complete this assessment is 21/ 18/ 12 months from the end of the assessment year (depending upon which year’s assessment it is)
Scrutiny assessment is clubbed with other provisions of the Income Tax Act in certain situations, such as:
- Best judgment assessment: when the taxpayer doesn’t cooperate / submit information, the tax officer can make an assessment on the basis of information available with him
- Section 148 assessment: when the income considered to have escaped assessment exceeds specified limits and the afore-said time period of 6 months to issue notice has expired
- Block assessment: when search / survey has been conducted, and assessment proceedings of multiple years are to be pursued on the basis of evidence collected during such search / survey.
How is scrutiny assessment conducted?
Once a notice is received, it is usually accompanied by a questionnaire seeking information as the tax officer may deem fit. The assessee must prepare a response and appear before the tax officer with all explanations. In case there is no questionnaire, the tax officer may ask for information during the course of discussion. The assessee can always seek some time which he thinks he will require to collate the details. If the tax officer considers the request reasonable, he would allow the assessee to come back with answers at a later date. Such back and forth may continue until all queries are responded to and tax officer has no further questions.
More recently, the department has been moving towards e-proceedings, which implies that all responses to the inquiries raised can be responded over email, and do not require the assessee to be present in person. This has turned out to be a sincere blessing for all taxpayers, since it saves significant effort, time and paper, and even rules out any chances of harassment of any kind.
What happens after?
It is not necessary that the tax officer may agree with all the explanations furnished by the assessee. In case he is not satisfied, he may make suitable adjustments to the taxable income of the assessee for that year and raise demand for any shortfall in taxes paid, basis such revised income computed by him.
If the taxpayer does not agree with such assessment, he can approach the higher authorities to appeal against the assessment so completed and the matter can be argued by both parties (taxpayer and tax officer) for adjudication.
You can learn more about assessment proceedings as part of taxation training given by Super 20 Training Institute in its Advanced Executive of Commerce course.