Introduction
The Income Tax Act, 1961, provides for various types of assessments that are conducted by the Income Tax Department to ensure compliance with the tax laws. These assessments are done to determine the taxpayer’s taxable income, verify the tax returns filed, and ensure that the correct amount of tax is paid. In this blog, we will discuss the types of assessments in the Income Tax Act.
- Self-Assessment
Self-assessment is the assessment of tax liability by the taxpayer themselves. A taxpayer is required to file their tax returns and calculate their tax liability for the financial year. The taxpayer needs to pay the tax liability before the due date of filing the return. If the tax liability is not paid before the due date, the taxpayer may be liable to pay interest and penalty.
- Regular Assessment
Regular assessment is conducted by the Income Tax Department to verify the tax returns filed by the taxpayer. The tax officer can ask for additional documents and information to verify the income, deductions, and tax paid by the taxpayer. This assessment is done through a notice issued to the taxpayer under Section 143(2) of the Income Tax Act. The taxpayer needs to comply with the notice and provide the necessary information and documents to the tax officer. Based on the information provided, the tax officer can make necessary adjustments to the income, deductions, and tax liability of the taxpayer.
- Best Judgment Assessment
Best Judgment Assessment is conducted by the Income Tax Department when the taxpayer fails to file their tax returns. In such cases, the tax officer can estimate the income of the taxpayer based on the available information and make a best judgment assessment. This assessment is done through a notice issued to the taxpayer under Section 144 of the Income Tax Act. The taxpayer needs to comply with the notice and provide the necessary information and documents to the tax officer. If the taxpayer does not comply, the tax officer can estimate the income and assess the tax liability based on the available information.
- Scrutiny Assessment
Scrutiny Assessment is conducted by the Income Tax Department when there is a suspicion of tax evasion or non-compliance by the taxpayer. This assessment is done through a notice issued to the taxpayer under Section 143(2) of the Income Tax Act. The tax officer can ask for additional documents and information to verify the income, deductions, and tax paid by the taxpayer. Based on the information provided, the tax officer can make necessary adjustments to the income, deductions, and tax liability of the taxpayer.
- Limited Scrutiny Assessment
Limited Scrutiny Assessment is conducted by the Income Tax Department when there is a specific aspect of the taxpayer’s tax return that requires scrutiny. This assessment is done through a notice issued to the taxpayer under Section 143(2A) of the Income Tax Act. The tax officer can ask for additional documents and information related to the specific aspect of the tax return that requires scrutiny. Based on the information provided, the tax officer can make necessary adjustments to the income, deductions, and tax liability of the taxpayer related to the specific aspect.
In conclusion:
The Income Tax Act provides for various types of assessments that are conducted by the Income Tax Department to ensure compliance with the tax laws. These assessments include self-assessment, regular assessment, best judgment assessment, scrutiny assessment, and limited scrutiny assessment. It is important for taxpayers to comply with the notices issued by the tax officer and provide the necessary information and documents to avoid any penalties or legal proceedings.