Income Tax Assessment

December 4, 2019

Every assessee, who earns income beyond the basic exemption limit in a Financial Year (FY), must file a statement containing details of his income, deductions, and other related information. This is called the Income Tax Return (ITR). Once you as a taxpayer file the income returns, the Income Tax Department will process it. There are occasions where, based on set parameters by the Central Board of Direct Taxes (CBDT), the return of an assessee gets picked for an assessment.

The various forms of assessment are as follows:

  1. Self-Assessment
  2. Summary Assessment
  3. Regular/Scrutiny Assessment
  4. Best Judgement Assessment
  5. Income Escaping Assessment
  6. Self-Assessment

This type of assessment is mentioned in section 140A of Income Tax Act,1961. In this, the assessee himself determines the income tax payable. The tax department has made available various forms for filing income tax return. The assessee consolidates his income from various sources and adjusts the same against losses or deductions or various exemptions if any, available to him during the year. The total income of the assessee is then arrived at. The assessee reduces the TDS and Advance Tax from that amount to determine the tax payable on such income. Tax, if still payable by him, is called self-assessment tax and must be paid by him before he files his return of income. This process is known as Self-Assessment.


  1. Summary Assessment

It is a type of assessment carried out without any human intervention. In this type of assessment, the information submitted by the assessee in his return of income is cross-checked against the information that the income tax department has access to. In the process, the reasonableness and correctness of the return are verified by the department. The return gets processed online, and adjustment for arithmetical errors, incorrect claims, and disallowances are automatically done. Example, credit for TDS claimed by the taxpayer is found to be higher than what is available against his PAN as per department records. Making an adjustment in this regard can increase the tax liability of the taxpayer.

After making the aforementioned adjustments, if the assessee is required to pay tax, he will be sent an intimation under Section 143(1). The assessee must respond to this intimation accordingly.


  1. Regular/Scrutiny Assessment

This type of assessment is mentioned in section 143(3) of Income Tax Act,1961. The income tax department authorizes the Assessing Officer or Income Tax authority, not below the rank of an income tax officer, to conduct this assessment. The purpose is to ensure that the assessee has neither understated his income or overstated any expense or loss or underpaid any tax.

The CBDT has set certain parameters based on which a taxpayer’s case gets picked for a scrutiny assessment.

  1. If an assessee is subject to a scrutiny assessment, the Department will send a notice well in advance. However, such notice cannot be served after the expiry of 6 months from the end of the Financial year, in which return is filed.
  2. The assessee will be asked to produce the books of accounts, and other evidence to validate the income he has stated in his return. After verifying all the details available, the assessing officer passes an order either confirming the return of income filed or makes additions. This raises an income tax demand, which the assessee must respond to accordingly.

An income tax notice under Section 143(2) is issued if the tax officer was not satisfied with the documents and information that was submitted by the taxpayer. Taxpayers who receive notice under Section 142(2) have been selected for a detailed scrutiny by the Income Tax department and will have to submit additional information.


  1. Best Judgement Assessment

This assessment mentioned in section 144 of Income Tax Act,1961 gets invoked in the following scenarios:

  1. If the assessee fails to respond to a notice issued by the department instructs him to produce certain information or books of accounts
  2. If he/she fails to comply with a Special Audit ordered by the Income tax authorities
  3. The assessee fails to file the return within due date or such extended time limit as allowed by the CBDT
  4. The assessee fails to comply with the terms as contained in the notice issued under Summary Assessment


After providing an opportunity to hear the assessee’s argument, the assessing officer passes an order based on all the relevant materials and evidence available to him. This is known as Best Judgement Assessment. The notice sent in this type of assessment is Show Cause Notice, under section 144 only.


  1. Income Escaping Assessment

This type of assessment is mentioned in section 147 of Income Tax Act,1961. When the assessing officer has sufficient reasons to believe that any taxable income has escaped assessment, he has the authority to assess or reassess the assessee’s income. Some scenarios where reassessment gets triggered are given below.

  • The assessee has taxable income but has not yet filed his return.
  • The assessee, after filing the income tax return, is found to have either understated his income or claimed excess allowances or deductions.
  • The assessee has failed to furnish reports on international transactions, where he is required to do so.

The time limit for issuing a notice to reopen an assessment is given in section 148. It is as follows:

  • If the amount is less than 1 lakh, 4 years from the end of the relevant assessment Year.
  • If the amount is more than 1 lakh, 6 years from the end of the relevant assessment Year.
  • In case of foreign assets, 4 years from the end of the relevant assessment Year.


In some cases, it may so happen that an order containing mistakes is passed by the assessing officer. Section 154 provides an opportunity for the assessing officer to rectify any mistake or error that was done by him. It allows the officer to correct mistakes done by him. It also provides relief to the taxpayer from the tedious process of getting his accounts assessed once again.

Rectification of Mistake under Section 154

Income Tax Act provides for rectification of mistakes under Section 154. It is a rectification of mistake apparent from records. Orders issued under Sections 143(3), 144, 148, 153A and intimations under section 143(1) can be rectified. However, only those mistakes can be rectified that are apparent from the record. This rectification of mistakes shall be done only after a return has been filed by the assessee; such return has been processed and an intimation is received by the taxpayer and such intimation has errors or mistake.

Features of Section 154

  • Notice under Section 154 can be issued by the authorized officer himself or by an application made to him by the taxpayer.
  • It is important to give a notice to the taxpayer in case such rectification results in enhancing the assessment increase of any tax liability or reduction of refund. Such notice can be issued either through sending an E-mail on the registered E-mail ID of the tax payer or at the registered address through postal mode.
  • Excess refund credited to the account of the taxpayer shall be demanded through Section 154.
  • Application made by taxpayer for rectification under Section 154 shall be disposed within 6 months from the end of the month in which such application is received.
  • Where rectification is done on suo moto basis, that is on its own, then such rectification is possible up to four years from the end of the financial year in which order to be rectified is passed.
  • Any order which is a subject matter of appeal or revision cannot be rectified. In simpler words, only those orders can be rectified which are not decided by appeal. Any point/matter of an order which is under appeal or revision cannot be rectified. Rectification can be done against other matters/ points of an order.
  • If any order is passed by Commissioner (Appeals), then he too has the authority to rectify the mistake, either on its own motion or on an application made to him by the taxpayer.