Assessment under Indian Tax Laws refers to the process by which the Income Tax Department determines the correct amount of tax payable by an individual or entity. This process ensures that the taxpayer has correctly reported their income, deductions, and tax liabilities. There are different types of assessments such as self-assessment, summary assessment, scrutiny assessment, best judgment assessment, and reassessment. Each has a specific purpose and is conducted under various circumstances, such as after a return is filed or when income is concealed. Timely and accurate compliance can help taxpayers avoid penalties or interest.
According to the Income Tax Act, 1961, the key sections governing assessments include:
- Section 139: Deals with the filing of income tax returns.
- Section 143(1): Summary assessment without calling the assessee, where the return is processed for arithmetical accuracy.
- Section 143(2) and 143(3): Scrutiny assessments, where detailed examination of the return and documents is undertaken.
- Section 144: Best judgment assessment, applied when the taxpayer fails to file returns or comply with notices.
- Section 147: Reassessment, when income has escaped assessment, and the department seeks to reopen the case within a stipulated time frame.
These sections collectively ensure tax compliance and give the department tools to check evasion and underreporting.
To remember the types and legal bases of assessments, use the mnemonic “S3BR”:
- S – Self-Assessment (Section 139)
- S – Summary Assessment (Section 143(1))
- S – Scrutiny Assessment (Sections 143(2), 143(3))
- B – Best Judgment (Section 144)
- R – Reassessment (Section 147)
