Tax – Assessment / Scrutiny

ASSESSMENT SCRUTINY

ASSESSMENT / SCRUTINY

“The word “assessment” is used in the Act in a number of provisions in a comprehensive sense and includes all proceedings starting with the filing of the return or issue of notice and ending with the determination of tax payable by the Assessee”.

ASSESSMENTS COVERED

143(3): Scrutiny Assessment
144: Best Judgement
147: Reassessment proceedings
144C: Draft Orders in respect of Transfer Pricing Assessments

PRE-ASSESSMENT PROCEDURES

Return of Income
Annual Accounts and Tax Audit report – relevance in Scrutiny Assessments
E-filing Scenario vis a vis aggressive and debatable claims
Providing Disclosure and notes – How and when
AIR information

ASSESSMENT– GENERAL PRINCIPLES

Quasi-judicial Proceedings – Indian & Eastern Newspapers Society v. CIT (119 ITR 996)(SC)
Assessment to be based on material and information and on the basis of conjectures and surmises – Dhakeshwari Cotton Mills Ltd (26 ITR 775) (SC)
Principle of natural justice applies (CIT v. Raja Ginning Udyog (268 ITR 383) (MP)
Res judicata does not apply – Dwarkadas Morarka (44 ITR 529)(SC). However principle of consistency applies (208 ITR 872)(Raj)
Principle of Estoppel does not apply to the Department as well as to assessee. A mistake by one does not stop another. CIT v. Thanthi Trust (137 ITR 735)Mad) & Balmukund Acharya (Bom)(HC)

ASSESSMENT – PRACTICAL ASPECTS

Manner and extent of furnishing details
AIR Reconciliation
Issue – wise Submissions
Details to be self-explanatory else supported by explanatory notes
Additional Information
Recurring Issues
Fresh Claims and Deductions
Without Prejudice claims
Recourse to section 144A

TIME LIMIT TO COMPLETE ASSESSMENT

From AY 2010-11 & onwards: An assessment u/s 143 shall be completed within 2 years from the end of the relevant assessment year;
From AY 2009-10 & onwards: Where reference is made to Transfer Pricing Officer (TPO), the time limit for completion of assessment would be shall be 3 years.

ASSESSMENT ORDER

The assessment order should determine not only the total income of the assessee but also the amount payable by him. Where the order determining the total income is passed within the prescribed time limit but the tax payable is not determined within the prescribed time limit, the assessment would be time-barred.
The officer must assess the total income of the assessee in accordance with the provisions of the Act. It is not open to him to assess the income from one or more sources and leave the others undetermined. He cannot make piecemeal assessment nor can he make a provisional or tentative assessment – Debi Prasad Malviya v. CIT 22 ITR 539 (All.)

SCOPE OF RE-ASSESSMENT

Need not restrict himself to the reasons recorded
When original reasons recorded are held to be invalid, the re-assessment cannot be confirmed on other grounds – [Chunnilal 160 ITR 141]
Reasons recorded on Grounds A and B
Grounds A and B no addition made;
Additions made on Ground C – Not Valid
What is set-aside in the re-assessment is only the previous under-assessment and not the whole assessment. Assessee cannot re-agitate questions which had been decided in the original assessment – [Sun Engineering Works 198 ITR 297 (SC)
However, the assessee can put forward his claim for expenditure relatable to escaped income [Caixa Economica 210 ITR 719 (Bom)]
Reduction in originally assessed income, a refund of tax, assessment of loss, etc. not permissible [Kasinath 4 ITC 472, Satyendra 4 ITC 447, Niranjan 52 ITR 882

OTHER ASPECTS IN ASSESSMENTS

Scrutiny Assessment with reference to AIR (Sec. 285BA)
Transfer Pricing Assessments and DRP
Protective Assessments
Order Giving Effect to 263, 250, 254

POST ASSESSMENT PROCEDURES

Penalty Proceedings
Transfer Pricing Assessments and DRP
Stay Proceedings
Filing of Appeals and Revision Applications
Rectification Proceedings
Additional Claims post-assessment

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