1. Baldev Raj CA - 9312235173 S.P.PURI & CO.
EDCASC
District Centre Janak Puri Study Circle of NIRC OF ICAI Assessment procedure for Scrutiny cases under Income Tax Act
Baldev Raj CA S.P.PURI & CO.

2. Assessment generally understood
Regular assessment U/s 143(3)
Income escaping assessment under section 147
Assessment under search cases
Baldev Raj CA S.P.PURI & CO.

3. Assessment procedure under Chapter XIV of the Income Tax Act
Procedure of self assessment :
Section 139 and Filling of return , PAN, singing of return, deposit of self assessment tax
Procedure of assessment
Section Intimation and regular assessment
Section Best judgment assessment
Section Income escaping assessment
Section 153A – Assessment in search cases
Baldev Raj CA S.P.PURI & CO.

4. Related and supported provisions
Section Inquiry before assessment
including audit
Section 142A- Estimations of valuation officer
Section Method of Accounting
Section – Rectification
Section Notice of demand
Section Intimation of loss
Baldev Raj CA S.P.PURI & CO.

5. Other important provisions relating to assessment under Income Tax Act
Section Power regarding discovery, production of evidence etc.
Section 133 (6) Power to call for information
Section 292BB Notice deemed to be valid
Baldev Raj CA S.P.PURI & CO.

6. Baldev Raj CA - 9312235173 S.P.PURI & CO.
Self Assessment
Return – voluntarily or in response to notice
Assessee is required to make his own assessment
Compute his income and deposit all tax along with interest
Interest and Penalty
Baldev Raj CA S.P.PURI & CO.

7. ASSESSMENT DEPARTMENT
Two stages
1) Processed
to correct arithmetical mistakes,
internal inconsistency,
tax calculation and verification of tax payment
2) % of tax returns selected for scrutiny- verification of the income
Baldev Raj CA S.P.PURI & CO.

8. Baldev Raj CA - 9312235173 S.P.PURI & CO.
Processing u/s 143(1)
Total income/ loss after Adjustments:
Arithmetical errors:
Incorrect claim apparent from records :
Inconsistent with any other entry –
tax audit report vs computation i.e depreciation personal expenses
Information required not furnished
Deduction exceeds specified statutory Limit – C Rs. 1,00,000
Tax and interest-
Intimation to be send : refund due / tax payable / loss reduce
 Period : one year from the end of the financial year
Baldev Raj CA S.P.PURI & CO.

9. Baldev Raj CA - 9312235173 S.P.PURI & CO.
ISSUES
If no intimation and time lapse and refund due
When TDS credit / Advance tax not allowed / short allowed
When different tax rate charged i.e general rate in place special rate
Notice u/s 143(2) issued and processing not done
Alternative : Rectification/Appeal
Baldev Raj CA S.P.PURI & CO.

10. Baldev Raj CA - 9312235173 S.P.PURI & CO.
Notice u/s 143(2)
Whether notice ?
Served upon assessee
Served in time
Served in proper manner
If invalid notice – objection (Section 292BB)
Valid notice
Response at first hearing :
Filing of documents ?
POA
Reasons for selection ?
Board guidelines on selection of cases
Baldev Raj CA S.P.PURI & CO.

11. Comparison of Notice U/s 142(1) Vs. Section 143(2)
Notice to call for ROI/ books ofAccounts/other information
By issuing notice u/s 142(ii) alone, assessment is not possible
Notice can be issued even if the assessee has not filed the ROI
No time limit prescribed in law for issue of this notice
Books of accounts can be asked for a limited period (3 years)
Notice u/s 143(2)
Notice for making assessment u/s143(3)
Assessment u/s 143(3) is possible only if the notice u/s 143(2) has been issued.
Notice can be issued only if the assessee has filed ROI
Time limit of 12 months prescribed for service of notice.
No such restriction
Baldev Raj CA S.P.PURI & CO.

12. Regular assessment under section 143(3)
Enquires and investigation ;
Calling for books of accounts or other relevant documents
Calling for information in such form and on such point or matters
Requiring to furnish a statement of all assets and liabilities
Examining the assessee or other parties as witness under section 131 to verify any accounts or transaction
Baldev Raj CA S.P.PURI & CO.

13. Baldev Raj CA - 9312235173 S.P.PURI & CO.
continuation
Gathering information from banks, financial institutions and such other person with whom assessee has had transaction during the year- section 133(6)/131
Directing to get account audited u/s 142 (2A)
Reference to Valuation officer u/s 142A- determine the value of any investment, bullion, jewellery or other articles
Gather all relevant and requisite evidence, properly scrutinizing,
Baldev Raj CA S.P.PURI & CO.

14. Baldev Raj CA - 9312235173 S.P.PURI & CO.
Allowing reasonable opportunity , to explain the discrepancies , inaccuracies and omissions
Rule of evidence : Adverse inference - if assessee fail to answer or produce evidence to contradict the data/ information gathered by assessing officer
Determine the total income , compute tax and interest
Baldev Raj CA S.P.PURI & CO.

15. Baldev Raj CA - 9312235173 S.P.PURI & CO.
ISSUES FOR DISCUSSION
Fact of assessee and its business
Strength and weakness
Assessment of self code cases
In case of returned U/S 139 4A , 4B , 4C etc
Trust , Political parties, educations trust etc
AIR Information's
Reconciliations –income with TDS certificates
Rejection of books of accounts – 145 (3)
Baldev Raj CA S.P.PURI & CO.

16. Baldev Raj CA - 9312235173 S.P.PURI & CO.
In case of non-resident cases and TP issues order-
New provision w.e.f DRP
( Dispute Resolution Panel )
New Claim in assessment proceedings
GOETZE (INDIA) LTD. Vs. CIT (2006) 284 ITR 323(SC)
Baldev Raj CA S.P.PURI & CO.

17. Baldev Raj CA - 9312235173 S.P.PURI & CO.
Show cause notice
Revenue / capital expenses ,
business vs capital gain,
business vs income from other sources etc
Facts, provisions, Case laws
Section 40A(2)specified persons
Three criteria
Fair mkt value, legitimate needs of business , benefit to the assessee
(cumulative or alternative)
ITR 1 (Guj)
Baldev Raj CA S.P.PURI & CO.

18. Baldev Raj CA - 9312235173 S.P.PURI & CO.
Information u/s 133(6)-
Not received
received with difference or
Notice un served or
Stock statement submit with bank/stock audit conducted by bank
confrontation during the assessment proceedings
Summons issued :
Un served
not attended by the parties
Absence of personnel presence – default?
Use of affidavit
Baldev Raj CA S.P.PURI & CO.

19. Baldev Raj CA - 9312235173 S.P.PURI & CO.
Assessee duty in case
Confirmations - in case of creditors, debtors
Matter send for valuation u/s 142 A
Baldev Raj CA S.P.PURI & CO.

20. Baldev Raj CA - 9312235173 S.P.PURI & CO.
Section 68 to 69D
Objective – an effort to curb the all pervading evil of generation and proliferation of black money
Section are clarificatory and addition may be made otherwise
‘May’ word used – discretion of assessing officer
Cash credit :
Ø      The existence of books of accounts maintained by assessee himself
Ø      A credit entry in the books of accounts
Ø      Absence of satisfactory explanation by the assessee about the nature and source
 Burdon of proof on assessee
Ø      The identity of the creditors
Ø      The capacity of the creditors
Ø      The genuineness of the transaction
 The assessee has adduced evidence to establish prima facie the aforesaid, than onus shift to department
Baldev Raj CA S.P.PURI & CO.

21. Baldev Raj CA - 9312235173 S.P.PURI & CO.
other issues ?
Baldev Raj CA S.P.PURI & CO.

22. Baldev Raj CA - 9312235173 S.P.PURI & CO.
Assessment is void-ab-initio
Assessment without serving a notice u/s 143(2)
Notice served after expiry of period
Assessment is invalid.
After the expiry of 23 months from the relevant year
Fresh assessment on set-aside or cancelled order or on order made under section 263/ 264 made after expiry of 9 months from the financial year
Baldev Raj CA S.P.PURI & CO.

23. Best judgment assessment-u/s 144
Defaults :
Fail to submit return
Fail to complied with terms of the notice u/s 142(1)/ 143(2)
Fail to comply with direction u/s 142(2A)
Show cause notice -best judgement
Reasonable opportunity
On the basis of all relevant material gathers – compute the income or loss to the best of his judgement , determine the tax payable
Cannot assess the income below return income/ loss more than return loss
Baldev Raj CA S.P.PURI & CO.

24. C/O of best judgment assessment-u/s 144
Ø Not be arbitrary or on adhoc basis
Ø Based on material
Ø  On rational and scientific basis
Ø Order must speaking order
Baldev Raj CA S.P.PURI & CO.

25. Baldev Raj CA - 9312235173 S.P.PURI & CO.
Objective
ü      Improve the quality of assessment
ü      Eliminate avoidable litigation
Joint commissioner
   On his own motion
     On reference made by assessing officer
     On application of the assessee
Call for and examine the record of the pending proceeding
Reasonable opportunity to assessee before issue direction being prejudicial to the assessee
Investigation not an prejudicial to the assessee
Issue direction
Binding on assessing officer
Directions u/s 144A
Baldev Raj CA S.P.PURI & CO.

26. Baldev Raj CA - 9312235173 S.P.PURI & CO.
EDCASC
Directions u/s 144A
No appeal against direction
In practice:
No seriousness for the intended purpose of the legislature
The responsibility cast on supervisory officers not discharged
Baldev Raj CA S.P.PURI & CO.