Income Tax Scrutiny Assessment in India - GST In India

Saturday, 24 March 2018

Income Tax Scrutiny Assessment in India

Section 143(3) Scrutiny Assessment

Income tax assessment is the process carried out by the Income Tax department after the filing of income tax return by an assessee. In an income tax assessment, the Income Tax department would verify the return filed for correctness with respect to the amount of taxable income declared and tax paid. There are various types of income tax assessment. In this article, we look at scrutiny assessment u/s 143(3) in detail.


Scrutiny Assessment

Scrutiny assessment under section 143(3) is a detailed assessment of an income tax return filed by a taxpayer. In a scrutiny assessment, a tax officer would perform various tests and processes to confirm the correctness and genuineness of various claims, deductions, etc., made by the taxpayer in the income tax return. The objective of a scrutiny assessment is to ensure that the taxpayer has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner.

Income Tax Notice u/s 143(2)

To initiate a scrutiny assessment, the concerned Income Tax officer must first issue an income tax notice u/s 143(2). In the income tax notice u/s 143(2), the tax officer would request the taxpayer to appear in person and/or produce information and documents which the tax officer ascertains to be important for determining the taxable income and tax payable.

Income tax notice under section 143(2) should be served within a period of six months from the end of the financial year in which the return is filed. The taxpayer or his/her authorised representative can appear before the Assessing Officer and will place his arguments, supporting evidence, etc., on various matters/issues as required by the Assessing Officer.

Scrutiny Assessment Hearing

While conducting a scrutiny assessment, the concerned tax officer will provide ample opportunity for the assessment to be heard and to produce documents or evidence to support the information filed in a tax return. In case of failure to produce information or non-cooperation by the taxpayer, the tax officer is empowered to complete the best judgement assessment under section 144.

In case of co-operation of the taxpayer and submission of information, after hearing/verifying such evidence and taking into account all the information produced by the taxpayer, the Assessing Officer would pass an order. On passing of order by the Assessing Officer, the assessee has one of the choices below:

To agree with teh order passed by the Income Tax authority and pay any tax demanD or receive refund or accept the loss determined.

Make an application for refund u/s 154, if any clerical error persists.

Can make a revision application to Commissioner of Income Tax under section 263/264.

Appeal the order

Time Limit for Scrutiny Assessment

As per Section 153, the time limit for making scrutiny assessment under section 143(3) is:

Within 21 months from the end of the assessment year in which the income was first assessable. [For assessment year 2017-18 or before]

18 months from the end of the assessment year in which the income was first assessable. [for assessment year 2018-19]

12 months from the end of the assessment year in which the income was first assessable [Assessment year 2019-20 and onwards]