Procedure of Assessment in Income Tax

Every taxpayer has to furnish the income tax return to the Income-tax Department which discloses the income earned by the taxpayer during the previous year. Once the income tax return is filed by the taxpayer, the next step is the processing of the income tax return by the Department. The Department examines the details of income disclosed by the taxpayer for its correctness. This process of examining the income tax return by the Income Tax department is called “Assessment”.

Intimation Under Section 143(1)

Assessment under section 143(1) is a preliminary assessment and is referred to as summary assessment without calling the assessee (i.e., taxpayer). Once the assessee files his income tax return, the income tax department does a preliminary assessment. And sends Intimation under Section 143(1). This intimation is not a Notice but a communication received from the income tax department.

This includes verifying arithmetical errors, any incorrect claims in the return, the difference in tax calculation, verification of tax payment, etc. It is a preliminary checking of the return of income.

After making the following adjustments (if any), the total income or loss is computed, namely:-

1. Any arithmetical error in the return; or

2. An incorrect claim of exemption or deduction, if such incorrect claim is apparent from any information in the return;

3. Disallowance of loss claimed, if the return of the previous year for which set-off of loss is claimed was furnished after the due date specified under section 139(1); or

4. Disallowance of expenditure disclosed in the audit report but not considered while computing the total income in the return; or

5. Disallowance of deduction claimed u/s 10AA, 80IA to 80-IE, if the return is furnished after the due date specified under section 139(1); or

6. Addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return.

Following are the Types of intimations possible :

• Intimation with no demand or no refund – This is the intimation when the department has accepted the return as filed, without carrying out any adjustments to it.

• Intimation determining demand – Demand intimation is Issued in case of adjustments made under Section 143(1) due to a discrepancy found and tax liability is arrived at. And assesse needs to take action
in this case by replying.

• Intimation determining refund – Issued where any tax is found to be refundable either where no discrepancy in the return filed or after making adjustments as referred to in Section 143(1). The refund
will be credited to the bank account of the assesse.

Time Limit

Assessment under section 143(1) can be made within a period of 9 months from the end of the financial year in which the return of income is filed.

Mode of Communication

By Mail: The system auto-generates the intimation u/s 143(1) and communicates to the assessee on the email entered while filing the income tax return.

The intimation is an attachment to the email in a pdf format. It is password- protected. The password to open is PAN in lower case and the date of birth in ddmmyyyy format. Eg: aaapa1234a10101990 for PAN: AAAPA1234A and DOB: 10/10/1990

By SMS: The system auto-generates the intimation u/s 143(1) and communicates to the assessee on the mobile entered while filing the income tax return.

Action to be taken against Intimation u/s 143(1)

Cases where no action is required:

1. The calculation in the ITR filed matches with the calculation as per income tax i.e. No Demand & No Refund

2. Tax paid as per ITR filed is more than the tax payable as per income tax calculation i.e Refund. In this case, refund would be credited to the bank account of the assessee.

Cases where action require:

1. After receiving intimation if you observe any mistakes in the ITR filed, this mistake can be corrected by filing Revised Return u/s 139(5) within the time limit prescribed for the revised return.

2. Tax payable as per ITR filed is less than the tax payable as per income tax calculation i.e. Outstanding Demand. If you agree with the Demand of tax raised in the intimation then Pay Demand and File
Response (within 30 days)

3. Tax payable as per ITR filed is less than the tax payable as per income tax calculation i.e. Outstanding Demand. If you disagree with the Demand of tax is raised in the intimation then File
Rectification Request u/s 154 and File Response (within 30 days)

The department considers the response received from the assessee, if any, before making any adjustment. In cases where the response is not received within 30 days of the issue of such intimation, such adjustments shall be made.

In conclusion, Every assesse who files an income tax return receives intimation under 143(1). Assesse should read the intimation carefully and must take action accordingly within the time. To avoid further litigation and notices from the department, assessee must ask for the professional help in case where required.

FAQs

Q. What are various types of assessment under Income tax Act?
A. Following are the types of assessment under the Income Tax Act:
1. Summary Assessment as per section 143(1)
2. Regular Assessment
3. Scrutiny Assessment
4. Best Judgement Assessment
5. Income Escaping Assessment

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