Income Tax Assessment and Appeals

Filing of Income Tax Return (ITR) is a yearly obligation for every taxpayer whose income exceeds the basic exemption limit. Once the return is filed, it goes through a process of verification and examination by the Income Tax Department. This process is called Income Tax Assessment.

In this blog, we will cover the different types of assessments under the Income Tax Act and the appellate remedies available to taxpayers.

🔹 Income Tax Assessment in India

Income Tax Assessment refers to the process by which the Income Tax Department examines the return filed by the taxpayer. It ensures that income has been correctly reported and taxes have been duly paid.

Broadly, assessments can be categorized as follows:

1️⃣ Self-Assessment – Section 140A

When the taxpayer himself calculates income and pays tax before filing the return, it is called self-assessment. The balance tax, after adjusting advance tax and TDS, must be paid within 30 days of filing the return. If any shortfall remains, it must be cleared to avoid penalty and interest.

2️⃣ Summary Assessment – Section 143(1)

This is a completely online assessment. The return is processed automatically, correcting arithmetic errors, mismatches, or ineligible claims. If extra tax is payable or a refund is due, the system issues an intimation under Section 143(1).

3️⃣ Scrutiny Assessment – Section 143(3)

Conducted when the case is selected for detailed examination. A notice is issued under Section 143(2). The Assessing Officer may demand supporting documents, books of accounts, and explanations. After review, an order is passed either confirming the return, making additions, or allowing refunds.

Remedies available: Rectification under Section 154, Revision under Sections 263/264, or Appeals.

4️⃣ Best Judgement Assessment – Section 144

Done when the taxpayer does not file the return, ignores notices, or fails to produce books of accounts. The Assessing Officer makes an assessment based on available information and estimates. After considering the assessee’s submissions, an order is passed – often adverse to the taxpayer.

5️⃣ Income Escaping Assessment – Section 147

If the AO believes that income has escaped assessment, he may reopen the case. Notice under Section 148 is issued. Such reassessment can go back up to 6 years, and in some cases even longer.

Common reasons: failure to file ITR, understatement of income, excessive deductions, or undisclosed international transactions.

6️⃣ Regular Assessment

Carried out by an AO of rank not below an Income Tax Officer. Involves thorough checking of accounts, expenses, and claims. If satisfied, AO confirms the return; if not, additions or modifications are made.

🔹 Appeals in Income Tax

When a taxpayer is dissatisfied with an assessment order, the Income Tax Act provides a structured appeal mechanism:

1️⃣ Appeal before Commissioner (Appeals) – CIT(A)

The appeal must be filed within 30 days of receiving the order. It is filed against orders such as:

• Adjustments under Section 143(1).
• Orders under Sections 143(3), 144, 147, 153A, etc.
• Penalty orders under Sections 271, 271A, 271C, etc.
• Orders treating taxpayer as assessee in default.

2️⃣ Appeal before Income Tax Appellate Tribunal (ITAT)

Can be filed against orders of CIT(A) or certain specific AO/Commissioner orders. Both the taxpayer and the department can appeal. Examples include:

• Orders under Section 250, 263, 154, or penalties.

3️⃣ Appeal before High Court

Lies against ITAT’s orders where a substantial question of law is involved. It must be filed within 120 days and is heard by a division bench of at least two judges.

4️⃣ Appeal before Supreme Court

Lies against orders of the High Court if it certifies that the case is fit for appeal. Additionally, a Special Leave Petition (SLP) can be filed under Article 136 of the Constitution.

👉 For expert guidance on Income Tax Assessments, Appeals, and GST matters, connect with us at Indian Tax Planning (ITP) – www.indiantaxplanning.in/contact-us/