CU -BCOM-Sem VI -Tax assessment and procedure

8.5 KEYWORDS  Self-assessment – u/s 140A- This is the type of income tax assessment in which the assessee calculates the tax themself, usually accompanied by payment of the amount they believe is due.  Summary Assessment u/s 143(1)- The assessment under section 143(1) is similar to the initial review of a tax return. The taxpayer receives an intimation u/s 143(1) from the IRS under this section. The department will send you a comparative income tax calculator. The overall income or loss incurred is computed in the income tax assessment.  Scrutiny Assessment u/s 143(3)- Scrutiny assessment is the assessment of a return filed by an assessee by providing an opportunity for the assessee to support the declared income and expenses, as well as claims of deductions, losses, exemptions, and so on, in the return using proof. The committee manages it using a single work plan. The committee undertakes specific work, as well as forming informal panels (for in-depth activities) or working groups.  Best Judgment Assessment u/s 144- The term ‘best judgment assessment’ refers to the assessing officer’s opinion or calculation of the assessee’s income in the context of income tax law. In the situation of best judgment assessment, the evaluating officer will make the decision based on the best reasoning, i.e., they will not be dishonest. The assessee will not be dishonest in his or her assessment, nor will he or she be hostile to the officer.  Protective Assessment- This is a type of assessment that focuses on those that are made to ‘protect’ the revenue’s interests. The income tax legislation, however, has no provision for the imposition of income tax on anyone other than the person to whom it is due. It is open to the authorities to undertake a protective or alternative assessment if it is unclear who among a few probable persons is actually liable to pay the tax. 151 CU IDOL SELF LEARNING MATERIAL (SLM)

8.6LEARNING ACTIVITY 1. What is thetax assessment rules ___________________________________________________________________________ ___________________________________________________________________________ 2. What is income computation ___________________________________________________________________________ ___________________________________________________________________________ 8.7 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. What is the meaning of assessment? 2. What is the major assessment under income tax law? 3. What is assessment under section 143(1)? 4. What is assessment under section 143(3)? 5. What is the procedure adopted for making the assessment under section 143(1)? Long Questions 1. What is the assessment under section 147? 2. What is limited scrutiny ? 3. What is assessment under section 144? 4. Under what circumstances the assessing officer will proceed for making assessment under section 144 i.e., best judgement assessment? 5. What is income computation and disclosure standards B. Multiple Choice Questions 1. Income Tax is imposed by. a. State Government b. Central Government c. Both of these 152 CU IDOL SELF LEARNING MATERIAL (SLM)

d. Constitution of India 153 2. Parliament has the power to levy tax on incomes other than. a. Exempt Incomes b. Income of poor people c. Agricultural Income d. All incomes are taxable 3. Which Entry of Union List gives the power to Parliament to levy tax on incomes? a. Entry 81 of List I to Seventh schedule b. Entry 81 of List II to Seventh schedule c. Entry 82 of List I to Seventh schedule d. Entry 82 of List II to Seventh schedule 4. Highest Administrative Authority for Income Tax in India is. a. Finance Minister b. CBDT c. President of India d. Director of Income Tax 5. Income-tax Act, 1961 applies to. a. Whole of India b. Whole of India excluding J&K c. Maharashtra d. All of these CU IDOL SELF LEARNING MATERIAL (SLM)

Answers 1-d, 2-c, 3-c, 4-b, 5-a 8.8 REFERENCES Reference books  IIBF's Micro, Small and Medium Enterprises – Covering all important aspects of MSMEs in India, including setting-up of MSME, MSME policy, regulatory legal & institutional framework, etc. Paperback – 10 April 2022 by Indian Institute of Banking & Finance (IIBF) (Author)  Taxmann's Direct Taxes Ready Reckoner (DTRR) | A.Y. 2022-23 & 2023-24 – Illustrative Commentary on all Provisions of the Income-tax Act for 40+ years with Focused Analysis | 46th Edition Paperback – 27 March 2022 by Dr. Vinod K. Singhania (Author)  V.D. Mahajan's Jurisprudence & Legal Theory 6th Edition, 2022 Unknown Binding – 1 January 2022 by Dr.V.D.Mahajan (Author)  Taxmann's Benchmarking ESG & CSR: A Compendium of Best Practices in ESG & CSR in India – Learn from the ESG & CSR practices of companies of different sizes, nature, and sectors [IICA] Paperback – 5 July 2022 by Dr. Garima Dadhich (Author), Dr. Ravi Raj Atrey (Author) Textbook references  Taxmann's Tax Audit – Detailed commentary/clause-by-clause analysis on provisions relating to Tax Audit and clauses of Form 3CA, 3CB and 3CD, along-with Guidance Notes issued by ICAI Paperback – 19 April 2022 by CA Srinivasan Anand G. (Author)  Taxmann's GST Practice Manual - Comprehensive Guide for Understanding the Background, Concepts, Execution, Challenges and Solutions Involved in your Day-to- Day Compliance of GST | 4th Edition | October 2020 [Paperback] Aditya Singhania Paperback – 2 October 2020  Taxmanns Direct Taxes Ready Reckoner with Supplement Including Case Studies on Mode of TCS Recovery, Alternative Tax Regime & Break-even Tables | 44th Edition | A.Y. 20-21 & 21-22 [Paperback] Dr. Vinod K. Singhania Paperback – 7 October 2020 by Dr. Vinod K. Singhania (Author)  Universal's Combo of 5 Bare Acts IPC, CrPC, CPC, Constitution of India, Indian Evidence Act 2022 Edition Paperback – 1 January 2022 by Universal (Author) 154 CU IDOL SELF LEARNING MATERIAL (SLM)

Website https://cleartax.in/s/income-tax-assessment https://www.coverfox.com/personal-finance/tax/income-tax-assessment/ https://www.taxmann.com/post/blog/principles-of-income-tax-assessment-with-case-laws/s 155 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT - 9INCOME TAX ASSESSMENT PROCEDURES STRUCTURE 9.0 Learning Objectives 9.1 Introduction 9.2 scrutiny Notice u/s 143(2) 9.3 Income Escaping Notice u/s 148 9.4 Summary 9.5 Keywords 9.6 Learning Activity 9.7 Unit End Questions 9.8 References 9.0LEARNING OBJECTIVES After studying this unit, you will be able to:  Understand the application of business Knowledge in both theoretical and practicalaspects.  Determine the procedures and schedules to be followed on preparing financial statements of Companies.  File Income tax return and compute the tax liability of individuals  Develop proficiency in the management of an organisation  Attain skills in conducting business transactions online 9.1 INTRODUCTION Assessee or income tax officer estimates the amount of income tax due. Income tax legislation assesses the following. This page explains each evaluation kind. Self-evaluation under 140A. (ii) s143 summary (1) (iii) s143 scrutiny (3). (iv) 144 best judgement evaluation. 156 CU IDOL SELF LEARNING MATERIAL (SLM)

(v) Safeguarding. (vi) 147-exempt income. (vii) 153A search evaluation Assessing officer must comply with following statute conditions to make assessments: u/s 140A self-assessment Assessee must determine whether he owes tax or interest before filing returns. Income tax statute provides a provision for this purpose. If tax is due on a section 139, 142, 148, or 153A return, deduct: Tax deposit TDS/TCS Relief under 90, 91, and 90A MAT credit under 115JAA or 115JD Assessee must pay tax, interest, and fees before filing return, and evidence of payment must be included. Self-audit Summary: 157 CU IDOL SELF LEARNING MATERIAL (SLM)

If any sum is due under section 140A, the payment is first applied to interest and subsequently to tax. Summary Assessment u/s 143(1) is not an assessment. Under this provision, the assessee's Return of Income will not be inspected, but the assessing officer will accept whatever the assessee claims after ensuring mathematical correctness. 1. the total income or loss shall be computed after making the following adjustments: I any arithmetical error in the return; (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; (iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished after the due date specified in sub-section (1) of section 139; (iv) disallowance of expenditure indicated in the arithmetic No adjustment will be made for returns filed for the 2018 tax year or later. No such modifications must be made without written or electronic notice to the assessee. Before making any changes, the assessee's answer, if any, is examined. If no response is received within 30 days of the notification, modifications are made. 2.the tax and interest, if any, shall be computed on the total income computed under clause (a); 3. the sum payable by, or the amount of refund due to, the assessee shall be determined after adjusting the tax and interest and fee, if any, computed under clause (b) by any tax deducted at source, any tax collected at source, any advance tax paid, any relief allowable under section 90 or section 90A, or any relief allowable under section 91. 4. an intimation shall be written or created and delivered to the assessee detailing the sum found to be payable by, or the amount of refund due to, the assessee under subsection (c); and 5. the amount of refund due to the assessee according to clause (c) shall be provided to the assessee: U/S 143 scrutiny (3). Regular evaluation is called scrutiny. 1. On the day specified in the notice issued under] sub-section (2), or as soon thereafter as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after considering all relevant material he has gathered, the Assessing Officer shall, by an order in writing, assess the assessee's total income or loss, and determine the sum payable by him or ref. 2. No assessment/reassessment order under section 143(3) shall be issued beyond the conclusion of the relevant Assessment Year (18 months for A.y 2018-19 and 12 months wefA.y 2019-20). 3.Where a Transfer Pricing Officer has been referred to determine Arm's Length Price, no order of assessment/reassessment under section 143(3) must be issued beyond the end of the relevant Assessment Year (30 months for A.y 2018-19 and 24 months wefA.y 2019-20). Section 143(2) and 143(3) What-If Analysis? What-if? What if assessee hasn't submitted RETURN? 143(2) notice can't be issued, hence 143(3) assessment isn't feasible. 158 CU IDOL SELF LEARNING MATERIAL (SLM)

What if 143(2) notice isn't given? Void Test What if the notice is issued more than six months after the return's due date? Void Test Assessor reduces income below returned income? CBDT says AO may drop below returned income. What if assessee seeks deduction through letter during assessment? No requests until response is updated. BJU 144. If a person— (a) fails to make the return required under subsection (1) of section 139 and has not made a return or revised return under subsections (4) or (5) of that section, (b) fails to comply with all the terms of a notice issued under subsection (1) of section 142 or a direction issued under subsection (2A) of that section, or (c) having made a return, fails to comply with all the terms of a notice issued under subsection (1) of section 142, The Assessing Officer must offer the assessee a date and time to show cause why the assessment should not be completed to his satisfaction. Unless a notification under section 142 subsection (1) has been provided prior to the assessment under this section. (2) The provisions of this section as they stood before being amended by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any assessment for the assessment year commencing on 1 April 1988 or any earlier assessment year, and references in this section to other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessments. (3) No assessment/reassessment order under section 144 shall be issued beyond the conclusion of the relevant Assessment Year (18 months for A.y 2018-19 and 12 months wefA.y 2019-20). (4) No order of assessment/reassessment under section 144 shall be issued beyond 33 months (30 months for A.y 2018-19 and 24 months wefA.y 2019-20) from the conclusion of the relevant Assessment Year. Suppose Section 144 What-if Analysis What if Assessing Officer didn't provide notice? Void Test What if the Assessing Officer didn't serve a hearing notice but issued a 142(1)(i) notice? Validation AO cuts income below restored income? AO can't cut earnings. How about arbitrary assessment? Void evaluation. AO should gather assessment material. What if evaluation after 2 years? Void Test Safeguarding. The Act doesn't specify how to conduct a protective evaluation. But traditionally, when the department was unsure how an assessment had been framed against an assessee because of pending litigation, the Assessing Officer would make an assessment in a way he thought it should be done and then, fearing that it would be set aside in the litigation, he would make another assessment according to the assessee's stand. There is no provision in the Act stating that a protective assessment must be undertaken together with the initial evaluation (MP). Lalji Haridas v. ITO (43 ITR 387) and G. Topi Saheb vs Commissioner of Income-Tax are cases involving protective assessments (170 ITR 181 AP). 159 CU IDOL SELF LEARNING MATERIAL (SLM)

9.2 SCRUTINY NOTICE U/S 143(2) Income tax notices might cause worry. You may not have to accept the notification. You may not know how to react if you do. Various notifications have different meanings. Learn about notification u/s 143(2), how to react, and more. Section 143 notices are issued when the IRS detects small or large inconsistencies in tax returns (2). Under-reporting revenue or over-reporting losses causes inconsistencies. The notification ensures you haven't underpaid tax. Your registered email address may get a PDF message. It's also mailed. The assessing officer can't issue a 143 notice if you haven't filed taxes (2). He must first send a 142(1) notice requesting refunds. When you get the 143(2) notice, you must present any papers supporting your deductions, exemptions, allowances, reliefs, and other claims. All revenue sources must be verified. The evaluator investigates thorough 143 notifications (2) Section 143(2) notices: Fewer checks Cases are chosen via Computer-Assisted Scrutiny Selection (CASS). Inaccurate or mismatched return information. The review will be confined to the return area indicated in the notification, such as foreign tax credit or property sale. Examine 160 CU IDOL SELF LEARNING MATERIAL (SLM)

Return and accompanying papers will be thoroughly reviewed. CASS flags cases. In this kind, the evaluating officer can't check papers beyond the assessment year. Inspections The Central Board of Direct Taxes selects cases for thorough review based on annual criteria. Notice deadline Section 143(2) notices may be given after a tax return is submitted, but within six months after the end of the fiscal year. Mr. Ram submitted his 2018-19 taxes on 31 July 2019. Section 143(2) notices are due by September 30, 2020. He may only issue the notification within six months after the conclusion of Mr. Ram's filing year, 2019-20. Not responding: Don't disregard the notification. If you miss the deadline, Section 272A penalises each non-response with Rs.10,000. Section 144 allows the assessor to conclude the assessment using his best judgement. A larger taxable income might increase your tax and penalty. Before appealing a higher tax demand, you must pay at least 20% of the tax payable. It may lead to prosecution and incarceration if convicted. When is 143(2) notice given? When your Income Tax Return is chosen for scrutiny or thorough assessment u/s 143, the IRS sends you a Notice u/s 143(2). (3). 161 CU IDOL SELF LEARNING MATERIAL (SLM)

Scrutiny assessment or comprehensive evaluation u/s 143(3) confirms the accuracy and veracity of your Income Tax Return claims, deductions, etc. This scrutiny check ensures you submitted the right income and tax return. This review aims to: Your income is accurate You've underestimated loss. You haven't underpaid tax. The Income Tax Department issues a notice u/s 143(2) to conduct a 143(3) scrutiny. 9.3 INCOME ESCAPING NOTICE U/S 148 Taxes are good, but it hurts to pay so much from your hard-earned money. Citizens use unscrupulous tactics to hide money and pay less tax. The IRS may assess or evaluate your income if it escapes assessment. Reassessment vs. Tax returns filed in Bangalore are automatically processed at the CPC. The programme picks cases for further review by the Assessing Officer ('AO') based on Central Board of Direct Taxes standards (CBDT) Example: Raghav submitted his tax return for the year ending March 31 on July 5. FY 2017-18 return submitted. Raghav may get a tax notification before March 31, 2019. 162 CU IDOL SELF LEARNING MATERIAL (SLM)

Assessment An assessment procedure is the complete process from when a taxpayer gets a notification to when the assessing officer determines the taxpayer's ultimate taxable income. One year after filing a tax return, a scrutiny assessment notification might be issued. Reassessment If an AO suspects taxable income avoided assessment, he or she might revisit the case. The tax authorities agree with Mr. Rohan's reported income for FY 2015-16. The assessing officer learns about a land transaction Rohan made in FY 2015-16, but he didn't report the capital gains in his tax return. AO may reopen evaluation based on such information. Untaxed income Unreported income is called income evading assessment. Untaxed income. The assessee's income exceeds Rs 2,50,000 (the limit will be Rs 3,00,000 and Rs 5,00,000 for senior citizens and very senior citizens respectively). If the assessee submitted a return but underestimated income or inflated losses/deductions. Assessee hasn't submitted section 92E report for overseas transactions. The assessee has foreign assets. Notice-issuing period 163 CU IDOL SELF LEARNING MATERIAL (SLM)

Before an evaluation or reassessment, a proper notification must be served. AOs must document reassessment reasons. Notice-issuing period Reassessment notice issuers No Assessing Officer (AO) ranking below Assistant Commissioner or Deputy Commissioner may issue a notice to an assessee. The Joint Commissioner may bypass this if the Assessing Officer's arguments are sufficient to issue a notice to an assessee. Section 147 of the Income Tax Act, 1961, allows the IRS to review previously filed tax returns. The Assessing Officer may examine your income tax return under section 148 for income escaping assessment. Section 148 notices A person may obtain a section 148 notice if the assessing officer feels their taxable income escapes assessment. If he has evidence, the AO will write out his reasoning and deliver a section 148 notice. Assessing officer can't reinvestigate without a justification. If the assessee supplied all papers and proper information during the first assessment, the Assessing Officer cannot evaluate the same documents. Some facts or fresh papers should reveal untaxed income. If fresh information or records show that a person has disguised income, the AO might take action under sections 147 and 148. 164 CU IDOL SELF LEARNING MATERIAL (SLM)

Section 148 notices: Income Tax Act, 1961 Section 151(1) provides notice provisions: No notice would be issued by an Assessing Officer under section 148 after four years from the end of the relevant AY (assessment year) unless the Principal Chief Commissioner, Principal Commissioner, Chief Commissioner, or Commissioner is satisfied, based on the AO's reasons, that it's a fit case for issuing such a notice. In circumstances other than the one above, an Assessing Officer below the level of a Joint Commissioner cannot issue a section 148 notice unless the Joint Commissioner is convinced, based on the AO's grounds, that it's a suitable case. For (1) and (2), the Principal Chief Commissioner, Principal Commissioner, Chief Commissioner, or Joint Commissioner, depending on the situation, need not issue the notice himself if satisfied by the AO's grounds for issuing the notice under section 148 of the Income Tax Act. Section 148 notification deadline Section 149 of the Income Tax Act allows section 148 notices to be issued within 4 years after the end of the relevant assessment year if the evaded income is less than INR 1 lac. If the evaded income is more than INR 1 lac, a notice may be issued within 6 years from the end of the relevant AY, under section 151. Section 148 notices may be given 16 years after the end of the relevant AY if the evaded income comes from foreign assets. If the assessment has been completed under section 143(3) or 147, no further action can be taken under section 147 after 4 years from the end of the relevant AY unless taxable income escaped assessment for that AY due to the assessee's failure to file the return under section 139 or 142 or 148 or fully and truly disclose all the material facts required for the assessment. 165 CU IDOL SELF LEARNING MATERIAL (SLM)

Section 148 reply Take the notice seriously. Please follow these guidelines if you get a section 148 notification. First, review the notice for grounds for issuing it under section 148. If the notification doesn't contain the reasons, you may ask the assessor for a copy. If you agree with the assessing officer's reasoning, submit the return immediately. Send the filing to the assessor. If you're submitting a tax return in response to a section 148 notification, report all your income and expenditures meticulously. Missing revenue might result in fines. If you consider that notice isn't issued properly or the assessing officer's grounds for commencing assessment under section 147 aren't legitimate, you might contest the legality of such notice. If you win, the court will stop your evaluation. If the judgement goes against you, the evaluating officer may review. 9.4 SUMMARY  A tax return is a document submitted to a taxing body that lists earnings, outlays, and other pertinent financial data.  Taxpayers compute their tax liabilities, set up tax payments, and seek refunds for overpaid taxes on their tax returns.  Tax returns must typically be submitted yearly.  This \"Summary Assessment\" is not a true evaluation. According to this clause, the Assessee's Return of Income will not be carefully examined, but the Assessing Officer will accept whatever the Assessee claims in his ROI after just verifying the correctness of the math. 166 CU IDOL SELF LEARNING MATERIAL (SLM)

 Everyone who falls within a taxable category is required by the Income Tax Act of 1961 to submit their income tax return by the deadline. The Income Tax Department checks the accounts and determines the taxability when the returns are submitted. An income tax assessment is what is used to describe this. The Income Tax Department's examination of ITRs is called as an \"assessment,\" to put it simply. There are many different evaluation kinds, which we will quickly examine in this article.  Scrutiny assessment is the assessment of a return filed by an assessee by providing an opportunity for the assessee to support the declared income and expenses, as well as claims of deductions, losses, exemptions, and so on, in the return using proof. The committee manages it using a single work plan. The committee undertakes specific work, as well as forming informal panels (for in-depth activities) or working groups. 9.5 KEYWORDS  INCOME TAX - Income tax is a direct tax that a government levies on the income of its citizens  ASSESSMENT - the act of assessing something : appraisal assessment of damages an assessment of the president's achievements.  INCOME TAX ASSESSMENT - Income tax assessment is the process of collecting and reviewing the information filed by assesses in their income tax returns.  SCRUTINY - Scrutiny is when you look at something really closely, like when you are checking a test for mistakes. Scrutiny can also be an intense look, like when your mother looks at you — trying to tell if you might be lying.  ASSESSEE - a person or group that is being assessed (= judged), especially in order to decide how much tax they must pay: The form must be filled out by every assessee on a yearly basis. Analyzing and evaluating 9.6LEARNING ACTIVITY 1. Define income tax assessment 167 CU IDOL SELF LEARNING MATERIAL (SLM)

___________________________________________________________________________ ___________________________________________________________________________ 2. State the principles of Income escaping ___________________________________________________________________________ ___________________________________________________________________________ 9.7 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. What is the procedure for assessment in income tax? 2. What are the 4 types of assessment in income tax? 3. What is the assessment procedure explain? 4. What do you mean by tax assessment explain its different types of assessment? 5. Explain income escaping notice u/s 148 Long Questions 1. What is the procedure adopted for making the assessment under section 143(3) i.e. scrutiny assessment? 2. What is limited scrutiny? 3. What is the assessment order u/s 143 (3)? 4. What is the meaning of intimation u/s 143 (1)? 5. What happens if I don't respond to the notice within 30 days? B. Multiple Choice Questions 1. The Income tax Act extends to a. Whole of India b. Whole of India except Jammu &Kashmir c. Whole of India except Sikkim d. Whole of India except Jammu&Kashmir& Sikkim 2.Every year a Budget is presented before the parliament by 168 CU IDOL SELF LEARNING MATERIAL (SLM)

a. Prime Minister 169 b. Finance Minister c. State Minister d. Education Minister 3.Following are two sentences, find out correct sentence 1.Income tax is one of the form of Direct Taxes 2.This tax is Levi able and collected under Income -tax Act, 1961 a. Only 1 b. Both1&2 c. Only'2 d. Both wrong sentence 4.CBDT stands for. a. Chief board of Direct Taxes b. Central board of Direct taxes c. Central board of Duplicate taxes d. None of these 5.Circulars issued by CBDT are binding on a. Assessee b. Income Tax Authority c. Both of these d. None of these Answers 1-a, 2-c, 3-b, 4-b, 5-b 9.8 REFERENCES Reference books CU IDOL SELF LEARNING MATERIAL (SLM)

 Law Relating to Assessment in Search Cases G.C. Das, K. Chandrahas  Taxation Law / The Income Tax Act 1961, Assessment Procedure, Tax Exemptions and trusts, PAN in details, Problem on Tax, Important Questions, Case Laws Paperback – 1 January 2019 by Dr.B.V.Narayana Rao (Author)  Taxmann's Income Tax Act | Pocket Edition Annotated text of the Income-tax Act, 1961 in the Most Authentic, Amended & Updated Format | Amended by Finance Act, 2021 | 27th Edition | 2021 [Paperback] TaxmannTaxmann's Income Tax Act | Pocket Edition Annotated text of the Income-tax Act, 1961 in the Most Authentic, Amended & Updated Format | Amended by Finance Act, 2021 | 27th Edition  Taxmann's Income Tax Act – Covering Amended, Updated & Annotated text of the Income-tax Act, 1961 [amended by the Finance Act 2022 & Taxation Laws (Amendment) Act 2021] | 67th Edition Unknown Binding – 30 March 2022 by Taxmann (Author) Textbooks  Universal Income Tax Act Bare Act 2020 Paperback – 1 January 2020  Taxmann's Taxation of Virtual Digital Assets – Basic primer analysing the new scheme of taxation from an Income-tax & GST perspective, including cryptocurrencies & NFTs [Finance Act 2022 Edition] Paperback – 22 April 2022  by Taxmann (Author)  Income Tax Assessment and Procedures Assessment Year, 2020-21 M.COM Finance Semester 4 M.g university Website  https://taxguru.in/income-tax/income-tax-assessment-procedure-nutshell-part.html  https://www.incometaxindia.gov.in/Tutorials/33-various%20assessments.pdf  https://www.mbaknol.com/tax-management/income-tax-assessment-procedure/ 170 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT - 10TYPES OF ASSESSMENT 171 STRUCTURE 10.0Learning Objectives 10.1Introduction 10.2Scrutiny Assessment u/s 143(3) 10.3Best Judgment Assessment u/s 144 10.4Income Escaping Assessment u/s 147 10.5Dropping of Income tax Assessment u/s 152 10.6Summary 10.7Keywords 10.8Learning Activity 10.9Unit End Questions 10.10 References 10.0LEARNING OBJECTIVES After studying this unit, you will be able to:  Describe the concepts and features of assessment of profits and gains of individual proprietorship, Doctor, Advocate and Chartered Accountant as individual assessee.  Assess short term and long-term capital gains of an Individual assessee who is involved in Business and Profession.  Assess taxable income from other sources of an Individual assessee after taking into account deduction u/s 57 and amounts disallowed u/s 58.  Evaluate gross total income of an Individual assessee after taking into account deduction u/s 80.  Describe the mechanism of carry forward and set off of an Individual assessee. 10.1 INTRODUCTION CU IDOL SELF LEARNING MATERIAL (SLM)

Types of Income Tax Assessment Self-assessment – u/s 140A Summary Assessment – u/s 143(1) Scrutiny Assessment – u/s 143(3) Best Judgment Assessment – u/s 144 Protective Assessment Re-assessment or Income Escaping Assessment – u/s 147 Assessment in case of Search – u/s 153A (1) Self-assessment – u/s 140A This is the type of income tax assessment in which the assessee calculates the tax themself, usually accompanied by payment of the amount they believe is due. After taking TDS and subtracting advance tax paid, tax payable is required to be given under section 139, section 142, section 148, or section 153A. (2) Summary Assessment u/s 143(1) The assessment under section 143(1) is similar to the initial review of a tax return. The taxpayer receives an intimation u/s 143(1) from the IRS under this section. The department will send you a comparative income tax calculator. The overall income or loss incurred is computed in the income tax assessment. (3) Scrutiny Assessment u/s 143 172 CU IDOL SELF LEARNING MATERIAL (SLM)

(3) Scrutiny assessment is the assessment of a return filed by an assessee by providing an opportunity for the assessee to support the declared income and expenses, as well as claims of deductions, losses, exemptions, and so on, in the return using proof. The committee manages it using a single work plan. The committee undertakes specific work, as well as forming informal panels (for in-depth activities) or working groups. The assessing officer is given the chance to conduct an investigation in order to determine if the assessee correctly reported his or her income in the return. The claims for deductions, exemptions, and other benefits are legal and factually correct. In case of any omissions, contradictions, inaccuracies, or other errors, the assessing officer prepares his or her own assessment for the assessee, taking into account all relevant circumstances. (4) Best Judgment Assessment u/s 144 The term ‘best judgment assessment’ refers to the assessing officer’s opinion or calculation of the assessee’s income in the context of income tax law. In the situation of best judgment assessment, the evaluating officer will make the decision based on the best reasoning, i.e., they will not be dishonest. The assessee will not be dishonest in his or her assessment, nor will he or she be hostile to the officer. (5) Protective Assessment This is a type of assessment that focuses on those that are made to ‘protect’ the revenue’s interests. The income tax legislation, however, has no provision for the imposition of income tax on anyone other than the person to whom it is due. It is open to the authorities to undertake a protective or alternative assessment if it is unclear who among a few probable persons is actually liable to pay the tax. The authorities just make an assessment and keep it on paper until the situation is resolved when they make a protective assessment. A protective order of assessment, but not one of penalty, can be issued. FILE YOUR ITR NOW 173 CU IDOL SELF LEARNING MATERIAL (SLM)

(6) Re-Assessment (or) Income Escaping Assessment u/s 147 If the assessing officer has reason to think that income liable to tax has escaped assessment for any assessment year, they will conduct an income escaping assessment under Section 147. Moreover, it gives them the authority to reassess or re-compute income, turnover, and other figures that have escaped their notice. The goal of conducting an assessment under Section 147 is to bring any income that escaped assessment in the original assessment into the tax net. (7) Assessment in Case of Search u/s 153A The assessing officer will do the following in this type of income tax assessment: Giving such a person notice requires furnishing it within the time frame mentioned in the notice. Clause (b) referred to the income return for each of the six assessment years, which is confirmed in the prescribed format. Setting forth such other particulars as may be prescribed, and the provisions of this Act shall apply as if such return were a return required to be furnished under Section 139, to the extent possible; The assessor re-assesses the total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which such search or requisition is made. Conclusion Income tax assessments of any kind should be treated seriously. Furthermore, to avoid any form of income tax assessment in front of the assessing officer, one must prepare the income tax return accurately. If you are uncomfortable interacting with income tax authorities, please contact the tax professionals at Vakilsearch. Further, we can help you get your ITR submitted in as little as two working days. In addition, we handle all of your paperwork and provide complete transparency throughout the process. 174 CU IDOL SELF LEARNING MATERIAL (SLM)

10.2 SCRUTINY ASSESSMENT U/S 143(3) Section 143(3) Scrutiny Assessment Assessing a taxpayer's income tax return involves verifying the information given. After submitting a tax return, the IRS conducts an assessment. The Income Tax agency conducts the assessment to verify the return's taxable income and tax paid. Income tax assessments vary. This page discusses Section 143 scrutiny assessments (3). Here's Section 143(1) income tax notification info. Checkup Section 143(3) scrutinizes a taxpayer's income tax return. In a scrutiny assessment, a tax officer performs several tests and procedures to validate the validity and veracity of the taxpayer's claims, deductions, etc. A scrutiny evaluation ensures that the taxpayer hasn't underestimated income or underpaid tax. Section 143(2) scrutiny applies in the following situations: Section 139 or Section 142 returns are submitted (1). Assessing Officer or Income Tax Authority thinks it essential or expedient to guarantee taxpayer hasn't underestimated income, calculated excessive loss, or underpaid income tax. Audit hearing During a scrutiny assessment, the tax officer will allow adequate chance to be heard and submit papers or evidence to support a tax return. In the absence of information or non- cooperation by the taxpayer, the tax officer may use section 144's best judgement assessment. 175 CU IDOL SELF LEARNING MATERIAL (SLM)

In case of taxpayer cooperation and information submission, the Assessing Officer would pass an order after hearing/verifying evidence and considering all taxpayer information. On the Assessing Officer's order, the assessee can: To accept the Income Tax Authority's order and pay tax, obtain a refund, or accept a loss If a clerical mistake continues, file under Section 154. Can request a modification under section 263/264 Order appealed Review Time Limit Section 153 sets the deadline for section 143(3) scrutiny assessment: Within 21 months of the income's first assessment year. [Before 2017-18] 18 months after the income's first assessment year. [2018-19] 12 months after the assessment year in which the income was initially assessable [For 2019- 20 and later]. 10.3 BEST JUDGMENT ASSESSMENT U/S 144 In certain circumstances, the Assessing Officer must determine the entire income or loss after reviewing all relevant data. Examples: a. if someone doesn't file; 176 CU IDOL SELF LEARNING MATERIAL (SLM)

b. if someone violates a section 142(1) notification; c. if a guy doesn't audit his finances; d. if a person ignores a section 143(2) inspection notice or e. If the Assessing Officer isn't happy with the accounting. After hearing the assessee, best judgement may be formed. Best Judgement Assessment must provide the assessee a chance: After providing the assessee a chance to be heard, the best judgement assessment may be determined under section 144. If a notice under section 142(1) has already been issued, this notification is not required. Account Rejection Best Judgement: The Assessing Officer may reject inaccurate, false, erroneous, or incomplete account books under Section 145(3). The Assessing Officer might reject the books of account for the reasons listed in section 144. He doesn't trust the assessee's accounts. Although the assessee's books are accurate and comprehensive to the Assessing Officer's satisfaction, the technique of accounting used is such that profits cannot be appropriately derived, Where the assessee's accounting procedure isn't followed or Where income isn't estimated using section 145(2) standards\" 177 CU IDOL SELF LEARNING MATERIAL (SLM)

10.4 INCOME ESCAPING ASSESSMENT U/S 147 Income Escaping Assessment under section 147 is the assessment which is done by the Assessing Officer if there is a basis for him to suspect that income liable to tax has escaped assessment for any assessment year. It allows him to reassess or recompute escaped revenue, turnover, etc. Objective Income Escaping Assessment u/s 147 aims to tax any income that avoided initial assessment. Section 147 procedures are for the revenue, not the assessee, and intended to collect 'escaped income' At the assessee's request, the same cannot be transformed into ‘revisional' or ‘review' processes, rendering the machinery ineffective. Section 148 Income Escaping Assessment Notice If the Assessing Officer believes that taxable income avoided assessment for any assessment year, a section 148 notice may be issued: Case 1: If evaded income is less than Rs. 1,000,000 within 4 years of the relevant assessment. Case 2: If evaded income is at least Rs. 1,000,000, notice may be given for up to 6 years from the end of the assessment year. Case 3: If fugitive income is related with foreign assets, notification may be given up to 16 years after the assessment year. It's any financial interest. 178 CU IDOL SELF LEARNING MATERIAL (SLM)

The AO may only issue a notice under section 148 with consent from the section 151 authority. Taxable income that escaped assessment (a) If an assessee's income in the preceding year exceeded the maximum amount not taxable and he did not file a return. (b) When the Assessing Officer notices the assessee overstated income or claimed an excessive loss, deduction, allowance, or relief and no assessment has been made. (c) When an assessee fails to file a section 92E return regarding an overseas transaction. (c) After an evaluation, Undertaxed income. Too little income is assessed. This Act over-relieves such revenue. This Act's excessive loss or depreciation allowances have been calculated. A person with foreign assets. It's any entity's financial interest. Section 148 return The assessee must file by the deadline in the Notice of Income Escaping Assessment. Assessee might request AO's s.147 reasons. If the assessee doesn't request explanations, the 179 CU IDOL SELF LEARNING MATERIAL (SLM)

AO may continue assessing. AO must provide explanations if assessee requests them. Assessing officer must disclose explanation documented within a reasonable period, under Supreme Court standards. Conclusion Section 147 allows the Assessing Officer to review tax-chargeable income if he believes it eluded assessment. If the AO has grounds to suspect that revenue avoided assessment, he has reason to believe. LegalRaasta can aid with ITR filing. You may file ITR using our software or a CA's aid. Business, Bulk, and Revised Return Filing are other options. Assessment evasion (Section 147) When may Income Escaping Assessment Reassessment begin [Proviso 3 to Section 147]? Cases of untaxed income (Explanation 2 of Section 147) Section 148 income evasion notice If the Assessing Officer believes taxable income eluded assessment, he may evaluate it. Section 148 requires this notification. Once an assessment has been reopened, any escaping income that comes to the Assessing Officer's attention during the section 147 procedure might be added. Two conditions: Assessing Officer must think taxable income, earnings, or gains eluded assessment. This happened because the assessee omitted or failed to provide all key facts needed for his assessment that year. 180 CU IDOL SELF LEARNING MATERIAL (SLM)

10.5 DROPPING OF INCOME TAX ASSESSMENT U/S 152 Income Tax Act Section 152 \"Other provisions\" (1) In an assessment, reassessment, or recomputation under section 147, the tax is imposed at the rate or rates it would have been assessed had the income not avoided assessment. (2) Where an assessment is reopened under section 147, the assessee may, if he hasn't impugned any part of the original assessment order for that year under sections 246 to 248 or under section 264, claim that the proceedings under section 147 shall be dropped on his showing that he had been assessed on an amount or to a sum not lower than what he would be rightly liable for even if the income alleged to have escaped assessment had been taken into account, He cannot reopen cases closed by an order under sections 154, 155, 260, 262, or 263. Miscellaneous. (1) In an assessment, reassessment, or recomputation under section-147, the tax is imposed at the rate or rates it would have been assessed had the income not avoided assessment. (2) Where an assessment is reopened 97f[under clause (b) of section-147], the assessee may, if he has not impugned any part of the original assessment order for that year under sections 246 to 248 or under section-264, claim that the proceedings under section-147 shall be dropped on his showing that he had been assessed on an amount or to a sum not lower than what he would be rightly liable for even if the alleged escaped income had been He cannot reopen cases closed by an order under sections 154, 155, 260, 262 or 263. 181 CU IDOL SELF LEARNING MATERIAL (SLM)

10.6 SUMMARY  Tests are disliked by most pupils. For many pupils, test anxiety may make arithmetic more difficult. It may be challenging to correctly arrange assessments and time- consuming to mark them. Additionally, as a teacher, you are aware that student growth is much more than just a grade.  But evaluations include much more than just giving an end-of-unit exam or getting ready for a test. According to math teacher Marylin Burns  It might be difficult to include evaluation into routine mathematical training. It takes careful preparation to utilise homework assignments and class discussions to find out what pupils comprehend and don't grasp. We are better equipped to satisfy the needs of students who are hungry for new challenges and to help those who are having trouble since evaluation is a regular component of education.  Assessment as learning actively incorporates students in the learning process. It promotes students to create attainable objectives for themselves and objectively monitor their progress, as well as critical thinking and problem-solving abilities.  Use these six types of assessment in your teaching.  When preparing teaching for the first time, formative assessment is employed. Monitoring student progress is the aim in order to provide feedback. It assists in identifying the initial instructional gaps. You will be able to concentrate on what needs to be expanded upon for your training based on this input.  Confirmatory evaluation Assessments must be taken even after your lesson plans have been executed in the classroom. Confirmative assessments are used to determine if education is still effective, for example, after a year, and whether your teaching strategy is still relevant. A confirmative assessment might be thought of as a more thorough version of a summative evaluation.  Ipsative evaluation It compares a student's performance against past examples of that student's work. With this approach, you want to do better by comparing prior outcomes. You are not evaluating yourself in relation to other pupils, which might be detrimental to your confidence. 10.7 KEYWORDS  ASSESSMENT - the act of assessing something: appraisal assessment of damages an assessment of the president's achievements.  Protective Assessment- 182 CU IDOL SELF LEARNING MATERIAL (SLM)

This is a type of assessment that focuses on those that are made to ‘protect’ the revenue’s interests. The income tax legislation, however, has no provision for the imposition of income tax on anyone other than the person to whom it is due. It is open to the authorities to undertake a protective or alternative assessment if it is unclear who among a few probable persons is actually liable to pay the tax.  Resource Centre- means the Directorate of Income Tax constituted by the Board to act as the Resource Centre  Income tax- Income tax is a direct tax that a government levies on the income of its citizens. The Income Tax Act, 1961, mandates that the central government collect this tax. The government can change the income slabs and tax rates every year in its Union Budget. Income does not only mean money earned in the form of salary.  Tax- A tax is a mandatory fee or financial charge levied by any government on an individual or an organization to collect revenue for public works providing the best facilities and infrastructure. 10.8 LEARNING ACTIVITY 1. what are the types of assessment ___________________________________________________________________________ ___________________________________________________________________________ 2. There are how many types of assessments? ___________________________________________________________________________ ___________________________________________________________________________ 10.9 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. How many types of assessment are there? 183 CU IDOL SELF LEARNING MATERIAL (SLM)

2. Explain protective assessment 3. Explain dropping of income tax assessment u/s 152 4. What is income escaping assessment u/s 147 5. Explain scrutiny assessment. Long Questions 1. What is best judgement assessment u/s 144 2. Describe the concepts and features of assessment 3. Describe the mechanism of carry forward and set off of an Individual assessee. 4. What isDiagnostic assessments. 5. Explain Criterion-referenced assessments. B. Multiple Choice Questions 1. It is the extent to which a test measure it purports to measure is a. Validity b. Reliability c. Norms d. Probability 2.Which record is maintained to verify the ability, interest, aptitude and response of the students? a. Portfolio b. Diary c. Summative report d. None of these 3. The school headmaster conducts a monitoring programme for improving classroom instructional procedure. This will be in the midst of which type of evaluation? a. Norm-referenced evaluation 184 CU IDOL SELF LEARNING MATERIAL (SLM)

b. Criterion-referenced evaluation c. Summative evaluation d. Formative evaluation 4. The distributions made to a taxpayer from a traditional IRA are less than the required minimum distribution for the year. The amount of excise tax that the taxpayer may have to pay on the amount not distributed is a. 75% b. 50% c. 25% d. 10% 5. Self-employment tax applies to which of the following? a. Individuals who report only interest and dividend income b. Corporations that report less than $50,000 in gross receipts c. Independent contractors reporting net earnings from self-employment of $100 d. Independent Contractors reporting net earnings from self-employment of $400 or more Answers 1-a, 2-a, 3-d, 4-b, 5-b 10.10 REFERENCES Reference books  Essentials of Assessment Report Writing W. Joel Schneider, Elizabeth O. Lichtenberger, Nancy Mather, Nadeen L. Kaufman  Teaching with the Instructional Cha-Chas Four Steps to Make Learning Stick LeAnn Nickelsen, Melissa Dickson  Assessing English Language Learners 185 CU IDOL SELF LEARNING MATERIAL (SLM)

Bridges to Educational Equity: Connecting Academic Language Proficiency to Student Achievement Margo Gottlieb-  Assessment and Teaching of 21st Century Skills Care Textbooks  Next Generation Technology-Enhanced Assessment Global Perspectives on Occupational and Workplace Testing John C. Scott, Dave Bartram, Douglas H. Reynolds  Decolonizing Educational Assessment Ontario Elementary Students and the EQAO ArdavanEizadirad  Assessment in Educational Therapy Marion Marshall  Beyond Testing Towards a Theory of Educational AssessmentCaroline Gipps Website  https://www.prodigygame.com/in-en/blog/types-of-assessment/  https://www.teachthought.com/pedagogy/6-types-assessment-learning/  https://www.onlineassessmenttool.com/knowledge-center/online-assessment-center/what- are-the-types-of-assessment/item10637 186 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT - 11AUDIT STRUCTURE 11.0Learning Objectives 11.1Introduction 11.2Rectification under section 154 11.3Special Audit u/s 142(2A) 11.4Reference to Valuation. 11.5Summary 11.6Keywords 11.7Learning Activity 11.8Unit End Questions 11.9References 11.0LEARNING OBJECTIVES After studying this unit, you will be able to:  To introduce the concept of auditingand to enable students to understand its various aspects  To enable students to understand the importance of audit planning and documentation and procedures involved in audit.  To enable students to assess the audit techniques and the concepts of internal control and internal checks.  To study about Internal Audit. 11.1 INTRODUCTION Knowing what a tax audit is and if it applies to you as a taxpayer is crucial. Here is a helpful glossary of the word \"audit\" for your reference. A record, transaction, account, etc. may be checked, reviewed, verified, or examined as part of an audit. A tax audit is the process of examining and verifying a taxpayer's financial records to ensure they are in compliance with income tax laws. 187 CU IDOL SELF LEARNING MATERIAL (SLM)

The Audit of the Accounts of a Specific Category of Persons Carrying On a Business or Engaged in a Profession is covered under Section 44AB of the Income Tax Act, 1961. The group of taxpayers described in this section are required by law to have a Chartered Accountant audit their financial records. The CA will review and confirm that these accounts adhere to the different Income Tax legislation restrictions. A tax audit is the audit that is necessary in accordance with Section 44AB of the Income Tax Act of 1961. An audit report is the final product of the audit. The Chartered Accountant draughts this report in which they provide their conclusions and observations on the audited person's compliance. What does a tax audit have as its goal? The following goals are intended to be attained by a tax audit: Maintain and check the correctness of your books of accounts, and get a tax auditor to certify them. Making sure you abide by the different requirements of income tax legislation is the goal of submitting mandated information. Additionally, tax audits make sure that the claims for deductions are valid and that the records represent the taxpayer's real income. Who is the target of a tax audit? If a taxpayer has gross profits, sales, or turnover of more than Rs. 1 crore in a particular fiscal year, a tax audit is necessary. However, there are additional situations in which a taxpayer can be forced to have their finances audited. Taxpayers who fall under the following categories are required to take part in a tax audit: 2020 Above Provision Finance Act updates The threshold limit of one crore turnover for tax audits is proposed to be increased to five crores with effect from AY 2020-21 (FY 2019-20) if: Cash receipts from the taxpayer are restricted to 5% of the total revenue or turnover. and 188 CU IDOL SELF LEARNING MATERIAL (SLM)

The taxpayer is only permitted to receive 5% of the total amount in cash. Fiscal Act of 2021 The threshold has been raised from Rs 5 crore to Rs 10 crore in situations where cash transactions do not account for more than 5% of all transactions (with effect from 1st April 2021) The following people must voluntarily have their finances audited. When it comes to Professionals: If a profession or professionals have gross profits of more than Rs. 50 lakhs for the fiscal year, a tax audit would be necessary. According to Rule 6F of the Income Tax Rules of 1962, a profession or professional might be any of the following: Authorized representation Accountant Architect Interior Decorator actors, editors, directors, music directors, camera operators, etc. Engineer Advocate or Lawyer: Legal Professional Consultative Technical Doctors, physiotherapists, nurses, and paramedics are examples of medical professionals. If you practise a profession that is subject to presumed taxation (Section 44ADA) and you have asserted that your profits were less than the allowed threshold but your income above the threshold below which income tax is exempt, then you may be subject to presumptive taxation. If a company or individual is running a business: running a company (not choosing a presumed taxation plan) if your turnover or gross income exceeds 1 crore. The turnover bar for tax audit is enhanced to Rs. 10 crores if cash transactions make up to 5% of all gross receipts and payments (w.e.f. FY 2020-21) An audit is required if you operate a company that falls under Section 44AE, 44BB, or 44BBB's presumptive taxation provisions and assert that your earnings or gains are below the allotted threshold. 189 CU IDOL SELF LEARNING MATERIAL (SLM)

If your company qualifies for presumptive taxation under Section 44AD of the Income Tax Act, you report that your taxable income was below the thresholds set out under the presumptive taxation system, and your income exceeds the Basic Threshold Limit, carrying on the business and is not eligible to claim presumptive taxation under Section 44AD due to opting out for presumptive taxation in any one financial year of the lock-in period, or 5 consecutive years from when the presumptive tax scheme was selected, and if income exceeds the maximum amount not chargeable to tax in the following 5 consecutive tax years from the financial year when the presumptive taxation was not opted for. operating a firm that reports earnings in accordance with Section 44AD's presumptive taxation system, and if income exceeds the maximum amount exempt from tax in the five tax years that follow the fiscal year in which presumptive taxation was not chosen. carrying on a company that is reporting earnings in accordance with the Section 44AD presumptive taxation system and if your turnover or gross revenues exceed 2 crores in a fiscal year Regarding the taxpayer who sustained a business loss: If you have more over Rs 1 crore in total sales, turnover, or gross profits and you claim a loss from operating your firm while not choosing the presumptive taxation plan. The taxpayer may be subject to a tax audit under Section 44AB if his total income exceeds the basic threshold limit but he has a loss from operating a business (without choosing the presumptive taxation scheme) and the loss from operating a business occurs when sales, turnover, or gross earnings exceed Rs. 1 crore. carrying on a business (presumptive taxation system under section 44AD applicable) and experiencing a business loss but income above the basic threshold limit and declaring taxable income within the limitations stipulated under the presumptive tax scheme but income exceeding the basic threshold limit Legal Audit vs. Tax Audit The organization could need to have its books of accounts audited in accordance with a number of laws, such as the Societies Registration Act and the Companies Act. There is no need to undertake a new audit if the taxpayer already has a legal responsibility to have the accounts audited under a legislation other than the Income Tax Act. So long as the taxpayer's books of accounts are audited in accordance with the other legislation that requires an audit, it is adequate. However, the other requirement requires that the audit be finished before the return filing deadline. According to income tax legislation, the taxpayer may provide a 190 CU IDOL SELF LEARNING MATERIAL (SLM)

specified audit report declaring that an audit under the Income Tax Act is not required since the accounts have previously been audited in line with the requirements of another law. Who will do the tax audit requirements' bookkeeping audit? The audit is carried out in accordance with tax audit laws by a chartered accountant or a company of chartered accountants. Only 60 audits may be performed by one person in a fiscal year. This restriction applies to each member of the partnership firm who is a chartered accountant in the event of a partnership. How is a tax audit conducted? The tax audit report must be filed by the taxpayer in the designated format. Report Format For Income Tax Audits The department of income taxes specifies the format. The several forms of tax audit reports and when they apply are as follows: Form 3CA - This form is for taxpayers who are engaged in a trade or business and who are required to have their books of accounts audited by another legislation. Form 3CB – This form is for taxpayers who are in the business or profession of their choice and who are NOT otherwise obligated by law to have their books of accounts audited. The Form No. 3CD should be seen as a thorough description of specifics. It contains a variety of information on the business and its dealings. NRIs and international businesses should use Form No. 3CE. If they receive fees or royalties from any Indian company or the government for the provision of technical services, they are obligated to have an audit of their financial records. However, the taxpayer must submit Form No. 3CD together with Form No. 3CA or Form No. 3CB, as appropriate, in each of the two scenarios. Filing of Tax Audit Reports The report filing process is broken down into the following steps: 191 CU IDOL SELF LEARNING MATERIAL (SLM)

The chartered accountant will use his or her own login information to submit the tax audit report online. The person tasked with conducting the audit of the person or business must be a chartered accountant. The taxpayer is required to provide information on the chartered accountant in their platform. as soon as the chartered accountant uploads the audit report. The report is available for acceptance or rejection by the taxpayer. If the taxpayer rejects the report, the procedure will restart from scratch. What timeframe does the submission of a tax audit report have? The report's due date is dependent upon the income tax return's due date. The report must be submitted by the taxpayer by the income tax return deadline, whichever comes first. For taxpayers subject to audit under the Income Tax Act, the submission deadline for the audit report, Form 3CA or Form 3CB, coupled with Form 3CD, is September 30 of that year. Taxpayers with transfer pricing and specified domestic transactions (Form 3CE) have until October 31, 2022, to submit their audit reports for the AY 2022–2023. These deadlines must be met unless they are postponed. Read this: Tax return filing deadlines. Failure to Comply with Tax Audit Provisions Is Punishable Under Section 44AB The appropriate penalty must be paid by a taxpayer who disregards tax audit requirements. According to Section 271B of the Income Tax Act, the penalty will be the least of the following: 5% of the entire sales, turnover, or gross income is Rs. 1,50,000 Since Mr. Amit operates a company, he might face a tax audit. His entire revenue for the fiscal year is Rs 4 crore. As required by section 44AB, he neglects to have his books of accounts audited. The following will incur the lowest penalty: Rs 1,50,000 192 CU IDOL SELF LEARNING MATERIAL (SLM)

10% of the whole revenues. 4% times 0.5% is $2,000 The fine in this instance will be Rs. 150,000. When the taxpayer demonstrates a valid basis for non-compliance, the income tax department will, however, waive the penalty. Some valid justifications for which a remission of penalties is appropriate include the following: the retirement of the tax auditor-related delay death or physical incapacity of the accounting partner causes a delay Natural catastrophes Labor difficulties like strikes or lockouts can create a delay delay brought on by the theft, fire, or other uncontrollable events leading to the loss of accounts How may a company owner or professional lower their tax obligations? As a professional or company owner, you may reduce your tax obligations in the following ways: Tax returns must be submitted on time or earlier. This tax filing advice benefits you in additional ways besides guaranteeing that you are a law-abiding firm. This is so that you may carry a loss from your firm forward for up to 8 years in a row. Follow the government's reforms as they are implemented. To aid companies, particularly small and medium-sized ones, the government periodically revises its policies. Making sure you are taking full advantage of all deductions to reduce your taxable income requires familiarizing yourself with these developments. Make the most of your startup costs. These provide tax advantages under Section 35D of the Income Tax Act and are further known as preliminary costs. These may be written off over five consecutive years in accordance with the legislation and often consist of costs you spend before the start of your firm. As a result, keep these tips in mind to lower your tax burden and complete your tax audit on time. Keep in mind that you might face a fine of up to Rs. 150,000 if you don't. 11.2 RECTIFICATION UNDER SECTION 154 193 CU IDOL SELF LEARNING MATERIAL (SLM)

The Income Tax Department handles your tax return once you submit it and notifies you by email. Details about the return you filed and the department's numbers are included in the notification. The following may be done if there is a discrepancy, such as a bigger demand or refund than what you had reported in the return: Make a correction request. Accept the request, then pay the tax. When there is an apparent error in your income tax return, the Income Tax Department will grant a correction request under section 154(1). The following mistakes may be fixed by submitting a rectification: an untrue statement an error in the numbers a little administrative mistake a mistake brought on by ignoring legally required requirements. Here are a few instances of these mistakes: an incorrect tax credit mismatch in advance taxes inappropriate mention of gender 194 CU IDOL SELF LEARNING MATERIAL (SLM)

Additional information was omitted while completing the report for capital gains. Changes to your income tax return's bank account or address should not be made through a correction request. When is a correction actionable? Only returns that have previously been processed by CPC, Bangalore, are eligible for correction requests. A rectification should not be submitted if, after correcting an \"error,\" income changes. A revised income tax return should be submitted in this situation. No further exemptions or deductions may be made. Who is able to submit the Rectification? You may fix a return by: the individual submitting the return, An error that is visible on the record's face may be corrected by the Income Tax Authority on its own. 11.3 SPECIAL AUDIT U/S 142(2A) Only when the conditions outlined in Section 44AB are met, which are often based on the Turnover/Gross receipt Criteria, is the Assessee required to have its accounts audited. The major goal of introducing Section 44AB is to ascertain whether or not the tax obligation computed by the Assessee complies with the provisions and regulations of the Income Tax Act. The assessee’s-chartered accountant's submission of the Tax Audit Report according to Section 44AB is not always the best course of action. √ This implies that the revenue may still need to conduct a core inquiry even after a report has been filed under Section 44AB, depending on the circumstances. 195 CU IDOL SELF LEARNING MATERIAL (SLM)

Ads by √ It's also feasible that the assessee, who is exempt from having his or her books audited under Section 44AB because their annual revenue is less than $1 million, operates a specialized kind of company. √ Transaction volume, complexity of accounts, and type of the transaction all call for extra attention. √ If the assessee is entitled to receive its account, the concerns raised in the Tax Audit Report could not be covered. √ This is when the need for a particular audit under Section 142(2A) arises. The order must be granted during assessment procedures within the time frames outlined in Section 153 of the Act. For instance, an order for the AY 2019–20 must be approved on or before March 31, 2021. This indicates that AO has around a year to finish the Assessment. In such situation, after receiving the prior consent of CIT, AO may request a special audit in accordance with Section 142(2A) of the Act in order to swiftly complete the Assessment. The audit must also be completed over a period of time by the Chartered Accountants Commissioner has designated for this reason. As a result, AO needs a little more time in this situation to finish the evaluation. Therefore, Explanation to Section 153 is added to the Act to enable completion of Assessment in such a circumstance. B) Sections 142(2A) through 142(2D) of the Income Tax Act of 1961 are decoded ADVERTISEMENT I) Analysis of the \"Proceeding\" that is now in front of him, the Assessing Officer The Assessing Officer alone has the authority to order a special audit. According to Section 142(2A) of the Act, the Commissioner of Income Tax cannot order the taxpayer to have his accounts audited. √ Due to his dual role as an Assessing Officer and Joint Commissioner of Income Tax, he may provide guidance for Special Audits. √ However, prior approval from PCCIT/CCIT/PCIT/CIT is necessary before directing the Special Audit. This indicates that they have a secondary role in directing the Assessee's Special Audit. √ Only while the proceedings are still pending before him, that is, before the AO, may a direction for a special audit be made. A proceeding might be an assessment or a penalty proceeding before an AO, such as a penalty proceeding under section 270A. The Commissioner of Income Tax (Appeals), popularly known as CIT, may also start the penalty proceedings under Section 270A. They are still unable to lead the Special Audit. since only AO-initiated processes are covered. 143(3)/144/147/153A refers to the fact that all sorts of assessment proceedings are included here. The actions taken before the CIT(A)/CIT, whether under Section 263 or 264, the ITAT, the High Court, or the Supreme Court, are not covered by Section 142(2A) of the Act. 196 CU IDOL SELF LEARNING MATERIAL (SLM)

It implies that they are unable to direct the Assessee for a Special Audit. It is assumed that such processes are ongoing before the Assessing Officer in the event that the matter is remanded back to the AO, that is, the Assessment is set aside or cancelled with the directive to make a new assessment as stated to in Section 153(3). √ In such instance, AO may conduct a special audit according to Section 142. (2A). In this situation, Explanation to Section 153 extends the deadline for doing the evaluation. √ The Assessment Jurisdiction of the AO is restricted to the direction and does not extend beyond that in cases when a higher authority gives a direction. √ For instance, ITAT instructs the Assessing Officer to just review Income A and B while maintaining the remainder of the order. A matter of this kind is handled in accordance with Section 153(6) of the Act. In such case, if the AO wishes to require the assessee to undergo a special audit, the scope of that audit should logically be restricted to just Income A and B. There must be ongoing legal proceedings before the Assessing Officer. The Assessee cannot receive specific audit instructions before to the assessment or after its completion. It follows that the AO cannot offer such instructions about whether to initiate the Assessment of Assessee case or not. √ Similar to that, the AO cannot issue this directive after the passage of the Assessment Order. For instance, the CIT(A) grants Assessee Mr. X costs D of Rs 20 Lacs based on the most recent Supreme Court decision, which was earlier denied by the AO under Section 143. (3). Revenue wants to be sure the appeals' potential result before filing any more appeals with ITAT. As a result, he gave the Assessee permission for AO to order a Special Audit. Comment: Yes, Since the Assessment Proceedings have already been completed, the AO's direction for a special audit is not legal given the conclusion of the Assessment Proceedings. Assessee may object to such directives by filing a Writ Petition. √ The Income Tax Act of 1961 prohibits the arbitrary use of Special Audits. II) A description of the kinds of transactions examined under Section 142(2A) of the Act. √ Only if one of the following circumstances arises and it is in the best interests of the revenue may the Direction for Special Audit be given: Complexity and nature have a role in accounting. The quantity of the Accounts For instance, a specific transaction has been entered several times. 90% of the products sold by Mr. X to Mr. Y, a relative, throughout the year were sold on credit. 197 CU IDOL SELF LEARNING MATERIAL (SLM)

Amounts more than 20% are claimed as bad debts under Section 36(1)(vii) of the Act. Uncertainty over the accuracy of the Accounts The abundance of transactions in the Accounts It seems sense that certain transactions happen more often at certain times of the year. For instance, throughout the course of the year X Limit, take Rs. 49,900 from their current account 170 times and deposit the same amount 150 times. Activities of a company with a specialized nature: As an example, the Assessee operates oil rigs in India. Prior to granting the order for a Special Audit, both conditions must be met. Since they must be completed before delivering special audit direction. Even if the complexity of the accounting is established but does not negatively affect the revenue's interest, the AO cannot order a special audit. The concerned assessee is given a fair chance to be heard before the Special Audit is directed. 11.4 REFERENCE TO VALUATION The tax authorities may need to determine the value of any capital asset in order to complete the assessment of a taxpayer or for any other reason. In this situation, the tax authorities may consult the valuation officer (*) to determine the capital assets worth. The clause pertaining to the tax authorities' ability to refer a capital asset's value determination to the valuation officer is found in Section 55A. You may learn more about the different provisions of section 55A in this section. (*) The definition of \"Valuation Officer\" under clause (r) of section 2 of the Wealth-tax Act, 1957, is the same. A valuation officer is defined in section 2(r) of the Wealth-tax Act as a person appointed as a valuation officer under section 12A of the Wealth- tax Act, 1957. This definition covers regional valuation officers, district valuation officers, and assistant valuation officers. The Wealth-tax Act of 1957's Section 12A allows the Central Government to designate valuation officers. basic supplies The tax authorities may refer to a valuation officer for the purpose of valuing a capital asset under the conditions and for the reasons specified in Section 55A. It's necessary to comprehend the fundamental provisions pertaining to the nature of the valuer before diving into the specific regulations in this respect. Two categories of valuer exist: (1) Registered Valuers and 198 CU IDOL SELF LEARNING MATERIAL (SLM)

Valuation Officer, second. While both registered valuers and valuation officers carry out the same duties, registered valuers may also be referred to as private valuers since they act in private capacities. Registered valuers, also known as private valuers, operate under a Board- issued license in a personal capacity. The Private Valuer's valuation is not legally enforceable by the tax authorities. A departmental valuer is another name for a valuation officer. They are approved valuers for the Income-tax Department and are recognized by that department. The Income-tax Department has approved or authorized departmental valuers, often known as valuation officials. The value determined by these valuers will be pursued by the tax authorities. In other words, if the tax authorities need to assess the value of an item, they will ask the valuation officer to do so, and the value they arrive at will be taken into account by the tax authorities. [As modified by the 2022 Finance Act] Situations in which a valuation officer reference may be made After recognizing the distinction between departmental valuers and private valuers, we will now comprehend the conditions under which the Assessing Officer may send a matter to the valuation officer. According to section 55A, the Assessing Officer may refer the assessment of a capital asset to a Valuation Officer in order to determine the fair market value of the asset. The following categories will serve to roughly group the situations in which the Assessing Officer may refer to the Valuation Officer: (1) A situation in which the taxpayer's claim for the asset's worth matches the registered valuer's estimate. In other words, in this instance, the taxpayer will have gotten a valuation report from a registered valuer, sometimes known as a private valuer. The taxpayer often obtains such a report to substantiate the declared value of the capital asset. The Assessing Officer may refer a case to the valuation officer (i.e., departmental valuer) if the Assessing Officer believes that the value of the asset as claimed by the taxpayer differs from its fair market value in cases where the value of the asset as claimed by the taxpayer is consistent with the estimate made by a registered valuer (i.e., a private valuer). In other words, no quantum of variation has to be proved in this situation in order to send the matter to the valuation officer. The Assessing Office must only believe that the value of the asset claimed by the taxpayer and the asset's fair market value are different, or that both values are different. The difference, or variance, might be of any value. (2) An instance not mentioned above If the situation does not fall under (1) above, the Assessing Officer may submit the issue to the Valuation Officer if he believes that: I that the asset's fair market value exceeds the taxpayer's claimed value by a greater percentage of that value than claimed or by a greater sum than that which may be specified (*) in this respect; or (ii) that, given the asset's nature and other pertinent factors, it is necessary to do so. (*) Currently, the required amount is Rs. 25,000, and the prescribed rate is 15%. To put it 199 CU IDOL SELF LEARNING MATERIAL (SLM)

another way, the Assessing Officer may refer to the Valuation Officer in any of the following circumstances that are not covered by (1) above: [As modified by the 2022 Finance Act] I where the difference between the taxpayer's claimed value for the asset and the Assessing Officer's estimate of its fair market value is more than 15% of the asset's worth or more than Rs. 25,000, as applicable; or (ii) if it is required to do so in light of the asset's nature and other relevant circumstances. When the Assessing Officer refers the Valuation Officer in accordance with Section 55A, the requirements of the following sections of the Wealth-tax Act of 1957 shall apply with the appropriate modifications. modifications: provisions of Section 16A of the Wealth-tax Act of 1957, Subsections (2), (3), (4), (5), and (6). The Wealth-tax Act of 1957's Section 16A is comparable to the Income-tax Act's Section 55A. The requirements pertaining to making a referral to the valuation officer for conducting an assessment under the Wealth-tax Act are found in Section 16A of the Wealth-tax Act, 1957. provisions of subsections (3A) and (4) of subsection (ha) of section 23 of the Wealth- tax Act of 1957. The Wealth-tax Act of 1957's Section 23 addresses appeals to the Deputy Commissioner (Appeals). provisions of Section 24's Subsection 5 of the 1957 Wealth Tax Act. The Wealth-tax Act of 1957's Section 24 addresses appeals to the Appellate Tribunal. Section 34AA of the Wealth- tax Act of 1957's provisions. Registered valuers may represent the taxpayer when appearing before the tax authorities under Section 34AA of the Wealth-tax Act of 1957. provisions of the 1957 Wealth-tax Act's Section 35. Correction of errors that are evident from records in any order of the tax authorities is covered under Section 35 of the Wealth-tax Act, 1957. Section 37 of the Wealth-tax Act of 1957's provisions. The Wealth-tax Act of 1957 has provisions in Section 37 pertaining to the ability of tax officials to collect evidence under oath, among other things. A valuation officer may be referred to by the Tax Authorities in addition to the requirements of Section 55A and Section 142A. The following are the section 142A's provisions: 200 CU IDOL SELF LEARNING MATERIAL (SLM)