Page 126 - DCOM308_DCOM502_INDIRECT_TAX_LAWS

Unit 7: Collection and Recovery of Service Tax and Assessment Procedure

Dept processes the Return and sends the Refund Cheque (Income Tax Refund Order) – it is Notes
sent under cover of ‘Intimation u/s 143(1)’

2. Regular/Scrutiny Assessment u/s 143(3): For this notice is issued u/s 143(2).
The salient features are:
This notice can be issued only when the assessee has furnished Return of Income u/s
139(1) or 142(1)
The notice u/s 143(2) has to be served on the assessee within six months of expiry of
financial year in which the return was furnished.
Only 3% to 5% cases are taken for scrutiny assessment
The Assessing Officer (A.O) is not required to possess any ‘reason to believe’. In this
assessment, A.O is charged with the duty to ensure that the assessee:
 has not understated income

 has not computed excessive loss
 has not under paid taxes
3. Best Judgement Assessment u/s 144:

Conditions:
 Assessee fails to furnish ITR u/s 139(1) and has not furnished it u/s 139(4)

 fails to comply with all terms of notice u/s 142(1)
 fails to comply with direction issued u/s 142 (2A)
 fails to comply with terms of notice u/s 143(2)

Then the A O to the best of his judgment can determine the income and tax pay able by
assessee based on records possessed by A O.

Prior to proceeding on assessment u/s 144, the A O should give a show cause notice to the
assessee. However if the A O has already issued notice u/s 142(1)(i) and the assessee has
not complied with its terms, then A O can go ahead with assessment and no show cause
notice is required.
4. Assessment / Reassessment of Income Escaping Assessment u/s 147: To undertake assessment
u/s 147 , notice has to be issued u/s 148. Before issuing notice u/s 148 the A O shall ‘record
his reasons’ for issuing the notice. The notice has to be issued separately for each A Y for
which proceedings are to be taken up u/s 147. The assessee has to file Return in response
to notice u/s 148 – even if he has filed the return previously within due date. Also, the
A O is duty bound to provide the assessee the reasons recorded by him – if the assessee
requests for it after filing Return of Income in response to the notice.

Example: Now take an example – the assessee “X” has filed Return for A Y 2006-07 based
on income for the FY 2005-06 within due date of 31-July-2006. For doing scrutiny assessment
u/s 143(3), Notice u/s 143(2) can be issued upto 30-Sept-2007.
But now he can do the assessment u/s 147.

So, he would issue him notice u/s 148 on 30-May-2009 for opening assessment proceedings
u/s 147. Now in response to this notice – “X” files return in 5-June-2009. Now this return is

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