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Unit 13: Registration of Dealers

13.5 Types of Assessment Notes

Assessment means checking, judging or in simple words computing the income and tax on it. In
the Income Tax Act there are four types of Assessment:

1. Self assessment u/s 140A.
2. Scrutiny assessment u/s 143(3).
3. Best judgment assessment u/s 144.

4. Income escaping assessment u/s 147.

13.5.1 Self Assessment U/S 140A

As we know after the end of the financial year every person who is required to file income tax
return, should file his return of income. Thus, an assessee himself files his return of income, and
pay tax as per the return of income filed. This process of self-calculation of income and tax is
called self-assessment. Since the tax and income under return of income is calculated by assessee
himself therefore, it is called self-assessment. The Assessing Officer (AO) only checks the return
of income on the face of it and corrects the mistake, if any on it. If there is any short of tax he call
for it and if there is any excess of tax paid he shall refund the same.

13.5.2 Scrutiny Assessment U/S 143(3)

On the basis of return of income filed, AO may undertake deep examination of some return of
income roughly 2% to 3% of the total returns filed. In scrutiny assessment the AO calls the
assessee to furnish the explanations and books of accounts. For undertaking the scrutiny
assessment the AO has to issue a notice to the assessee under section 143(2). If Assessee produces
the information and explanations required by the Assessing Officer (AO) the AO completes the
assessment and determine the Taxable income and income tax liability on the basis of the
information and explanations produced before him.

13.5.3 Best Judgement Assessment U/S 144

Best Judgment Assessment, as the name indicates Best Judgment Assessment means the
computation of income and tax is undertaken by the AO himself, on the basis of the best of his
judgment. The Best judgment Assessment can be made by an AO under the following cases:
1. Assessee does not file his regular return of income u/s 139.

2. Assessee does not comply with instructions u/s 142 (1), i.e., notice requiring to file his return
of income or 142 (2A), i.e., notice requiring assessee to conduct audit of his accounts.
3. Assessee does not comply with instructions u/s 143(2), i.e., notice of scrutiny assessment.

4. AO is not satisfied regarding completeness of accounts. Since in all of the above cases either
assess does not cooperate with the Assessing Officer (AO) or does not file return of income or
does not have complete accounts. Thus, the assessing officer cannot calculate the income and
therefore, he has to judge the income on the basis of his best assumptions/judgments. The AO
must give a hearing to the assessee before completing the assessment as per best of his judgment.
No refund can be granted under best judgment assessment.

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