Tuesday, 21 May 2013

Procedure of Scrutiny Assessment u/s 143(3)

  Regular/Scrutiny Assessment Procedure U/s 143 (3)

For this notice is issued u/s 143(2). The salient features of this section 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 month of expiry of financial year in which the return was furnished.

 Only 3% to 5% cases are taken for scrutiny assessment.

The assessing officer (AO) is not required to possess any ‘reason to believe’. In this assessment AO is charged with the duty to ensure that the assessee:

  • has not understand the Income or

  • has not computed excessive loss has not under paid taxes

Also while the scrutiny assessment is in process, the assessee can also put forth claims that he had not done in the ITR and these have to be considered by the AO.

Consequently, in his assessment u/s 143(3) the AO can even reduce income or assess loss higher than the returned loss.

The assessment u/s 143(3) is completed with an assessment order in writing which should contain the tax computed under the signature of AO.

Under this AO can also do protective assessment-i.e. assess the same income in hands of more than one person till it becomes clear in whose hand the income should be assessed. Protective assessment is undertaken so that there is no loss to revenue.

If assessment u/s 143(3) is done on basis of invalid return- the assessment order continues to operate till it is invalidated by the court.

On remand (i.e. if the cases goes to ITAT  on some points, and ITAT sends it back to AO for reconsideration or correction on question  of fact or law) only the specific point can be dealt by the AO. On remand, the AO cannot bring in new sources of income or open new issues.

Assessment made under this section would be final and the department cannot open the case again unless there are valid reasons (‘reasons to believe’). These are dealt in reassessment proceedings.                  


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