Module 5

Assessment [Section 2(8)]

This is the procedure by which the income of an assessee is determined by the Assessing Officer.
It may be by way of a normal assessment or by way of reassessment of an income previously
assessed.

Types of Assessment:
Self Assessment [Sec 140A]: It is an assessment done by the assessee himself/herself.
Best Judgment Assessment [Sec 144]: It is an assessment based on the best judgement of the
income tax officer and it is performed when the assessee does not cooperate with the income tax
officer.
Scrutiny Assessment [Sec 143(3): It is an assessment done when the return of income is
selected for a scrutiny by the assessment officer.
Income escaping Assessment [Sec 147]: It is an assessment done if the tax officer believes
that the income of an assessment has escaped the assessment by reopening the earlier
assessment.

Income--‐tax is recovered from the assessee in the previous year itself through:
(1) Tax deduction at source (TDS): It is the tax deducted on salary, income from securities,
bank interest on deposits, Winnings from lotteries, crossword puzzles and horse races, Payments
to contractors and sub--‐contractors, Commission etc. on the sale of lottery tickets, rent, Payment
on transfer of certain immovable property other than agricultural land, Fees for professional or
technical servi etc.

(2) Tax Collection at Source (TCS]: Seller of certain goods or provider of services is responsible
for collecting tax at source at the prescribed rate from the buyer. Generally, tax is required to
be collected at source at the time of debiting of the amount payable by the buyer of certain goods
to the account of the buyer or at the time of receipt of such amount from the said buyer,
whichever is earlier.

(3) Advance Tax [Sec 207 to 219]:

(1) Tax shall be payable in advance during any financial year, in accordance with the provisions
of sections 208 to 219, in respect of an assessee’s current income i.e. the total income of the
assessee which would be chargeable to tax for the assessment year immediately following that
financial year [Section 207].
(2) Under section 208, obligation to pay advance tax arises in every case where the advance tax
payable is Rs. 10,000 or more.
Senior citizens (age 60 years or more) need not pay advance tax provided they do not have
business income and are allowed to discharge their tax liability (other than TDS) by payment of
self--‐assessment tax.
These taxes are deductible from the total tax due from the assessee.

TAN: It is Tax Deduction and Collection Account Number. It is allotted by the assessing officer to
those who are supposed to deduct tax at source or collect at source.

MODULE 5 – INCOME TAX

Refund of Income Tax:
The refund of Income tax by the department of income tax to the assessee arises when the actual
tax liability is less than the amount of tax paid. As per Section 237 of the Income Tax Act, 1961,
assessees can claim a refund for tax amount paid in excess. Refund orders are issued by Income
Tax Department only after the thorough verification of facts and circumstances and refunds are
made online i.e., e--‐refunds.
Cases leading to refunds:
If taxes paid by you on the basis of self--‐assessment are more than what you are liable to pay
If Tax Deducted at Source (TDS) by the employer or by the bank is more than what the assessee
is liable to pay as per the regular assessment.
When the details of tax--‐saving investments are not provided on time, one can claim tax refund on
declaring the investments after providing the proofs to the income tax department.
The assessee can check Income Tax Refund Status Online by logging in to e--‐filling portal of
income tax.

Return of Income:
A return of income is the declaration of income by the assessee in the prescribed format. The
format for filing of returns by different assessees is notified by the CBDT. The particulars of income
earned under different heads, gross total income, deductions from gross total income, total income
and tax payable by the assessee are generally required to be furnished in a return of income.
Under section 139(1), it is compulsory for companies and firms to file a return of income or loss
for every previous year on or before the due date in the prescribed form.
In case of a person other than a company or a firm, filing of return of income on or before the
due date is mandatory, if his total income or the total income of any other person in respect of
which he is assessable under this Act during the previous year exceeds the basic exemption limit.
Return of Loss: Section 139(3) requires filing of return of loss mandatorily within the time
allowed under section 139(1) for claiming carry forward of the losses.
Belated Return [Sec 139(4): Any person who has not furnished a return within the time allowed
to him under section 139(1) may furnish the return for any previous year at any time:
(i) before the end of the relevant assessment year; or
(ii) before the completion of the assessment, whichever is earlier.
Revised Return [Sec 139(5): If any person having furnished a return under section 139(1) or a
belated return u/s 139(4), discovers any omission or any wrong statement therein, he may furnish
a revised return at any time: (i) before the end of the relevant assessment year; or (ii) before
completion of assessment, whichever is earlier.
Due date of Filing of Return
Assessee Due date
(a) a Company
30th Sept
(b) a Person (other than a Company) whose accounts are required to be
of the
audited under the Income Tax Act, 1961 or any other law in force; or A.Y.
(c) a Working Partner of a firm whose accounts are required to be audited
under the Income Tax Act, 1961 or any other law for the time being in force.
Assessee who is required to furnish a report referred to in section 92E 30th Nov of
(assessees the A.Y.
who have to file a transfer pricing report u/s 92E w.r.t. international transactions)

Any other Assessee 31st

July of
A.Y.

MODULE 5 – INCOME TAX

ITR Forms: Income Tax Returns Forms are provided by the income tax department for filling the
returns of income. The forms, templates and regulations are notified and issued for each
assessment year by the tax department after 31st March. Generally, the ITR forms are: ITR 1, ITR
2, ITR 3 and ITR 4.
The use of a particular form depends on the type of the assessee and the sources/heads of income
from where the income is earned by the assessee.
E Filing: Efiling or electronic filing is submitting your income tax returns online. The E--‐filing is
done by logging on to:
https://www.incometaxindiaefiling.gov.in/

Tax Planning: It is the art and science of reducing the tax liability within the legal framework of
the tax laws. This can be achieved as follows:
(1) For each head of income, claim all deductions subject to conditions
(2) For each head of income, exploit all exemptions subject to conditions
(3) Check the residential status for the relevant previous year
(4) Claim total income deductions
(5) Adhere to tax management by filing the returns of income in time
(6) Return of Loss is essential for claiming the set--‐off in the subsequent year
(7) Pay advance tax as required by law

Note on Tax Management: It is a strategic approach to mange the taxes at the corporate level.
It encompasses international taxation, DTAA (Double Tax Anti Avoidance), assessment of impact
of M&A on taxes, responding to the fiscal policy of the government etc.

Tax Avoidance: It is the process of reduction of tax liability by making use of the loopholes of
the tax law. Here the attempt is to follow the letter of the law but not the spirit of the law. It is
legal but desirable in the long run interest of the assessee.

Tax Evasion: It is an attempt to break the law provisions. It is illegal and has serious legal
consequences leading to punishment and imprisonment.

Tax Planning, Tax Avoidance and Tax Evasion: A Comparison:

1. Nature: Tax planning and Tax avoidance are legal whereas Tax evasion is illegal
2. Attributes: Tax planning is moral. Tax avoidance is immoral. Tax evasion is illegal and
objectionable.
3. Motive: Tax planning is the method of saving tax. However, tax avoidance is dodging of tax.
Tax evasion is an act of concealing tax.
4. Consequences: Tax planning results in savings of tax ethically. Tax avoidance leads to the
deferment of tax liability. Tax evasion leads to penalty or imprisonment.
5. Objective: Tax planning is done to reduce the liability of tax by applying the provision and
moral of law.
The objective of Tax avoidance is to reduce tax liability by applying the script of law whereas Tax
evasion is done to reduce tax liability by exercising unfair means.
6. Permissible: Tax planning and Tax avoidance are permissible whereas Tax evasion is not
permissible.

MODULE 5 – INCOME TAX