Process Scrutiny Assessment

Income Tax Assessment Under Section 143(3) of Income Tax Act

Assessment U/s 143(3) is a detailed assessment and is referred to as scrutiny assessment. At this stage a detailed scrutiny of the return of income will be carried out. At this stage a scrutiny is carried out to confirm the correctness and genuineness of various claims, deductions, etc., made by the taxpayer in the return of income.

The objective of scrutiny assessment is to confirm that the taxpayer has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner.

Procedure of assessment under section 143(3)

If the Assessing Officer considers it necessary or expedient to ensure that the taxpayer has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, then he will serve on the taxpayer a notice requiring him to attend his office or to produce or cause to be produced any evidence on which the taxpayer may rely, in support of the return.

To carry out assessment under section 143(3), the Assessing Officer shall serve such notice in accordance with provisions of section 143(2).

Notice under section 143(2) should be served within a period of six months from the end of the financial year in which the return is filed.

The taxpayer or his representative (as the case may be) will appear before the Assessing Officer and will place his arguments, supporting evidences, etc., on various matters/issues as required by the Assessing Officer.

After hearing/verifying such evidence and taking into account such particulars as the taxpayer may produce and such other evidence as the Assessing Officer may require on specified points and after taking into account all relevant materials which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the taxpayer and determine the sum payable by him or refund of any amount due to him on the basis of such assessment.

FAQs

Frequently Asks Questions

Scrutiny assessment refers to the examination of an income tax return by giving an opportunity to the assessee to substantiate the income declared and the expenses, deductions, losses, exemptions, etc. claimed in the return with the help of evidence.
During the course of scrutiny, the assessing officer gets an opportunity to conduct enquiries, as deemed fit, from the assessee and from third parties.
The exercise is aimed at ascertaining whether the income in the return is correctly shown by the assessee and whether the claims for deductions, exemptions, etc. are factually and legally correct.

If any omissions, discrepancies, inaccuracies, etc. come to light as a result of this examination, the assessing officer makes his own assessment of the assessee’s taxable income after taking into consideration all the relevant facts. These assessments are made under section 143(3) of the Income Tax Act. The assessing officer may charge mandatory additional interests and may levy penalties and may initiate prosecution proceedings.

Tax officer would perform tests and processes to confirm the correctness and genuineness of various claims, deductions, etc. made by the taxpayer in the income tax return, and to initiate a scrutiny assessment, the Income Tax officer must first issue an income tax notice u/s 143(2). The time limit to issue notice is three months from the end of the relevant F.Y. in which the return is filed.

Limited Scrutiny cases shall remain confined only to the specific reasons/issues for which the case has been picked up for scrutiny.
The time limit is only up to a period of 3 months from the end of the financial year in which the assessee filed his return.

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