Principles Of Income Tax Assessment

An income tax assessment is a procedure used to determine taxability, as well as the income and losses of taxpayers. Assessments are made for a specific tax period. The principles underlying an income tax assessment are investigated in this article.

What Is Income Tax Assessment?

Under the new tax regime in India, the basic exemption limit for individuals up to the age of 60 is Rs. 2.5 lakh. As a result, if an individual or entity earns more than 2.5 lakh, they must file income tax returns by self-calculating the amount earned during the previous fiscal year.

After taxpayers diligently fill out their income details, it is assessed. As a result, income tax assessment is a post-filing procedure that assists authorities in determining whether the information provided by taxpayers is legitimate or not.

Principles Of Income Tax Assessment

Types Of Income Tax Assessment

  1. Self-Assessment – u/s 140A
  2. Summary Assessment – u/s 143(1)
  3. Scrutiny Assessment – u/s 143(3)
  4. Best Judgment Assessment – u/s 144
  5. Protective Assessment
  6. Re-assessment or Income Escaping Assessment – u/s 147
  7. Assessment in case of Search – u/s 153A


Procedural Quasi-Judicial Proceedings

Quasi-judicial proceedings are income tax assessments in which the taxpayer is required to appear before the Assessing Officer. A quasi-judicial officer would be granted certain judicial powers for a specific purpose, most commonly for scrutiny evaluation. As a general rule, the officer in question must follow the fundamental rule of justice while carrying out his judicial duties.

Opportunity To Be Heard

Assessment under Section 143(3), which refers to scrutiny assessment, can only be performed after the assessee has been allowed the opportunity to be heard. 

  • In this context, a hearing means that the assessee should be allowed to produce the necessary evidence to substantiate the specific query.
  • If the officer has additional questions based on the documents or evidence submitted, the assessee should be allowed to provide clarifications or provide the required documents.
  • If the officer has gathered sufficient materials to rely on, he should communicate the substance of such material to the assessee and allow him/her the opportunity to make statements on the same.

Assessing Officer’s Private Inquiries

If deemed necessary, the assessing officer may conduct a private and confidential investigation. Such an investigation is carried out by summoning witnesses and recording their statements, with or without the knowledge of the taxpayer being assessed. The sources of information here could be his competitors in his trade, previous employees under the assessee, other experts, and so on. Any pieces of evidence or information against the assessee must be disclosed to the assessee so that an opportunity to be heard is readily available.

Inquiry To A Valuation Officer

When the tax authorities need to determine the value of a product, they can refer to a valuation officer. This is only done in the case of a pending assessment.

Material Requirement

The assessee’s previous records are necessary and relevant information for the assessment. There must be some material related to the accounting year that, when combined with previous records, reasonably entitles the Income-tax authorities to conclude that there must be some concealed income during the accounting year that is liable to assessment.

Affidavits As Proof

An affidavit may be received by an assessing officer. If the assessing officer is not satisfied with the affidavit, the officer will request that the assessee submit supporting documents. Affidavits are a type of evidence.

Account Books As Evidence

In the ordinary course of business, an assessee must keep proper books of account. This would be substantial evidence for the content, which would not need to be proven in a court of law.

Assessment In Piecemeal Or Tentative Form

The assessing officer is not supposed to make a piecemeal or tentative assessment; he is only supposed to do so by the provisions of the law. For example, he cannot decide based on data from one or more sources while leaving the others undetermined. To reiterate, he must only assess the income by the law.

Order Is Quashed

If the order is found to violate the laws, it will be revoked. The assessing officer must either start from scratch or redo the assessment from the point of failure.

Invalid Returns

Invalid returns (defects in tax returns) would remain in effect until they were overturned by a court of law. The consequences of such an order would be applicable until then.

Orders Must Be Submitted In Writing

Principles Of Income Tax Assessment

An assessing officer must issue his order in writing and sign it. Although an initial can be used in place of a signature, the order will not be approved unless these two crucial provisions are followed.

Evaluation Of Safety

A protective assessment is carried out to safeguard the revenue’s interests. This is rarely discussed because it occurs so rarely. When the assessing officer is unsure about the original recipient of the income and there are two or more parties to whom the income could be attributed, the assessing officer conducts a protective assessment.

Setting Aside Assessments

Assessments set aside cannot be re-done by the officer because they may not be necessary at the time, but an appellate order allowing the same would allow the assessing officer to redo it.


The assessment of income taxes is critical to the smooth and effective operation of the Indian taxation system. Any type of assessment in front of an AO should be avoided to avoid a delay in receiving income tax returns. Additionally, taxpayers should pay close attention to the various types of assessments and file ITR correctly.