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Income Tax Assessments and Appeals

Income tax returns filed by tax-payers can be taken up for assessments. Usually around 98 % of the income tax returns are not taken up for detailed scrutiny. What happens in such cases is Summary assessment under Section 143 (1) and there is an intimation given to the tax – payer about demand/ refund/ no demand etc.

Detailed scrutiny assessment is taken up under section 143 (3). Scrutiny assessments can be limited or complete. Limited scrutiny is taken up for particular points/ questions like cash deposits, share premium, share application money, valuation, mismatch between GST and income tax data etc. Complete scrutiny is where the entire books of accounts are taken up for detailed scrutiny.

When a notice for assessment is received, the following things need to be decided:

  1. Whether the notice is a valid one? – issued/ consented by competent officer or within the time period ? If notice itself is not valid, then the entire assessment proceedings are void and need to be challenged as such.
  2. Timely response to notices- A very important part of assessment. To ensure that no best-judgment assessments are passed or penalty notices are issued for non-response. If required, adjournments should be taken.
  3. Data/ information asked – Tax payer is under an obligation to provide all data/ information/records asked by officer during income tax assessment. However, care must be taken to provide only such information as is required or relevant and not excess information.
  4. Updated knowledge of case laws (including both favourable and unfavourable case laws) relevant to points raised during income tax assessment.
  5. Ensuring all relevant points/ arguments are placed before the assessing officer. This ensures that even if the assessing officer is not willing to take note of it, it will be noted in future appeals.
  6. Overall advice on how to approach and conclude the assessments- Practical advice in an income tax assessment is very important to understand overall costs.

Presently, faceless assessments are being put into place where there is an additional challenge because there is no element of personal argument/ persuasion.

Appeals are the next stage after assessments, if preferred by either party.

The following avenues are available to the tax-payer:

  1. Appeal before Commissioner Income tax (Appeals) – CIT (A)
  2. Appeal before the Honourable Income Tax Appellate Tribunal

In recent times, CIT (A) , in general experience, rarely gives substantial relief to the tax-payers and hence relief is sought from the Tribunal. The Tribunal is also the final fact finding authority. Hence Tribunal is the most important appellate stage.

Process involves the following:

  1. Drafting the petition
  2. Ground of appeal
  3. Statement of Facts
  4. Condonation of delay- if any
  5. Index book with various points/ evidence/ case laws.

After the Tribunal, the tax-payer can appeal before the Honourable High Courts and finally to the Supreme Court. However, please note that appeals before the Courts will be allowed only – 

  • If there is a substantial question of law
  • Writ petition
  • petition of perverse treatment of facts in the Appellate treaties below

Appeals under the income tax law are very important to be handled carefully because of the cost factor involved in each stage.

Direct Tax team at Entrecap Business Services has considerable expertise and experience in advising and representing the tax-payers in all matters pertaining to income tax assessments and appeals upto the Honourable Tribunal. We shall be pleased to offer our services both on retainership basis and assignment wise.

For other income tax consultancy, click here.

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