Tax Appeals & Assessments
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Income tax notice, Income tax demands, Appeals, Assessments, Warrants, Show cause notice these can easily scare even the bravest of the brave entrepreneurs.
What does an assessment mean in the context of a startup?
After your company files the tax returns, the same start gets processed by the concerned department. The Income Tax department thoroughly reads and analyses all the details that your company has submitted, and this process is called the Income Tax Assessment. In crux, the cross-examination and validation of the details submitted by your company are called Income Tax Assessment. The assessment is a post returns filing procedure.
Here are some of the key assessments carried out by the Income-tax department:
- Self-Assessment under Section 140 A
The process of calculating the income and hence the tax payable, when carried out by the company itself, is called Self-Assessment. After a provisional assessment is complete, unpaid taxes of any must be paid towards the provisional assessment or regular assessment.
- Scrutiny Assessment under Section 143(3)
When a tax assessment is undertaken by an Income Tax Officer, he/she is obliged to inform the concerned company. The Scrutiny Assessment is done through an Income Tax Notice under Section 143(2). Thereafter, the Income Tax Officer may ask for specific information, documents and account books to complete the scrutiny assessment. The officer of the IT department then compares the documents and the returns submitted by the company. If there is a mismatch or a discrepancy in the income amount and the tax due to be paid, the same is notified to the company. The company can either accept the demand and clear the dues or choose to refute this.
- Best Judgement Assessment under Section 144
Best Judgement Assessment applies to companies/individuals who fail to co-operate with the Income Tax Department. In an event where the company does not respond to the multiple notices issued by the Income Tax Department asking for clarifications/dues payments, or the company fails to produce the requested information in time or does not maintain the necessary account books, the Best Judgement Assessment is put to action.
- Income Escaping Assessment under Section 147
The Income Tax Department reserves the right to open an assessment if it suspects that a taxable income might have escapes assessment. If an officer has reasons and information to believe that an income might have escaped assessment, he/she has the right to ask for an assessment or reassessment of the company’s income.
- Summary Assessment under Section 143 (1)
During the assessment, the income tax department cross-checks the information submitted by the company in the return filed, verifying the reasonableness and correctness of the returns. The return gets processed online and arithmetical errors, incorrect claims, and disallowances are highlighted. Summary assessment is carried out without any intervention from the taxpayers, and adjustments on tax liability are made if any. For example, if the TDS claimed by the taxpayer is found during the assessment to be higher than the amount per the PAN as per department records, adjustments are made. Adjusting can increase/decrease the tax liability of the company.
After making the aforementioned adjustments, if the company is required to pay tax, it will be sent as intimation under Section 143(1). The company must respond to this intimation accordingly.
- Scrutiny Assessment
The income tax department in India authorizes the assessing Income Tax officer (or authority) to organize and carry out the regular assessment. The purpose of doing this assessment is to make sure that the company has done the assessment correctly. Many companies internationally (or unintentionally understate their revenues or overstate expenses, losses or underpay taxes. The regular assessment by the department is to weed out these possibilities. The CBDT has a set of parameters they look at, which decided if the company’s case gets picked for the assessment.
If a company is subject to undergoing a scrutiny assessment, the income tax department sends a notice well in advance. A company must act in the time since this notice cannot be served after the expiry of 6 months from the end of the Financial year, in which returns are filed.
(The department though the notice asks the company to produce the books of accounts, and other evidence to validate the income and other details. After verifying all the information available, the assessing officer passes an order either confirming the return of income filed or makes additions. The assessment might raise a demand for tax, which the company must respond in time.
- Protective Assessment
Protective Assessment is permissible by law, and is done to ‘protect’ the interest of the revenue. When an income is offered by one identity, while the revenue considers that this income is assessable in the hands of other, a protective assessment can be done. In such case, the party has the right to assess the income offered protectively, so that income assessable in the hands of another identity is not sustained in appeal, and the protective assessment becomes final.
Manytimes the income declared by a person in his/her return filed is claimed by two Assessing Officers disputing that the income belongs to them or in their category. Sometimes income declared by a person in his return, would be assessed in the hand of a company, associations of person or some other entities and hence the jurisdiction of AO will be changed.
- Assessment in case of search Under Section 153A
Section 153A permits the assessing income tax officer to assess the income tax return of a person. The Assessing income tax officer has the right to look at the income of the last 6 years, assess and then draft his/her report.
Compliance and legal jargon (especially if you do not come from a legal/finance background) can be baffling. Even Albert Einstein once quoted, “The hardest thing in the world to understand is the income tax”.
With our team of seasoned experts, we have the experience needed for kinds of income tax matters. When you hire us, you can take a back seat and focus on keeping the business up and running, while we take care of compliance end to end. Dealing with tax authorities can be a breeze when you work with ardent professionals.We can help you across all the phases, right from decoding what an intimation means, to preparing and sending across a fitting reply, to representing you and your company at any specific forum if needed.
Contact us now, to know more about our offerings. You can rest assured that you are in safe hands as far as compliance is concerned.
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- Overcoming your biggest fear: We understand that as a startup founder, compliance surely is one of your biggest fear. The lack of understanding of the complexities of compliance and the thought of repercussions could be intimidating. We help the founders overcome this fear by taking care of the annual compliance end-to-end. While we seamlessly take care of all your compliances, you as the founders can focus on other important tasks like operations and activities cor to the business.
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