Income Tax Scrutiny in Surat
What do we mean by scrutiny
On verification of income tax returns or on the basis of some information, if income tax department is of the view has a reason to believe that more information or clarification is required on some of the declaration made by you under income tax return is inappropriate, than in that case income tax department may serve you a notice asking such clarification. These notices can be termed as scrutiny notices under applicable section of income tax act. This can be termed as Scrutiny Assessment also.
Types of scrutiny assessment
- Manual scrutiny cases
- compulsory scrutiny cases
Cases That Triggers Manual Scrutiny Assessment
1) Not filing ITR (Income tax return): if your income exceeds the basic exemption limit prescribed by Income Tax Department or TDS have been deducted on you and still you do not file your income tax return within the time limit prescribed by Income tax act due to ignorance, negligence or due to reason of being pre occupied in other activities, than there are chances that you may be served a notice by Income Tax Department for scrutiny assessment.
2) Disparity in current year’s income or losses compared to previous assessment year: If there is significant increase or decrease in the income reported in current year than that of the previous year, it may grab the attention of tax officials. In such a cases you may be asked for the further information or documents to justify such increase or decrease. This kind of significant changes can occur in volatile business environment.
3) Not showing exempted income: Income tax act contains some of the provisions which enables assessee to claim exemption to from paying income tax. Even if the assessee is exempt from paying income tax due to availability of exemption, he/she is required to report this exemption in the income tax return filed by them. Some of the incomes on which income tax is exempt are Interest from PPF, Interest on savings bank deposits. Tax officers are required to verify whether particular income shown as exempted are actually exempted under income tax act or not. Thus the correctness of exemptions availed needs to be verified.
4) Not filing the required paperwork due to change in jobs: If assessee changes the job during the financial year than he must remember to collect FORM 16 from the previous employer and submit it to the current employer so that the current employer get to know about the exemptions availed by you in a previous employment and other details as required by him. While filing income tax return, it is very important for an assessee to consider both FORM 16.
5) Transactions of high value: Income tax department can get information of high value transaction from various sources. Some of the sources are Banks/ NBFCs and so on. Income tax department verifies the transaction with that of the income tax returns filed by you. Income tax department may serve you a notice seeking full details of such transactions if there is any inappropriateness found in the ITR and the transaction. Transactions such as deposits in bank accounts of more than Rs.10 lakhs, property dealings worth over Rs.30 lakhs can attract further scrutiny to validate the income versus declaration
What To Do On Receiving Notice
1) 1. A notice u/s 143(2) is issued by the Assessing Officer within 6 months from the end of the financial year in which return was filed to carry out scrutiny of your income tax return u/s 143(3). If you have not filed returns for the financial year, the assessing officer cannot issue a notice u/s 143(2). He must first issue a notice u/s 142(1), asking you to first file returns.
2) Notice may be served in form of a PDF via email on your registered email address. It will also be sent to the postal address.
3) You are required to submit all documents supporting the deductions, exemptions, allowances, reliefs, and other claims made while filing the Income tax returns.
4) You are required to provide legitimate proofs related to all your income sources.
5) On receiving your submission an assessing officer may call for additional information or documents based on your submission or ask for you personal presence before him.
6) You or your representative shall appear before the Assessing Officer to place your arguments and evidence as required by him.
7) After considering all explanations and evidences a final order under section 143(3) is issued to tax payable or tax refundable.
What If You Do Not Respond To The Notice
If you receive the notice and you do not comply or respond to the same, you shall be liable to penal consequences as follows:
- Penalty u/s 272A amount of Rs. 10000 and even prosecution.
- The Best judgment assessment under section 144.
- This may increase your taxable income which in turn increases your tax liability with a penalty. If you want to dispute the taxable amount you will require to pay an additional 20% of the disputed amount before you file an appeal against the higher authorities
Get answers to all your queries
Under the Income-tax Law, there are four major assessments as given below:
1) section 143(1), i.e., Summary assessment without calling the assessee i.e. taxpayer.
2) Assessment under section 143(3), i.e., Scrutiny assessment.
3) Assessment under section 144, i.e., Best judgment assessment.
4) Assessment under section 147, i.e., Income escaping assessment
Assessment under section 143(1) can be made within a period of one year from the end of the financial year in which the return of income is filed
This 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. The scrutiny is carried out to confirm the correctness and genuineness of various claims, deductions, etc., made by the taxpayer in the return of income.
As per section 153, the time limit for making assessment under section 143(3) is:- 1. Within 21 months from the end of the assessment year in which the income was first assessable. [For assessment year 2017-18 or before] 2. 18 months from the end of the assessment year in which the income was first assessable. [for assessment year 2018-19] 3. 12 months from the end of the assessment year in which the income was first assessable [Assessment year 2019-20 and onwards] Note: If reference is made to TPO, the period available for assessment shall be extended by 12 months
If you are not satisfied with the order passed by your Assessing Officer then you can file an appeal to the higher authority. The first appellate authority is the Commissioner (Appeals). Subsequently, the matter can be taken to the Income-tax Appellate Tribunal, then to the High Court and the Supreme Court. Alternatively, instead of going for the appeal mechanism, you can make an application of revision to the Commissioner of Income-tax. Form No. 35 .In case of appeals to Commissioner (Appeals) (irrespective of date of initiation of assessment proceedings)
