Section 143

Assessment

n In order to enable the ITO to complete the assessment in a summary manner and in accordance with law, the returns of income should be correct and complete in all respects, and be accompanied by copies of trading profits and loss accounts, balance-sheets, etc., that are required under the rules. It is also necessary that evidence in support of rebates, reliefs and tax credit, etc., claimed, should accompany the returns.—Circular : No. 201 [F. No. 237/16/76-A & PAC-II], dated 5-7-1976.

n If the ITO, due to any unavoidable circumstance, cannot adhere to the schedule of hearing, the assessees should be informed in advance either through a letter or through telephone, wherever possible.—Instruction : No. 1395 [F.No. 201/28/81-IT(A-II)], dated 15-5-1981. [Source : 114th Report (1982-83) of the Public Accounts Committee, pp. 16-17].

n While fixing the hearing of cases by the issue of statutory notice, the ITOs should not indicate the same time for attendance in all cases, but should give each assessee a different timing.—Circular : No. 230 [F. No. 225/109/77-IT(A-II)], dated 27-10-1977.

n On the date fixed for hearing, the taxpayer must be heard and any requisition for information or evidence should, as far as possible, be sent to him in advance.—Source : Relevant extracts from minutes of 12th meeting of CDTAC held on 17-8-1967.

n The time taken for obtaining a copy of the assessment order should be excluded in computing the period of limitation under section 268 only when a valid application is presented to the income-tax authority for a copy—Circular : No. 1 [C. No. 9(17)-IT/50], dated 24-4-1950.

n With a view to encouraging non-company assessees to get their accounts fully audited, if a chartered accountant gives unqualified certificate in the prescribed form (as given in the circular) and agreed to by the Institute of Chartered Accountants, then such a certificate should ordinarily be treated with the same consideration that would be given to a certificate given in the case of a company. The ITOs should not, however, hesitate to go behind the certificate and call for detailed accounts where in their opinion the facts of a case justify that course.

If a chartered accountant gives a certificate in the said form in a non-company case and any deliberate inaccuracy is found in it, he can possibly be held guilty of misconduct under one or more clauses (o), (p) (r), (s) and (u) of section 22 of the Chartered Accountants Act, 1949, and the schedule thereto.—Circular : No. 18(XL-37), dated 28-4-1955.

n The power-of-attorney in favour of registered accountant or an income-tax practitioner or any other person who is not a duly appointed mukhtar under section 7 of the Legal Practitioners Act is a power of attorney (and not a vakalatnama or mukhtarnama) and requires to be stamped not under the Court Fees Act, but under the provisions of the Stamp Act as in force in the particular area, i.e., subject to the local amendments.

Instructions may continue to be followed in all charges except the Punjab charges. Insofar as the Punjab charges are concerned, the letter of authorisation presented by the income-tax practitioners and chartered accountants before the income-tax authority may be governed by the Court Fees Act in view of the decision of the erstwhile Punjab Chief Court in Ganpat v. Prem Singh [1912] 15 IC 122 wherein it was held that the power-of-attorney empowering any person to represent another in a civil court should be governed only by the provisions of the Court Fees Act and not by the Stamp Act.—Circular : No. 125 [F.No. 274/1/73-ITJ], dated 26-11-1973.

n All applications or petitions or representations which invoke any jurisdiction, authority, power, discretion, etc., whether real or supposed, vested in the Commissioner of Income-tax or the Central Board of Revenue under the Income-tax Act or any other Act, shall be liable to Court fee under article 1(c) of Schedule II to the Court Fees Act, 1870.

n Application or representations which are in the form of complaints such as excessive delay in disposal of any matter, ill-treatment, etc., which are not strictly referable to any provisions in the Income-tax Act or any other Act, would not be liable to Court fee.—Circular : No. 36(XL-52), dated 19-11-1958.

n Court fees on documents presented before the income-tax authorities are chargeable according to the scales laid down in the Court Fees Act, 1870 and the amendments made in different States are not to be taken into consideration.—Circular : No. 50(XL-43) of 1956, dated 28-12-1956.

n Application for transfer of files from one ITO to another or one Commissioner to another can be divided into two categories. The first category would be that where due to change of address or such other valid reasons the existing  ITO has ceased to hold jurisdiction. Application for transfer in such cases would not require the Court fee stamp. The other category would be where transfer of records is sought on grounds of personal convenience. In such cases Court fee stamps would be necessary —Letter : F. No. 91/41/67-ITJ(25), dated 3-7-1967.

n An important function of the Public Relation Officers would be to draw the attention of assessees to the rebates and reliefs provided by the Act. The Public Relation Officer should visit disabled persons, invalids, widows and pardanashin ladies, at their residence if they require his assistance.

The Public Relation Officer may also visit big Government and commercial establishments and explain the reliefs due under the Income-tax Act and the procedure for filling in the returns, and for applying for reliefs, etc.

Another way to render assistance to small assessees in the local areas in a big city could be for the Public Relation Officer to camp in a central public place in the various localities on fixed days published in advance. Small assessees of a particular locality can meet the Public Relation Officer at such public place for such assistance as they desire.—Letter : F. No. 81/27/65-IT(B), dated 18-5-1965.

n Officers of the Department must not take advantage of ignorance of an assessee as to his rights. Although, the responsibility for claiming refunds and reliefs rests with assessees on whom it is imposed by law, officers should—

    (a)   draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other;

    (b)   freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs.—Circular : No. 14(XL-35), dated 11-4-1955.

n Except that he should give precedence to cases which are likely to yield more revenue, the ITO should not be obsessed by the budget figure. He has certain number of assessments to complete in a year and his merits will be judged by the way in which he completes those cases and not by the extent to which he has collected his budget estimate.

Subject to the qualification that the ITO is free to call for books of account, vouchers, etc., in any company case where he feels that such a course is advisable, books of account, vouchers, etc., should not be called for either in the case of public companies or in the case of private companies where the accounts have been audited by an auditor qualified to audit a public company’s accounts and he has given a certificate similar to that given in the case of a public company.

Unless there is some material basis for suspicion, affidavits sworn or affirmed before Magistrates should not be called for.

The function of the ITO is to use, what he can make, of the assessee’s accounts as he finds them and not to lecture the assessee as to how he should keep his accounts.—Circular : No. 3 of 1942, dated 16-1-1942.

n As far as evidence of payments under clause (a) of section 43B is concerned, there should normally be no difficulty as the assessee can enclose the challan, etc., evidencing the payment. In case this is not possible, for any reason, then he must submit, along with the return of income, a  certificate from an accountant, as defined in the Explanation to section 288 of the Act. The accountant should verify that the payment of tax, etc., mentioned in clause (a) and claimed as a deduction, has been made by the due date for the filing of return under sub-section (1) of section 139 of the Act.

As regards evidence of payment under clause (c) of section 43B, the evidence required will be a certificate from an accountant as defined in the Explanation to section 288 of the Act. For payments of the type referred to in clause (d) of section 43B, the evidence required would either be a certificate from the institution concerned, or a certificate from an accountant as defined in the Explanation to section 288 of the Act.

The evidence mentioned above is considered sufficient for the purposes of making prima facie adjustments under section 143(1)(a). However, in cases selected for assessment under section 143(3), further evidence can be called for if necessary.—Circular : No. 601, dated 4-6-1991.

n Prima facie disallowance shall be made only in respect of the following types of claims:

    (a)   an incorrect claim, if such incorrect claim is apparent from the existence of other information in the return or the accompanying accounts or documents.

             Example : If a deduction has been claimed under the head “Capital gains” under section 54F, and if there is information in the return of income or the accompanying accounts or documents to show that the unutilised net consideration had not been deposited in an account specified in the notified scheme as stipulated under section 54F(4), the claim is incorrect and can be disallowed as a prima facie adjustment;

    (b)   any claim in respect of which there is an omission of information which is required, under the specific provisions of the Act or the Rules, to be furnished along with the return to substantiate such claim.

             Example : If the audit report specified under section 80HHC(4), which is required to be filed along with the return of income, is not so filed, the deduction claimed under that section can be disallowed as a prima facie adjustment. Some more examples in this regard are the non-filing of audit reports or other evidence along with the return of income as required  under sections 12A(b), 33AB(2), 35E(6), 43B (first proviso), 54(2), 54B(2), 54D(2), 54F(4), 54G(2), 80HH(5), 80HHA(4), 80HHB(3), 80HHD(6), 80HHE(4), 80-I(7), 80-IA(8) and the like. But if evidence is subsequently furnished, rectification  under section 154 should be carried out to the extent permitted by Board’s Circular No. 669, dated 25-10-1993 (see under section 154). No prima facie disallowance shall however be made if any evidence, required to be filed along with the return of income only in pursuance of the non-statutory guidance notes for filing in the return of income, is not so filed.

    (c)   A claim for deduction or rebate of any amount which exceeds statutory limit imposed, if such limit is expressed either as a specific mandatory amount or as a percentage, ratio or a fraction, and if the information relevant to application of the statutory limits appear in the return or the accompanying accounts or documents.

             Example :   (i)   If under section 24(1)(i) the deduction in respect of repairs and collection charges is claimed in excess of 1/5th of the annual value (applicable with effect from assessment year 1993-94), such excess can be disallowed as prima facie adjustment.

                                    (ii)   If the rebate on contribution eligible under section 88 is claimed in excess of 20 per cent of such contribution, the excess can be disallowed, provided there is indication of the total amount of such contribution in the return or the accompanying accounts or documents.

    (d)   Any claim which is patently inadmissible in law.

             Example : Deductions of items like income-tax, wealth-tax, personal expenses, depreciation claimed on conveyance under the head salary, depreciation claimed under the head house property and the like. The items of disallowance should be such that no two opinions are possible on their inadmissibility.

The Board desires that no other prima facie disallowance should be made except with the previous approval of the Commissioner of Income-tax who will, after according approval in suitable cases, bring the same to the notice of the Board.

The above procedure applies to all returns pending proceeding under section 143(1) on the date of issue of this Circular.—Circular : No. 689, dated 24-8-1994.

n Assessments in the following types of cases will be completed under section 143(1) on the basis of the returns after linking them with the assessment records :

- All the cases, other than company and trust cases, with returned income/loss up to Rs. 1 lakh.

- Company cases with returned income/loss up to Rs. 25,000 and paid up capital not exceeding Rs. 5 lakhs. However, the first assessment in all new company cases will be a scrutiny  assessment.

- All trust cases and cases of charitable institutions having income below Rs. 1 lakh before applying the provisions of section 11 provided the corpus of the trust does not exceed Rs. 5 lakhs. However, the first assessment in all trust cases will be a scrutiny assessment.

In the above cases, the arithmetical accuracy of computation of total income and taxes will be ensured and liability for penalty, interest, compulsory deposit, etc., if any, will be checked. No other checking of any sort will be necessary. All pending assessments in such cases will also be completed in the same manner along with the current assessments.

However, cases assigned to Inspecting Assistant Commissioners (Assessment), Central Circles, Special Investigation Circles, Special Circles, search and seizure cases, cases re-opened under section 147 and those selected for scrutiny on a random sample basis, etc., will not come under the purview of this scheme.

All other cases, (i.e., cases where the assessments are not to be completed in a summary manner), will be dealt with under the normal procedure of law.

When the assessments in cases mentioned above are completed under section 143(1) and there is no additional demand or refund, demand notices and copies of assessment orders will not be issued but an intimation that the assessment has been completed under section 143(1) resulting in ‘nil’ demand/refund will be issued in the attached form. This intimation may be got printed in the form of an inland letter and issued after writing the name and address of the assessee.

Summary and scrutiny cases should be entered separately in the Demand and Collection Registers.

The initiation of penalty proceedings/completion of penalty proceedings already initiated will be governed by the instructions which are being issued separately. However, interest under the relevant provisions will be levied.

Five per cent of the cases where assessments are completed in a summary manner will be taken up for scrutiny on a random sample basis. The Commissioners shall lay down the random number and the Income-tax Officers should complete selection of cases for random scrutiny by 31st August of the year. This should be done under the supervision of the Inspecting Assistant Commissioner. The number of cases so selected and disposed of should be shown separately in the Central Action Plan-II Statement. The instructions laid down for completion of assessments in cases selected for scrutiny on random basis will continue to be observed.—Instruction : No. 1617, dated 18-5-1985 extracted from 38th Report of Public Accounts Committee (1985-86) pp. 88 and 89.

n The assessment have to be made in a reasonable and fair manner after considering all the relevant circumstances of the case. Even where an assessment has to be made ex parte, the information available should be reasonably weighed and a proper estimate made in the exercise of best judgment in the circumstances. There should be no tendency to frame assessments even in such cases mechanically on past basis, if there is evidence to the contrary, e.g., the business of the concern has become defunct or is in clearly adverse circumstances.

If  unjustified over-assessments are avoided, this will, inter alia, curtail the feature of exaggerated demands which unnecessarily inflate arrears figures.—Instruction : No. 574, dated 27-7-1973 ; Source : 193rd Report of Public Accounts Committee (1983-84) (Seventh Lok Sabha), (pp. 26-27).

n Guidelines for selection of cases for income-tax assessment under section 143(3) - The Central Board of Direct Taxes has issued instruction for picking up cases for assessment under section 143(3) in respect of certain pending returns and those received during the current financial year. Under the new policy initiative introduced in the Finance Act, 1999, all returns will now be accepted under section 143(1). However, a very limited number of returns will be selected for assessment under section 143(3). The procedure adopted for this purpose has laid stress on transparency and accountability and is expected to enhance revenue yield.

The salient features are : Cases are to be picked up in a joint meeting of Assessing Officer and his next superior authority on the basis of credible information after recording the reasons in writing. The selection process is to be completed all over the country by 30-9-1999 to be followed by individual letters to assessees, whose cases have been selected. This will be followed by press note from respective Chief Commissioners/Directors General specifying the fact of completion of selection process and regarding intimation to the concerned assessees. Certain exceptional cases can be picked up only at the level of Chief Commissioner of Income-tax for reasons to be recorded in writing even after 30th September, 1999. However, all assessments relating to search and seizure, survey under section 133A, reassessment under section 147 (and set aside assessment) will continue to be made under section 143(3).

The end result/findings of the assessment under section 143(3) will have to justify the selection of a particular case against specified norms.—Press Release, dated 8-6-1999, issued by the Press Information Bureau.