Assessment under direct tax refers to the process of examining an individuals income by the income tax authorities. It is a crucial process for the smooth and effective functioning of the Indian taxation system. There are different types of assessments under the Income Tax Law, including:
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Self-Assessment: This is when taxpayers calculate their total taxable income by themselves. Under Section 140A, assessees have to calculate their income from various sources, adjust it against losses and deductions, and pay the tax applicable.
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Summary Assessment: This type of assessment is done without human intervention by cross-checking information provided by assessees with details stored by the Income Tax Department. Through summary assessment, one can spot clerical errors and inconsistencies in the ITR.
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Scrutiny Assessment: This type of assessment takes place to confirm that the taxpayer has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner. The Assessing Officer carries out a detailed scrutiny of the return of income and will satisfy himself regarding various claims, deductions, etc., made by the taxpayer in the return of income.
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Best Judgment Assessment: This type of assessment takes place when a taxpayer fails to cooperate with the IT department. In these cases, an AO has to compute the tax liability of an assessee with the best judgment in mind, without dishonesty.
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Income Escaping Assessment: This type of assessment takes place when the Assessing Officer or Income Tax authority, not below the rank of an income tax officer, conducts an assessment to ensure that the assessee has neither understated his income or overstated any expense or loss or underpaid any tax.
Overall, the assessment process is crucial for ensuring that taxpayers pay the correct amount of tax and that the Indian taxation system functions effectively.
