Calicut University Curriculum Compliance — Module IV Overview

Course Code: COM6EJ314 (7) • Course Title: Income Tax Assessment • Semester: VI • Credits: 4 • Contact Hours: 60
Module IV Title: PROCEDURE FOR ASSESSMENT (10 Contact Hours)
Syllabus Units Covered: Unit 9: Types of Assessment & TDS/TCS — Statutory Returns (Sec 139(1), Belated 139(4), Revised 139(5), Updated ITR-U 139(8A)), Self-Assessment u/s 140A, Summary Processing u/s 143(1), Regular Scrutiny Assessment u/s 143(3), Best Judgment Assessment u/s 144, Income Escaping Assessment / Reassessment u/s 147/148/148A, Faceless Assessment Scheme u/s 144B, Tax Deducted at Source (TDS) Framework (Sec 192, 194A, 194C, 194H, 194I, 194J, 194Q), Tax Collected at Source (TCS) u/s 206C • Unit 10: Advance Tax, Recovery & Tax Authorities — Liability u/s 208, Installment Schedule u/s 211, Interest Calculations under Sections 234A, 234B & 234C, Notice of Demand u/s 156, Tax Recovery Modes u/s 222-226, Administrative Hierarchy of Income Tax Authorities, Powers of Search & Seizure u/s 132, Survey u/s 133A, Calling for Information u/s 133(6) • Unit 11: Appeals, Revisions, Penalties & Prosecutions — Hierarchy of Appeals (CIT(A) / NFAC u/s 246A, ITAT u/s 253, High Court u/s 260A, Supreme Court u/s 261), Revisions by CIT (Prejudicial to Revenue u/s 263 vs. Assessee Benefit u/s 264), Penalties for Under-reporting & Misreporting u/s 270A (50% & 200%), Criminal Prosecutions under Chapter XXII • Calicut University Academic Examination Bank (Part A: 2 Marks, Part B: 5 Marks, Part C: 10/15 Marks).

1. Filing of Returns of Income and Statutory Assessments

The assessment process is the statutory machinery by which the tax liability of an assessee is formally determined by the Income Tax Department. The process commences with the submission of the Return of Income (ITR).

A. Statutory Framework for Filing Returns of Income (Section 139)

Statutory Types of Returns of Income under Section 139 Section 139

Return Category	Statutory Conditions & Deadlines	Legal Consequences & Limitations
Voluntary Return (Section 139(1))	Mandatory for companies, firms, and individuals whose total income exceeds basic exemption limit. Due Dates: • 31st July: Non-audit individual / HUF / AOP. • 31st October: Companies, audit cases u/s 44AB, partners of audited firms. • 30th November: Assessees required to furnish Transfer Pricing report u/s 92E.	Failure attracts late filing fee u/s 234F (up to ₹5,000) and interest u/s 234A. Business and capital losses cannot be carried forward if return is late (Section 80).
Belated Return (Section 139(4))	Can be filed at any time before 3 months prior to the end of the relevant Assessment Year (i.e., on or before 31st December of the Assessment Year) or before completion of assessment, whichever is earlier.	Attracts late fee u/s 234F and interest u/s 234A. Losses under PGBP and Capital Gains cannot be carried forward (except loss from house property and unabsorbed depreciation).
Revised Return (Section 139(5))	Can be filed if the assessee discovers any omission or wrong statement in the original return. Deadline is the same as belated return (31st December of AY).	Replaces the original return completely from the date of filing. A belated return can also be revised!
Updated Return (Section 139(8A) — ITR-U)	Introduced by Finance Act 2022. Allows an assessee to file an updated return within 24 months from the end of the relevant Assessment Year.	Cannot be used to report loss, decrease tax liability, or claim/increase refund. Mandatory additional tax: 25% of tax + interest if filed within 12 months; 50% if filed between 12 to 24 months.

B. Comprehensive Classification of Assessments

The Income Tax Act provides six distinct statutory modes of assessment:

Typology of Assessments under Chapter XIV Assessment Codes

Assessment Type	Statutory Basis & Procedure	Statutory Time Limits
1. Self-Assessment (Section 140A)	Assessee is statutorily required to determine their own taxable income, calculate tax payable along with interest u/s 234A, 234B, 234C, and pay before filing the ITR. Return must be accompanied by proof of tax payment.	Must be paid prior to furnishing the return of income. Assessee is deemed in default if tax remains unpaid.
2. Summary Assessment / Intimation (Section 143(1))	Conducted electronically by the Centralized Processing Centre (CPC), Bengaluru without human intervention. Adjustments permitted: arithmetical errors, incorrect claims apparent from return, disallowances in audit reports.	Intimation must be sent within 9 months from the end of the financial year in which the return was furnished.
3. Regular Scrutiny Assessment (Section 143(3))	In-depth examination by the Assessing Officer to ensure income has not been understated, excessive losses computed, or tax underpaid. Notice u/s 143(2) is served calling for accounts, documents, and explanations.	Notice u/s 143(2) must be served within 3 months from the end of the FY in which return is filed. Order must be passed within 12 months from end of AY.
4. Best Judgment Assessment (Section 144)	Ex-parte assessment made by the AO to the best of their judgment when the assessee fails: (a) to file return u/s 139(1)/(4)/(5); (b) to comply with notice u/s 142(1); (c) to get accounts audited u/s 142(2A); or (d) to comply with scrutiny notice u/s 143(2). Opportunity of being heard via show-cause is mandatory.	Must be completed within 12 months from the end of the relevant Assessment Year.
5. Income Escaping Assessment / Reassessment (Section 147)	If any income chargeable to tax has escaped assessment for any assessment year. Governed by Section 148A: AO must conduct preliminary inquiry, provide opportunity to show cause, and pass an order before issuing notice u/s 148.	Normal limit: 3 years from the end of relevant AY. Extended limit: up to 10 years if escaped income represented by assets exceeds ₹50 Lakh.
6. Faceless Assessment Scheme (Section 144B)	All assessments u/s 143(3) and 144 are conducted electronically in a faceless environment through the National Faceless Assessment Centre (NaFAC). Functional units: Assessment Units, Verification Units, Technical Units, and Review Units. Dynamic allocation removes territorial bias.	Integrated with standard scrutiny deadlines. Zero personal interface between taxpayer and tax officer.

2. Tax Deduction at Source (TDS) and Tax Collection at Source (TCS)

TDS and TCS operate on the principle of "Pay As You Earn" (PAYE). They ensure steady revenue inflow to the Government and establish an automated trail preventing tax evasion.

A. Key TDS Provisions Applicable in India

Statutory TDS Rates and Thresholds Chapter XVII-B

Section	Nature of Payment	Exemption Threshold	Statutory TDS Rate
192	Salaries	Basic Exemption Limit	Average rate of income tax of the employee.
194A	Interest other than Interest on Securities (Bank FD)	₹40,000 p.a. (₹50,000 for Senior Citizens); ₹5,000 for other payers.	10% (20% if PAN not furnished u/s 206AA).
194C	Payment to Contractors and Sub-contractors	Single contract > ₹30,000 or Aggregate in FY > ₹1,00,000.	1% for Individual/HUF; 2% for Others.
194H	Commission or Brokerage	₹15,000 per financial year.	5%
194I	Rent of Land, Building, or Furniture Rent of Plant, Machinery, or Equipment	₹2,40,000 per financial year.	10% for Land/Building; 2% for Plant & Machinery.
194J	Fees for Professional Services Fees for Technical Services (FTS) / Royalty	₹30,000 per financial year for each category.	10% for Professional Fees; 2% for FTS / Royalty.
194Q	Purchase of Goods (Buyer turnover > ₹10 Cr)	Purchases exceeding ₹50 Lakh from a seller in FY.	0.1% on excess over ₹50 Lakh.

B. Tax Collection at Source (TCS) under Section 206C

Under Section 206C, every person being a seller shall collect from the buyer a specified percentage at the time of debiting the buyer's account or receipt of payment:

Alcoholic liquor for human consumption: 1%
Tendu leaves: 5%; Timber obtained under forest lease: 2.5%
Scrap: 1%; Minerals (coal, lignite, iron ore): 1%
Foreign Remittance under Liberalised Remittance Scheme (LRS): 20% for remittances exceeding ₹7 Lakh (5% if for education financed by loan).
Sale of Goods exceeding ₹50 Lakh (Section 206C(1H)): 0.1% collected by seller having turnover > ₹10 Crore.

3. Advance Payment of Tax (Sections 207 to 211)

Under Section 208, every assessee whose estimated total tax liability for the financial year (after deducting TDS/TCS and tax credits) is ₹10,000 or more is legally obligated to pay Advance Tax in quarterly installments.

Exemption for Senior Citizens (Section 207(2)): An individual resident in India who: (a) is of the age of 60 years or more; and (b) does NOT have any income chargeable under the head "Profits and Gains of Business or Profession", is completely exempt from paying advance tax!

Statutory Advance Tax Installment Schedule (Section 211) Section 211

Due Date of Installment	Cumulative Percentage of Advance Tax Payable	Presumptive Taxpayer (Sec 44AD/44ADA)
On or before 15th June	Not less than 15% of Advance Tax payable.	Nil
On or before 15th September	Not less than 45% of Advance Tax payable.	Nil
On or before 15th December	Not less than 75% of Advance Tax payable.	Nil
On or before 15th March	100% of Advance Tax payable.	100% on or before 15th March.

A. Mandatory Interest for Defaults: Sections 234A, 234B & 234C

Statutory Framework of Penal Interest under Chapter XVII-F
Section 234A — Delay in Filing Return of Income: Levied at 1% per month or part of a month on the amount of tax payable (after deducting TDS and advance tax paid). Runs from the day immediately following the statutory due date u/s 139(1) to the actual date of filing the return.

Section 234B — Default in Payment of Advance Tax: Triggered where the assessee fails to pay advance tax or where advance tax paid is less than 90% of the assessed tax. Levied at 1% per month or part of a month on the shortfall, running from 1st April of the Assessment Year to the date of regular assessment or determination u/s 143(1).

Section 234C — Deferment / Shortfall in Installments of Advance Tax: Levied at 1% per month for deferment of individual quarterly installments:
• Shortfall on 15th June (if paid < 12%): 1% per month for 3 months on shortfall from 15%.
• Shortfall on 15th September (if paid < 36%): 1% per month for 3 months on shortfall from 45%.
• Shortfall on 15th December (if paid < 75%): 1% per month for 3 months on shortfall from 75%.
• Shortfall on 15th March (if paid < 100%): 1% for 1 month on shortfall from 100%.

4. Recovery of Tax and Income Tax Authorities

When tax, interest, or penalty is determined, a Notice of Demand under Section 156 is served on the assessee requiring payment within 30 days. If the assessee fails to pay within 30 days, they become an "assessee in default" and interest u/s 220(2) @ 1% per month is triggered.

A. Modes of Tax Recovery under Section 222 & 226

Certificate to Tax Recovery Officer (TRO) u/s 222: The TRO may recover the outstanding demand through: (a) Attachment and sale of the assessee's movable property; (b) Attachment and sale of the assessee's immovable property; (c) Arrest of the assessee and detention in prison; (d) Appointment of a receiver for management of properties.
Garnishee Proceedings (Section 226(3)): The AO or TRO can issue a notice to any third party who owes money to the assessee (such as a debtor, tenant paying rent, or a bank holding deposits) directing them to pay such money directly to the Income Tax Department!

B. Administrative Hierarchy and Statutory Powers of Authorities

Administrative Hierarchy (Section 116)

Central Board of Direct Taxes (CBDT) — Apex statutory body under Dept of Revenue, Ministry of Finance.
Principal Directors General / Principal Chief Commissioners of Income Tax.
Directors General / Chief Commissioners.
Principal Commissioners / Commissioners of Income Tax (Appeals).
Joint / Additional Commissioners.
Deputy / Assistant Commissioners.
Income Tax Officers (ITOs) & Tax Recovery Officers.
Inspectors of Income Tax.

Statutory Investigative Powers

Section 131: Powers regarding discovery, production of books of accounts, issue of commissions, and attendance of witnesses (Civil Court powers under CPC).
Section 132 (Search & Seizure / Raids): Power to enter and search building/vehicle, break locks, seize undisclosed cash, bullion, jewellery, books, and place identification marks.
Section 133A (Power of Survey): Entry into business premises during business hours to inspect books, check cash/stock, and impound books (no seizure of stock).
Section 133(6): Power to call for financial information or bank statements from third parties.

5. Appeals, Revisions, Penalties and Prosecutions

A. Hierarchy of Appellate Remedies

Four-Tier Judicial Appellate Framework Appeals Hierarchy

Appellate Forum	Statutory Section & Limitation Period	Jurisdiction & Nature of Appeal
1. First Appeal: CIT (Appeals) / Joint CIT (Appeals) / NFAC	Section 246A Time limit: 30 days from the date of service of notice of demand. Form: Form No. 35.	Appeals against assessment orders u/s 143(3), 144, 147, penalty orders. Decides on questions of both fact and law. Power to confirm, reduce, enhance, or annul assessment.
2. Second Appeal: Income Tax Appellate Tribunal (ITAT)	Section 253 Time limit: 60 days from communication of CIT(A) order. Form: Form No. 36.	Both Assessee and Department can appeal. ITAT is an independent judicial body under Ministry of Law & Justice. It is the Highest and Final Fact-Finding Authority!
3. Third Appeal: High Court	Section 260A Time limit: 120 days from communication of ITAT order.	Appeal lies to the High Court ONLY if the High Court is satisfied that the case involves a Substantial Question of Law. Findings of pure fact by ITAT cannot be challenged!
4. Final Appeal: Supreme Court	Section 261 / Article 136 Limitation: 90 days.	Appeal against High Court decision on certification by HC or via Special Leave Petition (SLP) under Article 136 of the Constitution of India. Final constitutional authority.

B. Revisions by the Principal Commissioner or Commissioner

Revision Prejudicial to Revenue (Section 263)

Initiator: Initiated suo motu by the Commissioner if an order passed by the AO is both: (a) erroneous, and (b) prejudicial to the interests of the revenue.
Opportunity of Hearing: Mandatory natural justice opportunity given to the assessee.
Limitation: Order must be passed within 2 years from the end of the financial year in which the order sought to be revised was passed.

Revision in Favour of Assessee (Section 264)

Initiator: Initiated either suo motu by the Commissioner or upon an application made by the assessee.
Condition: No appeal has been filed before CIT(A) or ITAT; right of appeal waived by assessee.
Limitation: Application must be made within 1 year from the date of communication of the order. Order must be passed within 1 year from the date of application.

C. Penalties and Criminal Prosecutions

Section 270A — Penalty for Under-reporting and Misreporting of Income:
- For Under-reporting of income: Penalty equals 50% of the amount of tax payable on under-reported income.
- For Misreporting of income (misrepresentation, failure to record investments, claiming false deductions): Penalty equals 200% of the amount of tax payable!
Section 234F — Fee for Default in Furnishing Return: ₹5,000 (reduced to ₹1,000 if total income ≤ ₹5,00,000).
Section 271C: Penalty for failure to deduct TDS equal to the amount of tax failed to be deducted.
Criminal Prosecutions (Chapter XXII):
- Section 276B: Failure to pay tax deducted at source to the Government — Rigorous imprisonment from 3 months up to 7 years + fine.
- Section 276C: Wilful attempt to evade tax, penalty, or interest — Rigorous imprisonment up to 7 years + fine if tax evaded > ₹25 Lakh (up to 2 years in other cases).
- Compounding of Offenses (Section 279(2)): Offenses can be compounded by the Principal CCIT/DGIT on payment of compounding charges before or after institution of proceedings.

6. Calicut University Academic Examination Bank

Part A: Conceptual Questions (2 Marks Each) Short Answer

Q1. State the statutory due date for filing return of income for an individual whose accounts are not required to be audited.

Ans: Under Section 139(1), the statutory due date is 31st July of the Assessment Year.

Q2. What is an Updated Return under Section 139(8A)?

Ans: Section 139(8A) allows any person to file an updated return of income (ITR-U) within 24 months from the end of the relevant assessment year on payment of additional tax (25% if filed within 12 months; 50% between 12-24 months), provided it does not report a loss or claim an increased refund.

Q3. Mention any two conditions under which Best Judgment Assessment u/s 144 is made.

Ans: Best Judgment Assessment is made ex-parte when the assessee: (1) Fails to file return u/s 139(1), (4), or (5); or (2) Fails to comply with statutory notices issued u/s 142(1) or scrutiny notice u/s 143(2).

Q4. What is the threshold limit of advance tax liability under Section 208?

Ans: Under Section 208, advance tax is payable during a financial year in every case where the estimated net tax liability for that year is ₹10,000 or more.

Q5. Which authority is recognized as the highest and final fact-finding authority in income tax?

Ans: The Income Tax Appellate Tribunal (ITAT) constituted under Section 252 is the highest and final fact-finding authority. An appeal against its decision lies to the High Court only on a substantial question of law.

Q6. Distinguish between Revision u/s 263 and Revision u/s 264.

Ans: Revision u/s 263 is initiated suo motu by the Commissioner if the AO's order is erroneous and prejudicial to the revenue (pro-revenue). Revision u/s 264 is made on application by the assessee (or suo motu) to grant relief against an order not appealed against (pro-assessee).

Part B: Analytical & Practical Problems (5 Marks Each) Problem Solving

Q7. Explain the Faceless Assessment Scheme under Section 144B of the Income Tax Act.

Ans: The Faceless Assessment Scheme under Section 144B eliminates personal interface between taxpayers and tax officers through electronic assessment. All communication is routed through the National Faceless Assessment Centre (NaFAC). Cases are assigned to Assessment Units through an automated allocation system using algorithms and artificial intelligence. Functional units include Assessment Units, Verification Units (for enquiry and cross-verification), Technical Units (for legal/forensic advice), and Review Units (for reviewing draft assessment orders), ensuring objectivity and transparency.

Q8. An assessee whose estimated net tax liability for FY 2023-24 is ₹1,60,000 paid the following advance tax: ₹20,000 on 15.06.2023; ₹40,000 on 15.09.2023; ₹50,000 on 15.12.2023; and ₹50,000 on 15.03.2024. Determine whether interest u/s 234C is leviable and calculate the interest.

Ans:
Estimated Tax = ₹1,60,000.
1. Installment 1 (15 June): Minimum required 12% = ₹19,200. Paid ₹20,000 (> 12%). No interest u/s 234C.
2. Installment 2 (15 Sept): Minimum required 36% = ₹57,600. Cumulative paid = ₹20,000 + ₹40,000 = ₹60,000 (> 36%). No interest u/s 234C.
3. Installment 3 (15 Dec): Minimum required 75% = ₹1,20,000. Cumulative paid = ₹20,000 + ₹40,000 + ₹50,000 = ₹1,10,000. Shortfall from 75% (₹1,20,000 - ₹1,10,000) = ₹10,000. Interest = 1% × 3 months × ₹10,000 = ₹300.
4. Installment 4 (15 March): Minimum required 100% = ₹1,60,000. Cumulative paid = ₹1,60,000. Shortfall = Nil.
Total Interest Leviable u/s 234C = ₹300.

Q9. Outline the penalty structure for under-reporting and misreporting of income under Section 270A.

Ans: Section 270A prescribes a two-tier penalty structure: (1) Under-reporting of Income: Penalty is 50% of the tax payable on under-reported income. It covers routine additions or disallowances; (2) Misreporting of Income: Penalty is 200% of the tax payable on misreported income. Misreporting includes: misrepresentation or suppression of facts, failure to record investments in books, claiming expense without substantiating evidence, recording false entries in books, and failure to report international transactions.

Part C: Comprehensive Problem (10/15 Marks) Assessment Procedure & Interest

Q10. Mr. Ramanan (age 52, non-audit individual) had an assessed tax liability of ₹2,40,000 for Assessment Year 2023-24. TDS deducted from his income was ₹40,000. He paid advance tax of ₹80,000 on 14th March 2023. The statutory due date for filing his return was 31st July 2023, but he filed his return on 15th December 2023 and paid self-assessment tax along with interest on that date.
Required: Compute the interest payable by Mr. Ramanan under Sections 234A, 234B, and 234C.

Step 1: Assessed Tax Calculation:
• Total Assessed Tax = ₹2,40,000
• Less: TDS = (₹40,000)
• Assessed Tax (Net Tax Liability) = ₹2,00,000.
• Total Advance Tax paid = ₹80,000 (paid on 14.03.2023).

Step 2: Interest under Section 234A (Delay in Filing Return):
• Due date of filing return: 31st July 2023.
• Actual date of filing return: 15th December 2023.
• Period of delay: August, September, October, November, and 15 days of December = 5 months (fraction of a month is rounded up to a full month).
• Unpaid tax amount = Assessed Tax ₹2,00,000 - Advance Tax ₹80,000 = ₹1,20,000.
• Interest u/s 234A = 1% × 5 months × ₹1,20,000 = ₹6,000.

Step 3: Interest under Section 234B (Default in Payment of Advance Tax):
• 90% of Assessed Tax = 90% of ₹2,00,000 = ₹1,80,000.
• Since actual advance tax paid (₹80,000) is less than 90% of assessed tax, Section 234B is attracted!
• Shortfall subject to interest = Assessed Tax ₹2,00,000 - Advance Tax ₹80,000 = ₹1,20,000.
• Period: From 1st April 2023 to date of self-assessment payment (15th December 2023) = 9 months (April to December).
• Interest u/s 234B = 1% × 9 months × ₹1,20,000 = ₹10,800.

Step 4: Interest under Section 234C (Deferment of Installments):
(i) 15th June: Required 15% (₹30,000). Paid Nil. Shortfall = ₹30,000. Interest = 1% × 3 × ₹30,000 = ₹900.
(ii) 15th September: Required 45% (₹90,000). Paid Nil. Shortfall = ₹90,000. Interest = 1% × 3 × ₹90,000 = ₹2,700.
(iii) 15th December: Required 75% (₹1,50,000). Paid Nil. Shortfall = ₹1,50,000. Interest = 1% × 3 × ₹1,50,000 = ₹4,500.
(iv) 15th March: Required 100% (₹2,00,000). Paid ₹80,000 (paid on 14.03.2023). Shortfall = ₹1,20,000. Interest = 1% × 1 × ₹1,20,000 = ₹1,200.
• Total Interest u/s 234C = ₹900 + ₹2,700 + ₹4,500 + ₹1,200 = ₹9,300.

Step 5: Summary of Total Statutory Interest Payable:
• Interest u/s 234A: ₹6,000
• Interest u/s 234B: ₹10,800
• Interest u/s 234C: ₹9,300
TOTAL INTEREST PAYABLE = ₹26,100.