Assessment — Kinds; Return of Income & E-Filing; Refund — Law of Taxation Notes

Assessment — Kinds; Return of Income & E-Filing; Refund

Two returns arrive at the department. One is simply processed by computer and accepted; the other is picked up for detailed scrutiny with notices and hearings. “Assessment” is the umbrella for how the department examines a return — and it comes in several distinct kinds, each with its own trigger, which is exactly what the exam asks you to separate.

What assessment is

Assessment is the process of determining the total income and the tax payable by an assessee. It begins with the return of income.

Return of income (s.139). Every person whose income exceeds the exemption limit (and certain others) must file a return by the due date, disclosing income and tax. Returns are now largely e-filed on the department’s portal. A belated return (s.139(4)) can be filed late (with consequences); a revised return (s.139(5)) corrects an omission/error; a defective return (s.139(9)) must be cured.

Kinds of assessment (learn each with its section and trigger — this is the essay):

1. Self-assessment (s.140A) — the assessee himself computes his income and pays the tax due before filing the return; the return carries the self-assessed tax.
2. Summary assessment / processing (s.143(1)) — the return is processed electronically: arithmetical errors and obvious adjustments are corrected, and an intimation of tax/refund is issued. No detailed scrutiny.
3. Scrutiny assessment (s.143(3)) — the Assessing Officer, after selecting the case, issues a notice, examines evidence, hears the assessee, and passes a reasoned assessment order determining income and tax.
4. Best-judgment assessment (s.144) — where the assessee fails to file a return, or to comply with notices, or maintains no proper accounts, the AO assesses to the best of his judgment on the material available (a fair estimate, not arbitrary).
5. Income escaping assessment / re-assessment (s.147, with notice under s.148) — where income has escaped assessment, the AO may reopen and reassess within the prescribed time limits.

Refund of tax (ss.237–245). If the tax paid (by TDS, advance tax, self-assessment) exceeds the tax due, the assessee is entitled to a refund of the excess, with interest (s.244A) for the period of delay. Refunds are now issued electronically to the bank account.

🧩 WORKED EXAMPLE — Which assessment applies?

Facts. An assessee does not file his return at all despite notices; the AO must still determine his income.

Rule. On a failure to file/comply, s.144 authorises a best-judgment assessment — the AO estimates income fairly from available material after giving the assessee an opportunity.

Apply. Since there is no return and no compliance, s.143(3) scrutiny (which needs a return) does not fit; the AO proceeds under s.144.

Conclusion. A best-judgment assessment (s.144) is made. Had the assessee filed and simply been picked for detailed examination, it would be s.143(3) scrutiny instead.

Section 139(1) (gist): every person whose total income exceeds the maximum amount not chargeable to tax “shall, on or before the due date, furnish a return of his income …”

In Simple Terms: Assessment is how the department checks your return. You first self-assess and pay (s.140A). The return is processed (s.143(1)); some are picked for scrutiny (s.143(3)); if you do not file or cooperate, the officer makes a best-judgment estimate (s.144); and escaped income can be reopened (s.147). Pay more than due, and you get a refund with interest.

flowchart TD
    ROOT["Return filed s.139 (e-filing)"]:::root
    ROOT --> A["Self-assessment s.140A<br/>pay before filing"]:::leaf
    ROOT --> B["Summary / processing s.143(1)"]:::leaf
    ROOT --> C["Scrutiny s.143(3)<br/>notice, hearing, order"]:::leaf
    ROOT --> D["Best-judgment s.144<br/>no return/no compliance"]:::leaf
    ROOT --> E["Re-assessment s.147/148<br/>escaped income"]:::leaf
    ROOT --> F["Refund ss.237/244A if excess paid"]:::sub
    classDef root fill:#FFF8DC,stroke:#000,stroke-width:1px,color:#000;
    classDef leaf fill:#E6F3FF,stroke:#1E3A8A,color:#000;
    classDef sub fill:#F2F2F2,stroke:#555,color:#000;
    linkStyle default stroke:#888,stroke-width:1px;

Case Laws

• State of Kerala v C. Velukutty (1966) — a best-judgment assessment must be a fair and honest estimate, based on material, not a punishment or a pure guess.

Back to Top

📄 Full notes + Question Bank (₹199) — every topic in depth, model answers to all past KSLU questions, in one printable PDF. Get the bundle · 10 Solved Problems · All Law of Taxation topics