The document discusses key concepts related to income tax returns and assessments in India. It explains that a return of income is a formal document that taxpayers must file declaring their income, deductions, and tax liability for a financial year. The assessment process involves tax authorities evaluating the return and determining the accurate taxable income and tax owed based on supporting documents provided. There are different types of income assessments depending on factors like whether the return was filed on time or if income was found to have been missed.

1. Return of Income
and Assessment
SUBMITTED BY: SUBMITTED TO:
RUDRA PRATAP MS. ANKITA KAUSHIK
4TH YEAR, 7TH SEMESTER ASSISTANT PROFESSOR
06213403820
Assignment 2 of Tax Law

2. Introduction
 The Income Tax Act, 1961 is a critical legal framework that is governing the
taxation of income in the country. This presentation aims to provide a
comprehensive understanding of "Return of Income" and "Assessment" under
the Income Tax Act.
 The term “return of income" refers to a formal document that individuals,
businesses, and other entities are required to file with the tax authorities. This
document provides a comprehensive declaration of their income earned
during a specific financial year, details of various deductions and exemptions,
and the computation of tax liability.
 The term "assessment" refers to the process of evaluating and determining the
tax liability of a taxpayer based on the information provided in their income
tax return. This involves verifying the accuracy and completeness of the return,
as well as making any necessary adjustments, additions, or deductions to the
reported income.

3. What is Return of Income (hereinafter
referred to as ITR)
 An income tax return is a document or a form that individuals, businesses,
and other entities are required to file with the tax authorities, usually the
income tax department of a country, to report their income, deductions,
exemptions, and compute their tax liability or claim any refunds.
 The income tax return provides a summary of the taxpayer's financial
activities and serves as a basis for calculating the amount of income tax
that needs to be paid or refunded. It helps the tax authorities assess the
taxpayer's compliance with the applicable tax laws and regulations.

4. Who is supposed to file the ITR
 Resident and Ordinarily Resident: For citizens who are citizens and ordinarily citizens of India, the liability
to file an ITR arises. If the total income before allowing deductions under Chapter VI-A exceeds the basic
exemption limit the individual is liable to pay taxes on it. The basic exemption limit for individuals below
60 years of age is rupees 2.5 lakhs, for senior citizens, i.e., people between the age of 60 and 80 years, it is
₹3 lakhs and for super senior citizens, i.e., people above 80 years of age is ₹5 lakhs
 Resident but Not Ordinarily Resident: RNOR individuals are subject to certain conditions and tax benefits.
They are subjected to taxation only on income that is accrued and/or earned in India and income received
in India. Foreign income and income from outside India are not taxable for RNOR individuals.
 Non-Resident: if and NRI's income originates in India, he is required to pay tax on that income,
irrespective of his residential status.
 Apart from individuals, all other entities such as companies, firms and trusts are also liable to file a return
of income, irrespective of the amount of income earned or losses incurred.

5. Penalty for late filing/submission
If the return if filed after the expiration of the due date, then in that case 3
scenarios will take place:
 If gross total income is ₹2.5 lakhs or less, then the penalty will be nil, i.e., 0
 If the total income is more than ₹2.5 lakhs and up to ₹5 lakhs, the penalty will
be ₹1000
 If the income is more than ₹5 lakhs, the penalty will be ₹5000
When the due date of filing under section 139(1) has been exceeded, the assessee
will not be able to carry forward losses except for house property losses incurred
for the financial year.
Pending for unpaid taxes would be chargeable 1% of tax liability for every month
or part of the month until the payment of the amount.

6. What is Assessment in Taxation Law
Assessment in income tax refers to the process undertaken by tax authorities to evaluate and
determine the taxable income, tax liability, and other related matters of a taxpayer. It is a
crucial step in the taxation process, which helps ensure compliance with the provisions of the
Income Tax Act and determines the amount of tax to be paid by the taxpayer.
Objectives of Assessment:
The primary objectives of the assessment process are as follows:
 Determination of Taxable Income: The tax authorities assess the income earned by the
taxpayer from various sources, such as salary, business, capital gains, or other sources.
They evaluate the taxpayer's financial documents, including the income tax return and
supporting documents like bank statements, invoices, receipts, etc., to verify the accuracy
and completeness of the income reported.
 Calculation of Tax Liability: Based on the taxable income determined during the
assessment, the tax authorities apply the relevant tax rates and provisions to calculate the
tax liability. The tax liability is generally influenced by factors such as the taxpayer's income
slabs, deductions, exemptions, and tax rates applicable for the relevant assessment year.

7. Objectives of Assessment in Taxation
Law
 Compliance Verification: The assessment process also includes reviewing the
taxpayer's compliance with various tax provisions, such as tax deducted at
source (TDS), advance tax payments, filing of tax returns within the specified due
date, and maintaining appropriate records. Non-compliance with these
requirements may attract penalties, interest, or other legal actions.
 Tax Refunds: The assessment process also identifies cases where the taxpayer
has paid excess tax compared to their actual tax liability. In such cases, the tax
authorities issue tax refunds to the taxpayer, providing them with the excess tax
amount.

8. Who is an Assessee in terms of
Taxation Law
An assessee is a person or entity who is liable to pay tax or is subject to the assessment
of tax by the tax authorities. It refers to the individual or organization on whom the tax
liability is imposed.
The term "assessee" is used in various tax laws, including the Income Tax Act, 1961 in
India. In this act, the word "assessee" is defined in Section 2(7) as follows:
"Assessee" means a person by whom any tax or any other sum of money is payable
under this Act, and includes:
 Every person in respect of whom any proceeding has been initiated under this Act for
the assessment of his income or the income of any other person in respect of which
he is assessable;
 Every person who is deemed to be an assessee under any provision of this Act;

9. Who is an Assessee in terms of
Taxation Law
 Every person who is required to file a return of income under this Act;
 Every person who is a resident deemed to be an assessee in accordance
with the provisions of section 160 or section 163.
Therefore, any individual, Hindu Undivided Family (HUF), firm, company, trust,
or any other entity that is liable to pay tax or is subject to the assessment of
tax can be considered an assessee under the relevant tax laws. The tax
authorities determine the tax liability of the assessee based on the income,
deductions, exemptions, and other relevant factors declared in the tax return
filed by the assessee.

10. Different types of Income Assessments
There are different types of income assessment, some of them are a follows
 Self-assessment: This is the most common type of assessment where individuals, Hindu
undivided families (HUFs), and some businesses estimate their total income for the
financial year and calculate the tax liability accordingly. This assessment method
requires taxpayers to file their income tax return (ITR) on or before the due date
specified by the Income Tax Department.
 Regular assessment: In cases where an individual or business fails to file their ITR or if
the tax authorities have reason to believe that any income has escaped assessment, the
assessing officer may initiate a regular assessment. This involves issuing a notice to the
taxpayer, who will be required to furnish relevant financial documents and evidence to
support their income and deductions. The assessing officer will then ascertain the
correct taxable income and determine the tax liability accordingly.

11. Different types of Income Assessments
 Best judgment assessment: Under Section 144 of the Income Tax Act, if a
taxpayer fails to comply with a notice issued under Section 142(1) or fails to
provide the required documents and information, the assessing officer can
make a best judgment assessment based on the available material. In such
cases, the assessing officer will estimate the taxpayer's income and determine
the tax liability to the best of their judgment.
 Income escaping assessment: If the assessing officer has reason to believe that
any income chargeable to tax has escaped assessment in a particular financial
year, they may initiate an income escaping assessment under Section 147 of
the Income Tax Act. The officer shall issue a notice to the taxpayer, providing
an opportunity to present their case and furnish relevant documents. The
assessing officer can reassess the income and determine the tax liability for the
relevant financial year.