Understand Income Tax Assessment for your Benefit

The income tax assessment procedure is a systematic process undertaken by the Income Tax Department to determine the correct tax liability of an individual or entity based on their income and other financial information.

This blog is going to give you an idea of the assessment procedure through a short story.

Ronita and Rohon, two good friends working in two different companies, accidentally met at a shopping mall one evening. After a cheerful greeting, they looked around for a place to chill and relax. Finally, they settled at a small café corner with cold drinks and some snacks.

As they began chatting about work and life, the discussion slowly drifted toward income tax.

Rohon is asking his friend, Ronita, can you tell me what “assessment” means in income tax?

Ronita replied -Income Tax Assessment is the examination of all the information disclosed in the ITR by the taxpayer to ensure it is accurate and in compliance with the regulations.

Rohon replied, oh, I see. But do we really need to know the assessment procedure?

Ronita replied, definitely! assessment helps taxpayers understand how their income is examined, how refunds or demands are determined, and what rights and responsibilities they have in the process. It also makes compliance easier and prevents future disputes or penalties.

Rohon, makes sense. So, it’s not just about filing the return, but also about knowing how it’s processed.

Ronita: Exactly.

Ronita: Rohon, listen — I’ll tell you about my experience in our company; it’ll make this clearer.

When Ronita, a young MBA (finance) from Kolkata, landed her first job, she proudly filed her Income Tax Return (ITR) online. After clicking “Submit,” she smiled — thinking it’s done for this financial year.

Ronita: you know, my mentor once told me something interesting about this.

“Filing a return is only half the story, Ronita. What follows is the assessment — the real test of how accurately you’ve reported your income.”

That curious line made me dig deeper. What exactly happens after I file my income tax return? Who checks it? And what if the figures don’t match?

Let’s explore Ronita’s journey through the regulated legal world of Income Tax Assessments — the process by which the Income Tax Department verifies, corrects, or even reopens tax returns.

Self-Assessment (Section 140A): Your own assessment

Before filing, Ronita calculates her income — Rs. 6,00,000 salary, Rs.20,000 bank interest, and some small amount of capital gains.
Her total tax comes to Rs.41,600, but her Form 26AS shows TDS of Rs.38,000.

She pays Rs.3,600 online before submitting her return.

This is called Self-Assessment Tax — where the taxpayer willingly computes tax liability on income and pays tax before filing.

It reflects voluntary compliance — the foundation of our tax system.

Attention:  Self-assessment = You check yourself before they check you.

Summary Assessment (Section 143(1)): The system checks your calculation

Once Ronita files her income tax return (ITR), it is automatically processed by the Centralized Processing Centre (CPC) in Bengaluru.

The system compares:

• Income declared vs. Form 26AS / AIS data
• Deductions and exemptions claimed
• Basic calculation errors

After this automated check, Ronita receives an email:

“Your return has been processed under Section 143(1). Refund of ₹450 will be credited shortly.”

This is a Summary Assessment — quick, computer-based, and free from human judgment.

Scrutiny Assessment (Section 143(3): The ITO’s detailed examination

A few months later, Ronita receives a notice — her case has been picked up for scrutiny.

The Assessing Officer (AO) noticed that her capital gains appeared higher than her reported investment value.
Ronita visits the AO’s office with proofs — broker statements, investment records, and bank statements.

After verification, the AO accepts her explanations and finalizes the assessment.

Scrutiny Assessment ensures that the return filed is genuine and complete. It’s a manual and detailed verification by the department — a reality check after the computerized summary.

Best Judgment Assessment (Section 144): What notice from ITO is ignored

Now imagine a different scenario. Suppose Ronita ignored the department’s notice — no reply, no documents.

In that case, the Assessing Officer doesn’t just give up.
He makes a Best Judgment Assessment — estimating income based on available data like TDS, AIS, or bank transactions.

This is done when the taxpayer fails to cooperate — and often results in a higher tax demand or penalty.

Income Escaping Assessment (Section 147): When old income Reappears

Two years later, through information from a property registrar, the department learns that Ronita had sold a plot of land in 2022 — something she hadn’t disclosed earlier.

The AO now believes that some income has escaped assessment.
He issues a notice under Section 148 and reopens her earlier year’s case.

Ronita submits the sale details and pays the additional tax with interest.

This is known as Income Escaping Assessment or Reassessment — when past income that was missed or hidden comes under scrutiny again.

Time limit: The time limit for issuing a notice to reopen an assessment is 3 years from the end of the relevant assessment Year. If the escaped income is believed to exceed ₹50 lakh, the case may be reopened for up to 10 years from the end of that year.

Reassessment Proceedings (linked to Sec. 147–148A): A second chance to explain

In the new system, before reopening, the AO must give the taxpayer an opportunity to explain.
Ronita gets a notice asking why the case shouldn’t be reopened. She replies promptly and cooperates — showing her property sale was already declared in another year.

The AO, satisfied with her reply, drops the reassessment.

This ensures transparency and fairness — taxpayers now get a chance to clarify before the department reopens any past case.

Learning outcome

• Self-Assessment (140A): You calculate and pay your own tax before filing.
• Summary Assessment (143(1)): CPC automatically checks for calculation or data errors.
• Scrutiny Assessment (143(3)): AO examines your return in detail.
• Best Judgment Assessment (144): AO estimates income when taxpayer doesn’t respond.
• Income Escaping Assessment (147): Past year reopened when hidden income surfaces.
• Reassessment (148A): Taxpayer gets a fair chance to explain before reopening.

Conclusion: What Ronita learned

Ronita realized that assessment isn’t a threat — it’s a process that ensures honesty, accuracy, and fairness in the tax system. From self-check to government verification, every stage builds trust between taxpayers and the nation.

Both Ronita and Rohon stood up, shook hands with a warm smile, and walked out of the place— feeling satisfied after a meaningful discussion on income-tax assessment.