Self-Assessment & Intimation – CMA Inter Direct Tax Study Material is designed strictly as per the latest syllabus and exam pattern.
Self-Assessment & Intimation – CMA Inter Direct Tax Study Material
Short Notes
Question 1.
Write short note on the following:
Adjustments required to be made while processing the return of income, u/s 143 (1). (June 2017, 5 marks)
Answer:
Section 143(1):
Scheme of Processing of Returns Adjustment to be made by software to the returned income while processing under section 143(i):
Where a return has been made under section 139, or in response to a notice under section 142(1), the total income or loss shall to computed after making the following adjustments, namely:
- any arithmetical error in the return: or
- an incorrect claim, if such incorrect claim is apparent from any information in the return;
- disallowance of loss claimed if return of the previous year for which set off of less is claimed was furnished beyond the due date specified under section 139(1);
- disallowance of expenditure or increase in income indicated in the audit report but not taken into account in computing the total Income in the return;
- disallowance of deduction claimed [Under Section 10AA or under any of provisions of Chapter VI-A under the heading “C-Deductions in respect of certain incomes” if] the return is furnished beyond the due date specified under section 139 (1).
- addition of income appearing in Form 26AS or form 1 GA or form 16 which has not been included in computing the total income in the return.
However, no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in
writing or in electronic made.
Further, the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within 30 days of the issue of such intimation, such adjustments shall be made.
Question 2.
Write short note on the following:
Best judgment assessment under section 144 (Dec 2018, 5 marks)
Answer:
Best judgment assessment [Section 144]
If any person:-
(a) fails to make the return required under section 139(1) and has not made a return or a revised return under section 139(4) or section 139(5) or an updated return under sub-section (8A) of that section, or
(b) fails to comply with all the terms of a notice issued under section 142(1) or fails to comply with a direction issued under section 142(2A), or
(c) having made a return, fails to comply with all the terms of a notice issued under section 143(2), the Assessing Officer, after taking into account all relevant material which the Assessing Officer has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment:
Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment:
Provided further that it shall not be necessary to give such opportunity in a case where a notice under section 142(1) has been issued prior to the making of an assessment under this section.
Question 3.
Write short note on the following:
Scrutiny assessment under section 143(3) (June 2019, 5 marks)
Answer:
Where the Assessing Officer or the prescribed income-tax authority (here-in-after collectively referred to as ‘Assessing Officer’) considers it necessary to ensure that the assessee has not –
- understated his income; or
- declared excessive loss; or
- underpaid the tax
he can make a scrutiny in this regard and gather such information and evidence as he deems fit. And on the basis of such information and evidence so collected, he shall pass an assessment order. Such order shall be treated as regular assessment order.
Conditions for scrutiny assessment:
- A return has been furnished u/s 139 or in response to a notice u/s 142(1); and
- Assessing Officer considers it necessary or expedient to ensure that the assessee has not understated his income, declared excessive loss or under-paid the tax.
Question 4.
Write short note on the following:
Best Judgement Assessment under section 144 (Dec 2019, 5 marks)
Answer:
Best judgment assessment [Section 144]
If any person:-
(a) fails to make the return required under section 139(1) and has not made a return or a revised return under section 139(4) or section 139(5) or an updated return under sub-section (8A) of that section, or
(b) fails to comply with all the terms of a notice issued under section 142(1) or fails to comply with a direction issued under section 142(2A), or
(c) having made a return, fails to comply with all the terms of a notice issued under section 143(2), the Assessing Officer, after taking into account all relevant material which the Assessing Officer has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment: Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment: Provided further that it shall not be necessary to give such opportunity in a case where a notice under section 142(1) has been issued prior to the making of an assessment under this section.
Question 5.
Write short note on Intimation or Assessment by income tax department? (Dec 2021, 3 marks)
Answer:
Intimation and Assessment by income tax department. After submission of return of income or on non-submission of return of income by the assessee, assessment is made by the Income tax department. The Assessing Officer can assess the income of the assessee in any of the following manner:
- Intimation u/s 143(1);
- Scrutiny Assessment u/s 143(3);
- Best Judgment Assessment u/s 144;
- Income Escaping Assessment u/s 147 for making assessment.
Question 6.
Write short note on the following:
Best Judgement Assessment (Dec 2022, 5 marks)
Descriptive Question
Question 7.
Briefly discuss the provisions of Section 142(2A) of the Income-tax Act, 1961 relating to special audit. (Dec 2012, 4 marks)
Answer:
Special Audit [u/s 142 (2A)]-
1. Power of Assessing Officer: At any stage of the proceeding, the Assessing Officer having regard to the nature and complexity of the accounts of the assessee and the interests of the revenue, is of the opinion that it is necessary so to do, he may, with the approval of the Chief Commissioner or Commissioner, direct the assessee to get his accounts audited by an accountant and to furnish a report of such audit.
2. Extension of Time Limit: Assessing Officer may suo moto or on the application made by the assessee in behalf extend period for furnishing the audit report upto 180 days from the date of directions.
3. Audit under Other Law: Assessing officer can direct the assessee to get his accounts audited under this section even it the accounts are already audited under this Act or under any other law.
4 Prior Approval: Prior approval of the Chief Commissioner or Commissioner must be obtained before directing such audit.
5. Appointment: The Chief Commissioner/Commissioner shall nominated the auditor.
6. Form of Report: The Audit Report containing prescribed particulars must be furnished in the prescribed Form No. 6B.
7. Opportunity of being heard: The Assessing Officer shall not direct the assessee to get the accounts so audited unless the assessee had been given a reasonable opportunity of being heard.
8. Penalty: On failure to comply with direction issued u/s 1 42(2A): A penalty for ₹ 10,000 u/s 271(1) (b) can be levied and Best judgment assessment u/s 144 can be made.
Question 8.
State the time limit prescribed for passing the following orders under the Income Tax Act:
(i) An order of assessment by the Assessing Officer under Section 143(3);
(ii) An order of assessment by the Assessing Officer under Section 143(3), where reference has been made to Transfer Pncing Officer for determination of arm’s length price in international transactions;
(iii) An order of assessment by the Assessing Officer under Section 147;
(iv) An order of revision by the Commissioner of Income Tax under Section 263; (June 2013, 4 marks)
Answer:
(i) As per Section 153 an assessment order under Section 143(3) is to be passed within 12 months from the end of the assessment year in which the income was first assessable.
(ii) Where a reference has been made to the Transfer Pricing Officer for determination of arms-length price in international transactions, assessment order under Section 143(3) is to be passed within 33 months from the end of the relevant assessment year.
(iii) An order of assessment under Section 147 is to be passed by the Assessing Officer within 9 months from the end of the financial year in which the notice under Section 148 was served.
(iv) An order for revision under Section 263 is to be passed by the Commissioner within 9 months from the end of. the financial year in which such order u/s 263 is passed by the PC or CIT as the case may be.
Question 9.
In the course of assessment proceedings, the Assessing Officer enhanced the value of closing stock and added the difference to the total income. In the assessment year subsequent to this, the assessee wants the A.O. to enhance, by the same amount, the value of the opening stock of the year. Discuss the validity of the claim. (June 2013, 3 marks)
Answer:
The value of the closing stock of the preceding year must be the opening stock of the succeeding year. Hence, if the value of the closing stock is enhanced, the enhanced value should be taken as the value of opening stock of the next year for purposes of the IT. The claim of the assessee is therefore valid.
Question 10.
Answer the following question with brief reason/working:
A foreign company cannot approach Dispute Resolution Panel in respect of its assessment. Is this statement correct? (Dec 2015, 2 marks)
Answer:
This is a false statement. The Scheme of Dispute Resolution Panel is available only to a foreign company and to any person who has entered into an international transaction and whose assessment has been referred to transfer pricing officer (Section 144C).
Question 11.
State the scope and time limit for rectification of order passed by the Assessing Officer under the Income-tax Act. (Dec 2015, 3 marks)
Answer:
Section 154 states that the Income-tax assessing officer ¡s empowered to rectify any order of assessment or of refund or any other order passed by him. Further, the AO is also empowered to amend any intimation or deemed intimation u/s 143(1) or amend any intimation u/s 200A (1).
Rectification of an order can be made only within 4 years from the end of financial year in which the order sought to be amended was passed. In case of amendment made U/sl 54(8); If an application for amendment is made by the assessee, the AC shall pass an order within a period of 6 months from the end of the month in which the application is received.
Question 12.
State the procedures to be adopted by the Income-tax Authorities for rectification of mistakes under section 154 of the Income-tax Act and the time limit for such rectification. (June 2016, 7 marks)
Answer:
Procedure for rectification of mistake u/s 154
An amendment of the following nature can be made only after the concerned authority has given notice in this respect and also a reasonable opportunity of being heard to the assessee or deductor or the collector.
- amendment which enhances an assessment
- Amendment which reduces a refund
- Amendment which otherwise increases the liability of the assessee or deductor or the collector.
It any amendment enhances the assessment or reduces a refund already made, a notice of demand is served on the assessee or deductor or the collector. Such notice is deemed to be a notice u/s 156. If any amendment reduces the assessment, refund due to the assessee is made unless it is withheld u/s 241.
Time Limit for Rectification:
Period of limitation for making rectification as prescribed in sub-section (7) of Section 154 is as follows:
No amendment under this section can be made after the expiry of 4 years from the end of the financial year in which the order sought to be amended was passed. It may be noted that an amendment is made when related order is passed.
This period of limitation ¡s not applicable in case the provision of Section 155 are applicable. However, if a valid application has been made by the assessee for rectification within the statutory time limit but is not disposed of by the concerned authority within the time specified, it may be disposed of even after the expiry of such time limit [Circular No. 73, dated 7th January, 1972]. This relief is, however, not admissible ¡n case rectification proceedings are initiated by the department itself.
Short Notes
Question 13.
Write short note on the following:
Features of ICDS. (June 2017, 3 marks)
Answer:
Features of ICDS:
The following are the main features of ICDS:
- ICDS are to be followed by all assessees following the mercantile system of accounting.
- ICDS are applicable to the computation of income chargeable to income tax under the head “Profit and gains of business or profession” or “Income from other sources.”
- This standard is not applicable for maintenance of books of account, AS ICDS are meant for computation of income only, there is no need for maintenance of books of account for this purpose.
- In the case of conflict between the provision of the Income-Tax Act, 1961 and ICDS, the provisions of the Act shall prevail to that extent.
- Non-compliance of ICDS will lead to be judgment assessment.
Question 14.
Write short note on the following:
State the type of assesses to whom the Income Computation Disclosure Standards (ICDS) apply? (Dec 2017, 5 marks)
Answer:
ICDS are applicable to the computation of income chargeable to income tax under the head profits and gains of business or profession and income from other sources.
Question 15.
Write short note on the following:
ICDS: Accounting policies (June 2018, 5 marks)
Answer:
Accounting Policies:
Accounting policies adopted by a person shall be such so as to represent a true and fair view of the state of affairs and income of the business, profession or vocation. The treatment and presentation of transactions and events shall be governed by their substance and not merely by the legal form. Marked to market loss or an expected loss shall not be recognised unless the recognition of such loss is in accordance with the provisions of any other income Computation and Disclosure standard.
Disclosure of Accounting Policies:
All significant accounting policies adopted by a person shall be disclosed.
Any change in an accounting policy which has a material effect shall be disclosed (with quantum of the effect, if ascertainable) where such amount is not ascertainable, the fact shall be indicated.
Disclosure of accounting policies or of changes therein cannot remedy a wrong or inappropriate treatment of the item.
Fundamental Accounting Assumptions:
The fundamental accounting assumptions i.e. Going concern, Consistency, and Accrual are assumed as followed. No specific disclosure is required, if these assumptions are followed, however, if such assumptions are not followed, the fact shall be disclosed.
Question 16.
Write short note on the following:
ICDS – I on “Accounting Policies” (Dec 2018, 5 marks)
Answer:
ICDS-I “Accounting Policies”
Accounting policies are the specific accounting principles and method of applying those principles in the preparation and presentation of financial statement
There are 3 fundamental accounting principles.
- Going Concern
- Consistency
- Accrual
Question 17.
Write short note on the following:
Items to be excluded in determining the cost of inventories under ICDS-II. (June 2019, 5 marks)
Answer:
Items to be excluded ên determining the cost of Inventories under ICDS-II:
The cost of inventories is governed by ICDS-II not only for the purpose of valuation on the closing date but also when the inventories are purchased for the purpose of manufacture or trade.
The following costs shall be excluded in determining the cost of inventories:
- Abnormal amounts of wasted materials, labour or other production costs.
- Storage costs, unless those costs are necessary in the production process prior to a further production stage.
- Administrative overheads that do not contribute to bringing the inventories to their present location and condition.
Selling costs.
Question 18.
Write short note on Disclosures to be made as per ICDS IV Revenue recognition (Dec 2021, 3 marks)
Answer:
Following disclosures shall be made in respect of revenue recognition:
- in a transaction involving sale of goods, total amount not recognised as revenue during the previous year due to lack of reasonable certainty of its ultimate collection along with nature of uncertainty;
- the amount of revenue from service transactions recognised as revenue during the previous year;
- the method used to determine the stage of completion of service transactions in progress; and
- for service transactions in progress at the end of previous year:
i. amount of costs incurred and recognised profits (less recognised losses) up to end of previous year
ii. the amount of advances received; and
iii. the amount of retentions.