Best judgement assessment in income tax, 1961 gives the guidelines that an Assessment Officer (AO) should follow while conducting an evaluation on assessee’s IT Return/tax liabilities the usage of his/her high-quality viable line of logical justification in positive precise situations. The unique situations, the place an Assessment Officer is compelled to examine ITR/Tax legal responsibility based totally on his/her very own great logical justification are given as:
1. Assessee failing to publish ITR u/s 139(1)
2. Assessee failing to publish belated ITR u/s 139(4)
3. Assessee failing to publish revised ITR u/s 139(5)
4. Assessee failing to fulfill 142(1) Notice phrases and conditions
5. Assessee failing to fulfill the Auditing of Accounts Guidelines u/s 142(2A)
6. Assessee failing to reply 143(2) Notice of Scrutiny Assessment
7. AO is dubious on the authenticity of the facts furnished in assessee’s Evidences/Books of Accounts
For these cases, AO need to use Best Judgement Assessment system as per Section one hundred forty four of IT Act, 1961.
Types of Best Judgement Assessment
A. Compulsory Best Judgement Assessment: Where assessee is no longer cooperating with AO or no longer furnishing integral evidences. Such
decision may additionally be taken, if assessee mentions of now not having essential files as required for the evaluation in response of AO’s Notice.
B. Discretionary Best Judgement Assessment: Where AO identifies foremost mistakes in profits tax computation and doubts about the authenticity of
information given in ITR/documents/Books of Accounts.
Incomplete/unsigned/unverified ITR can also lead to such decision. Best Judgement Assessment u/s one hundred forty four is finished by way of AO by means of gathering all the
available legitimate information, which can also no longer be ample for thorough assessment. For that, AO follows the pointers u/s a hundred and forty four to use his/her own
Important Conditions of Best Judgement Assessment u/s 144
1. Before conducting Best Judgement Assessment u/s 144, the assessee must be known as as given probability to make clear himself/herself before
AO. In that context, a exhibit purpose Notice u/s a hundred and forty four is dispatched to the assessed.
In case, assessee requests for greater time to gather proof documents, AO ought to reflect on consideration on the enchantment with realistic justification
rather than discarding abruptly. AO’s selection have to now not be biased/result of prejudice.
2. Best Judgement Assessment u/s a hundred and forty four can’t be concluded by way of AO in these cases:
i- Insignificant mistakes
ii- Non-rectification of errors/filing return from assessee’s stop inside due date, the place applicable motion (issue of similarly be aware with the aid of AO) to be taken towards assessee’s behavior at first, different than conclusion primarily based on Best Judgement Assessment. In case of non-response, Best Judgement Assessment may also be conducted.
iii- tax return is located to be much less than assessee’s declared return in ITR or loss greater than assessee’s declared loss
iv- Rejecting evidences barring acceptable motive by means of AO
v- Based on invalid Notices
3. No refund is granted primarily based on Best Judgement Assessment u/s 144.
4. AO has the strength to reject assessee’s Books of Accounts, if these stipulations are satisfied:
i- AO finds the Books of Accounts to be incomplete and no longer nice for concluding authentic assessee’s tax liability
ii- Assessee’s Books of Account does now not comply with the norms of Accounting regarded to be the general for earnings tax computation or is determined to be incomplete, such as, there are unexplained money credits, account mismatch, non-maintenance of inventory register, etc.
iii- Income is no longer computed as per the wellknown referred to u/s 145(2)
5. AO can’t discard Books of Accounts records, primarily based on the following
i- Insignificant mistakes
ii- Only on the floor of non-maintenance of inventory register, until AO feels it to be scrutinized primarily based on the involved situation
iii- AO can’t point out enormous discrepancy/assessee affords clarification regarded exceptional by means of the tribunal
iv- Lack of giant evidences .
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