written by Khatabook | August 17, 2021

All You Need To Know About Section 143(1) of Income Tax Act

Section 143(1) of the Income Tax Act provides the computation of an assessee's total income after making the adjustments. An assessee is an individual responsible for paying tax or sum of money under the Income Tax Act 1961. The adjustments are any arithmetic errors in the returned data and an incorrect claim if it's obvious from the information in return.

All taxpayers' income tax returns are first processed online at the Centralised Processing Centre. Following the Income Tax return processing, the income tax department sends intimation to the taxpayers under section 143(1) Income Tax informing them of the results. The taxpayers need to do assessments for this.

Preliminary assessment under the Income Tax Act 143(1)

  • Every taxpayer has to disclose the details of income to the Income Tax Department. 
  • These details are to be furnished by filing his return of income. 
  • Once the taxpayer has filed a return of income, the Income Tax department will process the return of income. 
  • The Income Tax Department checks the income tax return to ensure its accuracy. 
  • The process by which the Income Tax Department examines the return of income is known as Assessment. 
  • The assessee is the one who pays the tax.

Self-Assessment

  • Under self-assessment, the assessee determines the amount of income tax to be paid. 
  • The tax department has made available various forms for filing income tax returns.
  • The assessee aggregates his income from various sources and adjusts it against any losses, deductions, or exemptions available for them during the year. 
  • The assessee's total income is calculated. To calculate the tax payable on such income, the assessee deducts the TDS and Advance Tax from the amount. 
  • If they still owe tax, it is referred to as self-assessment tax and must be paid off before they file an income tax return. This is referred to as self-assessment.

Summary Assessment

  • It's a kind of assessment done without human involvement. 
  • The information submitted by the assessee in their revenue tax return is checked against the data available for the tax department in this type of appraisal. 
  • During this process, the department checks the accuracy of the filed Income Tax return. 
  • The return is processed online, and any other flaws, misrepresentations or rejections are corrected. 
  • For example, an increase in tax liability can occur if the taxpayer’s TDS credit is more in PAN as per department records.

Assessment of Best Judgment

  • This assessment is used in the following situations:

 a. If the assessee fails to respond to a notice from the department requiring them to produce certain information or books of accounts.

 b. If they fail to cooperate with a special audit ordered by the Income Tax authorities. 

 c. The assessee fails to file the return by the deadline or within the extended time limit permitted. 

 d. The assessee fails to follow the terms in the Summary Assessment notice. 

After hearing the assessee's argument, the assessing officer issues an order based on all relevant materials and evidence available to them. This is known as the assessment of best judgement.

Assessment of Income Escaping

  • The appraisers are authorised to verify the assessee's income if they have reasonable grounds to believe that taxable revenue has escaped the appraisal. 
  • Four years after the end of the relevant assessment year is the deadline for the issue of a notice to reopen an assessment. 
  • Some scenarios where reassessment is carried out are as follows:

a. The assessee has taxable income but has yet to file his tax return. 

b. The assessee is found to have understated his income or claimed excessive allowances or deductions after filing his income tax return.

c. The assessee has not produced the required international transaction reports. Some taxpayers may complete the assessment quickly, while others take a long time. It is recommended that you hire a Chartered Accountant for assistance when dealing with income tax officers if you are facing troubles.

Also Read: Section 44AD of Income Tax- Features & Applications

Intimation

What is Income tax Intimation u/s 143(1)

An income tax declaration can be submitted either on request by the income tax department under Section 139 or on request by Section 142(1). 

It is essential to understand what happens when the taxpayer has filed their return on income tax: 

  • The Department of Revenue shall conduct a preliminary review of all returns filed and inform taxpayers of the review results. 
  • This focuses on arithmetical errors, internal contradictions, calculation of taxation and verification of tax payments. 
  • The preliminary evaluation is fully computerised, free of human involvement, and is delegated to the Central Processing Centre (CPC).

There are a few reasons due to which an intimation under Section 143(1) Income Tax act is generated:

  • In such cases, the taxpayer need not get scared. This is procedural compliance only where you are required to convey the reason for the variance in the income tax return and Form 16. 
  • The taxpayer would also be required to submit proof of such deductions or any exemptions.
  • Under Section 143(1) Income Tax, a tax refund is notified if the tax paid by taxpayers exceeds the amount they were required to pay. If the refund amount exceeds rupees x, then the refund is paid to the taxpayer. Refunds of less than rupees Rs 100 will not be issued.
  • In relation to its actual liability, if the taxpayer has paid insufficient taxes, then the information shall include the remainder of the taxpayer's amount. The actual liability and the interest component are included.
  • The tax returns are notified to taxpayers after they are calculated by the assessing officer. In this case, a specific intimation must not be communicated to the assessee.

Processing of Section 143(1) Income Tax Act

The Central Processing Centre (CPC) automates the initial return processing entirely. The Intimation in section 143(1) of Income Tax act is also a record generated by the computer. In each tax report by CPC, they validate data from information available in the records of the income tax department, such as the collection of the banks, Form 16, TDS returns, among others. This notice generally indicates obvious errors that the mainframe system has identified. 

Upon the filing of Income Tax returns, the computerised system recalculates total or profit/loss revenues based on the records of the Income Tax department. It compares them with the taxpayer's information. Revenue tax Intimation (u/s 143(1)) is divided in the Return of Income (RRI) and Section 143 columns as provided by the taxpayer (1). For major categories like income in various categories, gross total income etc., there is a comparison.

Tax deducted is categorised under advance tax and self-assessment tax at source and tax payments by the taxpayer. Suitable adjustments to income are made in accordance with Section 143(1) of the Income Tax Regulation, and the final refund is calculated. Adjustments shall be made only when the taxpayer is notified of the proposed adjustments in the form of the written or electronic email address provided in the income tax return filed. 

Responses received from taxpayers within 30 days of the intimation's issue date will be considered before making the final adjustment. If no response is received within such a period, the initial adjustments will be denied. After calculating the final tax returns, it is adjusted for TDS and tax payments, as well as any other relief under Section 90/91. Under this section, tax relief is possible if tax is paid on double-taxed income outside India or Tax payable on double-taxed income under Income Tax Act. An intimation must be prepared and delivered to the assessee.

Following are some examples of possible intimations:

Intimation with no demand or refund- This usually occurs when the department accepts the return as filed without making any changes.

Demand determination for intimation measures- Adjustments are made by Section 143(1) of Income Tax based on discovery and a calculation of tax liability.

Refunding intimation- This is issued where any interest or tax has been found to have been refundable. This is either because there has been no discrepancy in the return previously filed or because the adjustments provided for in paragraph 143(1) have been made where taxes and interest are credited to taxpayers.

If a demand notice is issued in final tax liability, any refunds will be given to the taxpayer.

Return revision- What exactly is it?

  • Article 139(5) of the 1961 Income Tax Act provides taxpayers with a revised return in their original tax returns to correct errors. Deductions or exemptions incorrectly claimed, and income disclosed incorrectly may be corrected by filing this return.
  • When a higher tax requirement, which you do not agree to, is provided by the department, a revised return must be submitted. After you revise your income tax return, the original income tax return is withdrawn.
  • The revision of the income tax return is different from the original document of income tax. In contrast to the revisions, the correction should only be made after receipt of the notice from the central processing centre of the income tax department. 
  • The order is generally issued in response to a taxpayer's application for correction or if the ministry notices a discrepancy. 
  • Correction is needed in cases such as arithmetic errors, gender error, fiscal disparity advance and tax credit mismatch. 
  • No new exemptions or deductions may be claimed, or new revenue displayed during the correction. To make these changes, only the revision of the Income Tax return can be used.

What is the significance of Revised Revision?

This revised report must be filed before the end of the assessment year in question or before completing the assessment, whatever happens first. The revised return may be submitted at or before the end of the evaluation year on or before 31 March. However, the last day to revise your return is if the income tax department completes the evaluation before that date.

You can also revise Income tax returns that were filed late. It should be noted that the deadline for filing the belated return is the same as the deadline for filing revised returns at the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.

If you file your tax return on time, there is no limit to how many times you can revise it. However, use this option sparingly because multiple revisions may result in Income Tax Department scrutiny, which may result in tax notices to substantiate your income and a delay in processing your returns.

Also Read: TDS On Salary Under Section 192

Time Limit

The information provided in Sec 143(1) of Income Tax Act shall be transmitted within one year from the end of the fiscal year of the filing of the report. If a taxpayer did not receive any notification within this period, this means that the taxpayer's tax return has not been adjusted, and no change has occurred in respect of the tax refund.

Conclusion

To err is human, but it is essential to rectify these errors as early as possible. Suppose the Income Tax Department discovers an error in your IT return. In that case, it may be treated as income concealment, and you may face a penalty in addition to interest for delaying tax payment. As a result, it is critical to revise your return as soon as you discover any errors in the original return. Pay the self-assessment tax if the revision results in additional tax payable. In the event of a refund, you will be notified following the Income Tax u/s 143(1) in due course.

FAQs

1. Is an intimation under Section 143 (1) a levy order?

Intimation under Section 143(1) is an intimation, not an assessment order. It is an automated response sent by the department following a preliminary review of the taxpayer's return.

2.  Can I submit a revised return per Section 143(1) upon notification?

Yes, of course, you can. A taxpayer may file a revised return before the intimation is generated. The same can be achieved by visiting the website of the income tax department.

3. I have got a demand notice regarding Section 143(1) requiring me to pay some amount. What am I supposed to do?

If the taxpayer agrees with the tax demand, they can pay the remaining tax. If the taxpayer disagrees with the department's adjustments, they can file a correction under section 154. If a taxpayer is not satisfied with processing a rectification filed under section 154, they may file an online grievance by contacting the assessing officer.

4. What if I did not receive my intimation under section 143(1) Income Tax even after the above mentioned period has expired?

The acknowledgement of the return shall be identified as the intimation in a case where no sum is payable by, or refundable to, the assessee and would be considered where no adjustment has been made.

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