Understanding Best Judgement Assessment
In the best judgement assessment, the A.O assesses the assessment in his own judgement to gather sufficient information and to form a concrete opinion of the assessment.
Generally, best judgement assessment is done when there is less or no cooperation from the assessee.
There is two types of best judgment assessment as per the Income Tax Act:
- Compulsory best judgment assessment
- Discretionary best judgment assessment
Under Compulsory Best Judgement assessment – the Assessing Officer can go for his best judgement assessment if the assessee doesn’t cooperate and fails to provide the relevant information required by the Income-tax Authorities.
Under Discretionary Best Judgement assessment – Where the assessing officer is of the view that the assessee has shown lower income, has availed excessive deductions or losses. In other words, where the Assessing Officer is not satisfied with the method of accounting used by the assessee or he has some doubt about the authenticity or accuracy of the accounts of the assessee.
When can an A.O go for Best Judgement Assesment?
Circumstances when an Assessing Officer (A.O) can go for Best Judgement Assessment under Income Tax Act:
If any Person,
- Fails to furnish his return of income under section 139(1) and has not furnished income tax return under 139(4) up to the date of issue of show cause notice under 144 or,
- Fails to comply with all the terms issued under section 142(1)(i) or 142(1)(ii) or,
- Fails to comply with the direction issued under section 142(2A) or
- Fails to comply with all the terms of a notice issued under section 143(2)
Then the Assessing Officer after taking into the account ll the relevant material which he has gathered, shall make an assessment to the best of his judgement and determine the tax payable by the assessee.
In a case, if found that the turnover is taxable and no return is filed then penalty can be imposed under best judgement assessment under section 144 of IT Act.
Remedies available to the assessee
However, the assessing officer shall not make the assessment unless he gives an opportunity of being heard to the assessee.
After completion of the best judgement assessment u/s 144 of the IT Act, the assessee has an option; i.e assessee has a right to file an appeal to the Commissioner of Grant u/s 264A or to the Deputy. Revision of the same is available u/s 264. An assessee can ask for a fresh assessment.
The best judgment assessment is usually made after giving the assessee an opportunity of being heard. Such opportunity is given by issuance of the notice.
However, where notice under section 142(1) is already issued then no such opportunity of being heard is available to the assessee.