Once the financial year comes to an end, we file our India tax return and think that we are done away with the same as we submit the return form online.
One needs to keep in mind that there is one more step which the individual needs to take to complete the process, which is to verify the return online by doing an e-verification by the different methods introduced by the Income-Tax department or manually send the signed ITR-V acknowledgement to the Central Processing Centre and only then the return filing process is complete.
If the return is not verified within 120 days of filing, the return will become invalid and it will be considered as if you have not filed your income tax return at all and the IT department will not process your return. If in case you have opted to complete the verification process by manually sending the signed copy of ITR-V, the status of receipt of ITR-V can be tracked in the income tax website.
Now that return filing process is complete, one may wonder what happens to those returns which are filed.
How the IT department processes the returns? What are the timelines? Many of us may have these questions.
Once CPC receives your signed ITR-V form, it dispatches an email acknowledging the receipt of ITR-V which should reach you generally within a month of sending ITR-V to CPC. After receiving the ITR-V by CPC, you will receive an intimation of your tax return being processed. This is referred to as Intimation under section u/s 143(1).
Intimation provides a comparison between the numbers as provided by you in the return of income and as computed by the IT department. It covers, summary of your income under different heads, deductions, tax liability, tax deducted, tax paid, etc.
One needs to carefully analyse this intimation as it will confirm whether the tax return has been accepted as such by the department or whether there are any changes in the income/tax deducted/tax paid details.
The returns which are not processed by CPC due to complexity involved, high refund, treaty benefits being claimed in the return etc. are transferred to the jurisdictional Assessing Officer (AO).
You will be notified about the same with an intimation being issued to you by CPC. At this stage, there is no action required, however if you do not receive any further communication, one may need to follow up with the respective AO about the status of your return.
The AO may or may not select the case for scrutiny assessment, which is a detailed assessment. Under the scrutiny assessment, the AO confirms that you have not understated the income or has not computed excessive loss or has not underpaid the tax in any manner. To confirm the above, AO carries out detailed scrutiny of the return of income and checks various claims, deductions etc. made in the tax return.
The AO can serve a scrutiny notice only within 6 months from the end of the financial year in which the tax return has been filed. In case your income tax return is picked up for scrutiny by the Revenue Authorities, a notice will be issued under Section 142(1) of the Income Tax Act, 1961 calling for a meeting with the tax officer. Accordingly, you need to submit all the required information and documents as called for by the tax officer.
The timeline to close any assessment proceeding by the tax officer is 21 months from the end of the relevant assessment year in which the return is filed. For example, for the assessment year 2016-17, assessment needs to be closed by December 2018.
The taxpayer fails to comply with all the terms of the notice issued and in certain other circumstances, the AO can make a Best judgement assessment. It is an assessment carried out as per the best judgement of the AO.
The AO while carrying out best judgement assessment will take into account all the relevant material which he has gathered and also provides an opportunity to the taxpayer of being heard, post which makes an assessment of the total income or loss to the best of his judgement and determine the sum payable by the taxpayer on the basis of such assessment.
Given that the tax return process is not entirely complete till the time assessment is closed or intimation received, it is very important to keep record of all the supporting documents of the deductions claimed, income declared, exemptions availed etc till the time assessment is completed.
Some of the documents which are advisable to be kept for any assessment in the future are filed income tax return along with ITR-V acknowledgement, Form 16 & 12BA, self-assessment/advance tax payment challans, Form16A, proofs of any deduction or exemption claimed like housing loan certificate, life insurance premium payment receipts, house rent receipts etc, any intimation from the IT department.