Assessee, Assessment & Previous Year - Definitions and Basic Concepts of Income Tax, Income Tax Laws | Income Tax Laws - B Com PDF Download

 ASSESSEE [ Section 2(7) ]

‘Assessee’ means a Person  by whom any Tax or any other sum of money is payable under this Act. And this is divided into 3 categories.

Ordinary Assessee: It includes-

• Any person against whom some proceedings under this Act are going on. It is immaterial whether any Tax or other amount is payable by him or not ;
• Any person who has sustained loss and has filed return of Loss u/s 139(3).
• Any person by whom some amount of Interest , Tax or Penalty is payable under this Act ; or
• Any person who entitled to refund of Tax under this Act.

 Representative Assessee or Deemed Assessee:

A person may not be liable only for his own income or loss but also on the income or loss of other persons e.g. Guardian of Minor or Lunatic, Agent of a Non-Resident etc. in such case the persons responsible for the assessment of Income of such persons are called Representative Assessee. Such person is Deemed to be an Assessee.

Assessee-in-default:

A person is deemed to be an assessee-in-default if he fails to fulfill his statutory obligations. In case of an employer paying Salary or a person who is paying interest it is their duty to deduct tax at source and deposit the amount of tax so collected in Government treasury. If he fails to deduct tax at source or deducts tax but does not deposit it in the treasury, he is known as Assessee-in-default.

Example :

• Income of Mr. You ( age : 30 years) is Rs. 2,45,000 for the assessment year 2018-19. he does not file his return of income because his income is not more than the amount of exempted slab. Income-Tax  Department does not take any action against him. He is not an “assessee” because no tax or any other sum is due from him.

• Income of Mr. Me ( age: 35 years) is Rs.2,60,000 for the assessment year 2018-19. He does not file his return of income. Since he is supposed to file  his return of income ( income being more than exempted slab of Rs.2,50,000). he is an “Assessee”.

• Income of Mr. S ( age : 50 years) is Rs.170,000 for the assessment year 2018-19. He files his return of income ( even if his taxable income is less than Rs.2,50,000 ). Assessment order is passed by the Assessing Office without any adjustment. Mr.S is an “ Assessee”.

• Income of Mr. Ram ( age : 25 years) is less than Rs.2,50,000 for the assessment year 2018-19. He files his return of income to claim Refund of Tax deducted by XYZ Ltd. on interest paid to him. B is an “Assessee”.

• Income of MR. Clean ( age : 30 years) is less than Rs.1,50,000 for the assessment year 1009-10. He does  not file his return of income. During 2017-18 , he has paid salary of Rs.2,40,000 to an employee. Though he is supposed to deduct TDS (Tax deducted at Source ), yet due to ignorance of law, no tax deducted by him. In this case, Mr. Clean is an “assessee” as he has failed to deduct tax at source. This rule is applicable even if his own taxable income is below Rs.2,50,000.

ASSESSMENT YEAR [ Section 2 (9) ]

“ Assessment Year” means the period of 12 months commencing on the 1st day of April every year.
In India, the Govt. maintains its accounts for a period of 12 months i.e. 1st April to 31st March every year. As such it is known as Financial Year.  The Income Tax department has also selected same year for its Assessment procedure.

The Assessment Year is the Financial Year of the Govt. of India during which income a person relating to the relevant previous year is assessed to tax. Every person who is liable to pay tax under this Act, files Return of Income by prescribed dates. These Returns are processed by the Income Tax Department  Officials and Officers. This processing is called Assessment. Under this Income Returned by the assessee is checked and verified.

Tax is calculated and compared with the amount paid and assessment order is issued. The year in which whole of this process is under taken is called Assessment Year.

At present the Assessment Year 2018-2019 ( 1-4-2018 to 31-3-2019) is going on.

Example- Assessment year 2018-19 which will commence on April 1, 2018, will end on March 31, 2019.
Income of Previous Year of an assessee is taxed during the next following Assessment Year at the rates prescribed by the relevant Finance Act

PREVIOUS YEAR [ Section 3 ]

As the word ‘Previous’ means ‘coming before’ , hence it can be simply said that the Previous Year is the Financial Year preceding the Assessment Year. E.g. For Assessment Year 2018-2019 the  Previous Year should be the Financial Year ending 31st March 2018.

• Previous Year in case of a continuing Business :

It is the Financial Year preceding the Assessment Year. As such for the assessment year 2018-2019, the Previous Year for continuing business is 2017-2018 i.e. 1-4-2017 to 31-3-2018.

• Previous Year in case of newly set up Business :  

The Previous Year in case of newly started business shall be the period between commencement of business and 31st March next following. E.g. in case of a newly started business commencing its operations on Diwali 2017, the Previous Year in relation to Assessment Year 2018-2019, shall be the period between Diwali 2017 to 31 March 2018.

• Previous Year in case of newly created source of income :          

In such case, the Previous Year shall be the period between the day on which such source comes into existence and 31st March next following.