Fundamentals of Taxation

Definition Assessment
Assessment is the proceedings initiated by the taxation authority to compute income
and the amount of tax payable there on including re assessment if necessary but
excluding recovery proceedings. Lord Romer very aptly observed about the word
“Assessment” is used as meaning sometimes the computation of income , sometimes
the determination of the amount of the tax payable and sometimes the whole
procedure laid down in the Act for imposing liability upon a taxpayer. (CIT vs
Khemchand Ramdas, 6ITR414.
The method prescribed by the Act making an assessment to tax, using the word
assessment in its comprehensive sense as including the whole procedure for imposing
liability upon the taxpayer. The method consists of the following steps. In the first
place the taxable of the tax payer has to be computed. In the next place the sum
payable by him on the basis of such computation has to determined. Finally a notice of
demand in the prescribed form specifying the sum so payable has to be served upon
the tax payer.
“The meaning of the word ‘assessment’ has to be understood with
reference to the context in which it has been used” (A.N. Lakshman Shenoy vs. ITO,
34ITR 275(SC)
Fundamentals of Taxation
Types of Assessment
Provisional Assessment
After submission of the return by the assessee and after 1st day of
July of the concerned assessment year, the concerned assessing
official may proceed, in pursuance of sec.81 of the Act, for
provisional assessment of the return so submitted by the assessee
after rectifying arithmetical errors and require the assessee to pay
the tax so assessed.
Since this type of assessment is provisional, the assessee do not
have any right to make any appeal against such appeal. The tax
liability, so assessed is not final and subject to the final regular
assessment and amount of tax paid on the basis of provisional
assessment is always subject to adjustment.
Since this type of assessment is not subject to the option of an
assessee, and thus not mentioned in the prescribed return
Form. ( IT-11 M)
Fundamentals of Taxation
Types of Assessment
Normal Assessment

If an assessee, (individual/corporate) fails to

submit return in time as specified by the Act or
submit an incomplete return within the specified
time frame, then the return, so submitted , shall
be assessed by the assessing official applying his
discretion following the provisions of different
concerned sections of the Act.
Fundamentals of Taxation
Types of Assessment
Assessment on Correct Return (Normal)

Upon receipt of return from an assesee, the concerned assessing

official may proceed, in pursuance of Sec. 82 of the act, for
complete the assessment considering the submitted return and
other attachments good and final without calling upon the assessee
for further clarification and shall intimate the assessee, so
assessed, about the such completion of assessment within
thirty(30) days.
This type of assessment is regular assessment and the assessee
have the right to prefer appeal against such assessment.
Since this type of assessment is not subject to choice by the and
thus is not mentioned in the prescribed return form ( IT-11 M)
Fundamentals of Taxation
Types of Assessment
Assessment under Simplified Procedure (Normal)
If an assessee, other than a listed company, previously been assessed for any
assessment year ended on or before the thirtieth(30th) day of June, files a return
showing income for income year relevant to the assessment year commencing
on or after the first day of July,1995 and ending on or before the thirtieth(30th)
day of June,1997 and the income shown in such return is higher by not less than
ten percent over the last assessed income and has also increased by at least a
further sum of ten percent (10%) for each preceding assessment year in respect
of which the assessment is pending , then the return so submitted shall be
deemed to be correct and complete and the assessing official shall proceed for
complete the assessment on the basis of such return provided that the assessee
has paid his estimated tax along with the return and the net accretion of net
wealth is duly covered by the income.
The asessee should be intimated about the completion of assessment within
thirty(30) days of such completion and since such type of assessment is not
subject to the desire of the assessee, this type is not mentioned in the
prescribed return form ( IT-11M /11N)
Fundamentals of Taxation
Types of Assessment
Spot Assessment (Normal)

If an individual, who has not previously been

assessed under this Ordinance, carrying on any
business or profession in any shopping centre or
commercial market or having a small
establishment , the assessing official, in
persuasion of the provisions of Sec 82D may fix
tax payable by him in such manner and at such
rate as may be prescribed and the receipt
obtained payment of such tax shall be deemed to
be an order of assessment.
Fundamentals of Taxation
Types of Assessment
Assessment After Hearing (Normal)

Upon receipt of return or revised return fro an assessee, the

assessing official, in pursuance of the provisions of Sec. 83
of the Ordinance shall serve a notice on the concerned
assessee requiring him ,on a date to be specified therein, to
appear before hi and explain the correctness of the return so
submitted.
The assessing official considering the explanations given by
the concerned assessee and considering other relevant
evidences shall conclude the assessment process and initiate
the assessee about such conclution within 30 days of such

completion.
Fundamentals of Taxation
Types of Assessment
Assessment on the basis of report of a Chartered
Accountant.

When a return or revised return is submitted by a company

assessee under the provisions as laid down in chapter VIII of the
ordinance and the National Board of Revenue is not satisfied with
the correctness of the return so submitted may appoint a
registered chartered accountant to examine and report about the
correctness and completeness of the return.
Upon receipt of the report from the designated chartered
accountant, the assessing official shall forward the same to the
assessee and after receipt of such report, the assessing official
shall issue a notice calling upon the assesse to explain the report
before him.
Being heard, the asssessing official shall complete the assessment
and intimate the assessee regarding the completion
Fundamentals of Taxation
Types of Assessment
Best Judgement Assessment (Normal)

If an assessee fails to comply with the

Provisions under sec. 77,78,79 and 83(1)
requiring he assessee to submit return in time,
appear before the assessing official and to explain
on scheduled time, the assessing official, by
exercising the power vested upon him vide Sec,
84 of the Ordinance may proceed for the
assessment considering the past records and
exercising his best judgment shall complete the
assessment and intimate the assessee about such
completion within 30 days.
Fundamentals of Taxation
Types of Assessment
Self Assessment
An assessee may, subject to the fulfillment of certain conditions may prefer the self
assessment scheme that will relive him from being heard by the assessing official
about the return submitted by the concerned assessee.
The conditions are
1. In case of an individual assessee, income shown in the current year should be
more than that of previous year.
2. In case of a business, profit shown should not be less than that of previous year
and loss can not be shown.
3. There should not be any claim for refund
In both the cases of individul and business, the return should be submitted within the
specified time period for submission and admitted tax should be paid.
Upon receipt of the return, the assessing official will issue an acknowledgement which
will imply that assessment has been completed.
Always provided that such submission is subject to audit by the National Board of
Revenue and if selected will be assessed by the assessing officials.
Fundamentals of Taxation
Types of Assessment
Universal Self Assessment
Universal self scheme of assessment is an improve addition
of self allowing to show less income and loss also. Under
this
scheme an individual/corporate tax payer will be able to
prefer the scheme even having less income and loss in the
current assessment year and will also be entitled to claim
refund.
The only pre condition is that the return to be submitted in
time, admitted tax to be paid along with the return and the
return should be a complete return.
Fundamentals of Taxation
Definition Income Year

The “income year” on the income of which the tax is levied

is also called “accounting year. The expression “income year
substantially means an accounting year comprised of a full
period of twelve months and usually corresponding to a
financial year preceding the financial year of assessment. It
also means an accounting year comprised of a full period of
twelve months adopted by the assessee for maintaining his
accounts but different from the financial year and preceding
a financial year. Supreme Court of India in C.I.T. vs,
Srinivasan & Gopalan (1953 23 I.T.R.87,99)
Fundamentals of Taxation
Definition Assessment Year

Assessment year is the financial year commencing

on the first day of July for which the tax is paid
earned during the income year.

Example
Income Year Assessment Year
July-2010-June-2011 2011-2012
July-2011- June-2012 2012-2013
July-2012-June-2013 2013-2014
Jan-December-2010 2010-2011
Jan-December-2011 2011-2012
Fundamentals of Taxation
Charge of Income Tax.
As per the provisions of Sec. 16 of the Income Tax Ordinance,1984
income tax shall be charged ,levied, paid and collected in
accordance with the provisions of the annual Finance Act in respect
of the total income of the income year.
The basic principles of charging income tax are
1. Income tax is to be charged at the rate or rates fixed for the year by
the annual Finance Act
2. The charge is on every person which includes the assessable entities as
enumerated in the provisions of the Income Tax Ordinance 1984
3. The income taxed is that of the income year and not of the
assessment year.
4. Tax is levied on the total income of the assessable entity computed in
the manner as laid down in the special specified sections and subject to
the provisions of Income Tax Ordinance, 1984
Fundamentals of Taxation
Charge of Income Tax
Rates of tax fixed by Finance Act.
The purpose of this section is to charge income tax at the current rate and
the rate must be related to the total income of the income year. The
ordinance, although a permanent enactment but the liability of tax does not
arise until the annual Finance Act is passed (Kamakhya Narayan Sing v.
C.I.T. 1946 I.T.R. 683). It has been observed in the case of (Maharaja of
Pithapurum v C.I.T 1945 I.T.R.221,223-4) that is Ordinance (Act) “has no
operative effect expect so far as it is rendered applicable for the recovery of
the tax imposed for a particular fiscal year by a Finance Act” but Sec.183 of
the Ordinance provides that if on the first day of July in any year provision
has not been made by any Act for the charging of income tax for that year,
the provision in force in the preceding year or the provisions proposed in
the bill then before Parliament, whichever is more favourable to the
assessee, shall apply until the new provision becomes effective.
Fundamentals of Taxation
Charge of Income Tax
Units of Assesments.

Income tax is charged on every person under Sec.2(46) of

the Income Tax Ordinance,1984 includes
1. An individual
2. A Hindu undivided family
3. A company
4. A firm
5. An association of persons
6. A Local authority, and
7. Every other artificial judicial person
Fundamentals of Taxation
Charge of Income Tax
Tax is charged on Income of the Income year.

Under this Sec. the subject of charge is the income of the

income year and not income of the assessment year, that is
“tax is assessed and paid in the next succeeding year upon
the result of the year before”(Indian Iron and Steel Co. Ltd.
V. C.I.T. 1943 I.T.R 328). The proviso to sub-sec.(1) refers
to exceptional cases in which the income of the assessment
year may be taxed in that very assessment year, such as,
the income of a discontinued business (Sec.89) income of a
person leaving Bangladesh (Sec.91)
Fundamentals of Taxation
Charge of Income Tax
Source of Income need not necessarily exist in the Assessment
year.

Since under this Ordinance tax is levied on

the actual income of the income year, the
facts must be taken as they existed during
the income year, therefore, it is immaterial
whether the source on income is actually
existing or it is discontinued in the
assessment year. (Muthappa Chettiar v.
C.I.T. 1945 I.T.R. 311)
Fundamentals of Taxation
Charge of Income Tax
Each year is a separate, self contained Period.

Each year is a self contained period. For the

purpose of assessment each “income year is a
distinct unit of time and the profit made or loss
incurred before or after the relevant income year
are immaterial in assessing the profits of that
year” (Sir Kikabhai Premchand v.C.I.T.[1953] 24
I.T.R. 506 (S.C. of India) unless there is a
statutory provision in contradiciton . Sec. 38 of
the Act is contradiction allowing business loss to
be carried forward.
Fundamentals of Taxation
Charge of Income Tax
Law to be applied is that in force in the Assessment Year.

Though income tax is charged on the income of

the income year, the applicable law shall be the
law in force during the assessment year, not the
income year unless otherwise stated or implied
(Isthmain Steam Liner v C.I.T.[1951] 20
I.T.R.572,577 (S.C. of India) considering all the
amendments made at the beginning of the
assessment year though the income is earned
before such amendment. (C.I.T. v.Sind Hindu
Provident Funds Siociety 1940 I.T.R. 467 )
Fundamentals of Taxation
Charge of Income Tax
Tax to be charged on Total Income.

Tax to be charged on the total income of an assessable entity. Sec,2(65) of

the Act defined total income as “’total income’ means the total amount of
income referred to in Sec.17 computed in the manner laid down in this
Ordinance, and includes any income which under any provision of this
Ordinance, is to be included in the total income of the assessee”.
Definition and words of Sec. 2(65) suggest mainly three things :
1. Tax to be charged on total income computed in persuasion of the
provisions of Sec. 17 of the Act.
2. Full effect must be given to the exemptions from tax granted under
various provisions of the Ordinance
3. The income must be computed in accordance with the provisions of this
ordinance after making the allowances and deductions provided for the
different heads of income in relevant sections
Fundamentals of Taxation
Charge of Income Tax
Scope of Total Income.
As per Sec.17 of the Ordinance
(1). Subject to the provisions of this ordinance, the total income of any person
includes
(a). In relation to a person who is a resident, all income , from whatever source
derived, which
- is received or deemed to be received in Bangladesh by or on
behalf of such person in such year; or
- accrues or arises, or is deemed to accrue or arise to him in
Bangladesh during that year; or
- Accrues or arises to him outside Bangladesh during that year;and
(b). In relation to a person who is a non resident, all income from whatever
source derived, which-
-Is received or deemed to be received in Bangladesh by or on
behalf of such person in such year; or
-Accrues or arises, or is deemed to accrue or arise, to him in
Bangladesh during that year
Fundamentals of Taxation
Charge of Income Tax
Scope of Total Income.

Sub section (2) of Sec.7

(2) Notwithstanding anything contained in sub
section (1), where any amount consisting of
either the whole or part of any income of a
person has been included in his total income or
the basis that it has accrued or arisen, or is
deemed to have accrued or arisen, to whom in
any year, it shall not be included again in his
total income on the ground that it is received
or deemed to be received by his in Bangladesh
in another year.
Fundamentals of Taxation
Charge of Income Tax
Scope of Total Income.

Sec. 17 of the Act defines the whole range of total income. The
underlying principle of this section is to make the chargeability of
income depending upon the locality of receipt or accrual.
Asseessees are divided into two categories, (a) resident and (b)
non resident. Resident and non resident have been defined in Sec.
2(55) and 2(42) respectively. This section defines the extent of
total income with reference to the residence of an assessee, in
other words the incidence of tax depends upon and is determined
by the residential status of an assessee . A resident assessee is
charged with more tax than a non resident assessee due to
entitlement of exemptions which is not allowable to a resident
assessee. The incidence of tax is higher in the case of a resident
assessee and less in case of a non resident.
Fundamentals of Taxation
Charge of Income Tax
Status of an Assessee.

As per Sec.2(55) of the Act

“resident” in respect of any income year, means
An individual who has been in Bangladesh
- for a period of , or for periods amounting in all to, one
hundred and eighty two days or more in that year
- For a period of, or periods amounting in all to ninety days or
more in that year having previously been in Bangladesh for
a period of or periods amounting in all to, three hundred and
sixty five days or more during four years preceding that year
A Bangladeshi company or any other company the control
and management of whose affairs is situated wholly in
Bangladesh in that year
Fundamentals of Taxation
Charge of Income Tax
Test of Residential Status of an Assessee.

The status of residency of an assessee is determined by the duration of his

stay in Bangladesh during an income year and such determination be be
made with reference to each income year. The finding of residence during
one year would not warrant the assumption that the assessee was
residence in the next. (Wallace Bros. & Co. Ltd. V. C.I.T. 1945 T.R. 39,44)
The required say of an assessee in Bangladesh is alternative, not
cumulative. Each of the two tests requires the personal presence of the
assessee in Bangladesh. To summerise an assessee will be considered as
resident if
- He stays total 182 days in Bangladesh in a particular accounting year
or
- He stays Bangladesh minimum 90 days in a particular accounting year
provided that the aggregate stay during four years preceding the
current accounting year should not be less than 365 days.
Fundamentals of Taxation
Charge of Income Tax
Test of Residential Status of an Assessee.

An assessee residing continuously out

of Bangladesh during any accounting
year then the assessee shall be
considerd non resident during that
corresponding assessment year.