Best Judgment Assessment

What is Best Judgment Assessment?

The best judgment assessment means the assessment performed by an assessing officer with a certain knowledge of an assesse's financial conditions.
Suppose a taxpayer fails to file tax returns or provide the necessary documents to the income tax officer. In that case, the taxation authorities have the right to conduct a best judgment assessment to determine the taxpayer's tax liability.

Conditions for Assessing Best Judgment

There are specific conditions that precede the best judgment assessment to ensure the decision is fair, unbiased, and accurate. These conditions are:

1. Documentation: It is mandatory to maintain the proper documents of the whole assessment, which include the reason to start it, efforts made to collect information, examination criteria, and final decision.
2. Lack of Information: This process is started when the taxpayer does not provide the correct and complete information. The authorities begin the section 144 assessment process based on their best judgment, using the available information.
3. Objective Criteria: The whole process is based on the objective criteria of the assessment. It does not have a connection to personal biases or opinions. The Assessing Officer (AO) has to consider all the laws, principles, and regulations during the process of assessment.

Situations of Best Judgement Assessment

The Assessing officer has been told by the authorities to start the best judgment assessment under Section 144 of the Income Tax Act, and they have performed the best judgment assessment due to the following reasons:

1. If the taxpayer fails to file an IT return within the recommended date under section 139 (1)
2. If the taxpayer fails to comply with the terms of a notice issued under section 142(1)
3. If the taxpayer fails to follow all the directions mentioned under section 142(2A)
4. If the AO is not satisfied with the information the taxpayer has provided or with the accuracy of his accounts