Income Tax Assessee under the Income Tax Act

An income tax assessee is a person (individual, HUF, company, firm, etc) who pays tax or any sum of money like interest or penalty under the provisions of the Income Tax Act, 1961. The definition of assessee is not limited to the payment of tax or any sum of money only. If the Income Tax department calculates, investigates or processes the person’s income, losses or refund, he is considered as an assessee.

Who is an Assessee under the Income Tax Act?

Assessee is a person (defined below) eligible to pay tax or any other payment (like penalty or interest) to the government under the Income Tax Act, 1961. 

The definition of an assessee is not limited to the payment of taxes. Below are a few situations where an assessee will not pay tax, but is still called an assessee when the Income Tax department has started the process to figure out:

• the income or fringe benefits of the person
• the income of someone else on whose behalf the person is liable to pay tax 
• if the person has incurred a loss during the financial year, he can take the benefit of carrying forward the losses to future years
• the person is eligible for a tax refund

Also, a person is considered an assessee under any provision of the Income Tax Act, such as the heir of the deceased person. When a person fails to comply with any provision of the Income Tax Act, such as paying TDS to the government, he is considered an assessee in default.

Who is a ‘Person’ under the Income Tax Act?

 Section 2(31) of the Income Tax Act, 1961 defines a ‘person’ in the following seven categories:

• Individual
• Hindu Undivided Family
• Firm
• Company
• Association of Persons (AOP) or Body of Individuals (BOI)
• Local Authority
• Artificial Juridical Person (not covered under any of the above-mentioned categories)

Normal Assessee

An individual who is liable to pay taxes for the income earned during a financial year is known as a normal assessee. Every individual who has any income earned or losses incurred during the previous financial years is liable to pay taxes to the government in the current financial year if the income exceeds the basic exemption limit. However, every individual who incurs losses must file Income Tax Return to carry forward losses for the future years.
All individuals who pay interest/penalty or who are supposed to get a refund from the government are categorised as normal assessees. Say, Mr A is a salaried individual who has been paying taxes on time over the past 5 years. Then, Mr A can be considered as a normal assessee under the Income Tax Act, 1961.

Principal Assessee

A principal Assessee is a real Assessee on whose behalf the representative Assessee discharges his duties. The principal Assessee authorized his representative to file an income tax return, and the representative taxpayer pays income tax on behalf of the principal Assessee.

Representative Assessee

There may be a case in which a person is liable to pay taxes for the income or losses incurred by a third party. Such a person is known as a representative assessee.

Representatives come into the picture when the person liable for taxes is a non-resident, minor, or lunatic. Such people will not be able to file taxes by themselves. The people representing them can either be an agent or guardian.

Consider the case of Mr. X. He has been residing abroad for the past 7 years. However, he receives rent for two house properties he owns in India. He takes the help of a relative, Mr. Y, to file taxes in India. In this case, Mr. Y acts as a representative assessee. If the assessing officer plans to investigate the tax filing, Mr. Y will be asked to provide the necessary documents as he is the guardian of the property and represents Mr. X.

Deemed Assessee

An individual might be assigned the responsibility of paying taxes by the legal authorities and such individuals are called deemed assessees. Deemed assessees can be:

• The eldest son or a legal heir of a deceased person who has expired without writing a will.
• The executor or a legal heir of the property of a deceased person who has passed on his property to the executor in writing.
• The guardian of a lunatic, an idiot, or a minor.
• The agent of a non-resident Indian receiving income from India.

For example, Mr P owns a commercial building from which he earns rent income. He has prepared and signed a will stating the property should be handed over to his niece after his death. Upon his death, his niece will be considered as the executor of the property, i.e. deemed assessee. She will be responsible for paying tax on the rental income thereon.

Assessee-in-default

Assessee-in-default is a person who has failed to fulfil his statutory obligations as per the income tax act such as not paying taxes to the government or not filing his income tax return. For example, an employer is supposed to deduct taxes from the salary of his employees before disbursing the salary. He is, then, required to pay the deducted taxes to the government by the specified due date. If the employer fails to deposit the tax deducted, he will be considered as an assessee-in-default.

Roles/Responsibilities and Duties of an Assessee

Assesses must file their returns on time and pay their taxes when they are due. However, an assessee may frequently fail to file their return on time. In this situation, they may receive a notice from the IT department or the relevant Assessing Officer requesting information about why the return was not filed for that particular fiscal year. In this scenario, the assessee must provide a response to the Assessing Officer explaining why they did not file his returns on time, and he must also file the returns as soon as he receives the notification.

Let us take a quick look at the various roles and responsibilities of an Assessee upon receiving a notice:

• As soon as the Assessee receives the notice from the department, they must file their tax returns for the avoided income for the specific assessment year.
• After filing the returns, they may obtain a copy from the assessing officer that clearly states the grounds for which the officer issued the notice to them.
• If the Assessee believes that the grounds given in the copy are not valid, and they are not satisfied with the reasons, they may file an objection and question the legality of the notice.
• The Assessee must also ensure that they have valid reasons for filing the objection and that they have properly decided to query the government's notification.
• If the officer rejects the Assessee's allegations, the Assessee may submit a request to the concerned Assessing Officer, asking him to provide additional explanations.
• The Assessee may choose to contest the legitimacy of the notification much before the planned assessment or re-assessment is completed by filing a writ petition with the relevant High Court.
• The Assessee may also choose to challenge the legitimacy of the notice even after the planned assessment is completed by filing a writ petition with the respective High Court.
• The Assessee must provide details relevant to their income returns within 30 days of the date of issuance of the notice, not the date on which the notification was received by the Assessee. To avoid complications later on, the details relevant to the income for which tax payment has been avoided, as well as other associated income details, must be clearly given and filed with the concerned authorities.