PAN and TAN may now also be obtained online

PAN and TAN may now also be obtained online through   Aadhaar e-Signature based application process of Digital Signatures on the portal of NSDL. PAN/TAN shall be allotted with in one day from completion of valid online application. This is available for Individual applicants. Seeding of Adhar in PAN is aimed at curbing the problem of duplicate PANs [Press Release dated 22-07-2016]

IDS Form 1 amended to provide for revised declaration

CBDT has amended Form-1 to make provision for revised declaration under Income Declaration Scheme [Notification dated 20-07-2016]. Earlier in Circular dated 14-07-2016, it was provided that revised declaration can be filed provided the amount of undisclosed income in revised declaration is not lesser than amount reflected in original declaration

No Capital Gain without incurring cost

Where Whole amount of sale consideration was taxed by the Assessing Officer as capital gains without giving assessee any benefit with regard to cost of acquisition or cost of construction because the assesse could not prove the expenditure.

Held by ITAT that  It can be nobody's case that the assessee had acquired the property without paying any cost. Some value for cost of acquisition has to be given to the assessee. Even in cases of properties acquired through gifts, etc. the cost of acquisition as incurred by the previous owner is given to the assessee.

Nand lal Popli [2016] 71 taxmann.com 246 (Chandigarh - Trib.)]

cash flow statement cannot be considered as keeping the books of account

Keeping or preparing a cash flow statement cannot be considered as keeping the books of account.[Para 15 of Judgement in case of Nand lal Popli [2016] 71 taxmann.com 246 (Chandigarh - Trib.)]

No Addition u/s 69C for actual expenditure lesser than presumptive expenditure

Under Section 44AD, 8% of Income is presumed to be Income of the assesse. Hence automatically 92% shall be presumed to be expenditure of the assesse. Now, if assesse through his cash flow is not able to prove expenditure of 92%, but is able to substantiate much lesser expenditure, whether AO can invoke section 69C saying that source of balance expenditure [92%- Actual Expenditure] is not satisfactorily explained especially when section 44AD does not over ride section 69C.

Held by ITAT Chandigarh in Nand lal Popli [2016] 71 taxmann.com 246 (Chandigarh - Trib.)]

a)    Section 69C can be applied only if assesse has incurred some expenditure and not otherwise

b)    Asking the assessee to prove to the satisfaction of the Assessing Officer, the expenditure to the extent of 92% of gross receipts, would defeat the purpose of presumptive taxation as provided under section 44AD of the Act or other such provision. Since the scheme of presumptive taxation has been formed in order to avoid the long drawn process of assessment in  cases of small traders or in cases of those businesses where the incomes are almost of static quantum of all the businesses,

Addtion u/s 69C can be made only once the case is carved out of glitches of S. 44AD. Hence no addition is sustainable u/s 69C

Department after AIR Transactions without PAN

As per a Press Release dated 21-07-2016, Income Tax department has information about 90 lakh transactions in AIR where PAN is not quoted. These transactions pertain to 2009-10 to 2016-17. Income Tax department has identified 14 lakh transactions out of above.

The Income Tax department shall issue letters to identified persons. Such persons can own or disown such transactions and provide online response to transactions on efiling website. Where no response is received action shall be initiated by the department.

The persons who received such letters can make use of department’s helpline instead of making direct contact with Income Tax Officials.

[Note: Department on 05-07-2016 also had issued a letter regarding NON PAN AIR Information in which commissionrate wise list of 60 lacs was provided.

Signed Hard Copy of digitally signed Excise Invoice can be accepted

Notification No. 18/2015 dated 06-07-2015, authorized assesses to issue Excise invoices using digital signs. But the people who receive such invoice do not have infrastructure  to accept or received digitally signed invoice . So, CBEC vide Circular dated 19-07-2016, has permitted to take print of hard copy of such invoice and hand over after manual signatures. Thus such invoices shall stand authenticated twice.

“Project Insight” to catch hold of tax defaulters

The Income Tax department is engaged in “Project Insight” to catch hold of tax defaulters, by widening tax base and data mining.  Income tax department has signed a pact with L&T Infotech Ltd. For implementation of Project Insight.

New infrastructure is aimed at implementing FATCA [Foreign Account Tax Compliance Act]

Compliance Management CPC  also to be set up to promote voluntary compliance  and to enable resolution of simple compliance related issues in online manner without visiting Income Tax Office.

[Press Release dated 19-07-2016]

Lawyers presumed to Know law, not judges

There is presumption in law that lawyer knows the law but there is no absolute presumption that a judge should know the law. A Judge is only called upon to balance the two sides of an argument presented before him

J. Rajiv Narain Raina in Punjab and Haryana High Court in Nirmal Singh and Others vs. Tarsem Singh and Others [CR No. 3791 of 2013 (O&M) dated 01-05-2014]

Apna Tax Scheme of Punjab Government

Punjab Government in its Budget for 2016-17 presented on 15-03-2016 had promised to launch apna tax scheme. The Purpose is to encourage customers to procure bills from retail vendors which would ensure tax compliance in a systematic, non-intrusive and non-regulatory manner.

Features of the scheme:

1.    App can be downloaded from Google play or pextax.com

2.    Upload the bill details on the app

3.    Chance to win 5 times the value of bill (excluding Vat and Tax free goods). A person can win cash prize up to Rs. 50,000/-

4.    Monthly draw of prized on 15^th of the month for entries from Ist day to last day of the month.

5.    Min number of cash prizes = 10

6.    First draw on 15^th of the August

Issues:

1.       Most of the items being procured by customers from retail vendors are covered under first point taxation and are tax free in the hands of retail vendors being subsequent dealers under First Point taxation Scheme. So, how the objective of the scheme shall be met ?

2.       Whether all the bills uploaded by the customers shall be verified for accuracy by the government.

3.       Shops like Walmart  can not sell in retail ,so, their bills shall remain excluded.

4.       How the government shall determine that goods have been purchased from retail vendor.

5.       Right now, not available on Google play store or pextax.com.

6.       Retail vendors do not enter bill wise detail in their returns, then how shall this scheme work.

Investigation Wing of Income Tax department launches following drive to locate tax evaders in wake of Income Declaration Scheme [ Letter dated 05-07-2016] as under

1.      Non PAN AIR Information to be targeted. In CIT-1, Amritsar there are 6928 cases of Non PAN AIR Information. In CIT-2, Amritsar, there are 8357 cases of Non PAN Air Information. Jammu is much ahead with 32150 cases. Jalandhar 50728 cases. Chandigarh with 2382 cases only.

2.      Functionality to own up non PAN data being developed

3.      Non filers with potential tax liabilities to be targeted.

4.      Penny Stock cases where shares are purchased off the market at little value and sold at high market value to earn exempt long term capital gain on shares

[Note : Recent Court Orders have cancelled the additons made by department for penny stocks like Farah Marker dated 13-06-2016 Indravan Jain HUF  dated 16-06-2016 by ITAT Mumbai, Mukesh Rati Lal Marolia (Bombay High Court) 13-06-2016]

Introduction of a new entry and inclusion of certain services in that entry would pre-suppose that there was no earlier entry covering the said services

Bombay High Court in the case of Indian National Shipowners' Association-v.-Union of India, 2009 (14) STR 289, at paragraph 38 of the judgment, held in the context of the Finance Act, 1994 that introduction of a new entry and inclusion of certain services in that entry would pre-suppose that there was no earlier entry covering the said services

As per Section 19(7) of GST Law, registration is required to be granted with in prescribed period. Further As per section 19(9), if registration is not granted with in stipulated period and also no deficiency is communicated to the dealer, the registration under GST law shall be deemed to have been granted. Comments: This is a welcome provision under GST law. This is just like section 12AA(2) of Income tax law, where after six months from end of month in which application for grant of registration of trust is made, if application is not rejected, the assesse trust is granted deemed registration. Such like provision does not exist in present vat or service tax law. [GST Law Note-4]

Tug of War for Limitation period for penalties not linked to assessment of Income like 271D/271E/271C imposable by Range Heads i.e. Joint Commissioners

Under Section 271D penalty is imposable by Joint Commissioner for failure to comply 269SS i.e. accepting loan or deposit for Rs. 20,000/- or more otherwise than through account payee cheque equal to amount of loan or deposit. Similarly Under Section 271E, there is penalty for repayment of the amount of loan or deposit otherwise than through account payee cheque, where loan or deposit is outstanding for Rs. 20,000 ruprees or more.

CBDT vide letter dated 11-07-2016 has provided three revised format of issuing notices u/s 143(2). 1. Limited Scrutiny 2. Complete Scrutiny 3. Mannual Scrutiny

CBDT vide letter dated 11-07-2016 has provided three revised format of issuing notices u/s 143(2). 1.       Limited Scrutiny 2.       Complete Scrutiny 3.       Mannual Scrutiny In Limited Scrutiny, issues identified for examination to be specified. Notice for Complete scrutiny shall specify that case is selected for complete scrutiny. In case of manual scrutiny, specific parameter for selection of case along with reference to manual instruction no. of compulsory scrutiny guidelines shall be given. Assessee is required to produce evidence in support of his return or if assesse wishes to send no evidence, he may send his communication to AO. If on the basis of response of assesse, any adverse view is contemplated, show cause notice/questionnaire shall be given . In case of Ahemadabad, Bengluru, Chennai, Delhi , Hyderabad , Kolkatta and  Mumbai, it is to be stated in notice that email based assessment is proposed to be made. Email id provided by assesse in return or alternate id provided by the assesse shall be used for the purpose. Assessees not wishing to opt for email based assessment may convey refusal to AO. Subsequent withdrawl from email based assessment is possible only with prior permission of AO. Also in Instruction No. 20/2015 dated 29-12-2015, CBDT had mentioned that AO to provide reasons for scrutiny in cases which have been selected on the parameter(s) of AIR/CIB/26AS data . Further Specific issue based enquiry is to be conducted only in those scrutiny cases which have been selected on the parameter(s) of AIR/CIB/26AS data. In such cases, the Assessing Officer, shall also confine the Questionnaire only to the specific issues pertaining to AIR/CIB/26AS data Regards Ca Vinamar Gupta

Revised Return can be filed even after intimation u/s 143(1) is issued since the same is not considered as an assessment order in the court law though referred to as summary assessment. Since even after the issuance of intimation u/s 143(1), regular/scrutiny assessment can be done without any restriction. There is a case law of Gujarat High court in which the court held that the assessee can file revised return even after intimation is served . S. R. Koshti v. Commissioner of Income-tax [2005] 276 ITR 165 (Guj). The issue is settled to rest by the decision of Supreme Court in the case of ACIT vs Rajesh Javeri Stock Brokers (P) Ltd. 291 ITR 500 in which it was held that intimation although deem to the notice of demand U/s. 156 can not taken as assessment order. Revised return can be filed after intimation u/s 143(1)(a)-AO must amend such intimation on the basis of revised return-Gujarat HC [2011] 333 ITR 0508 Commissioner of Income-tax Versus Himgiri Foods Limited

Crown Consultants (P.) Ltd. v. CIT [2014] 362 ITR 368/224 Taxman 81 (Mag.)/44 taxmann.com 397 (Bombay High Court) has taken a view that where an objection is not taken before the Assessing officer while responding to the reasons in support of a notice seeking reopen an assessment, then it is not open to assessee to raise such objection for the first time before this (High) Court in writ proceedings under Article 226. The exception of course being if the impugned notice is ex-facie without jurisdiction and no determination of facts are required to establish it is without jurisdiction.

During the regular assessment proceedings leading to the assessment order, the eight lenders referred to in the reasons were a subject matter of examination and then assesse provided evidence in the form of loan confirmation to establish its genuineness. However, during search of one person, he admitted to have given entry only. Thus, it is submitted by the assesse that this is a case of change of opinion. High Court held that the exact nature of the transaction is only privy to the parties to the transaction and when one of the parties to the transaction states that what appears is not factually so, then the Assessing Officer certainly has tangible material to form a reasonable belief that income chargeable to tax has escaped assessment. [para 8] Bright Star Syntex (P.) Ltd. [2016] 71 taxmann.com 64 (Bombay)

Supreme Court in Phoolchand Bajranglal v. ITO [1993] 203 ITR 456/69 Taxman 627 - "One of the purposes of Section 147 appears to us to be to ensure that a party cannot get away by willfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn round and say "you accepted my lie, now your hands are tied and you can do nothing."

The Court will certainly interfere in 148 matters where the reason to believe that income has escaped assessment, is a clear case of change of opinion i.e. the same material was subject to consideration in regular assessment proceedings or where the reopening is being done only on suspicion and/or to carry out investigation or where the assessment is sought to be reopened after a period of more than four years from the end of the relevant assessment year and there has been no failure on the part of the assessee to truly and fully disclose all material facts necessary for assessment [para 6] Bright Star Syntex (P.) Ltd. [2016] 71 taxmann.com 64 (Bombay)

Apex Court in ITO v.Lakhmani Mewal Das [1976] 103 ITR 437 held that the expression "reason to believe" cannot be read to mean that the Assessing Officer should have finally established beyond doubt that income chargeable to tax has escaped assessment. It held that the only requirement to reopen an assessment is a reasonable belief on the part of the Assessing Officer issuing the reopening notice that income chargeable to tax has escaped assessment.

Supreme Court in S.V.R. Mudaliar v. Rajabu F. Buhari [1995] 4 SCC 15 held as follows:— "…we have no doubt in our mind that before reversing a finding of fact, the appellate court has to bear in mind the reasons ascribed by the trial court. This view of ours finds support from what was stated by the Privy Council in Rani Hemanta Kumari Debi v. Maharaja Jagadindra Nath Roy Bahadur [10 CWN 630 : 8 Bom LR 400] wherein, while regarding the appellate judgment of the High Court of Judicature at Fort William as "careful and able", it was stated that it did not "come to close quarters with the judgment which it reviews, and indeed never discusses or even alludes to the reasoning of the Subordinate Judge".

A Court of appeal interferes not when the judgment under attack is not right but only when it is shown to be wrong. (See Special Land Acquisition Officer, Bangalore v. T. Adinarayan Setty [1959 Supp 1 SCR 404 : AIR 1959 SC 429 : 1959 Cri LJ 526] ;Dattatraya Shankarbhat Ambalgi v. Collector of Sholapur [(1971) 3 SCC 43] and Dollar Company, Madras v.Collector of Madras [(1975) 2 SCC 730] .)

While reversing the order of the CIT(A) the Tribunal is duty bound to examine and discuss the reasons given by the CIT(A) to hold one way or the other and then to dispel those reasons. If the Tribunal fails to make such an exercise the judgment will suffer from serious infirmity.[Para 15] Assuming that another view was possible, that itself would be no ground to interfere with the order of the CIT(A) by ITAT unless it is shown that the appreciation of evidence by the CIT(A) was either perverse or untenable and that in holding in favour of the assessee the CIT(A) either ignored material evidence or that the view taken by him was patently untenable.[Para 17 of Judgement] Prahlad Bhattacharya [2016] 71 taxmann.com 63 (Calcutta) MARCH 4, 2016

A donor cannot be expected to disclose or answer any question which was not specifically put to him in the course of proceedings u/s.131. The inspector deputed by the assessing officer had full opportunity to make inquiry and the assessee should not suffer on account of a lapse on the part of the inspector. [Para 14 of the Judgement] Prahlad Bhattacharya [2016] 71 taxmann.com 63 (Calcutta) MARCH 4, 2016

Rajasthan High Court in the case of CIT v. Padam Singh Chouhan [2009] 315 ITR 433 for the proposition that:— "There is no legal basis to assume, that to recognize the gift to be genuine, there should be any blood relationship, or any close relationship, between the donor and the donee. He further submitted that instances are not rare, when even strangers make gifts, out of very many considerations, including arising out of love, affection and sentiments.

Delhi High Court in the case of CIT v. Suresh Kumar Kakar [2010] 324 ITR 231 held that when the donor and the donee are in blood relationship with each other, the donor does not need any particular occasion to make any gift.

Assessee was a closely held company incorporated in USA In India, assessee-company entered into contract with DPC .First phase of contract was completed - Second phase of contract did not run its full course . Same was terminated by assessee-contractor on account of non-payment of bills by contractee DPC. Assessee raised a claim which had not been accepted by contractee DPC. Since ultimate collection was not certain while raising bills, assessee did not credit same to its profit and loss account . Thus, said amounts were not shown by assessee as its income - Whether since, suits/ disputes between assessee-contractor and contractee were pending, contractual income could not be said to be accrued when invoice raised by assessee had been rejected by contractee in view of its bankruptcy - Held, yes - Whether, however, on actual receipt of invoice amount, same would be taxed in year of receipt - Held, yes Bechtel International Inc [2016] 71 taxmann.com 62 (Mumbai - Trib.) OCTOBER 30, 2015

Facts

Assessee , a closely held company in USA , entered into contract with Indian Companies. Contract could be executed partly only because contratee companies failed to pay the bils raised. The USA Company raised bill for work done and also for demobilization in winding up site operations. The bills were not offered for Income and assesse made a disclosure in this regard in his computation. AO made addition. CIT A deleted addition of bill for demobilization only saying that this bill was never accepted by contractee.

As per Section 2(14)(iii), agricultural land outside specified limit is not capital asset and hence there can be no capital gain on transfer of such agricultural land. Hence it is important to determine whether land is agriculture land or not. A few case laws relevant to the subject:

In Gemini Pictures Circuit (P.) Ltd. v. CIT [1981] 130 ITR 686/6 Taxman 42 (Mad.) it was held that onus is on the department to prove that land is non agricultural or that it forms part of business assets. Once the assessee proves that the land is raagricultul land the burden of proving that it is not agricultural land is on the revenue.

In case of Gordhanbhai Kahandas Dalwadi v. CIT [1981] 127 ITR 664 (Guj.), it was held that the correct test that has to be applied is whether on the date of sale the land was agricultural land or not. Just because after the sale the purchaser was going to put the land to non-agricultural use, it does not mean that the land had ceased to be agricultural land on the date of sale.

In case of CIT v. Borhat Tea Co. Ltd. [1982] 138 ITR 783/[1981] 7 Taxman 388 (Cal.), it was held that for the purpose of land being agricultural land, actual agricultural operations or cultivation or tilling of the land is not necessary. What is to be seen is whether such land is capable of agricultural operations being carried on.

In case of CIT v. Modhabhai H. Patel [1994] 208 ITR 638/77 Taxman 408 (Guj.), it was held that if a land is recorded as agricultural land in the revenue records and if till the date of its sale it is used and exploited as agricultural land, and if the owner of the land has not taken any step which would indicate his intention to exploit the land thereafter as non-agricultural land, then such a piece of land would have to be regarded as agricultural even though it was included within the municipal limits or it was sold on a per square yard basis and not acreage basis.

The purpose for which such a land is sold, though not relevant, will not have that much importance and weight as it would have in a case where the land has remained a spadatar or idle or is used for agricultural purposes only by way of a stop-gap arrangement.

Where assesse enters into agreement to sell agri land. There after makes an application to the authorities to permit to covert the land into farm houses and authority replies that no such conversion required for farm houses and there after the sale deed with buyer is registered. Whether the land ceases to be agricltual land on the date of registration of sale deed. What is the relevant date of transfer, the date of agreement or date of registration of sale deed?

As per Section 2(14)(iii), agricultural land outside specified limit is not capital asset and hence there can be no capital gain on transfer of such agricultural land. Hence it is important to determine whether land is agriculture land or not.

Where assesse enters into agreement to sell agri land. There after makes  an application to the authorities to permit to covert the land into farm houses  and authority replies that no such conversion required for farm houses and there after the sale deed with buyer is registered. Whether the land ceases to be agricltual land on the date of registration of sale deed. What is the relevant date of transfer, the date of agreement or date of registration of sale deed?

Held by Jaipur Tribunal in Megh Chand Meena, HUF [2016] 70 taxmann.com 374 (Jaipur - Trib.) MAY  17, 2016  that  it was clear that there was no conversion of agricultural land and what had been transferred by assessee continued to be agricultural land beyond 8 Kms. of municipal limits. it was not a capital asset under section 2(14)(iii) . therefore, sale consideration was not liable to capital gains tax under section 45.

Ratan Melting & Wire Industries, 2008 (12) STR 416. At paragraph 6 of the judgment, the Hon'ble Apex Court observed as follows "6. Circulars and Instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the Circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Govt. and/or the State Govt. are not concerned they represent merely their understanding of the statutory provisions. They are not binding upon the Court. It is for the Court to declare what the particular provision of statutes says, and it is not for the executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law

Registration of sale / transfer deed is not relevant factor to the matter of capital gain and related aspect. 1. CIT v. Poddar Cement (P.) Ltd. [1997] 226 ITR 625 (SC) 2. Mysore Minerals Ltd. - 239 ITR 775 (SC) 3. B.L. Sood - 245 ITR 727 (SC)

Old and Gold Rule of Law reiterated by Calcutta High Court in Sheo Kumar Mishra [2016] 70 taxmann.com 375 (Calcutta) FEBRUARY 26, 2016 that In the absence of an appeal or cross-objections by the department against the order in dispute, the Appellate Tribunal will have no jurisdiction or power to enhance the assessment. Under Section 251, CIT A has power to enhance the assessment but u/s 253 Tribunal does not have the power to enhance the enhancement. it is not open to the Tribunal itself to raise a ground or permit the party, who has not appealed, to raise a ground, which will work adversely to the appellant

Facts and Decision

As per N/N 30/2016, dtd 28-06-2016, a person who obtains registration as first stage dealer shall not be required to obtain registration as importer and a person registered as importer shall not be required to obtain registration as FSD. Further in Circular No. 1032/20/2016 dated 28-06-2016, CBEC has clarified that a person who conducts business both as FSD as well as importer may now have common registration but this is optional and he can have separate registrations also. Further clarified that a person who conducts business both as FSD as well as importer shall have option to file single quarterly return

Procedure for online submission of TDS return through incometaxindiaefiling.gov.in provided by CBDT vide N/N 11/2016 dated 22-06-2016

Procedure for online submission of TDS return through incometaxindiaefiling.gov.in provided by CBDT vide N/N 11/2016 dated 22-06-2016 as under:

1.       Get registered with your TAN on the site

2.       FVU file to be uploaded as zip file.

3.       Statement can be filed through DSC using DSC Management Utility or can be filed using EVC

4.       Submit TDS return by logging in through TAN. Then Go to TDS-Upload TDS. Then upload Zip file along with signature file discussed above

5.       On being uploaded the status shall be shown as “uploaded”. Uploaded file shall be accepted or rejected in 24 hours. Staus can be checked at TDS- View filed TDS. Rejection reasons shall be provided along rejected file.

Relaxation from deduction of tax at higher rate under section 206AA by inserting Rule 37BC vide Notification dated 24-06-2016

Finance Act 2016 had amended Section 206AA(7) to provide that higher rate of TDS u/s 206AA shall not apply to payments made to non residents not having PAN  subject to certain conditions

The Conditions have now been specified by incorporating Rule 37BC which provides as under:

1.       Relaxation u/s 206AA(7) to apply to  payments in the nature of interest, royalty, fees for technical services and payments on transfer of any capital asset

2.       Deductee to file following details/documents

a)      Name, Email id, Contact No.

b)      address in the country or specified territory outside India of which the deductee is a resident

c)       Tax Residency Certificate from foreign government, if the laws of that government provide for issuance of such certificate

d)      Tax Identificaton Number (TIN)of resident foreign country or if TIN is not available, Unique ID No. of resident foreign country

Relevant details also incorporated in TDS return for non residents

Time Limit for taking central excise registration by jewelers extended to 31-07-2016. Excise for March 2016 to June 2016 to be paid till 31-07-2016 [Circular 1033/21/2016 dated 01-07-2016]

Very Important Circular on Income Declaration Scheme dated 30-06-2016

1.       The information contained in the declaration shall not be shared with any other law enforcement agency. The information will also not be shared within the Income Tax Department for any investigation in respect of a valid declaration.

2.       The Scheme provides immunity under the Income-tax Act, 1961, the Wealth-tax Act, 1957 and the Benami Transactions (Prohibition) Act, 1988. Immunity from Benami Transactions (Prohibition) Act is subject to the condition that the property will be transferred to the declarant (being the person who provided the consideration for the property) latest by 30th September, 2017. However, as mentioned in response to Question No.1 above, the information contained in the declaration made under the Scheme will not be shared with any other tax or law enforcement agency.

3.       The value of the property for the purposes of declaration in such cases shall be computed as per Rule 3 of the IDS Rules even if such value is lower that the value adopted or assessed/assessable by stamp valuation authority.

4.       The value mentioned in the registered deed shall be relevant for determining the cost of acquisition and the same can be taken as the fair market value only where it is higher than the price that the property shall ordinarily fetch if sold in the open market as on 1st June, 2016.

5.       ; credit for tax deducted shall be allowed only in those cases where the related income is declared under the Scheme and the credit for the tax has not already been claimed in the return of income file for any assessment year.

6.       There is no need to indicate the source of income at all.

7.       No Investigation against the seller of the property representing undisclosed income of the buyer for which declration is made under the scheme.

8.       Declaration of past undisclosed income in the current year [i.e. AY 2017-18] amounts to false verification of return of income which shall attract prosecution under the Income-tax Act.

9.       If anyone attempts to disclose past undisclosed income in the current year[i.e. AY 2017-18], he will have to explain the source of income and substantiate the manner of earning the said income. In case of disclosure under the Scheme, there is no need to explain the source of income.

10.   Declaration of past undisclosed income in the current year cannot explain assets acquired in the past or provide any immunity in respect of the same.

11.   The Income-tax Department is in receipt of large volume of information from various sources such as registrars of property, banks, financial institutions, stock exchanges, tax deductors etc. The Department has launched a comprehensive data-mining and compliance management programme in the form of ‘Project Insight’ which will generate a large volume of reliable information about financial transactions undertaken by taxpayers and the relevant year in which the transaction was undertaken

12.   In a case the declarant earned undisclosed income of Rs. 90 lakh in previous year 2010-11. Out of the same, he acquired an immovable property in the previous year 2011-12 for Rs.50 lakh, made personal expenditure to the extent of Rs.20 lakh and balance Rs.20 lakh is left with him as cash in hand on 01.06.2016. The fair market value of the immovable property as on 01.06.2016 is Rs.80 lakh. What is the amount to be declared under the Scheme?

The declarant in this case has to declare the following: (i) Rs. 80 lakh being fair market value of the immovable property as on 01.06.2016 (ii) Rs. 20 lakh being the cash in hand as on 01.06.2016 (iii) Rs. 20 lakh being the balance of undisclosed income [Rs. 90 lakh – (Rs.50 lakh + Rs. 20 lakh)] which is not represented in the form of investment in any asset. Thus the total undisclosed income to be declared in this case will be Rs. 1.20 crore.

13.   In case the person declares the undisclosed house property at its fair market value on 01.06.2016, whether any action will be taken for bringing the annual value of the undisclosed property to tax as income from house property by deeming it to be let property as provided under section 23(4)(b) of the Income-tax Act for the earlier previous years?

No. However, where the house property was let-out during the relevant period, the actual rent received or receivable will be required to be declared under the Scheme in addition to the fair market value of the house property as on 01.06.2016.

Effective Tax Rate under Income Declaration Scheme come down to 31%?

Fnance Minister in his address to ICAI on 02-07-2016 has mentioned that effective rate of tax under the scheme is now reasonable. What is this effective rate ? As per Answer to Q.No. 5 in Circular No. 25/2016 dated 30-06-2016, no enquiry in respect of sources of payment of tax, surcharge and penalty shall be done. It means that if one has Rs. 145 as undisclosed Income, he shall make declaration of undisclosed Income for Rs. 100, pay tax of Rs. 45 there on out of his undisclosed Income. No enquiry regarding where abouts of Rs. 45 paid as tax etc shall be done by the department. It means against total undisclosed Income of Rs. 145/-, I have paid a tax of Rs. 45. Hence effective tax rate is 45/145 *100= 31%. Before this clarification if  I had to make full declaration of say Rs 145 and out of so disclosed Rs. 145 , I had to pay tax @ 45% i.e. Rs. 145 x 45%= Rs. 65.25. The above view has been fortified in yesterday’ webcast of ICAI also.

Rule for tax credit of foreign taxes

Rule for tax credit of foreign taxes. Rule 128 inserted vide Notification dated 27-06-2016

1.       Rule is applicable to resident assesses only.

2.       Credit to be allowed for foreign taxes.

3.       Credit of only those foreign taxes are allowed which are paid in country with which India has DTAA or TIEA.

4.       Credit of Foreign taxes to be allowed only if they have been paid whether  by way of tax deduction or otherwise

5.       Credit to be allowed by converting foreign tax into Indian Currency  at TT buying rate on last day of month immediately preceeding the month in which tax has been paid or deducted.

6.       Credit shall be allowed to the extent of Income corresponding to tax is offered to tax in India

7.       Where income on which foreign taxes are paid is reflected in multiple years, credit of taxes shall be allowed proportionately.

8.       Credit of foreign taxes can be adjusted against tax , surcharge and cess payable under the Act

9.       Credit of foreign taxes can not be adjusted against interest, fee or penalty.

10.   Where the levy of foreign tax is disputed by the assessee, no credit of foreign taxes to be allowed

a)      Where dispute is finally setteled, credit of foreign tax can be allowed if With in six months from the end of month in which dispute is finally settled:

b)      Assessee furnishes evidence of settlement of dispute and

c)       Assessee also furnishes evidence that liability for payment of foreign taxes has been discharged by him  and

d)      Assessee furnishes an undertaking that no refund directly or indirectly has been claimed or shall be claimed in respect of such amount

11.   Credit of tax to be computed by aggregating taxes paid for each source of income from a particular country.

12.   Credit shall be allowed at lower of the tax payable under the Act and foreign tax

13.   Where foreign tax paid is more than payable under DTAA or tax relief, then excess shall be ignored.

14.   Where income of resident assessee is computed under special provisions u/s 115JB or S.115JC, credit of foreign tax shall be allowed against MAT /AMT as it allowable against tax payable under  normal provisions.

15.   Following document to be furnished for availing credit of foreign taxes:

a)      Statement in F. 67 specifying detail of income from foreign country and foreign taxes claimed

b)      Certificate from tax authority of foreign country specifying the nature of income and tax deducted/paid  OR  Such certificate from deductor or Self Signed Certificate [In case of self signed certificate , the certificate to accompany an acknowledgement of online payment or bank counter foil or challan for payment of tax, where payment has been made the assessee  and proof of tax deduction]

16.   Documents/Certificate regarding foreign taxes to be furnished before due date of furnishing of return u/s 139(1).

Clarifications Issued on Income Declaration Scheme vide Circular No. 24/2016 dated 27-06-2016

Further Clarifications Issued on Income Declaration Scheme vide Circular No. 24/2016 dated 27-06-2016

1.       In case of part payment of tax, surcharge and penalty, entire declaration shall fail.

2.       In case of amalgamation or conversion into some other entity, the declaration to be made by amalgamated entity or converted entity because amalgamating or converting entities are no longer in existence.

3.       The scheme is applicable to residents as well as non residents.

4.       Undisclosed Income of older assessment years like asstt year 2001-02 shall also get taxed in the year of issue of notice u/s 148/153A/153C

5.       For search conducted in April 2016 but notice u/s 153A not issued till 31-05-2016, the scheme is not applicable and hence not eligible to make declaration

6.       Pr Commissioner / Commissioner may require valuation report before issuing acknowledgement and in such case it will be compulsory to file valuation report.

7.       It is necessary to furnish PAN

8.       The years for which proceedings are pending before settlement commission, the scheme can not be availed.

9.       Cases where letter are issued u/s 133(6) and no notice u/s 148 or section 142 is issued , declaration can be filed.

10.   Cases letter issued by  Non filer Monitoring System but no no notice u/s 148 or section 142 is issued , declaration can be filed.

11.   Cases where summons are issued u/s 131(1A) but no no notice u/s 148 or section 142 is issued , declaration can be filed.

12.   Where notices have been issued u/s 142, 143(2) and 148 but not received till 31-05-2016, the declaration shall be valid if there is no misrepresentation or suppression of facts. On issue of certificate by Pr CIT/CIT in Form 4 the proceedings u/s 142,143(2), 148 shall stand abated.

Vide NN 1/2016 dtd 03-02-2016, refund of service tax under NN 41/2012 was allowed on use of service for export of goods beyond factory. The reference to place of removal was omitted to dispel the contention that rebate of service tax on service from factory gate to port of shipment shall not be allowed. Now, section 160 of Finanace Bill 2016 passed by Lok sabha on 04-05-2016, has required retrospective application of above amendment i.e. from 01-07-2012 to 02-02-2016 (both days inclusive) by virtue of Tenth Schedule of Finance Bill passed by Loksabha. Further restoration of service tax credit denied allowed by section 160(2). Also, assessee who had not availed refund, can now apply for refunds for retrospective periods from 01-07-15 to 02-02-16 with in one month from the date of passing of Finance Act 2016.

Krishi Kalyan Cess is applicable from 01-06-2016 @ 0.5% and thus service tax rate shall become 15%. Krishi Kalyan Cess to be applied even for outstanding amount of services rendered before 01-06-2016 for which payment is not received till 31-05-2016. E.g. for bank audit fee, if the amount is not received till 31-05-2016, Krishi Kalyan cess shall have to be paid for amount received after 31-05-2016. However, Krishi Kalyan Cess is Cenvatable. So, service providers should collect amount before 31-05-2016 to avoid payment of Krishi Kalyan Cess

Separate date for furnishing 15G/15H announced by CBDT vide Notification dated 09-06-2016

Separate date for furnishing 15G/15H announced by CBDT vide Notification dated 09-06-2016

Earlier, TDS return for June was required to be filed by 31st July, for Sep by 31st October, for December by 31st January, for March by 31st May as per N/N 30/2012 dtd. 29-04-2016.

No separate date was prescribed for 15G/15H.However now, separate dates for uploading 15G/15H have been provided vide Notification dated 09-06-2016.

Due Date for QE 30 June shall be 15th July, for 30th Sep shall be 15th October, for 31st December shall be 15th January and for 31st March it shall be 30th April

It means for first three quarters 15G/15H to be filed 16 days ahead of due date for TDS return and for last quarter a month ahead for TDS return, thus maintaining a time distance between the TDS return and 15G/15H so that information regarding 15G/15H may be timely submitted in TDS return.

Further in respect of 15G/15H for 3rd and 4th Quarter of 2015-16 not filed electronically can be so e-filed up to 30-06-2016

Issues /Observations/ Ambiguties Regarding Income Declaration Scheme, 2016

1 As per Section 183(2) , FMV of asset on 01-06-2016= Deemed Undisclosed Income u/s 183(1). As per Section 183(3), FMV of an asset shall be determined in prescribed manner.

Also Tax, Surcharge and Penalty is required to be calculated @ 45% of Undisclosed Income u/s 184 and S.185.

However section 183(1) does not mention about Undisclosed Income. Hence the anamoly, ostensibly seminal, may mar the entire scheme.

Under Income Tax Act , the inclusive definition of word Undisclosed Income is provided u/s 158B(b) for limited purpose of Chapter XIV-B, which is also not in operation for searches after 31-03-2003.

The word Undisclosed Income is also defined u/s 271AAB but again for purpose of levy of penalty under that section.

3 It Should be clarified whether declaration can be filed by residents as well as non residents.

4 As per Circular No. 16/2016 dated 20-05-2016, A declaration under the aforesaid Scheme may be made in respect of any income or income in the form of investment in any asset located in India
However, it should also be clarified whether declaration can be filed in respect of foreign income [i.e. income accruing or arising outside India or Income received outside India.]

5 Whether stamp duty value of Immovable property can be taken as Fair Market Value under the Scheme

6 As per Circular No. 17/2016 dated 20-05-2016, in Q.No.12, it is mentioned that After the declaration is made the Principal Commissioner/ Commissioner will enquire whether any proceeding under section 142(1)/143(2)/148/153A/153C is pending for the assessment year for which declaration has been made. Apart from this no other enquiry will be conducted by him at the time of declaration.

However, as per Advertisements being published no enquiries to be made. The matter should be clarified.

7 Since an embargo has been placed on making any other declaration, whether it means that revision of declaration already filed is not possible.

If a person files a declaration in representative capacity say as Karta of HUF, whether he can file another declaration in Individual capacity is not clear from the section 186(3) of the Scheme

8 As per Circular No. 16/2016 dated 20-05-2016,
The declarant shall not be liable for any adverse consequences under the Scheme in respect of, any income which has been duly declared but has been found ineligible for declaration. However, such information may be used under the provisions of the Income-tax Act.
The term adverse consequences be defined. Whether such
person shall not be visited with penalty and prosecution
Circular No. 17/2016 dated 20-05-2016
As per Circular No. 17/2016 dated 20-05-2016, In respect of such undisclosed income which has been duly declared in good faith but not found eligible, then such income shall not be hit by section 197(c) of the Finance Act, 2016. However, such undisclosed income may be assessed under the normal provisions of the Income-tax Act, 1961. [Q.No.9]

However, while answering to Q.No.11 in respect of declaration made by person for undisclosed Income which has been acquired from money earned through corruption, it has been stated by Circular NO. 17/2016 dated 20-05-2016 that if such a declaration is made and in an event it is found that the income represented money earned through corruption it would amount to misrepresentation of facts and the declaration shall be void under section 193 of the Finance Act, 2016. If a declaration is held as void, the provisions of the Income-tax Act shall apply in respect of such income as they apply in relation to any other undisclosed income

Subjectivity between what is declared in good faith and what is declared by misrepresentation should be removed.

Further whether not being hit by section 197(c) means taxing the income in the year of accrual and not the year of detection/issue of notice, Further whether it means not inviting penalty and prosecution .

9 Section 189 bars the reopening of assessment or reassessment. However, it should have been further extended to take care of revision also.

Further Section 189 talks about disentitlement of declarant but not the privilege of Income Tax department to reopen the assessment. So, the matter should be clarified.

10 Person other than Declarant can not claim any benefit, concession,
Immunity under the Scheme[Section 197 (a)]

The benefits of the scheme shall only be available to declarant and not any other person.

One Interpretation is that If declaration is filed in different name and tax is inadvertently filed in different name, then subject to timely payment u/s 187, immunity shall be available to declarant and not the person in whose name the tax has been deposited. SO, whether such person needs to deposit tax again ?

Another interpretation that comes from 197(a) is say that if declaration is made by one husband in respect of cash in his hand, and later if the same cash is deposited into the account of wife, whether wife can explain the cash so deposited on the strength of declaration made by husband,

The scope of S.197(a) be clarified

11 As per Circular 17/2016 the period of holding shall start from the said date (i.e. the date of determination of fair market value for the purposes of the Scheme) i.e. 01-06-2016. The Income tax law has not been amended . Without amending section 2(42A), litigation might arise on the issue.

12 As per Circular 17/2016, Discussing the querry No. 3 on “If the notice has been issued but not served on the declarant, then how will he come to know whether the notice has been issued, the CBDT has stated that The declarant will not be eligible for declaration under the Scheme where a notice has been issued and served on the declarant on or before 31st day of May, 2016

Further In the form of declaration (Form 1) the declarant will verify that no such notice has been received by him on or before 31st May, 2016.

However no such declaration is there in Form-1 except for the wording mentioned in Section 196

13 Circular 16/2016 dated 20-05-2016
For the purposes of declaration under the Scheme, it is clarified that the person will not be eligible under the Scheme if any notice has been served upon the person on or before 31st May, 2016 i.e. before the date of commencement of this Scheme.

As per Circular 17/2016, Discussing the querry No. 3 on “If the notice has been issued but not served on the declarant, then how will he come to know whether the notice has been issued, the CBDT has stated that The declarant will not be eligible for declaration under the Scheme where a notice has been issued and served on the declarant on or before 31st day of May, 2016

Hence whether declaration for notices u/s 148 for AY 2009-10 issued but not served till 01-06-2016 can be filed ?

14 As per Circular In the case of survey, a person is eligible to make a declaration in respect of an undisclosed income of any other previous year other than in which the survey was conducted

Comments: In such a case the declarant shall be able to make a declaration even for the previous years before the year in which survey is conducted, although incriminating material for such period is in the possession of the department.

15 Normally under VDIS Scheme, there are no harsh consequences of not disclosing the Income and the assessee is not placed at a position inferior to that he would be if there was no VDIS. But this scheme as per Section 197(c) says:

Where any income has accrued, arisen or received or any asset has been acquired out of such income prior to commencement of this Scheme, and no declaration in respect of such income is made under this Scheme,—

(i) such income shall be deemed to have accrued, arisen or received, as the case may be; or

(ii) the value of the asset acquired out of such income shall be deemed to have been acquired or made,

in the year in which a notice under section 142, sub-section (2) of section 143 or section 148 or section 153A or section 153C of the Income-tax Act is issued by the Assessing Officer, and the provisions of the Income-tax Act shall apply accordingly

At the onset, the purpose is to disincetivise the assessee for not making the declaration under the scheme and provide for higher valuation of asset by providing deeming provisions but scheme of fixing the year of deemed accrual or acquisition is not clear.

E.g. As per 197(c) for assessment year 2016-17, notice u/s 148 for undisclosed income of AY 2016-17 is issued on 30-09-2018 , then income shall be deemed to have accrued in 2018-19, being the year of issue of notice and not in previous year 2015-16 relevant to assessment year 2016-17. In such a case, how shall AO assess the assessee, when the income itself is not deemed to have arisen in AY 2016-17. Further the Income tax law has not been amended to provide for such fiction.

As per Press Release dated 14-05-2016, Non-declaration of undisclosed income under the Scheme, will render such undisclosed income liable to tax in the previous year in which it is detected by the Income tax Department

Hence there is not only ambiguity but also contradiction regarding application of S.197 (c). Whether the year of issue of notice or year of detection is relevant for S.197(c ).

Further there is no amendment in Income tax law to give effect to section 197 (c).

Inspection Procedure for grant of registration certificate under Punjab Vat framed vide order dated 17-06-2016

Inspection Procedure for grant of registration certificate under Punjab Vat framed vide order dated 17-06-2016 as under:

1. TI to inform applicant prior to visit via SMS and email.

2. If applicant is female, inspecting official should be accompanied by female official

3. Before leaving office for Inspection, TI to inform ETO ward in charge and also record the same in movement register

4. Inspection to be carried out in day time

5. TI shall inform the applicant about discrepancies at the time of inspection, if it is not possible to inform before hand. Applicant may provide additional documents at the time of visit which shall be accepted by TI. For unresolved discrepancies, TI to give notice providing date and time to submit the proof at office.

6. At the time of inspection, applicant may call his advocate for assistance.

7. TI to record his findings in system with in 48 hours from completion of inspection

Yet another circular on TCS [23/2016 dtd 24-06-2016] sets at Knot all speculations regarding TCS 1. Goods Sold for Rs. 5 lac. Cheque Received Rs. 4 lacs. Cash Received Rs. 1 lakh. Since cash received lesser than 2 lacs, no TCS applicable 2. Goods Sold for Rs. 5 lac. Cheque Received Rs.2 lacs. Cash Received Rs.3 lakh. TCS shall apply on Rs. 3 lacs only and not whole of consideration of Rs. 5 lacs

Under Lok pal and Lokayaukta Act 2013, as per section 14(1)(g) the Lokpal shall inquire any allegation of corruption made in a complaint in respect of any person who is or has been a director, manager, secretary or other officer of every other society or association of persons or trust (whether registered under any law for the time being in force or not), by whatever name called, wholly or partly financed by the Government and the annual income of which exceeds such amount as the Central Government may, by notification, specify; It has been notified vide Notification dated 20-06-2016 issued by Ministry of Pesonnel, Public Grievances and Pensions that inquiry into allegations of corruption in above cases to be made only where grants or financial assistance given by the Central Government exceeds Rs. 1 crores. Income other than Central Government Grants not to be considered for conducting such inquiry. Even state government grant not covered. The moot point is whether Invocation of section 13(1)(c) of Income Tax Act i.e. use or application of any part of income or assets of the trust for the benefit of trustee etc. might invite such enquiry

Clarified by CBDT vide press release dated 21-06-2016 that no statement regarding arrest of willful defaulters has been issued. CBDT also expressed that though the provisions for arrest and detention by the Tax Recovery Officers in respect of the non-compliant tax defaulters are contained in the Income-tax Act, these are used extremely sparingly

U/s 11 of Model GST law, remission of tax on quantities found deficient due to natural causes has been allowed. U/r 21 of Central excise law similar remission is available for deficiencies arising out of natural as well as accidental cases and other cases where goods found unfit for consumption or marketing before removal. U/R 21 of PVAT Rules, ITC is required to be reversed where goods are lost or destroyed due to whatever reasons. Hence remission should be allowed under GST law on quantities found deficient on account of reasons other than natural causes also. Although Schedule I of Model GST law, dealing with supplies without consideration also does not include deficiencies due to unnatural reasons with in definition of supply but perhaps matter needs a bit of more clarification also. [GST Law Note-3]