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.

“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]

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]

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