Category: Assessment under Income Tax

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1.25 CRORES “new return filers” targeted to be added during 2017-18 as per CBDT letter dated 27-09-2017

 

A ‘new return filer’ for this purpose is defined as a person who has not filed return in the previous three Financial Years (2014-15 to 2016-17) but has filed return in the current financial year.

Region wise targets are as under:

:

Region Target for new return filers for FY 2017-18 Region Target for new return filers for FY 2017-18
JAIPUR 580261
AHMEDABAD 941123 KANPUR 616725
BANGALORE 876846 KOCHI 362156
BHOPAL 620925 KOLKATA 697685
BHUBHNESWAR 234850 LUCKNOW 620651
CHANDIGARH 1041948 MUMBAI 740741
CHENNAI 1047702 NAGPUR 211922
DELHI 727367 PATNA 502132
GUWAHATI 254948 PUNE 1182532
HYDERABAD 1239486 Total 12500000
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in cases where on receiving the intimation u/s 143(1l)(a)(vi) of the Act, the concerned assessee has already filed a revised return, such returns shall be treated as valid and handled accordingly

As per section 143(1)(a)  while processing return the total income or loss shall be computed after making the adjustments for

  • any arithmetical error in the return or [S.143(1)(a)(i)]
  • an incorrect claim, if such incorrect claim is apparent from any information in the return. [S.143(1)(a)(ii)] As per Explanation to 143(1) an incorrect claim apparent from any information in the return” shall mean a claim, on the basis of an entry, in the return
  1. of an item, which is inconsistent with another entry of the same or some other item in such return
  2. in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished;
  3. in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction

 

 

WEf AY 2017-18 Now adjustment u/s 143(1)(a) in return of income can also be made for

  1. disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139 [S.143(1)(a)(iii)]
  2. disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return[S.143(1)(a)(iv)]
  3. disallowance of deduction claimed under sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC,80-ID or section 80-IE, if the return is furnished beyond the due date specified under sub-section (1) of section 139 [S.143(1)(a)(v)]
  4. addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return [S.143(1)(a)(vi)]

 

Intimation of Adjustment to Assessee:

Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode:

 

Response of the assessee to be awaited for 30 days

 

Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made

As per Above Instructions No. 9/2017, In returns filed in ITR-1 Form, information about a particular head/item of income is only on net basis and thus, complete data/information may not be available therein which may enable comparison with the data/information as contained in the three Forms [F.16,16A and 26AS]  in a meaningful manner. Therefore, in exercise of its powers under section 119 of the Act, the Board hereby directs that provision of section 143(1)(a)(vi) of the Act would not be invoked to issue intimation proposing adjustment to the income/loss so filed in ITR-1 Form in such situations.

 

  • However, where any head/item of income has been altogether omitted to be included in the return of income filed in ITR-1 while the three Forms contain specific detail in this regard pertaining to that item/head of income, section 143(1)(a)(vi) of the Act shall continue to apply.

 

  • Further, for purpose of section 143(1)(a)(vi) of the Act, only the three Forms specified therein would be taken into consideration

 

  • The pending intimations proposing adjustments under section 143(1)(a)(vi) wherein the taxpayer has tendered an explanation without revising the return or has not tendered any response till now shall be dealt with in accordance with the above direction.

 

In cases where on receiving the intimation u/s 143(1l)(a)(vi) of the Act, the concerned assessee has already filed a revised return, such returns shall be treated as valid and handled accordingly

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MES Contractor be assesses at 7.5% says Jodhpur Tribunal

Assessee was engaged in business of contract work of military engineering services – Assessing Officer having found that assessee disclosed lower gross profit rate 7.20 per cent in relevant year, in comparison to 10.25 per cent in immediately preceding year despite three fold increase in gross receipt and assessee had not maintained salary register, payment register etc., rejected books of account of assessee and estimated income of assessee by applying net profit rate of 12.5 per cent – Whether since explanations of assessee that gross receipts had substantially increased by three times for which assessee had to reduce margin, and that contract works were executed in military and air force areas where working hours were lesser in comparison to normal civil work and that cost of various expenses and material had also been increased, was not rebutted by revenue, gross profit rate applied by Assessing Officer could not be sustained – Held, yes – Whether on facts, it would be fair and reasonable if net profit rate of 7.50 per cent was applied subject to interest to third parties, depreciation, interest to partners and salary to partners – Held, yes-Shri Ram Traders [2013] 37 taxmann.com 427 (Jodhpur – Trib.)

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Important Changes in ITR Forms wef AY 2016-17

Where total Income of assessee is more than 50 lacs, the Individual/ HUF  assessee is required to disclose cost of Immovable Assets viz. Land and Building and Movable Assets viz. Cash in Hand, Jewellery Bullion etc., Vehicle, Yatches, Boats and Aircrafts and also Liability in relation to Immovable and Movable assets in case amounts not disclosed in Balance Sheet. Earlier assesses having total Income exceeding 25 lacs were required to disclose this information. In ITR-3 and ITR-4.

Provision  for  availing TCS credit by the buyer for cash purchase of jewellery and bullion exceeding Rs. 5 lacs and Rs. 2 lacs respectively.[Introduced since Finance Bill 2012]

Partnerships firms going for presumptive Income can now file 4S instead of ITR-5. They can also claim deduction of interest and salary to partner.

Provision made in ITRsfor availing additional deduction of Rs. 50,000/- in respect of New Pension Scheme u/s 80CCD(1B) introduced by Finance Act 2015.

Disclosure of exempt share income of partner from firm/AOP/BOI done away.

Impact of ICDS to be disclosed.

Trusts to disclose percentage of commercial recipts visa vis total receipts, because as per Finance Act 2015, if commercial receipts exceed 20% OF TOTAL RECEIPTS of trust advancing objects of general public utility, it shall not be charitable and shall lose exemption u/s 11 and 12.

The Finance Act, 2015 has amended the provisions of Section 139 to provide that  universities or educational institutions, hospitals or other institutions which are wholly or substantially financed by the Government, shall be mandatorily required to file their returns of income. Now such universities, hospitals, educational institutions, etc., have to disclose their name and annual receipts in new ITR 7. Further, they are also required to disclose the amount eligible for exemption in ITR 7.

In new ITR forms there is a separate row for disclosure of following details if taxpayer is liable for audit under any Act [other than the Income Tax Act]:  1) Act and Section under which taxpayer is liable for audit   2) Date of furnishing of Audit Report.

 

Finance Act 2015 extended the benefit of section 80JJAA for 30% of additional wages to new and regular workmen for three asstt years to non corporate assessee also. Hence ITRs 4 and ITR-5 amended to extend benefit to non corporate assesses.

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Electronic Assessment proceedings in cases getting time barred on 31-12-2017: Instruction 8/2017 dated 29-09-2017

  • AO shall issue a communication to assesses having e filing accounts and also having their cases pending for scrutiny assessment by 8th October 2017

 

  • These Assessee to send his consent for E-assessment till 15-10-2017

 

 

  • Mannual Scrutiny to be kept at hold till 15-10-2017 or till the consent of these assesse, whichever is earlier

 

  • E-proceedings can be opted out subsequently under intimation to AO

 

 

  • Proceedings of assesses not having e filing accounts, assesses opting for manual scrutiny, search assessments, transfer pricing assessments, Cases before Range Head u/s 144A shall continue to be assessed manually.

 

  • Notices/communications/orders through e proceedings to be digitally signed by AO

 

 

  • Mannual issue of notice to Assessee shall be done only after providing reason to Range Head

 

  • Online response to AO can be made only till the conclusion of office hours of the day fixed for response

 

 

  • Response for electronic proceedings to be closed by seven days before time barring date i.e. 24-12-2017. An exception can be allowed with permission of Range Head only.

 

  • Manual production of response can  be allowed in following cases
  1. Where manual books or original documents have to be examined
  2. Where summons are issued to assesse or for third party enquiries
  3. Where examination of witness is required by assesse.
  4. Where show cause notice is issued drawing any adverse inference and assesse requests personal appearance

 

  • In appeal proceedings documents shall be produced in two parts : Manual-Part A & Electronic-Part B
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“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

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.

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Consideration of same material by AO can not result in reassessment

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)

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Purpose of S.147 explained by SC in Phool Chand Bajrang Lal

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.”

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Reversion of lender from loan confirmation forms reasonable belief to initiate action u/s 148

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)