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DT Simplified CA Final Direct Tax Laws &

International Taxation The Invictus – CA

Simplified DT Simplified CA Final Direct Tax

Laws & International Taxation DT Simplified

CA Final Direct Tax Laws & International Taxation


International Taxation DT Simplified CA Final Direct

Tax Laws & International Taxation DT Simplified CA

Final Direct Tax Laws & International Taxation DT

Simplified CA Final Direct Tax Laws & International

The Invictus – CA Simplified DT


Taxation DT Simplified CA Final Direct Tax Laws &




Simplified CA Final Direct Tax Laws &

International Taxation DT Simplified CA Final

Direct Tax Laws & International

Taxation DT Simplified CA Final Direct Tax

Laws & International Taxation DT Simplified CA

Final Direct Tax Laws & International Taxation


International Taxation DT Simplified


DT Simplified CA Final The Invictus –

CA Simplified Direct Tax Laws & Interna

CA Final – May 2019(Old & New Syllabus)

CA Dhaval Patanvadia

Part –I I

Direct Tax Laws

DT – Simplified[Amended as per Finance Act 2018]

www.theinvictus.in

DT-Simplified

First Edition: February 2018

Second Edition: June 2018

Third Edition: February 2019

Price: Your commitment towards sincere preparation :)

Published by: The Invictus Institute, Ahmedabad

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3rd Edition

I believe that students learn best when they read with enjoyment. With intent to developing the interest of students in reading and enable them to cover the entire syllabus with multiple revision in very short span of time, I have brought out an abridged version of Direct Tax Laws. I hope It will prove to be a significant preparation resource for the students 1st Edition was introduced last year in February 2018 and It gives immense pleasure to introduce 3rd Edition of “DT – Simplified” to the students of Final Level. In order to make it more simplified and smarter and benefit of student at large, I am introducing this as E-Book, so students can easily store on digital devices and read the same at any time anywhere. It is not just summary book but Smart Book. I will urge all students to take maximum benefit out of it. Multiple revisions will develop better understanding of the concepts and provide stronger grip on the subject, for which “DT –

Simplified” will certainly serve as a means. I would like express my sincere gratitude to CA Prarthana Bhatt, Students and other academic and technical members of the team for the constant support & motivation. It would never have been possible for me to take this work to completion without their incredible support and encouragement

Based on your feedbacks, this book has been divided in three parts

Part I – Basic Chapters

Part II – Assessment of Various entities, Assessment procedure, Appeals etc.

Part III – Non Resident & International Taxation

Features of this E-Book

Covers the recent amendments [Written with red colour]

Section wise approach.

Covers the Selected Case Studies.

No need to carry physical book, Read anytime anywhere.

Read Smartly, Write Smartly…

Enjoy Reading…

My best wishes to you all...!

CA Dhaval Patanvadia

About “DT-Simplified”

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Part – II Assessment

Chapter Particulars Page No.

11 Assessment of Various Entities

Assessment of Companies – Dividend & MAT 11.1

Taxation of Mutual Fund 11.4

Taxation of Securitization Trust 11.4

Taxation of REIT / INVIT 11.5

Taxation of Investment Funds 11.6

Assessment of Other Entities & AMT 11.7

12 Trust, Political Parties & Electoral Trust 12.1

13 Income Tax Authorities & Survey 13.1

14 Assessment Procedure 14.1

15 Appeals & Revisions 15.1

16 Settlement of Tax Cases 16.1

17 Penalties & Prosecutions 17.1

18 Miscellaneous Provisions 18.1

Index

DT - Simplified

CA Dhaval Patanvadia www.theinvictus.in +91-87800 58699

11.1

CHAPTER – 11

ASSESSMENT OF VARIOUS ENTITIES

ASSESSMENT OF COMPANIES

Section 115-O – Dividend Distribution Tax for Domestic Companies

Dividend Distribution Tax (DDT) leviable on the dividend distributed and paid by Domestic company.

Hence dividend is exempt in the hands of shareholder subject to dividend chargeable to tax u/s 115BBDA

DDT is also payable on deemed dividend u/s 2(22)

DDT is payable within 14 Days even if Co. is not liable to pay Income Tax.

Interest @ 1% p.m. or part thereof from next day of due date of payment upto date of payment

No further Credit/deduction available for Dividend or DDT to Company/Shareholders

Exemption from levy of DDT

No DDT payable by company located in IFSC having income solely in convertible foreign exchange also Dividend not taxable in hands of shareholders.

No DDT payable by SPV company wholly owned by Business trust

Removal of Double Taxation :

Where Domestic Holding Co. (Who holds > 50% nominal Value of shares in Sub. Co.)

Receives any dividend from Indian Subsidiary which has paid DDT on such dividend.

Holding Co. while distributing dividend can reduce the dividend received from subsidiary for the purpose of paying DDT

Rate of DDT to be paid by Company

In case of Normal Dividend & Deemed Dividend u/s 2(22)(a) to (d)

15% Tax on Gross Dividend + 12% Surcharge (on Tax) + 4% Cess (on Tax+SC) = 17.472%

In case of Deemed Dividend u/s 2(22)(e)

30% Tax on Gross Dividend + 12% Surcharge (on Tax) + 4% Cess (on Tax+SC) = 34.944%

Grossing Up Provision :

Gross Dividend = Dividend Distributed / [100 - 15 (tax rate of DDT)]

However Grossing up provision does not apply to dividend referred to in section 2(22)(e)

Example: Dividend Distributed = 3,80,000

Dividend Received from Subsidiary = 40,000

Gross Dividend for the purpose of DDT = (3,80,000 - 40,000)/ (100-15) = 4,00,000

DDT = 60,000 (4,00,000 15%) + 7,200 (60,000 12%) + 2,016 (67,200 3%) = 69,216

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DT - Simplified


11.2

Section 115JB – Minimum Alternate Tax (MAT) on Companies

If Tax computed as per Income Tax Act < 18.5% of Book Profit

In such cases Book Profit shall be deemed Total Income &

Tax shall be payable at MAT Rate = 18.5% plus Applicable Surcharge & Cess

If company located in IFSC & derives income solely in convertible forex, MAT Rate = 9%

MAT Provision is not applicable, if having income from life insurance business,

Every company shall furnish report from CA [Form 29B] along with ITR certifying that books profit has been computed in accordance with provisions of this section

All other provisions of Income Tax like Interest, penalty, Carry forward and setoff of loss etc. shall also applicable

Book Profit shall be calculated by following adjustment to profit as per P/L statement

Additions Deductions

Increase, if following amount in (a) to (i) if debited to P/L Account

Decrease, if following amount is Credited to P/L Account

(a) Income Tax paid, Payable or Provision Includes, DDT, Interest, Surcharge, Cess

(iii) Brought forward Loss or Unabsorbed Depreciation, as per books, whichever is lower

(b) Amount Transferred to reserves, other than, Reserve created u/s 33AC

(iih) Aggregate amount of unabsorbed depreciation & loss brought forward by company under Resolution Process under IBC 2016

(c) Provision for Liabilities other than, Provision made for ascertained liabilities

(i) Amount withdrawn from reserves, which considered for increase while computing book profit earlier, & credited to profit & loss account

(d) Provision for losses of subsidiary

(e) Dividend – Paid or Proposed

(f) Expenditure related to, Income credited,

(f) Income exempt u/s 10 or 11 or 12 excluding LTCG 10(38)

(ii) Income exempt u/s 10 or 11 or 12 excluding LTCG 10(38)

(fa) Share from AOP/BOI not taxable by virtue of Section 86

(iic) Share from AOP/BOI not taxable by virtue of Section 86

(fb) Income to foreign company from CG on securities or Royalty, interest etc. chargeable at special rate u/s 115A

(iid) Income to foreign company from CG on securities or Royalty, interest etc.

(fd) Income from royalty in respect of patent chargeable u/s 115BBF

(iig) Income from royalty in respect of patent chargeable u/s 115BBF

(fc) Notional Loss on transfer of

Share of SPV to Business trust against unit of such Trust

Notional Loss on transfer of Units of Business trust

(iie) Notional Gain on transfer of

Share of SPV to Business trust against unit of such Trust

Notional gain on transfer of Units of Business trust

(g) Depreciation debited to P/L (iia) Depreciation debited to P/L excluding depreciation on account of revolution

(h) Deferred Tax debited to P/L (ix) Deferred Tax credited to P/L

(i) Provision for diminution in value of asset (x) Profit of Sick Industrial Company


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11.3

(j) Balance amount in revaluation reserve of retired asset shall be added if it is not credited to Profit & Loss account

(iib) Amount credited from revaluation reserve restricted to the extent of depreciation on revaluation of asset

Simply, Amount Credited or Depreciation on revalued amount whichever is lower

(k) Actual gain on transfer of units of business trust shall be added if it is not credited to Profit & Loss account

(iif) Actual Loss on transfer of units of business trust shall be deducted if it is not debited to Profit & Loss account

MAT on Ind AS compliant financial statement

Book profit based on Ind AS compliant is likely to be different from the existing Indian GAAP,

Following additional adjustment shall be done to the book profit [Section 115JB(2A)]

a) Increase by all amount credited to Other Comprehensive Income (OCI) under head “Items that will not be re-classified to profit or loss”

b) Decrease by all amount debited to OCI under head “Items that will not be re-classified to profit or loss”

OCI includes certain items that permanently recorded in reserves hence never be classified to Profit & Loss account this items are included as below

Sr. Items When to Include in Book Profit

1 Ind AS 16 and Ind AS 38

Changes in revaluation surplus of Property, Plant or Equipment (PPE) and Intangible assets

Only at the time of realisation/

disposal/ retirement or

otherwise transfer of Asset

2 Ind AS 109

Gains and losses from investments in equity instruments designated at fair value through other comprehensive income (FVTOCI)

Only at the time of realisation/

disposal/ retirement

or otherwise transfer of Asset

3 Ind AS 19

Re-measurements of defined benefit plans

Every year when gains or losses arise

4 Any other item Every year when gains or losses arise

c) Increased by amount debited to profit & Loss account on distribution of non-cash asset to shareholder in case of demerger

d) Decreased by amount credited to profit & Loss account on distribution of non-cash asset to shareholder in case of demerger

As per Ind AS 10 non-cash asset distributed to shareholders in case of demerger shall be accounted at fair value.

Difference between Fair Value & Carrying Value is recorded in Profit & Loss Account

Corresponding reserves are debited at Fair Value to record distribution as ‘Deemed Dividend’

So there is corresponding adjustment to retained earnings hence such difference is excluded from book profit

In case of Resulting Company, difference in value of asset & liabilities shall be ignored while computing book Profit [Section 115JB(2B)]

Difference = Value recorded in books of Resulting Company less Value in the books of Demerged company before demerger

First time adoption of Ind AS i.e. Transition Period [Section 115JB(2C)]


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11.4

Book profit shall be increased/decreased by 1/5th of the transition amount in year of adoption and each of the following four years

Section 115JAA – MAT Credit & Set off

Company is allowed to carry forward MAT Credit for 15 AY

MAT Credit allowable = Tax paid as per MAT less Tax as per Normal Provision

Set-off against tax liability in the year in which company pays tax as per normal provision

Set-off allowable = Tax as per normal provision less Tax as per MAT Provision

Credit not allowed to carry forward or set off / shall be ignored

Private/Unlisted company converted into LLP, MAT Credit not allowed to successor LLP

Credit relates to Difference = FTC allowed against MAT less FTC allowed against normal tax

FTC refers to Foreign Tax Credit u/s 90, 90A & 91

Chapter XII-E – Tax on Income distributed by Mutual Fund [Section 115R to 115T]

Income of all mutual fund company/Specified Company is exempt u/s 10(23D)

However, Mutual Fund/Specified company shall pay tax on income distributed to unit holders

Types of Fund Person to whom distributed Rate

Money Market Fund (MMF) Individual / HUF 25%

Any other Person 30%

Equity Oriented Fund Any Person 10%

Other than MMF or Liquid Fund or

Equity Oriented Fund

Individual / HUF 25%

Any other Person 30%

Infrastructure Debt Fund Non-Resident or Foreign Co. 5%

Condition for Grossing up, Payment of tax and interest on delayed payment is same as DDT

Income distributed by Mutual Funds is exempt in hands of unit holder u/s 10(35)

Capital Gain on transfer of units by unit holder

Equity Oriented Fund

LTCG @ 10% [Section 112A] STCG @ 15% [Section 111A]

Other Fund

LTCG @ 20% [Section112] STCG @ Normal Tax Rate

Section 115TCA – Tax on Income of Securitization Trust & its Investors

Securitization Trust is an Entity/SPV/Trust setup under SEBI/RBI/SARFAESI Regulations

Taxability in the hands of Trust & its Investors

Investors Trust Securitization Activity

Receives Income

Distributes Income

Exempt in the hands of trust

Taxable in the hands of Investor. In same manner and same nature of Income as if investor has directly earned from securitization activity.

Example: if trust has income from PGBP/CG, it shall be taxable as PGBP/CG in the hands of Investor,

If it is exempt income such as LTCG u/s 10(38), it shall be exempt in the hands of Investor


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11.5

If income is not credited/paid to investor by trust during previous year, it shall be deemed to have been credited on last day of previous year on accrual basis and taxable in the hands of investor in such previous year itself on accrual basis

Once Income taxable on accrual basis shall not be taxed again in the year payment

Trust shall furnish statement containing details of nature & proportion of income distributed to investor (by 30th June) and to CIT (by 30th Nov.)

TDS to be made by trust while distributing the income to investor under 194LBC

Resident Individual/HUF @ 25%

Other Resident @ 30%

Non Resident @ Rate in force

Chapter XII-FA – Real Estate Investment Trust (REIT) & Infrastructure Investment Trust (INVIT)

Such trusts are known as Business Trust.

Investors invest in Units of such Business Trust listed on a recognised stock exchange.

Trust shall invest in commercial real estate assets either directly or through holding shares or interest in Special Purpose Vehicle (SPV) formed by Sponsor Company

Trust shall acquire shares in SPV and issue Units to Sponsor Company for such shares.

Such Exchange of shares by Sponsor for Units to trust is exempt transfer u/s 47

Income shall be Taxable in the hands of Investor. In same manner and same nature of Income as if investor has

directly earned from real estate activity.

Sr. Income In the hands of Business Trust

In the hands of Investor by way of dividend on units of Trust

1 Interest of Business Trust Received from SPV

Exempt 10(23FC)

SPV not required to deduct tax (TDS) u/s 194A

Taxable as Interest

Resident – Normal Tax Rate

Non-Resident – 5%

Trust Shall Deduct TDS (194LBA)

Resident – 10%

Non-Resident – 5%

2 Dividend received from SPV on which DDT is paid u/s 115-O by SPV

Exempt 10(23FC)(b) Exempt 10(23FD)

3 LTCG / STCG on Capital Assets held by Business Trust

Taxable at Applicable Rates Exempt 10(23FD)

4 Income from Renting business directly received by trust

Exempt 10(23FCA)

Payer of rent shall not deduct TDS u/s 194I

Taxable as Rent 115UA (3)

Trust Shall Deduct TDS (194LBA)

Resident – 10%

Investors/Sponsor of SPV REIT/INVIT Carry on Real Estate Business

Receives Units

Formation and Activity of Business Trust

Invest/Issue share of

SPV Through

SPV

Directly

or


DT - Simplified


11.6

Non-Resident – Rate in force

5 LTCG / STCG on disposal of asset directly received by trust

LTCG – Taxable@ 20%

STCG – Taxable@ 35.535% (MMR)

Exempt 10(23FD)

6 Any Other Income Taxable@ 35.535% (MMR) Exempt 10(23FD)

Capital Gain on Certain Transactions

1 Transfer of listed units of the business trust by the unit holders

LTCG (112A) – Taxable@ 10% plus Surcharge if applicable & HEC@4%

STCG (111A) – Taxable@ 15% plus Surcharge if applicable & HEC@4%

2 Exchange of shares in SPV by sponsor for units of Business Trust

Taxability of capital gains on such transfer deferred to the time of disposal of units by the sponsor [47(xvii)]

LTCG (112A) – Taxable@ 10% plus Surcharge if applicable & HEC@4%

STCG (111A) – Taxable@ 15% plus Surcharge if applicable & HEC@4%

Cost of Acquisition of Units would be deemed to be cost of shares

Chapter XII-FB – Taxation of Investment Funds and Income from such Funds

Investment fund incorporated in the form of Company/Firm/LLP/Trust or Body Corporate

Such Fund are regulated by SEBI

Fund distributes income to the Unit holders, however fund need not pay DDT on such distribution

Sr. Income In the hands of Fund Unit Holder

1 Income from PGBP Taxable in case of

Company/Firm @ 30%

Others @ MMR

Exempt 10(23FBB)

2 Income other than PGBP Exempt 10(23FBA) Taxable, as if directly made investment

Fund Shall Deduct TDS (194LBB)

Resident – 10%

Non-Resident – Rate in force

3 Loss Incurred by Fund Carried Forward & Set-Off Not Passed to Unit Holder

4 Dividend distribution tax and tax on distributed income

Chapter XII-D and XII-E not to apply to income paid to unit holders


DT - Simplified


11.7

ASSESSMENT OF OTHER ENTITIES

Section 115JC – Alternate Minimum Tax on Person other than companies

In case of person other than company, Income Tax computed as per Income Tax Act < 18.5% of Adjusted Total Income (ATI)

ATI shall be deemed Total Income & AMT Rate = 18.5% plus Applicable Surcharge & Cess

If unit located in IFSC & derives income solely in convertible forex, MAT Rate = 9%

Adjusted Total Income (ATI)

Total Income of an Assessee

Plus: Deductions u/s Section 80-IA to 80RRB other than deductions u/s 80P

Plus: Deductions u/s 10AA “SEZ Unit”

Plus: Deductions u/s 35AD as reduced by Depreciation assuming deductions not allowed

Other provisions of act are also applicable such as Interest, penalty etc.

In case of Individual/HUF/AOP/BOI/AJP, if ATI ≤ 20 Lakh this provision is not applicable

Section 115JD – AMT Credit & Set off

Person is allowed to carry forward AMT Credit for 15 AY

AMT Credit allowable = Tax paid as per AMT less Tax as per Normal Provision

Set-off against tax liability in the year in which company pays tax as per normal provision

Set-off allowable = Tax as per normal provision less Tax as per AMT Provision

Credit relates to Difference = FTC allowed against AMT less FTC allowed against normal tax shall not allowed to carry forward or set off

Credit can be set off even if ATI ≤ 20 Lakh in the year of set off

ASSESSMENT OF FIRM/LLP & THEIR PARTNERS

It covers both registered as well as unregistered firms

Remuneration paid to Partner

Such remuneration only paid to working partner actively engaged may be fulltime or part time

It should be authorised by deed, remuneration for period prior to deed shall not be allowed

Authorisation by supplementary deed with retrospective effect shall also not allowed

It will be sufficient if deed specify total remuneration as some % of book profit and shall be shared between working partner as mutually agreed.

Remuneration cannot be paid to non-individual partner as it can never be a working partner

Example: if Company/HUF is a partner hence remuneration cannot be paid to Company/HUF. Further any Director/Karta of such Company/HUF can be employee & cannot be said as partner of firm hence salary paid to such employee is outside the ambit of section 40(b)

Remuneration shall be taxable as PBGP in the hands of Partner

Any remuneration disallowed and taxed in the hands of firm shall exempt in the hands of partner

Interest on capital paid to Partner

Simple interest @12% p.a. allowed to all partners working as well as non-working

It should be authorised by deed, Interest for period prior to deed shall not be allowed

Section 40(b) does not make any distinction between Interest paid on balance in Capital Account, Current Account or Loan advanced by partner to firm hence, limit u/s 40(b) shall applicable to all interest.

Interest shall be taxable as PBGP in the hands of Partner

Any Interest disallowed and taxed in the hands of firm shall exempt in the hands of partner

Interest paid to partner in representative capacity or for benefit of other person

Interest paid to representative partner in representative capacity shall be allowed within limit


DT - Simplified


11.8

Interest paid to representative partner in personal capacity shall be allowed without any limit

Interest paid to partner for benefit of other allowed without any limit

Sharing of Profit or Loss of Firm

Sharing of profit among partners shall be exempt in the hands of partners’ u/s 10(2A)

Loss of firm shall be allowed to carry forward and set off in subsequent year

Loss shall not be apportioned among the partners and partners cannot setoff such loss against their personal income

Carry forward & setoff of losses in case of change in constitution is discussed in Chapter-7

Salary, Bonus, Commission, Interest on Capital paid to partners allowed subject to certain restrictions (Already discussed in Chapter-3 PGBP)

Section 184 – Conditions to Partnership Assessed as such (PFAS)

Firm should be evidenced by an instrument. Such as Partnership Deed or any other document

Share of partner must be specified in such instrument

Change in constitution of firm, profit sharing, remuneration etc. shall be evidenced by revised deed

Consequences If any condition is not satisfied,

Firm shall be assessed as AOP (PFAOP)

Interest, Remuneration shall not be allowed as deductions in the hands of firm

However, such interest, remuneration disallowed shall not be taxed in the hands of partners

Section 187 to 189A – Assessment in case of Change in constitution, Succession or Dissolution

Change in constitution

One or more partner ceased to be partner other than death of partner

One or more new partners are admitted and

No change in partners but change in profit sharing ratios

Assessment shall be made on firm as constituted at time of making assessment

Succession of one firm by another

Separate assessment shall be made on Predecessor & Successor firm

Dissolution or Discontinuance of business by firm

Assessment shall be made as if firm is not dissolved or business is not discontinued

Liability of partners in respect of payment of tax due

All the partners of firm who were partner during previous year and legal representatives of deceased partner are jointly and severally liable in respect of tax due

Tax due includes interest, penalty or any other sum payable under Income Tax Act.


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11.9

ASSESSMENT OF AOP AND PARTNERSHIP FIRM AS AOP (PFAOP)

Individuals, Company, Firm, HUF, Other AOP and even Foreign Company can be a member of AOP

Members must join for common purpose and object of an AOP must be to produce income to be assessed as AOP

Mere receipt of income by group of members without effort in common shall not make AOP

Section 67A – Method of computing members share in AOP

Example : Total income of Rs. 3,60,000 after deducting salary & interest of ₹ 2,40,000

Mr B. is a member with Profit Sharing Ratio of 30% Salary & Interest paid to Mr. B = ₹ 70,000

Sr. Particulars Amount

A Compute taxable income of an AOP = Total income Plus Disallowed Salary & Interest paid to member (3,60,000 + 2,40,000 = 6,00,000)

6,00,000

B Compute aggregate of Salaries & Interest Disallowed 2,40,000

C Balance Amount (A – B), Allocate to each Member in Profit Sharing Ratio (3,60,000 × 30%) 1,08,000

D Member’s Share = Amount Allocated in C above plus Interest and Salary paid to respective members (1,08,000 + 70,000)

1,78,000

For the purpose of assessment, income from such share shall be apportioned under various heads in same manner as AOP has determined its income under each head

Interest on borrowed capital for investment in AOP shall be allowed as deduction from his share under PGBP

Section 167B – Computation of Tax in hands of AOP and Members

Computation of Tax of an AOP and Its Members

Foreign Co. is not a member

Share of any Member is not known Share of Member is known

Foreign Co. is a member

Total Income of any member > BEL

Total Income of All member ≤ BEL

Taxable @ MMR

Taxable @ 40% Foreign Co. is

not member Foreign Co. is

a member

Taxable @ MMR

Foreign Co. Share @ 40%

Other @ MMR

Taxable at rate applicable to

Individual

Share of such income in the hands of Members shall be exempt

Income included in hands of Members for

rate purpose only

Rebate u/s 86 at Average Tax rate on

such share is allowed

If AOP is not liable to pay tax, such share shall be taxable in the hands of Member at regular tax rates

Maximum Marginal Rate (MMR) = Tax @ 30% + Surcharge @ 15% + Cess @ 4% = 35.88%

Tax Rate of 40% shall be increased by applicable surcharge and cess


DT - Simplified


11.10

ASSESSMENT OF CO-OPERATIVE SOCIETIES

Co-operative society means a society registered under Co-operative Societies Act, 1912 or under any other law for the time being in force

Computation of income should be made in the same way as in the case of any other assessee

Entrance fees received by a Co-operative society from its members is taxable as its income under PGBP irrespective of the nature of the business carried on by the society as was held in [Co-operative Central Bank v/s C.I.T.]

In case of co-operative society has allotted house property to a member under House Building Scheme, Member shall be deemed owner u/s 27 and Society shall not be assessed under IFHP for such property even though it is a real owner

Deductions u/s 80P is discussed in Chapter - 9

ASSESSMENT OF LOCAL AUTHORITIES

Income under IFHP, CG, IFOS whether in India or outside India is exempt u/s 10(20)

Income from supply of commodity or service outside jurisdictional area taxable as PGBP

Exception, Water or Electricity supplied outside jurisdictional area is not taxable

ASSESSMENT OF INDIVIDUALS

An individual means a human being or a single person.

Computation of income is also applicable to non-resident individual.

The person may be major, minor, married or unmarried, possessing sound or unsound mind

In case of death of assessee before assessment, his executor, administrator or legal representative is treated as individual for the assessment of income of deceased person.

In case of minor/lunatic, assessment shall be made on guardian/trustee however it such person has no guardian/trustee or guardian/trustee is non-resident and cannot be traced, the assessment can be made directly on minor or lunatic.

ASSESSMENT OF HUF

Income of an HUF is assessed in the hands of HUF and not the family members.

Reasonable and genuine salary paid to Karta for managing family’s business is allowed.

Gifts and clubbing provisions for HUF is already discussed in earlier chapters

Where funds are invested by HUF in firm/company,

Any income in respect of interest/share in profit /dividend shall be taxable as income of HUF

Any remuneration or other income received by Karta/Other member in capacity as director/partner shall also be taxable in the hands of HUF if It is earned with aid of funds of HUF and there is a sufficient connection between investment and remuneration

However, salary/remuneration received by Karta/Other member by applying personal skill shall be assessed in the hands of individual where HUF has given fund as loan or guarantee whose role is secondary

Assessment in case of Partial partition

In case of Partial partition, some coparceners may separate from the joint family while the others might continue to remain as part of the joint family

Such partial partition is not recognised under income tax and assessment is made as if no such partition took place

Assessment in case of Total Partition

In case of Total partition, entire property of family divided amongst the members and HUF ceases to exist

Such partial partition is not recognised under income tax and assessment is made as if no such partition took place


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11.11

In case partition took place during the previous year, total income upto the date of partition shall be assessed in the hands of HUF. Every member is jointly liable and several liabilities shall be limited to the proportion of share from joint property allotted to him

In case partition took place after expiry of the previous year, total income of the previous year shall be assessed in the hands of HUF. All the members are jointly and severally liable

ASSESSMENT OF MUTUAL CONCERNS

Principal of Mutuality is that, no person can trade with himself and make profit out of himself

In mutual association, person contributes money, achieves object and divide surplus

Division of surplus may not be immediate; it may be divided on dissolution or in form of reduction of future contribution. Also not necessary to be divided on pro-rata basis.

Such persons may form an association or company

Income arise activities in mutual characters shall not be considered as profit and not taxable

Income of Trade and Professional Association

Income derived by such association from specific service provided to its member shall not be considered as mutual and treated as taxable income u/s 28 under the head PGBP

Other income such as entrance fees, periodic subscription fees, would be outside the scope of income and not taxable

As surplus arising from the process of advancement of common interest of members is not included in income and concerned expenditure shall also not allowed

Any deficit arise from such advancement process shall be allowed as deduction u/s 44A

Deficit = Exps Incurred less Contribution Received from members

Deficit can be deducted from Income from any other head

Max. Deficit can be deducted from other head = up to 50% of Taxable Income of such head (after

setting off brought forward loss under other section)

Income of Members’ Clubs

Any income arising from members is not taxable

Income arising from non-member is taxable

If Club is incorporated as company, Income in nature of business received from members as well as non-members may be taxable

In case of Proprietary Club owned by outsiders and not the members themselves then income shall be taxable in hands of proprietor.

Chapter XII-G – Tonnage Taxation [Section 115V to 115VZC]

Qualifying company operating having tonnage income form business of operating Qualifying Ships

Company have option to be assessed under this scheme or normal provision

Profit from such business shall be computed separately where company have opted for it

All sections from 30 to 43B deemed to be given full effect hence no further deductions allowed

No setoff or Carry forward of loss shall be allowed

No deductions under Chapter VI-A allowed

Daily tonnage income shall be deemed as under

Net Tonnage Daily tonnage Income

≤ 1,000 ₹ 70 per 100 tons

Exceeding 1,000 but ≤ 10,000 ₹ 700 + ₹ 53 per 100 tons exceeding 1,000 tons

Exceeding 10,000 but ≤ 25,000 ₹ 5,470 + ₹ 42 per 100 tons exceeding 10,000 tons

Exceeding 25,000 ₹ 11,770 + ₹ 29 per 100 tons exceeding 25,000 tons

Tonnage shall be rounded to nearest 100


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Section 115BBG - Tax on income from transfer of Carbon credits

Income from transfer of Carbon Credit is Taxable @ 10% plus Surcharge if applicable & HEC@4%

No expenditure or allowance in respect of such income shall be allowed under the Act.

Such income shall be taxable under the head PGBP


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12.1

CHAPTER – 12

CHARITABLE OR RELIGIOUS TRUSTS AND INSTITUTIONS, POLITICAL PARTIES AND

ELECTORAL TRUST

Section 10(23C) - Income of Universities, Hospitals, Educational/Medical Institutions Exempted

University/Educational Institution, existing solely for education and not for profit, exempted

If wholly or substantially financed by Govt.(iiiab) or

If aggregate annual receipt < 1 Crore (iiiad)

Hospital/Other Medical Institution exempted

If wholly or substantially financed by Govt. (iiiac)or

If aggregate annual receipt < 1 Crore (iiiae)

Substantially Financed by Govt. = Government Grant > 50% of Total Receipt of Institution

Other Trust, Institutions exempted only if approved by authority subject to some conditions

Fund/Institution for charitable purposes (iv)

Religious/Charitable Trust (v)

Other University/Educational Institution existing solely for education and not for profit (vi)

Hospital/Other Medical Institution(via)

Conditions to be fulfilled

Application for granting exemption shall be filed on or before 30th September of the succeeding FY

Other exemption u/s 10 would not be available

Apply its income or accumulate for the purpose of Object for which it is established

Corpus Donation given to other trust registered under 12AA shall not be treated as application

Accumulation > 15% of total income can be done for maximum period of 5 years

PGBP income exempted only if it is incidental to objective and separate books are maintained

Need to get accounts audited if total income > Basic Exemption Limit

Trust referred to in (iv)/(v) above shall not remain charitable for that year in which Commercial Receipts > 20% of Total Receipt. Even if registration is not cancelled.

If asset acquired by application of income, depreciation will not be allowed

Following provisions shall also be applicable in case of application income by Fund/Trust/Institution

Section 40(a)(ia) – Non deduction or Non deposit of TDS

Section 40A(3) & 40A(3A) – Cash Payment exceeding ₹ 10,000

Section 11 - Income from Property held for Charitable or Religious Purpose

Any income from property held under trust for charitable/religious purpose shall be exempt if

Asset must be held by trust, mere creation of trust only for income is not sufficient

Minimum 85% of total income to be applied to charitable/religious purpose in India

Accumulation of Income upto 15% of total income is permissible for indefinite period however, such accumulation must be applied for charitable/religious purpose in India at later date

Accumulation exceeding 15% is permissible only for period not exceeding 5 years and such accumulated amount shall be invested in modes specified in section 11(5). Further Form 10 and Return must be file on or before the due date.

Corpus Donation given to other trust registered under 12AA shall not be treated as application

Total income includes voluntary contribution [Section 12] but excludes Corpus Fund.

If asset acquired by application of income, depreciation will not be allowed

Following provisions shall also be applicable in case of application income by Trust

Section 40(a)(ia) – Non deduction or Non deposit of TDS

Section 40A(3) & 40A(3A) – Cash Payment exceeding ₹ 10,000


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Charitable Purpose Includes,

Relief to Poor

Education

Yoga

Medical Relief

Preservation of Environment

Preservation of Monument etc.

Advancement of any other object of general public utility

Advancement of any other object of general public utility shall not be charitable purpose if,

It involves activity in nature of Trade, Commerce or Business and

Receipt from such activity > 20% of Total Income

Inability to apply 85% of Income during PY for the purpose for which trust is created.

Extended period for application is granted if inability arise due to following reasons.

Whole or part of income has not been received during the PY

Extension : PY in which income is received plus PY immediately following PY in which income is received

E.g. Income of PY 2017-18 received in PY 2018-19, Extension = PY 2018-19 and 2019-20

Any other reason. For example, income received near to closing of PY.

Extension : PY Immediately following PY in which income is derived

E.g. Income derived on 30-03-2018, Extension = PY 2018-19

Income from Business Activity of charitable trust is taxable [Section 11(4A)]

Exception : Such Business is incidental to attainment of object of the trust and

Separate books of accounts maintained in respect of such business

Trust / Institution referred to in Section 10 continue to be exempt without any condition even if income from business activity

Capital Gain deemed to be applied for charitable purpose hence exempt [Section 11(1A)]

Amount of CG deemed to be applied = Cost of new asset acquired less Cost of asset sold

Section 12 – Voluntary Contribution received by Trust/Institution for Charitable/Religious Purpose

Voluntary contribution shall be deemed be income derived from property held for charitable or religious purpose as mentioned in section 11

Corpus donation shall be treated as capital receipt, hence not chargeable to tax.

Section 12A – Application for Registration and Conditions

Trust can apply any time for registration after creation of trust

The exemption would be available only with effect from the AY relevant to the PY in which the application is filed.

However, exemption for earlier AY would granted,

if objectives and activities of Trust should be the same as on the basis of registration granted

Assessment proceeding for an earlier AY is pending before AO on date of registration

Exemption would not be granted, if earlier trust has made application and was denied/cancelled

Audit by CA, if total income, without giving effect of Section 11 & 12, exceeds basic exemption limit

Return of Income must file on or before due date

Order for granting/refusing shall be passed within 6 Months from end of month in which applied, Registration deemed to be granted if no order is passed [CIT v/s Society for Promotion of Edu. (SC)]


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Section 13 – Denial of Exemption

1. Income not eligible for exemption u/s 11 or 12

Income does not enure for the benefit of general public

It is for benefit of any particular religious’ community or caste

Funds are invested in prohibited modes

2. Prohibited use or application for the benefit of Specified persons

Loan without adequate interest/security Allowing to use property without rent

Excess remuneration/payment for service Excess payment for asset purchased

Inadequate consideration for asset sold Diversion of income exceeding ₹ 10,000

Investment in substantial interest concern Free or concessional medical/ educational service

Specified Persons [Section 13(3)]

Author/Founder of Trust

If author is HUF, any member of HUF

Person gave substantial contribution > ₹ 50,000

Trustee, Manager etc.

Relatives of above

Concern in which all above have substantial Interest

Relatives [Section 13(3)]

a) Spouse of Individual / Person in (b) and (c) below

b) Brother or Sister of Individual / of Spouse of Individual

c) Lineal ascendant or descendant of Individual / of Spouse of Individual

d) Lineal descendant of Brother / Sister of Individual / of Spouse of Individual

3. Anonymous donations [Section 13(7)]

Anonymous donation subject to taxable u/s 115BBC shall not be exempt u/s 11 & 12

Anonymous donation in nature of corpus shall be exempt

However, corpus donation given to trust established wholly for charitable purpose is taxable

Taxability of Anonymous Donation [Section 115BBC]

Taxable @ 30% in the hands of all trust/Institution except wholly/substantially financed by Govt as referred to in section 10(23C)

Exemption Limit, higher of,

5% of Total Donation or ₹ 1,00,000

Total tax payable by such institutions,

30% on Anonymous Donation exceeding exemption limit above

Tax on the balance income i.e. total income as reduced by the anonymous donations which have been subject to tax@30% under section 115BBC

This section not applicable to trust/institution established wholly for Religious purpose

4. Main object is advancement of general public utility and Income from trading activity exceeds limits as discussed earlier.

5. Form 10 and Return of Income not submitted on or before due date


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Section 115TD – Tax on accreted income i.e. Exit Tax

Accreted income shall be taxable @ 34.944% [30% Tax + 12% SC + 4% HEC] i.e. Maximum Marginal Rate

Conversion/Deemed Conversion into non eligible trust for grant of registration u/s 12AA

Merged with entity not having similar objects and registered u/s 12AA

Non distribution of assets within 12 Months to eligible trust registered u/s 12AA or Approved u/s 10(23C) in the event of dissolution

Deemed Conversion

Registration u/s 12AA is cancelled or

Trust has modified the object and not applied for fresh registration or

Application for such fresh registration is rejected

Accreted Income = Aggregate FMV of all Assets less Total Liabilities

Exit tax payable in addition to normal tax payable on income, if any or even if no income tax payable

Tax shall be payable within 14 days otherwise interest @1% per month or part of month payable

Section 13A – Exemption to Political Parties

Income under head IFHP, CG, IFOS and Voluntary contributions are exempted provided,

Income under head PGBP is taxable

Must be registered u/s 29A of Representation of the People Act, 1951.

Maintains books of accounts and get audited by CA

Maintain record of Voluntary Contribution > ₹ 20,000 and Name & Address of contributor

Donation > ₹ 2,000 otherwise than account payee cheque/bank draft or use of ECS through a bank or electoral bond is taxable

Submit report as prescribed and file ITR accordance with section 139(4B) i.e. within due date

Section 13B – Exemption for Voluntary Contribution received by Electoral Trust

Trust to distribute ≥ 95% of donations along with brought forward donations of earlier year

Distribution is to be done before 31st March of FY to eligible political parties

Trust can spend maximum 5% of Total donations as management expense subject to maximum limit of ₹ 5,00,000 for first year and ₹ 3,00,000 for subsequent year

Permitted Contributions from

Citizen of India. If resident, obtain PAN and if Non-resident, obtain Passport Number

Company registered in India

Resident Firm, HUF, AOP/BOI

Prohibited Contributions from i.e. Taxable

Individual not citizen of India or any Foreign Entity

Other Electoral Trust

Government Company

Foreign Source

Cash Contribution of any amount


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13.1

CHAPTER – 13

INCOME TAX AUTHORITIES

Section 116 to 119 – Income Tax Authorities under CBDT

Assessment Wing Investigation Wing

Principal Chief Commissioner of Income Tax (PCCIT)

Chief Commissioner of Income Tax (CCIT)

Principal Director General of Income Tax (PDGIT)

Director General of Income Tax (DGIT)

Principal Commissioners of Income Tax (PCIT)

Commissioners of Income Tax (CIT)

Principal Director of Income Tax (PDIT)

Director of Income Tax (DIT)

Following are the Assessing Officers (AO)

Assistant Commissioners of Income Tax (ACIT)

Joint Commissioners of Income Tax (JCIT)

Deputy Commissioners of Income Tax (DCIT)

Income Tax Officer (ITO)

Assistant Director of Income Tax (ADIT)

Joint Director of Income Tax (JDIT)

Deputy Director of Income Tax (DDIT)

Tax Recovery Officer (TRO)

Inspector

Section 117 empowers central government to appoint such persons. CG may authorise CBDT and Commissioners to appoint such officers.

Section 118 authorises CBDT to direct any authority to subordinate such other authority as may specify in notification.

Section 119 empowers CBDT to issue instructions and circulars for proper administration of the act and may relax some provision of Income Tax.

Section Particulars

115P Interest payable for non-payment of tax by domestic companies

115S Interest payable for non-payment of tax on distributed income to unit-holders

139 Return of income

143 Assessment of income

144 Best Judgment Assessment of income

147 Income escaping assessment

148 Issue of notice where income has escaped assessment

154 Rectification of mistake apparent on record

155 Other amendments relating to assessment of income

201(1A) Interest for non-deduction of tax or non-payment of tax after deduction by such person/principal officer/company, as the case may be.

210 Payment of advance tax by the assessee of his own accord or in pursuance of order of AO. 211 Instalments of advance tax and due dates

234A Interest for default in furnishing return of income

234B Interest for default in payment of advance tax

234C Interest for deferment of advance tax

234E Fee for failure to deliver the statement of deduction of tax at source under section 200(3) and for failure to deliver the statement of collection of tax at source under section 206C(3) within the prescribed time.

270A Penalty for underreporting of income

271C Penalty for failure to deduct tax at source

271CA Penalty for failure to collect tax at source

273 Penalty for false estimate of, or failure to pay, advance tax


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Section 120 – Jurisdiction of Income Tax Authorities

The Income Tax authorities shall exercise the powers and perform functions according to directions issued by CBDT

Such directions issued by CBDT based on Area, Class of Persons, Class of Income or Class of Cases.

Section 124 – Jurisdiction of Assessing Officers

The AO shall have jurisdiction over any area in respect of the persons carrying of business in that area and persons residing in that area.

No person shall question the jurisdiction of AO where such person

Has furnished return u/s 139 or

After the one month from date on which he was served with the notice u/s 142(1) or 143(2) or

After the completion of assessment.

Section 127 – Power to transfer the cases

The AO can transfer the case to another subordinate AO after giving opportunity of heard to Assessee.

Section 129 – Change of Income Tax Authority

When any authority succeeds another authority

Assessee may demand successor authority of reopen or rehear the previous proceeding or part thereof before passing order.

POWERS OF INCOME TAX AUTHORITY

Section 131 – Power to Discovery, Production of evidence etc.

AO, PCCIT, CCIT, Commissioner (Appeals), DRP have power vested in Civil Court under CPC 1908

Discovery of facts and Inspection

Enforcing the attendance of any person by issuing summons and examine on oath

Compelling the production of books of account and documents

Issuing commissions to make inquiry and report to such authority

Section 132 - Powers related to search and seizure discussed in Chapter 17 ‘Assessment Procedure’

Section 133 – Power to Call for Information

AO, DCIT (Appeals) or JCIT (Appeals) for the purpose of any proceedings, may require

Any Firm/HUF/Trustee to furnish return of names & addresses of partners/members/trust

Any assessee to furnish names and address of persons to whom he has paid certain payments

Any broker/stock exchange to furnish details of person who has sold/purchased securities

Any person/banks to furnish such matters which will be useful for any inquiry, such information may be required even if no proceeding pending, [Section 133(6)]

With prior approval of PCIT/CIT/PDIT/DIT where AO is below the rank of DIT/CIT,

However Joint DIT/Dy. DIT/Assi. DIT can exercise such power without any approval


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Section 133A – Power to Survey

Section 133B – Power to Collect Information

Income tax authority for the purpose of collecting information

May enter, during business hours, any building/place where business/profession is carried on

However, Authority shall not remove any books/documents/stocks etc. from buildings

Section 133C – Power to call for Information by Prescribed Authority

Prescribed Income tax authority for the purpose of verification of information in its possession

May call any person to furnish such documents/information as required

Outcomes from such documents/information shall be made available to AO for any proceedings

CBDT can make centralised issuance of notice and processing of information and make outcome available to AO

Section 134 – Power to Inspect Registers of Companies

Income tax authority may inspect/take copies of any register of companies.

Section 135 – Power of PDGIT/DGIT/PDIT/DIT/PCCIT/CCIT/PCIT/CIT & JCIT

All above has same power that an AO has under this act in relation to making inquiries

Survey u/s 133A

Power to Enter Further Powers

IT Authority may enter any building or place at which Business/Profession/Charitable Activity is carried on including other place where Books/ Valuable things are kept

They can enter only during the business hours and in case of other place, only after sunrise but before sunset. No restriction on exit from such place

Any person attending such place shall provide necessary facility to inspect books/cash/stock etc.

Provide necessary information as required by Authority

IT Authority acting under this section may,

Place marks or identification on books and make copies

Impound & retain books/documents after recording reasons for 15 days. To extend retention prior approval of commissioner/director and above shall be required.

Make inventory of cash/stock/other valuable things. However, they cannot remove the same from the place

Same powers given to conduct the survey of Tax Deductor (TDS) or Tax Collector (TCS). However, they cannot impound books or make inventory of stock/cash/things

IT Authority is of the opinion that it is necessary to conduct survey of any function/ceremony/event, they can conduct the survey after completion of such event and require any person to furnish required information

If any person does not co-operate, Authority may issue summon u/s 131


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Section 136 – Proceedings before IT Authority shall be Judicial Proceedings

All the proceedings shall be deemed to be judicial proceedings under IPC and

All the authorities shall be deemed to be Civil Court

Section 138 – Disclosure of Information relating to Assessee

IT Authority may disclose information relating to assessee to any officer under any other law.

However, such disclosure can be made only on application made to them and not voluntarily


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14.1

CHAPTER – 14

ASSESSMENT PROCEDURE

Section 139 – Filling of Income Tax Return

139(1) Compulsory Filing on or before due date

In case of Companies/ Firm – Compulsory Filing

In any other case – Only if Total Income > BEL

In case of Ordinary Resident Not covered above shall file return if

Beneficial Owner of any asset/ Signing authority in any account located outside India or

Beneficiary of the any asset located outside India

Due Date Assessee Due Date

Company

30th September Other Assesses required to get accounts Audited

Partner of Auditable Firm

Assessee required to furnish Transfer Pricing Report u/s 92E

30th November

Any Other Case 31st July

Total Income Total Income without considering deductions under chapter VI-A

139(3) Return of Loss Return of loss need to be filed on or before due date mentioned above.

It will enable assessee to carry forward losses as per Section 80

139(4) Belated Return If return of income is not furnished u/s 139(1). Belated return can be filed earlier of

Before end of Relevant AY or

Before completion of assessment

139(4A) Charitable Trust/ Institutions

Total Income without giving effect of exemption of section 11/12 > BEL

required to file return within due date as per 139(1)

139(4B) Political Parties Total Income without giving effect of exemption of section 13A > BEL


139(4C) Scientific Research Association, News Agency and Trade Unions

Total Income without giving effect of exemption of section 10 > BEL


139(4D) Political Parties Total Income without giving effect of exemption of section 13A > BEL


139(4E) Business Trust Business Trust such as REIT/INVIT


139(4F) Investment Fund Investment fund


139(5) Revised Return

It will replace all return filed earlier

If any omission or wrong statement found, Assessee may furnish revised return any no. of times earlier of

Before end of Relevant AY or

Before completion of assessment

139(9) Defective Return AO has power to call upon assessee to rectify defective return

Assessee need to rectify defect within 15 days from date of receipt of intimation otherwise return shall be treated as invalid


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Section 140 – Person Authorised to verify Return

Sr. Assessee Competent person to verify the Return

1 Individual Individual himself / Authorised Person / POA holder / Guardian as the case may be

2 HUF Karta / Any adult member as the case may be

3 Firm / LLP Managing Partner / Designated Partner / Any Major Partner

4 Company Managing Director / Any Director / Insolvency Professional under IBC 2016

5 Local Authorities Principal Officer

6 Political Party Chief Executive Officer / Secretary

7 AOP Principal Officer / Member of AOP

Section 140A – Self-Assessment

Assessee himself assess his tax liability and pay the tax before filing return of income

Balance amount of tax after taking into account TDS, TDS, Advance Tax, MAT/AMT Credit or relief shall be paid as self-assessment tax

Assessee shall pay such tax together with interest and fees payable for default in furnishing return, if any. Amount paid shall be first adjusted towards interest and fees and balance shall be adjusted towards tax payable.

Section 142 – Inquiry before assessment

In order to make assessment AO shall serve notice u/s 142 to assessee who has furnished return u/s 139 or whose case the time allowed u/s 139 is expired and return is not furnished.

Inquiry before assessment

Purpose of Notice u/s 142 Special Audit with prior approval of PCCIT/CCIT/PCIT/CIT

To furnish a return who has not furnished the return

To produce books or accounts for maximum period of 3 years prior to PY

To furnish information whether included in accounts or not. However, prior approval of JCIT is required in case matters not included in accounts.

AO shall direct assessee, after giving opportunity of being heard, to get accounts audited by CA appointed by PCCIT/CCIT/PCIT/CIT under following circumstances

It must be in Interest of Revenue, it is primary requirement

Nature and complexity involved or Volume or Doubt about correctness of accounts

Multiplicity of transactions in accounts or Specialized nature of business of assessee

Audit may be directed even if accounts are audited under Income Tax act or under any other law

Time limit = Maximum 180 days [Original plus Extension], from date of direction given by AO

AO entitle to make best judgement assessment u/s 144, if failure on assessee’s part to get accounts audited,


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Section 142A – Reference to valuation officer

AO can refer to valuation officer to make estimate the value of assets/property/investment whether or not he is satisfied about correctness of accounts

In case of assessee do not co-operate with VO, AO entitle to make best judgement assessment

VO shall report within 6 months from the end of the month in which reference made to him by AO

AO may take into account valuation in assessment after giving opportunity of being heard to assessee.

Section 143(1) – Summary Assessment

It is compulsory to process the return filed u/s 139 or response to notice u/s 142(1)

Intimation u/s 143(1)

Adjustment shall be made Processing of adjustments

Arithmetical error or Incorrect claim apparent from the information filed

Disallowance of expenses indicated in audit report to be disallowed

Disallowance of Loss claimed or deductions u/s 10AA or under ‘Heading C’ of Chapter VI-A, if ROI is not filed within due date

Mismatch between Form 26AS/16/16A and Return [No adjustment done in relation to return furnished for AY commencing on or after 01-04-2018]

Tax, Interest, Fees or refund shall be computed after making the adjustments.

If there is no adjustment, Acknowledgement shall be deemed intimation u/s 143(1)

Assessee shall be sent an intimation requiring him to respond within 30 days

Intimation shall be sent within 1 year from the end of FY in which return is filed.

Intimation shall be sent even if Notice u/s 143(2) is issue in case of return file for AY 2017-18 and onwards

AO can withhold the refund up the date of assessment with prior approval of PCIT/CIT if he is in opinion that it will adversely affect the recovery of tax arise in the course of assessment.


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Section 143(2) & (3) – Scrutiny Assessment / Regular Assessment

Scrutiny/ Regular Assessment u/s 143(3)

Notice u/s 143(2) Assessment u/s 143(3)

AO or Authority not below the rank of ITO considers it necessary to ensure that assessee has not

Understated his income

Computed excessive loss

Underpaid the tax

Shall serve notice to make assessment

Time limit = 6 Months from the end of FY in return is filed

AO shall hear the case & collect evidence after taking into account material produced by assessee and gathered himself

AO shall, by order in writing, make assessment of total income or loss and determine amount payable or refund to assessee

AO cannot make assessment denying exemption u/s 10 to institutions/associations without intimating to CG/prescribed authority till approval granted is withdrawn/notification rescinded.

AO may send proposal to CG to withdraw approval to research association/college/university u/s 35 if activities are not carried out in accordance with conditions.

E – Assessment [143 (3A)/(3B)/(3C)]

The CG may make a scheme, by notification in the Official Gazette, for the purposes of making assessment of total income or loss of the assessee under sub-section (3) so as to impart greater efficiency, transparency and accountability by— [143(3A)]

Eliminating the interface between the AO and the assessee in the course of proceedings to the extent technologically feasible;

Optimising utilisation of the resources through economies of scale and functional specialisation;

Introducing a team-based assessment with dynamic jurisdiction.

The CG may, for the purpose of giving effect to the scheme made under sub-section (3A), by notification in the Official Gazette, direct that any of the provisions of this Act relating to assessment of total income or loss shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification: [143(3B)]

Provided that no direction shall be issued after the 31st day of March, 2020.

Every notification issued under sub-section (3A) and sub-section (3B) shall, as soon as may be after the notification is issued, be laid before each House of Parliament. [143(3C)]


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Section 144 – Best Judgement Assessment

Section 144 – Power of JCIT to issue directions

JCIT may his own motion/application by assessee/reference made by AO

Call for or examine record of any proceeding in which assessment is pending

If considers necessary, having regard to nature and amount involved or any other reason

Issue such direction to AO to complete the assessment which is binding to AO.

Assessee shall be given opportunity of being heard if such directions are prejudicial to assessee

Section 144C – Dispute Resolution Panel (DRP)

Best Judgement Assessment u/s 144

Circumstances Assessment u/s 144

Fails to file return u/s 139(1) or belated return or revised return or

Assessee fails to comply with notice served u/s 142(1) or direction to get accounts audited or

Filed the return but fails to comply with notice served u/s 143(2)

AO shall give opportunity to show cause why assessment should not be completed to best of his judgement.

However, if notice u/s 142(1) issued prior to making assessment under this section, no opportunity shall be given

AO shall, by order in writing, make assessment of total income or loss on the basis of relevant material gathered by him and determine amount payable by assessee

No refund shall be granted to assessee u/s 144

It is mandatory for AO to make best judgement assessment under circumstances referred in this section

Dispute Resolution Mechanism u/s 144C

Draft order by AO Further Processing

AO shall forward draft order u/s 143(3)/147/153A to Eligible Assessee

Eligible Assessee

Foreign Company or

Assessee in whose case variance arises due to report of Transfer Pricing Officer u/s 92CA

Assessee shall accept or file objection with DRP & AO within 30 days.

AO has to complete assessment within 1 Month from the end of month in which

Acceptance received or period of filing objections expires or

Directions received from DRP

In case of any objections received, DRP shall issue such directions to AO to enable him to complete the assessment.

DRP can consider any matter whether objected by assessee or not

DRP may make further inquiry or direct income tax authority to make further inquiry before issue such directions to AO.

DRP may confirm/reduce/enhance proposed variation but cannot set aside

DRP shall give opportunity to be heard to both AO and Assessee

Directions given by DRP shall be binding on AO


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Section 147 to 152 – Income Escaping Assessment

Income Escaped Assessment u/s 147

Circumstances Deemed Escaped

AO has ‘reason to believe’ that income chargeable to tax had escaped assessment

Reason to believe from

SC Judgement or

Retrospective Amendment in law or

Mistake apparent from record or

Evidence possessed by AO

Mere suspicion, gossip, rumour or change of opinion cannot constitute reason to believe

AO shall reassess income or re-compute the loss/ allowances or any other income which comes to notice subsequently during assessment

AO cannot assess the matter which is subject matter of appeal/reference or revision (Doctrine of partial merger)

AO need not to communicate reason to believe to assessee

Total Income > BEL but return is not filed

Filed the return but AO noticed that Assessee has Understated income or Claimed excessive loss,

deductions or relief

Failed to furnish TP report u/s 92E

Assessment completed but Income under assessed or Excessive loss/relief/

deduction allowed to assessee or

Income assessed at lower rate

On the basis of document received u/s 133C (2) AO is of the opinion that Assessee has not filed return

or Filed the return but

understated the income or claimed excessive loss/deductions / relief

Person found to have any asset located outside India

Notice

AO shall, after recording reasons for doing so, serve on assessee notice to furnish return (Sec. 148)

Time Limit (Sec. 149) 4 Years from end of

relevant AY or 6 Years from end of

relevant AY in case of income likely to escaped assessment ≥ 1 Lakh or

16 Years from end of relevant AY in case of income in relation to asset located outside India

Approval before issue of notice by AO (Sec. 151) Upto 4 Years obtain

approval from JCIT Beyond 4 Years obtain

approval from PCCIT/CCIT/PCIT/CIT

AO can send notice any time to give effect of any finding or directions contained in order (Sec. 150) By way of Appeal/Reference/Revision – Only if he was eligible to assess/reassess the matter u/s 147

earlier but could not do the same at that time because of Appeal/Reference/Revision is preferred By Court – Any time

Other Provision (Sec. 152) Tax Rates of respective AY shall be applicable to compute tax liability of income escaped AO can drop the assessment if assessee satisfies him that, income escaped shall not effect tax liability even

after taxing such income and he will not prefer appeal/reference/revision


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Section 153 – Time Limit to Complete Assessment

Assessment Time limit

143(3) / 144 12 Months from the end of relevant AY (for AY 2019-20 onwards)

147 Notice u/s 148 is served before 01-4-2019

9 Months from the end of FY in which notice u/s 148 is served

Notice u/s 148 is served on or after 01-4-2019

12 Months from the end of FY in which notice u/s 148 is served

Reference to TPO u/s 92CA Additional Period of 12 Months is available if case is referred to TPO

Fresh Assessment u/s 143/144 / 147 where original assessment has been set aside & referred back to AO by order u/s 254/263/264

Order u/s 254/263/264 is passed before 01-4-2019

9 Months from the end of FY

In which order u/s 254 is received by PCCIT/CCIT/PCIT/CIT

In which order u/s 263/264 is passed by PCIT/CIT

Order u/s 254/263/264 is passed on or after 01-4-2019

12 Months from the end of FY

In which order u/s 254 is received by PCCIT/CCIT/PCIT/CIT

In which order u/s 263/264 is passed by PCIT/CIT

Exclusion of Period Period to get Approval from CG/ Report of Valuation Officer / Audit Report u/s 142(2A) / Stay by court / Reopening / Rehearing as the case may be

Where immediately after exclusion of above period Time Limits available to AO is less than 60 days

Such remaining period shall be extended to 60 days and above period shall be deemed to be extended accordingly


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14.8

Section 153A/B/C – Assessment in case of Search & Seizure

Assessment in case of Search

Procedure u/s 132/132A

Procedure to Search u/s 132

IT authority has ‘reason to believe’ that Person

To whom Summon/Notice issued or might be issued u/s 133(1) or 142(1), Does not/will not produce Books or info.

Who possess money/ bullion Jewellery etc., has not/ would not disclose

Authorisation of the Search by

PCCIT/CCIT/PCIT/CIT or

PDGIT/DGIT/PDIT/DIT or

Addi. CIT/DIT or JCIT/JDIT only if empowered by CBDT

Power to requisition u/s 132A

Where search has already been conducted by any authority under any other law such as FEMA/Customs/CBI etc.

AO, authorised as above, may require such authority to deliver Books/Documents ASAP

Reason to believe need not to be disclose any person or Appellate authority

Power to IT Authority

Enter any building/place/vehicle/vessel/aircraft where he has reasons to suspect that such Books/Documents/ Money, jewellery, valuables etc. are kept.

He may seize such Books/Money/Bullion etc. however Stock cannot be seized

When it is not practicable to take physical possession of asset due to volume/weight/nature etc., AO may serve order on the owner that he shall not remove/dealt with such asset without prior approval (Constructive seizure)

When it is not practicable to take physical possession of Books/Asset other than above reason., AO may serve order on the owner that he shall not remove/dealt with such asset without prior approval. This order remains valid for 60 days.

Break open the locks where keys are not available

Require access to any electronic records

To safeguard recovery, AO may with prior approval of PDGIT / DGIT / PDIT/ DIT attach property for 6 Months

AO may make reference to valuation officer and require VO to submit report within 60 days.

AO can retain books/documents beyond 30 days with prior approval of authority however if assessee objects such extension Board can pass necessary orders as it thinks fit.

It its presumed that any books/assets/documents found in search belongs to assessee

Assessment u/s 153A/153B/153C

AO shall issue notice to person to file return in respect of 6 AYs and for relevant AY or AYs

Relevant AY means AY preceding AY relevant to PY in which search is conducted i.e. FY in which search conducted which falls beyond 6 AYs but not later than 10 AYs from the end of AY relevant to FY in which search is conducted.

Any pending assessment u/s 143(3)/144/147 shall abate. If order made u/s 153 annulled in any appeal, such abated assessment shall stand revived

If books/assets belong to other person seized during search, AO shall handover the same to AO having jurisdiction over such other person and that AO shall complete the assessment u/s 153A [153C]

Time limit : In case of 153A : 12 Months from the end of the FY in which search is completed.

In case of 153C : Later of 21 Months from the end of FY of search completed or 9 months from the end of FY in which books are handed over (Addi.12 M if case referred to TPO in both cases) [153B]

Prior approval of JCIT shall be required to make assessment u/s 153A except where approval given by CIT


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14.9

Section 154 – Rectification of Mistake

Section 155 – Other Amendments

Where assessment of any AY is need to be amended on account of specific provisions of the act

Rectification order can be passed within 4 years from the end of FY in which such provision is attracted in following cases.

Sr. Rectification of / to give effect of Reason

1 Partner’s Assessment Remuneration disallowed in the hands of firm

2 Member’s Assessment Enhancement/reduction in Income of AOP/BOI

3 Disallow loss/depreciation u/s 147 Excessive loss/depreciation allowed or setoff

4 CG becomes taxable by virtue of 47A violation of conditions

Considered as exempt transfer u/s 47(iv) or 47(v), i.e. Transfer of Capital Asset between wholly owned Holding Co./Sub Co.

5 Deductions of TDS/TCS Which is not considered while computing tax

6 Credit u/s 90 for Double Taxation Which was disputed and subsequently dispute is settled

7 Revision in value of consideration Value adopted by AO u/s 50C is revised under Appeal/Revision

8 Re-compute Capital Gain Compensation in compulsory acquisition reduced by court

9 Disallow deduction u/s 80RRB Name of patentee removed from patent register / Patent revoked

Rectification of Mistake u/s 154

Circumstances

IT authority can rectify mistake apparent from the record in

Any order passed under this act

Intimation u/s 143(1)

TDS intimation u/s 200A (1)

TCS intimation u/s 206CB (1)

Mere change of opinion cannot be base of rectification

Decision of Supreme Court or Retrospective amendment can constitute mistake apparent from record

Matters pending in appeal cannot be rectified under this section (Partial Merger)

Procedure & Time Limit

Authority may suo motu make amendment of rectify the mistake after giving opportunity of being heard to assessee

When matter is brought to notice by assessee, Authority is bound to rectify the mistake

It may result in enhance/reduce the tax payable or refundable and shall be dealt accordingly

Time Limit for passing rectification order

Suo Moto : 4 years form the end of FY in which order sought to be amended was passed

Application of Assessee : 6 months from the end of the month in which application is received


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14.10

Section 156 – Notice of Demand

AO shall serve notice of demand, when any tax, interest, penalty or fine or any other sum becomes payable under assessment

Intimation u/s 143(1), 200A (1), 206CB (1) shall be deemed to be notice of demand.

Failure to serve notice shall render the proceedings of recovery invalid [Mohan Vahi v/s CIT (SC)]


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15.1

CHAPTER – 15

APPEAL & REVISION

Section 246 to 250 – Appeal before Commissioner (Appeals)

Appeal before CIT(A)

Appealable Orders Procedure in Appeal

Assessee can file appeal against

Order passed by AO u/s 143(3)/ 144/147/153A except order passed by AO on direction of DRP u/s 144C

Rectification Order passed u/s 154/155

Intimation u/s 143(1)/ 200A (1)/ 206CB (1)

Order levying penalty by AO

Order levying Interest & Penalty on failure to deduct/ collect/pay TDS/TCS

Person denying liability to deduct TDS u/s 195

Any other order passed by AO

Time Limit

Appeal can be filed within 30 days stating grounds of appeal along with prescribed fees. However, CIT(A) may condone the delay if sufficient cause shown.

Stay of Demand

Assessee have to pay Tax before filing appeal. However, CIT(A) may grant exemption in respect of payment of tax. i.e. stay on demand till disposal of appeal

Power of CIT(A), discretionary power

Admit additional evidences which were refused by AO to admit or Assessee could not produce before AO due to sufficient cause. AO shall be given opportunity to cross examine such evidence.

Allow additional claim whether claimed in return or not. without filing revised return

Confirm/enhance/reduce/annul assessment

Consider any matter arising out of proceeding even if such matter not raised by appellant

Rectify the mistake in order passed by it


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15.2

Section 252 to 255 – Appeal to the Appellate Tribunal (ITAT)

Constitution & Decision of ITAT

CG shall constitute ITAT consisting of Judicial Members & Accountant Members

ITAT is final fact finding authority, no appeal can be preferred in HC unless case involves question of law

Every Bench of ITAT should consist of at least one Judicial & one Accountant Member

Single member bench can dispose the case where total income computed by AO < 50 Lakh

If members of bench differ on opinion on point, that shall be decided by majority.

Where members are equally divided, Case shall be referred to President of ITAT for hearing by one or more other members and case shall be decided on the basis of total majority.

Powers of ITAT

Tribunal can decide matters as it deems fit even if matter is not raised by appellant in grounds of appeal or not referred in order of CIT(A)

It may permit additional claim which is not claimed earlier before AO or CIT(A)

Tribunal does not have right to review its own judgement on merits.

However, it can recall its order to rectify any mistake apparent from the record within 6 months.

Section 260A & 260B – Appeal to the High Court (HC)

HC shall admit the appeal stating substantial question of law

HC satisfy that a substantial question of law involved, it shall formulate such question

HC may consider other question of law not formulated but it satisfies that case involves such question

Matter raised but not decided or wrongly decided by ITAT by reason of decision on such question of law hence it is necessary that question is raised before ITAT

There is no restriction on power of HC to review its order.

Time Limit

Appeal can be filed within 120 days from receipt of order HC may condone the delay if sufficient cause shown.

Appeal to ITAT

Appealable Orders Procedure in Appeal

Appeal can be filed against

Any order of CIT / CIT(A)

Order passed by AO on direction given by DRP u/s 144C (AO cannot file appeal in this matter)

Revision order u/s 163

Order of CIT (Exemptions) refusing approval u/s 10(23C)

Time Limit

Appeal can be filed within 60 days from receipt of order

Memorandum of Cross Objection can be filed by other party within 30 days from receipt of notice from ITAT

ITAT may condone the delay if sufficient cause shown.

Stay of Demand

Stay of demand can be granted for 180 days. It can be extended further if delay in disposing the appeal not attributable to assessee. [Max 365 days = 180 days + Extension] order stand vacated after 365 days


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15.3

Section 261 & 262 – Appeal to the Supreme Court (SC)

Appeal can be filed to SC against judgement of HC in which HC certifies that case is fit for appeal to SC

SC after hearing petitioner and respondent pass an order deciding question of law

Monitory limit on filing of Appeal by Income Tax Authority

Income Tax Authority shall not file appeal/SLP in case where tax effect does not exceed limit

Sr Appeals before Monitory Limit of Tax Effect

1 ITAT 10,00,000

2 High Court 20,00,000

3 Supreme Court 25,00,000

Commissioner shall specify on record that “even though the decision is not acceptable, Appeal is not filed only due to the monitory restriction”

By reason of above limit if IT has not filed appeal, it shall not preclude authority to file appeal on the same issue if tax effect exceeds prescribed limit in case of

Same assessee for another AY or

Other assessee for same AY or other AY

Appeal can be filed even if tax effect less than limits on merit basis where constitutional validity of act challenged, CBDT’s notification/circular etc. held ultra-vires or addition relates of Foreign assets

Section 158A & 158AA – Provision related to avoid Repetitive Appeal in Pending Cases

Procedure

Avoid Repetitive Appeal – 158A Matter pending before SC –158AA

Appeal is pending before HC or SC on question of law and the same matter is pending before AO/CIT(A)/ITAT for other AY for same assessee

Assessee shall make declaration that if AO/ CIT(A)/ITAT agrees to apply the decision of HC or SC in current case, he shall not prefer further appeal

AO/CIT(A)/ITAT may admit or reject such application of assessee

Any question of law pending before the SC against the judgement of HC in favour of assessee and same question of law arises for same assessee for other AY

CIT shall direct AO to make application to ITAT within 60 days from the date of order of CIT(A) that appeal on relevant case may be filed when final decision of SC received

AO shall take acceptance of assessee before making application. If assessee does not give acceptance CIT may direct AO to file appeal


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15.4

Section 263 & 264 – Revision by CIT

Revision of Order

Order Prejudicial to Revenue – 263 Other order - 264

CIT considers that order passed by AO is erroneous and prejudicial to interest of revenue

He may enhance/modify the assessment or Set aside and direct fresh assessment

Opportunity of being heard shall be given to assessee

Any order is subject matter of appeal; CIT may exercise his power in respect of matters which is not preferred in appeal [Doctrine of partial Merger]

Time Limit : 2 years form the end of FY in which order sought to be revised passed by AO

Time limit shall not apply where CIT has to give effect of finding in order of ITAT/HC/SC

Assessee can prefer appeal before ITAT

CIT on his own motion or on application made by assessee to revise order passed by AO

CIT shall pass the order as he thinks fit, after making inquiry

No revision can be made in respect of any matter, if order is subject matter of appeal [ Doctrine of Total Merger]

Time Limit : 1 year from the date of order sought to be revised passed by AO or

Where application has been made by assessee, revision order shall be made within 1 year from date of application

CIT may allow application from assessee after expiry of 1 year if sufficient cause

No further appeal can be preferred against this order


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16.1

CHAPTER – 16

SETTLEMENT OF TAX CASES

Section 245A to 245C – Income Tax Settlement Commission (ITSC)

Application can be made by eligible assessee at any stage of proceeding which pending before AO

containing a full and true disclosure of his income which has not been disclosed before the Assessing Officer

He should also disclose the following to the Settlement Commission

the manner in which such income has been derived,

the additional amount of income-tax payable on such income and

other particulars as may be prescribed.

Assessee eligible to make application (Application cannot be withdrawn once made)

Proceedings If Additional tax on income disclosed exceeds specified limit

Section 153A Person Searched - Additional Tax > 50 Lakh

Relative of Person Searched - Additional Tax > 10 Lakh

Section 143(3)/144/147 Tax on additional income > 10 Lakh

Additional Tax = Tax on aggregate Total income less Tax on returned income

Proceeding Pending means

Proceeding Commenced / Deemed commence on Concluded on

Section 143(3) Notice issued u/s 143(2) Where Assessment made

Date of Order passed

Where no assessment made

Expiry of time specified for making assessment u/s 153

Section 144 Show cause notice issued u/s 144

Section 147 Notice issued u/s 148 or

No notice issued but can be issued

Section 153A Notice issued u/s 153B


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16.2

Procedure & Final Order

Power of ITSC

ITSC may provisionally attach the property to safeguard the tax recovery such order shall remain valid for 6 months such period can be extended if it thinks fit.

Assessee need to pay tax settled within 35 days. ITSC may grant extension or permit to pay such tax in instalment. However, interest shall be levied on outstanding amount @1.25% p.m. or part of the month beyond 35 days even if extension is granted

ITSC have power to grant immunity from the penalty or proceeding if

Assessee has co-operated and

made full and true disclosure of his income and manner of deriving such income

Immunity granted shall be withdrawn/No immunity shall be granted

Assessee fails to pay tax within time allowed or

Fails to comply with condition of settlement

No immunity where proceedings already initiated before making application

ITSC shall not have power to reopen the proceedings

ITSC have no power to reduce/waive interest u/s 234 A/B/C. However, it can grant relief to the extent powers given vide circular issued by CBDT u/s 119 [CIT v/s Anjum MH Ghaswala (SC)]

Procedure & Order

Procedure on receipt of Application Final Order

ITSC require assesse to explain why application should be accepted within 7 days from the date of receipt of application

After that ITSC shall accept/ reject within 14 days from the date of application

if no order is passed it will be treated as admitted

ITSC shall call for CIT to submit report within 30 days from the date of application

On the basis of report ITSC may declare such application invalid and pass necessary order within 15 days of receipt of report

if no report received ITSC shall proceed further without report

After examination of record, make further inquiry on matter covered in application and other matters relating to case

ITSC may call for report form CIT or require CIT to make further inquiry

CIT shall furnish report within 90 days, if no report received, ITSC shall proceed without report

ITSC shall consider matter covered in application as well as matter referred in report of CIT

Such order shall be passed within 18 months form the end of the month in which application was made. No appeal allowed

Order passed by ITSC must provide for the terms of settlement and manner in which tax shall be paid

Order shall also provide that settlement shall be void if order obtained by fraud or misrepresentation,

In such case all the proceeding shall be revived and IT authority shall complete the pending assessment within 2 years from end of FY which Settlement becomes void

ITSC may suo moto or on application made by CIT/Applicant rectify the mistake apparent from the record within 6 months from the end of the month in which order passed/ application received


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16.3

Abatement of proceedings

In following cases proceedings with ITSC shall be abated

Application rejected by ITSC

Application declared invalid by ITSC

ITSC fails to pass order within 18 months

On abatement case shall be revert back to concerned AO and shall dispose the case in accordance with provisions of act

AO can use the material and information produce before ITSC to complete assessment

AO shall give credit of the tax paid while making application

Bar on subsequent application

Assessee can settle his case only once in lifetime. Even related person shall not be allowed to make application for settlement

Sr. Assessee Related Person

1 Individual Company in which individual holds > 50% of shares/voting right

2 Company Individual who holds > 50% of shares/voting right in such company

3 Firm/AOP/BOI Any individual holds > 50% of profit sharing rights

4 HUF Karta of HUF


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17.1

CHAPTER – 17

PENALTIES AND PROCECUTIONS

CHAPTER XXI – PENALTIES IMPOSABLE

Penalties Consequent to Assessment Proceedings

Section Nature of Default Penalty Leviable

221(1) Default in making

payment of tax u/s 220

As directed by AO

Penalty cannot exceed amount of tax in arrears

Even if tax paid after default

No Penalty if Assessee proves to the satisfaction of AO that default was good & sufficient reason

270A (1)

From AY 2017-18 Onwards

Under Reporting of Income Under Reporting – 50% of Tax payable on under reported income

Under Reported because of misreporting – 200% of Tax on under reported income

50% or 200% is fixed percentage – ITO cannot increase or decrease it

Exclusions form under reporting

Assessee offers explanation and disclose material facts

Income determined on the basis of estimation though the books of account are correct and complete

Assessee himself has estimated a lower amount of addition/disallowance and disclosed all material facts

Additions made in conformity with ALP determined by TPO and assessee has maintained prescribed documents and declared all material facts

Undisclosed income is detected on account of search and penalty is leviable u/s 271AAB

1. Total Income assessed or reassessed/ recomputed or deemed total income u/s 115JB/115JC

exceeds

Total Income determined under

Return Processed u/s 143(1)(a), where return is filed or

Basic Exemption Limit, where return is not filed or

Income assessed/reassessed in the order immediately preceding the order during the course of which penalty u/s 270A(1) has been initiated

2. Computation of under reporting arises due to determination of deemed income u/s 115JB or 115JC

(A-B) + (C-D)

A = Total Income as per Normal Provision

B = Total Income would have been chargeable as per Normal provision less Amount of Under Reported Income

C = Total Income as per 115JB or 115JC

D = Total Income would have been chargeable as per 115JB or 115JC less Amount of Under Reported Income

Where Under reported income considered under both Normal provision & 115JB/115JC, such amount shall not be reduced under item D

3. Losses reduced or converted into income as result of Income assessed/reassessed

Loss Claimed less Income/loss assessed or reassessed


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17.2

Misreporting of Income

Misreporting refers to

Misrepresentation or suppression of facts

Expenditure without evidence

Recording of false entry

Failure to record the investments

Failure to record receipt

Failure to report International or Specified Domestic transactions

273A

Immunity from penalty u/s 270A

(Waiver or Reduction)

Assessee is eligible to make application for immunity if he,

Pays the tax and interest payable as per assessment order passed within period specified in notice of demand and

Made full & true disclosure and

Must have co-operated in inquiry

If immunity is granted, Order shall be final

No appeal/revision admissible against order

Such relief shall be available only once in a lifetime

Power to grant immunity

PCCIT or CCIT own motion or

on application made by assessee within 1 month from the end of month in which order is received

AO shall pass the order granting/rejecting immunity within one month from the end of the month in which application is received

Opportunity shall be given before rejecting

No immunity in case of misreporting of income

Penalties consequent to Search Proceedings


271AAB (1) Search has been initiated

After 1-7-2012 but before 15-12-2016

10% of undisclosed income

If Assessee admit during the search


Assessee do not admit during the search but declares the same in return

60% of undisclosed income – any other case

271AAB (1A) Search has been initiated

On or After 15-12-2016


If Assessee admit undisclosed income during the search

60% of undisclosed income – any other case

Penalties related to payment of tax and filing of return


140A(3) Failure to pay Self-Assessment Tax/Interest/Fees

As determined by AO

Penalties cannot exceed Tax in arrears

221(1) Default in payment of Tax As determined by AO

Penalties cannot exceed Tax in arrears

234E Failure to Furnish TDS/TCS Return ₹ 200 per Day

Penalty cannot exceed TDS/TCS Amount

234F Default in Furnishing ITR ₹ 5,000 – If ITR filed before 31st Dec.


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17.3

₹ 10,000 – Any other Case

₹ 1,000 – if Total Income ≤ 5,00,000

It is mandatory & cannot be waived by AO on any ground

Other Penalties


271AAC Unexplained money, bullion, jewellery u/s 68 / 69A/B/C/D

10% of tax payable u/s 115BBE –

No Penalty If same income is included by assessee in ITR filed u/s 139 and Tax is paid

271A Failure to keep or maintain books of account u/s 44AA

₹ 25,000

271AA(1) Failure to keep and maintain information/ Failure to report such transactions / maintain or submitting incorrect data

Under sections 92D

2% of each

International Transactions or

Specified Domestic Transactions

271AA(2) Failure to furnish information related to international group u/s 92D(4)

₹ 5,00,000

271B Failure to get accounts audited u/s 44AB 0.5% of Turnover or

1,50,000 whichever is less

271BA Failure to furnish report of CA u/s 92E ₹ 1,00,000

271C Failure of deduct TDS (194B) or

pay DDT (115-O)

Amount equal to TDS/DDT

271CA Failure to collect TCS Amount equal to TCS

271D &

271E

Acceptance/Repayment of loan/deposit in contravention of Section 269SS / 269T

Amount equal to Loan or Deposit Accepted / Repaid

271DA Receiving amount of ₹ 2 Lakh or more from a person in a day [Section 269ST]

Amount equal to such receipt

271FA Failure to furnish statement of financial transaction or reportable account

within time prescribed u/s 285BA(2)

within time prescribed u/s 285BA(5)

₹ 500 per day

₹ 1000 per day

271FAA Furnishing inaccurate statement of financial transaction or reportable account u/s 285BA

₹ 50,000

271G Failure to furnish information required during proceedings u/s 92D(3)

2% of the value of

International Transactions or Specified Domestic Transactions

271GA Failure to furnish information or document by an Indian concern u/s 285A

2% of the value of the transaction,

if such transaction has the effect of directly or indirectly transferring the right of management or control in relation to the Indian concern

₹ 5,00,000, in any other case

271GB Default in furnishing of Country by Country Report (CbCR) by an entity as required u/s 286

₹ 5,000 for delay upto 30 days

₹ 15,000 per day beyond 30 days

₹ 50,000 per day for default continues even if order of levying penalty as above is served


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17.4

₹ 5,000 per day from the period for furnishing information before prescribed authority is expired

₹ 5,00,000 for submission of inaccurate information

271J Furnished Incorrect information in certificate/report by CA or Merchant Banker or Registered Valuer

₹ 10,000 for each report/certificate

272A (1) Refusal to answer questions

Refusal to sign the statement of proceedings

Non-compliance of summons issued u/s 131(1)

Failure to comply with notice issued u/s 142(1) or 143(2) or directions to get account audited u/s 142(2A)

₹ 10,000 for each failure/default

272A (2) Failure to :

Comply with Notice u/s 94(6)

Notice of discontinuance of Business/Profession u/s 176(3)

To furnish in due time returns statements mentioned in sections 133, 206, 206C or 285B.

To allow inspection of register referred in section 134

To furnish returns of

income u/s 139(4A) or 139(4C)

To furnish a certificate as required in section

203 or 206C

To deduct and pay tax u/s 226(2)

To furnish a statement as required by section 192(2C)

To deliver or cause to be delivered in due time a copy of the declaration referred to in section 206C(1A)

To deliver or cause to be delivered the statements within the time specified in section 206A(1)/200(2A)/ 206C(3A)

To deliver or cause to be delivered copy of the declaration u/s 197A

₹ 100 per day during which default continues

However, the amount of penalty for failure in relation to a declaration u/s197A, a certificate u/s 203 and a returns u/s 206 and 206C and statements u/s 200(2A)/(3) or proviso to section 206C(3)/(3A) shall not exceed the amount of tax deductible or collectible.

272AA Failure to comply with the provision of section 133B

Any amount upto ₹ 1,000

272B Failure to comply with the provisions of section 139A

Failure to quote/ intimate PAN u/s 139A(5A) or 139A(5C) or quoting/ intimating false PAN

₹ 10,000

272BB Failure to comply with the provisions of section 203A

Quoting false TAN wilfully in challans/ certificates/ statements/ other documents referred to in section 203A(2)

₹ 10,000


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17.5

CHAPTER XXII – PROSECUTIONS

Section Nature of Offence Rigorous Imprisonment / Fine

275A Contravention of order made for deemed seizure under the second proviso to sub-section (1) or sub-section (3) of section 132 regarding search and seizure

Upto 2 years

+ Fine

275B Failure to afford the authorized officer the necessary facility to inspect the books of account or other documents as required under section 132(1)(iib)

Upto 2 years

+ Fine

276 Removal, concealment, transfer or delivery of property to thwart tax recovery

Upto 2 years

+ Fine

No punishment if reasonable cause for the failure is proved

276B Failure to pay to the Central Government, TDS / DDT / Tax payable

Second proviso to section 194B i.e. tax on winnings from lotteries or

Section 115-O

3 Months to 7 Years

No punishment if reasonable cause for the failure is proved

276C Failure to pay to the Central Government TCS under section 206C

3 Months to 7 Years

276C(1) Wilful attempt to evade tax, penalty or interest chargeable or imposable or under reports his income

Tax evaded/tax on under reported income > 25 Lakh

6 months to 7 years + fine

Other Cases


276CC

Wilful failure to furnish in due time a return of income u/s 139(1) or u/s 142(1)(i) or u/s 148 or u/s 153A.

No Prosecution if

ROI is filed before end of AY or

ROI filed after end of AY and Tax payable after adjusting TDS and Advance Tax < 3000

Tax evaded/tax on under reported income ≤ 25 Lakh


Other Cases


276D Wilful failure to produce accounts and documents under section 142(1)/ 142(2A)

Upto 1 Year +

Fine

Individuals deemed to be guilty of offences and liable to imprisonment

Section Person Individual deemed to be guilty

278B Company Every person in charge of affairs

Director, Manager, Secretary and every officer

278B Firm Partner

AOP/BOI Members controlling affairs

278C HUF Karta or member


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18.1

CHAPTER – 18

MISCELLANEOUS PROVISIONS

Provisions related to acceptance or repayment of loan etc.

Section Provision Consequences

269SS Bar on acceptance of Loan/Deposit/advance ≥ 20,000 (Opening Balance in account + Amount accepted during the year) except by Account payee cheque/draft or ECS

Non Applicability,

Loan/deposit/advance taken from Government, Govt Company, Banks, Post Office or

Institutions notified by CG or

Persons involved in transactions having agricultural income only

Penalty 100% of amount accepted [Section 271D]

269ST Bar on receiving amount ≥ ₹ 2,00,000 except by account payee cheque/draft or ECS

Aggregate from a person in a day or

In respect of single transaction or

In respect of transaction relating to one event/occasion

Non Applicability,

Receipt by Government, Banks, Post Office or

Persons/transactions notified by CG such as Cash withdrawal from Bank, receipt by credit card issuing agencies against bill raised in respect of one or more credit cards or

Transactions referred to in sections 269SS

Penalty – 100% of amount received [Section 271DA]

No penalty if good and sufficient cause proven

269T Bar on repayment of loan/deposit/advance together with interest, if any ≥ ₹ 20,000

Non Applicability,

Repayment to Government, Govt Company, Banks, Post Office or

Institutions notified by CG

Penalty – 100% of amount received [Section 271E]

Section 281 – Certain transfers to asset to be void.

In order to safeguard revenue certain fraudulent transfers of asset shall be considered as void

Before the service of notice by Tax Recovery Office (TRO), Any assessee creates any charge or transfer the asset to any other person, such charge/transfer shall be treated as void

This provision does not apply to

Charge / transfer taken place for adequate consideration or with prior permission of TRO

Where amount of tax < 5,000 and Asset which are charged/transferred < 10,000

Charge/transfer of properties representing Stock in trade


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18.2

Section 281B – Provisional attachment of property to protect the interest of revenue.

In order to safeguard revenue during the pendency of proceedings AO can provisionally attach the property with prior approval of specified authorities

Such order shall remain valid for 6 months, However CCIT/CIT/DGIT/DIT can extend further period but total period should not exceed later of

2 years or

60 days after the date of order of assessment passed

Assessee can furnish bank guarantee in lieu of provisional attachment, AO can invoke the bank guarantee if assessee fails to pay the tax

Section 288 – Appearance by authorise representatives

The proceedings can be attended by an assessee in person or through an authorised representative

Person who is a relative/regular employee of the assessee

Any officer of a Scheduled Bank in which the assessee maintains a current account or has other regular dealings; or

Legal practitioner who is entitled to practise in any civil court in India; or

CA within the meaning of the CA Act, 1949 who hold a valid COP

Any person who has passed any examination / having qualification recognized in this behalf by the CBDT

Section 292B – Return, Order etc. not to be invalid.

Return of income, order of assessment, notice, summons or other proceedings shall not be

Invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission

If they are in substance and effect in conformity with or according to the intent and purposes of the Income-tax Act, 1961.

This enables tax authorities to accept returns and other documents and tax payers to accept orders, notice, etc., received from tax authorities even in cases where there are a few typographical, arithmetical or other mistakes which do not materially affect the objects with which the document was submitted by the assessee or order

Section 292BB – Notice deemed to be valid.

Assesse cannot raise objections that notice is not served within time or served in improper manner

If he has appeared in proceedings or co-operated in any inquiry related to assessment


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