baldev raj ca - 9312235173 s.p.puri & co. 1 district centre janak puri study circle of nirc of...
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Baldev Raj CA - 9312235173 S.P.PURI & CO.
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District Centre Janak Puri Study District Centre Janak Puri Study Circle of NIRC OF ICAI Circle of NIRC OF ICAI
Assessment procedure for Assessment procedure for
Scrutiny cases under Income Scrutiny cases under Income Tax Act Tax Act
Baldev Raj CA - 9312235173 S.P.PURI & CO.
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Assessment generally understoodAssessment generally understood
• Regular assessment U/s 143(3)• Income escaping assessment under section
147• Assessment under search cases
Baldev Raj CA - 9312235173 S.P.PURI & CO.
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Assessment procedure under Assessment procedure under Chapter XIV of the Income Tax Chapter XIV of the Income Tax
ActAct
Procedure of self assessment :• Section 139 and 140 - Filling of return , PAN, singing of
return, deposit of self assessment tax
Procedure of assessment • Section 143 - Intimation and regular assessment • Section 144 - Best judgment assessment• Section 147 - Income escaping assessment • Section 153A – Assessment in search cases
Baldev Raj CA - 9312235173 S.P.PURI & CO.
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Related and supported provisionsRelated and supported provisions
• Section 142 - Inquiry before assessment including audit
• Section 142A- Estimations of valuation officer
• Section 145 - Method of Accounting• Section 154 – Rectification• Section 156 - Notice of demand• Section 157 - Intimation of loss
Baldev Raj CA - 9312235173 S.P.PURI & CO.
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Other important provisions Other important provisions relating to assessment under relating to assessment under
Income Tax ActIncome Tax Act • Section 131 -Power regarding discovery,
production of evidence etc.
• Section 133 (6) - Power to call for information• Section 292BB - Notice deemed to be valid
Baldev Raj CA - 9312235173 S.P.PURI & CO.
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Self AssessmentSelf Assessment
• Return – voluntarily or in response to notice
• Assessee is required to make his own assessment
• Compute his income and deposit all tax along with interest
• Interest and Penalty
Baldev Raj CA - 9312235173 S.P.PURI & CO.
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ASSESSMENT DEPARTMENT ASSESSMENT DEPARTMENT
Two stages1) Processed to correct arithmetical mistakes, internal inconsistency, tax calculation and verification of tax payment2) % of tax returns selected for scrutiny-
verification of the income
Baldev Raj CA - 9312235173 S.P.PURI & CO.
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Processing u/s 143(1)Processing u/s 143(1)
• Total income/ loss after Adjustments:Arithmetical errors:Incorrect claim apparent from records :
Inconsistent with any other entry – tax audit report vs computation i.e
depreciation personal expenses Information required not furnished Deduction exceeds specified statutory Limit –
80C Rs. 1,00,000• Tax and interest- • Intimation to be send : refund due / tax
payable / loss reduce Period : one year from the end of the financial
year
Baldev Raj CA - 9312235173 S.P.PURI & CO.
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ISSUES ISSUES
If no intimation and time lapse and refund due
When TDS credit / Advance tax not allowed / short allowed
When different tax rate charged i.e general rate in place special rate
Notice u/s 143(2) issued and processing not done
Alternative : Rectification/Appeal
Baldev Raj CA - 9312235173 S.P.PURI & CO.
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Notice u/s 143(2)Notice u/s 143(2)
Whether notice ? Served upon assessee Served in time Served in proper manner If invalid notice – objection (Section 292BB)Valid notice Response at first hearing : Filing of documents ? POA • Reasons for selection ? • Board guidelines on selection of cases
Baldev Raj CA - 9312235173 S.P.PURI & CO.
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Comparison of Notice Comparison of Notice U/s 142(1) Vs. Section 143(2)U/s 142(1) Vs. Section 143(2)
Notice u/s 142(1)• Notice to call for ROI/ books
ofAccounts/other information
• By issuing notice u/s 142(ii) alone, assessment is not possible
• Notice can be issued even if the assessee has not filed the ROI
• No time limit prescribed in law for issue of this notice
• Books of accounts can be asked for a limited period (3 years)
Notice u/s 143(2)• Notice for making assessment
u/s143(3)
• Assessment u/s 143(3) is possible only if the notice u/s 143(2) has been issued.
• Notice can be issued only if the assessee has filed ROI
• Time limit of 12 months prescribed for service of notice.
• No such restriction
Baldev Raj CA - 9312235173 S.P.PURI & CO.
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Regular assessment under section Regular assessment under section
143(3)143(3) • Enquires and investigation ; Calling for books of accounts or other
relevant documents Calling for information in such form and on
such point or matters Requiring to furnish a statement of all
assets and liabilities Examining the assessee or other parties as
witness under section 131 to verify any accounts or transaction
Baldev Raj CA - 9312235173 S.P.PURI & CO.
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continuationcontinuation
Gathering information from banks, financial institutions and such other person with whom assessee has had transaction during the year- section 133(6)/131
Directing to get account audited u/s 142 (2A)
Reference to Valuation officer u/s 142A- determine the value of any investment, bullion, jewellery or other articles
Gather all relevant and requisite evidence, properly scrutinizing,
Baldev Raj CA - 9312235173 S.P.PURI & CO.
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• Allowing reasonable opportunity , to explain the discrepancies , inaccuracies and omissions
• Rule of evidence : Adverse inference - if assessee fail to answer or produce evidence to contradict the data/ information gathered by assessing officer
• Determine the total income , compute tax and interest
Baldev Raj CA - 9312235173 S.P.PURI & CO.
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ISSUES FOR DISCUSSION
• Fact of assessee and its business
• Strength and weakness
• Assessment of self code cases
In case of returned U/S 139 4A , 4B , 4C etcTrust , Political parties, educations trust etc
• AIR Information's
• Reconciliations –income with TDS certificates
• Rejection of books of accounts – 145 (3)
Baldev Raj CA - 9312235173 S.P.PURI & CO.
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• In case of non-resident cases and TP issues order- New provision w.e.f 01.10.09 DRP
( Dispute Resolution Panel )
• New Claim in assessment proceedings GOETZE (INDIA) LTD. Vs. CIT (2006) 284 ITR 323(SC)
Baldev Raj CA - 9312235173 S.P.PURI & CO.
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Show cause noticeShow cause notice
Revenue / capital expenses , business vs capital gain,business vs income from other sources etc
Facts, provisions, Case laws
Section 40A(2)specified persons Three criteriaFair mkt value, legitimate needs of business ,
benefit to the assessee (cumulative or alternative)2009 314 ITR 1 (Guj)
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• Information u/s 133(6)- Not received received with difference or Notice un served or
Stock statement submit with bank/stock audit conducted by bank
confrontation during the assessment proceedings
• Summons issued : Un served not attended by the parties Absence of personnel presence – default?
Use of affidavit
Baldev Raj CA - 9312235173 S.P.PURI & CO.
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Assessee duty in caseAssessee duty in case• Confirmations - in case of creditors,
debtors• Matter send for valuation u/s 142 A
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Section 68 to 69DSection 68 to 69D • Objective – an effort to curb the all pervading evil of
generation and proliferation of black money • Section are clarificatory and addition may be made
otherwise• ‘May’ word used – discretion of assessing officer • Cash credit : The existence of books of accounts maintained by
assessee himself A credit entry in the books of accounts Absence of satisfactory explanation by the assessee
about the nature and source Burdon of proof on assessee The identity of the creditors The capacity of the creditors The genuineness of the transaction • The assessee has adduced evidence to establish prima facie
the aforesaid, than onus shift to department
Baldev Raj CA - 9312235173 S.P.PURI & CO.
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• other issues ?
Baldev Raj CA - 9312235173 S.P.PURI & CO.
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Assessment is void-ab-initio• Assessment without serving a notice u/s
143(2)• Notice served after expiry of period Assessment is invalid.• After the expiry of 23 months from the
relevant year • Fresh assessment on set-aside or
cancelled order or on order made under section 263/ 264 made after expiry of 9 months from the financial year
Baldev Raj CA - 9312235173 S.P.PURI & CO.
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Best judgment assessment-u/s Best judgment assessment-u/s 144144
• Defaults : Fail to submit return Fail to complied with terms of the notice u/s
142(1)/ 143(2) Fail to comply with direction u/s 142(2A)• Show cause notice -best judgement • Reasonable opportunity • On the basis of all relevant material gathers –
compute the income or loss to the best of his judgement , determine the tax payable
• Cannot assess the income below return income/ loss more than return loss
Baldev Raj CA - 9312235173 S.P.PURI & CO.
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C/O of best judgment C/O of best judgment assessment-u/s 144assessment-u/s 144
• Assessment :Not be arbitrary or on adhoc basisBased on material On rational and scientific basisOrder must speaking order
Baldev Raj CA - 9312235173 S.P.PURI & CO.
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Directions u/s 144ADirections u/s 144A• Objective Improve the quality of assessment Eliminate avoidable litigation • Joint commissioner On his own motion On reference made by assessing officer On application of the assessee • Call for and examine the record of the pending
proceeding • Reasonable opportunity to assessee before issue
direction being prejudicial to the assessee • Investigation not an prejudicial to the assessee • Issue direction • Binding on assessing officer
Baldev Raj CA - 9312235173 S.P.PURI & CO.
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Directions u/s 144ADirections u/s 144A
• No appeal against direction • In practice:No seriousness for the intended purpose of
the legislature The responsibility cast on supervisory
officers not discharged