basics of income tax assessments and appeals

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PRESENTED AT THE COURSE FOR PROFESSIONAL ACCOUNTANTS ORGANISED BY BOMBAY CHARTERED ACCOUNTANTS’ SOCIETY Basics of Income-tax Assessments Procedures, Appeals & Revision 29 th November, 2013 CA Ameet N. Patel

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A brief presentation made be me to an audience consisting of semi qualified accountants giving the basics of Income-tax assessments and appeals in India. The contents may undergo a change from time to time based on amendments to the Indian Income-tax Act, 1961.

TRANSCRIPT

Page 1: Basics of income tax assessments and appeals

PRESENTED AT THE

COURSE FOR PROFESSIONAL ACCOUNTANTS

ORGANISED BY BOMBAY CHARTERED

ACCOUNTANTS’ SOCIETY

Basics of Income-tax Assessments

Procedures, Appeals & Revision

29th November, 2013

CA Ameet N. Patel

Page 2: Basics of income tax assessments and appeals

TIME FOR FILING RETURN OF INCOME [SEC.

139 (1)]

Different Situations Due Date for filing Return

1. Where the assessee is a company

i. Required to file a Transfer Pricing report under section 92E

30th November

ii. In any other case

30th September

2. Where the assessee is person other than a company –

i. In case where accounts of the assessee are required to be audited under any law

30th September

ii. Where the assessee is “working partner” in a firm whose accounts are required to be audited under any law

30th September

iii. In any other case 31st July

Page 3: Basics of income tax assessments and appeals

FILING OF RETURNS - STEPS

Compute income for each Source of Income

Aggregate the income from various sources under the respective Heads of Income

Arrive at the Gross Total Income

Claim the Deductions available

Arrive at the Total Income

Page 4: Basics of income tax assessments and appeals

FILING OF RETURNS - STEPS

Compute the Tax payable on the Total Income

Reduce the Rebates, if any from the tax payable

Add Surcharge as applicable to the tax

Add the Education Cess to the figure of tax plus surcharge

Arrive at the Gross Tax Liability

Page 5: Basics of income tax assessments and appeals

FILING OF RETURNS - STEPS

From the Gross Tax payable, reduce the TDS

Arrive at the Net Tax Payable or the Refund due as the case may be

If the net tax payable is equal to or more than Rs. 10,000 then Advance Tax is payable

Advance tax is payable in 3 installments (4 in case of companies) during the previous year itself

Page 6: Basics of income tax assessments and appeals

FILING OF RETURNS - STEPS

If there is a shortfall in payment of advance tax then calculate Interest u/s. 234B and/or 234C

If the return is filed late then calculate Interest u/s. 234A

From the net tax payable, reduce the Advance Tax

Add the Interest to the balance amount to arrive at the Self Assessment Tax Payable / Net Refund Due

Page 7: Basics of income tax assessments and appeals

FILING OF RETURNS - STEPS

Pay the Self Assessment Tax

File the Return physically or upload the return

electronically.

Page 8: Basics of income tax assessments and appeals

ADVANCE TAX [SECTION 211]

Advance tax is payable in 3 Instalments

(4 in case of Companies)

Payable on 15th June

15th September

15th December and

15th March

Where first installment of 15th June is payable only if the assessee is a company.

Page 9: Basics of income tax assessments and appeals

SELF ASSESSMENT TAX [SECTION 140A]

When on computation of income for the year for the

purpose of filing the return of income it is found that

some tax remains payable even after adjustment of

advance tax along with deducted/collected at source,

such balance tax along with interest thereon is

required to be paid as self-assessment tax before filing

the returns of income.

From A.Y 2013-14, any return uploaded without paying

the Self-assessment tax would not be accepted by the

Income-tax department and considered defective.

Page 10: Basics of income tax assessments and appeals

RETURN OF INCOME [SECTION 139]

Normal Return

Belated Return

Revised Return

Loss Return

Defective Return

Page 11: Basics of income tax assessments and appeals

NORMAL RETURN

Who is required to file return of income

Company or a firm – mandatory requirement

Others – total income exceeds basic threshold limit (i.e. INR 2,00,000 for A.Y. 2013-14)

Any person who is otherwise not required to furnish return of income will be required to file a return if he has any asset located outside India or has signing authority in any account located outside India.

Page 12: Basics of income tax assessments and appeals

BELATED RETURN

Any person who has not furnished a

return

within the time allowed u/s 139(1) or

Within the time allowed under a notice issued u/s

142(1),

but filed before the end of one year from the

relevant assessment year or the completion of

the assessment, whichever is earlier

Page 13: Basics of income tax assessments and appeals

REVISED RETURN

Can be filed if the assessee discovers an omission

or wrong statement

Replaces the original return

Can be filed before the end of one year from the

relevant assessment year or the completion of the

assessment, whichever is earlier

Can be revised further

Belated return cannot be revised

Page 14: Basics of income tax assessments and appeals

LOSS RETURN

Return must be filed within the prescribed time limits

If not filed, no carry forward of loss, however carry

forward of loss under House property head, unabsorbed

depreciation & unabsorbed family planning expenses are

permissible

Page 15: Basics of income tax assessments and appeals

DEFECTIVE RETURN Incomplete return

Assessee may be given an opportunity to rectify the defect

If the defect not rectified, the return treated as invalid.

Return defective if:

columns of return not filled or annexures not attached;

computation of income tax not attached;

proof of tax deposited is not produced within the period of two years,

Non furnishing of tax audit report; etc

Self-assessment tax is not paid (from A.Y 2013-14)

Page 16: Basics of income tax assessments and appeals

RETURN IS FILED – WHAT NEXT?

Either a summary assessment (Section 143(1))

and/or

A regular (scrutiny) assessment (Section 143(3))

Page 17: Basics of income tax assessments and appeals

SUMMARY ASSESSMENT [SEC.

143(1)

To be issued only if there is a demand or a refund due.

If no demand/refund then Acknowledgement is deemed to be the intimation

Time limit – the end of one year from the relevant assessment year or the completion of the assessment, whichever is earlier

Page 18: Basics of income tax assessments and appeals

SCRUTINY ASSESSEMENT [SEC.

143 (2)/(3)]

Time limit for issuing notice

Time limit for completing the scrutiny

Type of questions that are being asked

Page 19: Basics of income tax assessments and appeals

REFUNDS [SECTION 237]

A claim for refund shall be claimed in Form No. 30

Adjustment of refund against demand for another

year (Section 245)

Page 20: Basics of income tax assessments and appeals

INTEREST [SECTION 234A TO SECTION

234D]

For Defaults in furnishing return of income

[SECTION 234A]

For Failure to Deduct and pay tax at source

[SECTION 201(1A)]

Interest for Default in payment of Advance Tax

[SECTION 234B]

Page 21: Basics of income tax assessments and appeals

INTEREST [SECTION 234A TO SECTION

234D]

For Deferment of Advance Tax [SECTION 234C]

Corporate Assessee [SECTION 234C(1)(a)]

Non Corporate Assessee [SECTION 234C(1)(c)]

Short payment of Advance Tax in case of Capital

Gains/Casual Income [First Proviso to SECTION 234C(1)]

Page 22: Basics of income tax assessments and appeals

INTEREST [SECTION 234A TO SECTION

234D]

Interest on Excess Refund [SECTION 234D]

For Making Late Payment of Income tax

[SECTION 220(2)]

Interest Payable to Assessee

[SECTION 244A]

Page 23: Basics of income tax assessments and appeals

RECTIFICATION OF MISTAKES

[SECTION 154]

Page 24: Basics of income tax assessments and appeals

RECTIFICATION OF MISTAKES

An income-tax authority may with a view to rectifying any mistake apparent from the record:

amend any order passed by it

amend any intimation or deemed intimation under section 143(1) and section 200A.

Rectification may also be made on application by the assessee

Orders cannot be rectified after expiry of 4 years from the end of the financial year in which order sought to be amended was passed

On rectification plea by assessee – Amendment / refusal order to be passed within 6 months from the end of the month in which the application is received by the income-tax authority

Page 25: Basics of income tax assessments and appeals

RECTIFICATION OF MISTAKES

Mistake

Obvious and patent

Self evident and reached without debate

Fresh determination of facts should not be required

Misreading of a clear provision of law/ applying an inapplicable provision/ overlooking mandatory provision

Statutory interpretation should not be involved

Record

Includes all materials/ documents available at the time of passing the order of assessment

Fresh documents/ materials not recorded at the time of passing the order cannot be considered

Record of any period can be considered

Page 26: Basics of income tax assessments and appeals

RECTIFICATION OF MISTAKES

Examples of mistakes apparent from record

which can be rectified

Error of law or fact

Clerical or arithmetical error

Error in determination of written down value

Overlooking the obligatory provisions of the legislature

Mistakes arising out of retrospective amendment of law

Page 27: Basics of income tax assessments and appeals

REVISION OF ORDERS BY

COMMISSIONER

[SECTION 263 & 264]

Page 28: Basics of income tax assessments and appeals

REVISION OF ORDERS BY

COMMISSION U/S 263

Pre-requisites

Prejudicial to interests of Revenue

Erroneous order

Record shall include and shall be deemed always to have included all records available at the time of examination by the Commissioner

Revised order should be passed before the expiry of 2 years from the end of the financial year in which order sought to be revised was passed

Opportunity of being heard should be given to the assessee before passing an order under section 263

Powers of Commissioner – Enhance, modify or cancel the assessment and direct a fresh assessment

Appeal can be filed to the Appellate Tribunal against the order under section 263

Page 29: Basics of income tax assessments and appeals

REVISION OF ORDERS BY

COMMISSION U/S 264

Revision of orders, on own motion of Commissioner or on application by the assessee

Revision of order on own motion by the Commissioner, to be passed within one year from date of order sought to be revised

Application by assessee should be made within 1 year from date on which the order in question was communicated or date on which assessee came to know of order, whichever is earlier

Order to be passed within 1 year from end of financial year in which application is made by assessee for revision

Pre-requisite – Assessee to waive right of appeal

Where appeal against the order has been filed – no revision possible

Page 30: Basics of income tax assessments and appeals

APPEALS TO

COMMISSIONER(APPEALS)

[SECTION 246A TO 249]

Page 31: Basics of income tax assessments and appeals

APPEALS TO COMMISSIONERS (APPEALS)

Appealable orders (Illustrative):

Scrutiny assessment order

Best Judgment assessment order

Reassessment order

Rectification order enhancing assessee’s liability

Appeal against intimation passed under section 200A

Tonnage tax order

Appeal to CIT(A) within 30 days of

Date of payment of tax, where appeal is in respect of TDS under section 195

Date of service of notice of demand relating to assessment or penalty

Date on which intimation of order sought to be appealed against is served

Page 32: Basics of income tax assessments and appeals

APPEALS TO COMMISSIONERS (APPEALS)

Time extended if sufficient cause proven

Appeal to be filed in prescribed form and manner

CIT(A) fixes a day and place for hearing the appeal, and notice of the

same is given to the appellant and the assessing officer whose order

is being appealed against

During the course of the hearing, CIT(A) may entertain additional

ground/evidence raised by the appellant in seeking modification of

the assessment order passed by the assessing officer

CIT(A)’s order disposing of the appeal is in writing and states

decision and reasons supporting the same

CIT(A) has powers to confirm, reduce, enhance or annul the

assessment

Where possible, CIT(A) to dispose within 1 year from the end of the financial year in which appeal was filed

Page 33: Basics of income tax assessments and appeals

APPEALS TO TRIBUNAL

[SECTION 252 TO 255]

Page 34: Basics of income tax assessments and appeals

APPEALS TO TRIBUNAL

Should be filed within 60 days of the date on which the order sought to be appealed against is communicated

Memorandum of cross-objections – within 30 days of receipt of notice that an appeal has been preferred to the ITAT

Time extended if sufficient cause proven

To be filed in prescribed form and manner

Additional ground/ evidence can be raised for the first time before the ITAT. In such a case opportunity of being heard should be given to the assessing officer

After hearing both parties, the ITAT passes an order as it thinks fit and communicates the same to the assessee and the Commissioner

Where possible, ITAT to dispose within 4 years from the end of the financial year in which appeal was filed

In case order of stay is made, appeal to be disposed within 180 days of stay order; else, stay stands vacate

Page 35: Basics of income tax assessments and appeals

APPEALS TO TRIBUNAL

Mistakes apparent from record – Order of ITAT can

be amended within 4 years from date of ITAT order

[Section 254(2)] if it is brought to the notice by the

assessee or the assessing officer

Final fact finding authority

Binding nature

Page 36: Basics of income tax assessments and appeals

APPEAL TO HIGH COURT

[SECTION 260A]

Page 37: Basics of income tax assessments and appeals

APPEALS TO HIGH COURT

Right exercisable u/s 260A

Preferred against ITAT’s order

Only for a case involving a “substantial question of

law”

Should be filled within 120 days of receipt of ITAT’s

order

Can also be filed by the Tax department

Rules framed for court proceedings and conduct

has to be observed

Page 38: Basics of income tax assessments and appeals

APPEALS TO SUPREME COURT

Right exercisable u/s 261.

Preferred against High Court’s order

Only for a case involving a “substantial question

of law”

Should be filled within 60 days of receipt of

High Court’s order

Can also be filed by the Tax department

Rules framed for court proceedings and

conduct has to be observed

Page 39: Basics of income tax assessments and appeals

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if you have any queries