LUNAWAT & CO. Chartered Accountants 30 th January 2015 CA. PRAMOD JAIN FCA, FCS, FCMA, LL.B, MIMA, DISA
Assessment Regular [143(3)] Best Judgment [144] Reopening [147] Block [158BC]
PROCEDURE AFTER FILING OF RETURN Selection of Case Issue & Service of Notice Assessme nt Procedur e Issue of Order CASS AIR CIB 26AS Investi gation Manual - Compul sory Post Hand Electr onic Mode Affixt ure TPO DVO Special Audit 133(6) 131 143(3) 144 147 158BC
NOTICE Notice - selection of scrutiny case / re-assessment it s validity and effect. Presumption, defect Jurisdictions - 120/124, transfer of jurisdiction -127, effect on issue of notice or completion of assessment by wrong jurisdiction Proceeding is nullity where AO has no jurisdiction ab initio to take the proceedings Sant Baba Mohan Singh v. CIT (1973) ITR 197 (All) Where there is no inherent lack of jurisdiction but such jurisdiction is improperly exercised, the concerned proceedings may be regularised by Superior Authorities Mahalliram Ramniranjan Das v. CIT (1985) 156 ITR 885 (Pat) Relevance and Importance of scrutiny guidelines and citizen charter
CITIZEN S CHARTER Issued in November 2014 To deliver quality services Provides service delivery standards Refunds of electronic filed returns u/s 143(1) 6 months, other - 9 months Rectification - 2 months Registration of charitable Trusts 4 months Giving appeal effect - 1 month Responsibility??? Use???
PROCESSING OF RETURN Implication and status of processing of income tax return and rectification after notice of selection of scrutiny assessment Processing u/s 143(1) S. 143 (ID) - where a notice has been issued to a taxpayer u/s 143(2), it shall not be necessary to process the return in such a case. - Instruction No. 001/2015 dt 13.1.15 Citizen Charter??? Rectification after selection of scrutiny??
AO S RIGHTS & DUTIES To hear evidences To ask sufficient reasons for adjournment Pass an Order Compute income / loss / tax / refund Call information, records and documents u/s 142 (1) / 133 Call books of accounts, hold the books of account, Call information or confirmation from supplier, parties, lender, shareholders etc
AO S RIGHTS & DUTIES Issue summons and call personnel presence of supplier, parties, lender, shareholders etc. u/s 131 Reference for Special audit by department 142(2A) Reference to TPO 92CA with previous approval of Commissioner Reference to DVO S. 55A Capital gains only if variation more than 15% or 25k (R. 111AA) S.142A S. 69 -unexplained investments S. 69A -Unexplained money S. 69B -investments not fully disclosed in books S. 56 (2) - Gifts
DUTIES OF AO Tax authorities would not be acting properly and judiciously if they exercise their power in the manner most beneficial to revenue and consequently most adverse to assessee CIT v. Simon Carves 105 ITR 212, 218 (SC) To draw attention of the assessee to the deductions, reliefs and refunds to which he seems to be entitled on the facts of the case, which the assessee omitted to claim Circular dated 11.04.1955 To look into objections raised by the assessee to his proposed assessment and give reasons for rejecting the same K Mustafa v. State of Kerala 256 ITR 538
POA Power of Attorney Act 1882 Not court fee stamp, but must be on a stamp paper It is a Special POA. It should be strictly construed Shall be attested by two witnesses and Notarised Must not exceed authority given in POA. May do all those acts which are authorised, but only by a particular method, if the POA so indicates. If there is a breach of any condition then he shall be liable except in a case where acted reasonably. Must act with utmost good faith & tell donor nature & extent of any intt. which may conflict with duty. May pass on his powers & duties to another person but only if authorised to do so by the POA If case of POA at Foreign Place, local stamp duty also
SERVICE OF NOTICE (282) Either by post; or Registered post; or Approved Courier (Speed Post) In the manner summons may be issued under CPC May be served personally upon the individual or upon his agent duly authorised in terms of r. 6 of O. 3 of CPC If person is not available then on any male member of the family of the individual named in the notice Substituted service in terms of r. 20 of O. 5 of CPC (Affixture) Electronic mode Service on Employees? Service on Agents? Service in case of death of the assessee? Service on Legal Representatives? Irregularity waived if assessee proceeds without objecting
SPECIAL ATTENTION S. 14A, 2(22)(e) Cash credit, Investment in immovable property, Gifts Importance of Affidavit and its use and effect Stock filed with bank and stock as per audited accounts 26AS Reconciliation
ASSESSMENT New claim of deduction, allow ability of expenses, exemption etc during the assessment proceedings Which was not claimed or wrongly miss out in return of income Use of Order / judgments of apex court, high court and ITAT. The use and important of notifications, circular and administrative instructions issued by the CBDT Role or limitation of higher authority i.e Additional commissioner of income tax and or Commissioner / chief commissioner in assessment proceeding, How the assessee can use these rights in assessment Time Limitation to complete assessment / reassessment
ASSESSES RIGHTS & DUTIES Cross Examination Rebut the evidence Examine record and obtain copy Ask AO to issue notice u/s 131 / 133 to creditors etc. To appoint attorney through POA To produce documents required by AO
CERTAIN CASE LAWS Principles of natural justice are applicable - Elementary principle of natural justice is that the assessee should have knowledge of the material which is going to be used against him so that he may be able to meet it - Gargi Din Jwala Prasad v. CIT [1974] 96 ITR 97 (All.) ITO can collect material by private enquiry - But if he desires to use the material so collected, the assessee must be informed of the material and must be given an adequate opportunity of explaining it - C. Vasantlal & Co. v. CIT [1962] 45 ITR 206 (SC) Affidavits cannot be rejected straightaway - Rejection of an affidavit filed by assessee is not justified unless assessee has either been cross-examined or called upon to produce documentary evidence in support of affidavit sworn by him - L. Sohan Lal Gupta v. CIT [1958] 33 ITR 786 (All.).
CERTAIN CASE LAWS AO is empowered to launch fishing and roving enquiry with a view to detect tax evasion u/s 133(6) - Kathiroor Service Cooperative Bank Ltd. vs. CIT (CIB) & Anrs [2013-ITRV-SC-144] Issue of notice is equivalent to its service for purposes of section 143(2) - V.R.A. Cotton Mills (P) Ltd. vs. Union of India & Others [2012-ITRVHC- P&H-040] Assessee is entitled to raise claims before appellate authorities even if claim is not made in return of income - CIT vs. Pruthvi Brokers & Shareholders Pvt. Ltd. [2012-ITRVHC-MUM-144]
Handling Scrutiny Art Science Ability or Skill Knowledge about Subject
ART Entrance Appearance Mobile Manners Be a good listner Use of Language Keeping of Files Be Effective Speaker Taking Along Someone Politeness CONFIDENCE
SCIENCE Master of Subject Knowledge of Procedure Knowledge of Terminologies Teaching the Authority Telling Mistake of Other Assessees Don t miss the dates Master of Facts Say what you have written and write what you say
WRITTEN REPRESENTATIONS Use PAN, subject, year.. Positive approach Negate Specific question To address Factual position Legal position
DON TS Forget POA Misstate the fact Cite wrong or overruled cases Be eager to get the case done
IT S A MIND GAME
CA. Pramod Jain pramodjain@lunawat.com +91 9811073867 2015 CA. Pramod Jain, Lunawat & Co