Income Tax Dept warns public against cash dealings of Rs 2 lakh or more saying that the receiver of the amount will have to cough up an equal amount as penalty. CBDT further extends the time for Linking PAN with Aadhaar from 31st December 2017 to 31st March 2018.

Providing information to tax dept online can now help you avoid detailed scrutiny

If you get a notice due to a mismatch in your income tax return (ITR), you can now argue or explain your case online, without having to deal with the Income Tax Department in person. Further, if you have answered the department's questions satisfactorily, your ITR may not be taken up for detailed scrutiny. The Ministry of Finance issued a notification on February 22 where it said that it will be setting up a centralised communication centre, under the Centralised Communication Scheme, 2018, which will carry out this task. 

As per the notification, this centre will be authorised under section 133C of the Income Tax Act, 1961 to send notices to taxpayers asking them to verify the information available with the income tax authorities. 

Chetan Chandak, Head of Tax Research, H&R Block India said, "In the recently introduced Centralised Communication Scheme, 2018, the centralised communication centre will have powers to issue an e-notice (by electronic mail, or by placing a copy in the registered account on the portal) to any person. This notice will require him to furnish information or documents in his possession in machine readable (electronic) form, for the purpose of verification of information which may be useful for, or relevant to, any inquiry or proceeding under this Act. However, the procedural details are yet to be notified by the department." 

Taxpayers will benefit in two ways: 
1) It would save them trips to the income tax office, and 
2) They will get a chance to be heard by the income tax department before proceedings begin. 

How it will work 
"PAN cards are issued to an individual or any other persons by the Income Tax department. Therefore, even if you don't file your ITR, the I-T department is tracking your financial transactions on the basis of your PAN. The department can send you the notices as per section 133 and 133C to furnish required information in order to assess whether your case must come under further scrutiny or not. So, if your case falls in the doubtful category, then the tax department can send you notice for filing ITR under different sections such as 142(1) or 148 etc.," said Abhishek Soni, CEO,, a tax filing website. 

In cases where the I-T department has independent, individual-specific information which does not match with the person's declared income or is not reflected in his ITR, then the department will send a notice to the individual. This notice will ask the individual to explain the mismatch with documents. If the I-T department is satisfied with the documents and explanation, then the ITR may not be taken up for detailed scrutiny. 

"Section 133C allows the prescribed authority to ask (a taxpayer) for the documents or any other information to compare and verify with the information available with them (Tax department). The information provided by the individual will be the deciding factor whether a further enquiry would be initiated against the said individual or not. What this means is that the information provided by you will decide whether your filed ITR will come under scrutiny or not," said Soni. 

Income tax officials will have to follow certain guidelines while sending notices asking for further information from taxpayers. 
a) The notice will be sent through email or by placing it on the e-filing account of the user. An SMS will be sent to the user informing him about the notice on his e-filing account. 
b) The individual or his representative will not be required to personally appear at the centralised communication offices for proceedings. 
c) All the documents and information to be furnished by the individual is required to be sent in specified formats. However, the format is yet to be notified by the department. 
d) To ensure compliance of the notice sent, the authority can send you further emails, SMS, letters and so on, as reminders for the notice sent to you. You may even receive calls from the department reminding you about the notice sent to you. 
e) The notice will be issued with a digital signature of the designated authority. 

"The centralised communication centre will do the preliminary level of investigation and verification relating to any inquiry or proceeding under this Act and may make available the outcome of such processing to the Assessing Officer for further action. This is a step forward in the direction of jurisdiction-free/ face-less assessment," said Chandak. 

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AO should verify intention of assessee before alleging undisclosed income on basis of AIR info

Where undisclosed income of assessee reflected in AIR database of revenue on which TDS was also deducted under section 194H was added to income of assessee by Assessing Officer, Commissioner (Appeals) was justified in directing Assessing Officer to verify contentions of assessee as to factual aspect of matter and grant relief on merits

Section 79 applies only on brought forward and set off of business loss and it has no applicability on carry forward and set off of unabsorbed depreciation

Where shares of company in which public were substantially interested became more than fifty one per cent in assessee company only for a part of previous year 2010-11, carry forward of losses till assessment year 2010-11 could not be allowed; in assessment year 2012-13 losses arising in previous year 2011-12 would be allowed

Refer:[2018] 91 112 (Mumbai - Trib.)
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I-T sleuths unearth Rs 3,200 crore TDS scam; 447 firms in dock

MUMBAI: The income tax department has unearthed a Rs 3,200 crore scam where 447 companies deducted tax from its employees but did not deposit with the government and diverted to further their business interests. 

The TDS wing of the I-T has initiated prosecution against these firms and in some cases, warrants have been issued, sources said. Under the Income Tax Act, the offences attract a minimum punishment of rigorous imprisonment of three months to a maximum of seven years with fine. Prosecution is initiated under Section 276 B. 

I-T is contemplating adding IPC Sections of cheating and criminal breach of trust as this act amounts to duping its employees, sources said. The offenders mainly include builders with one of them, a leading and politically connected, diverting Rs 100 crore collected from his employees for business purposes. 

The others are from various sectors including movie production houses, infrastructure companies, start-ups and fly by night operators. An infrastructure company, part of a port development has diverted Rs 14 crore, sources said. An MNC, which provides IT solutions has not deposited Rs 11 crore. 

An I-T official told TOI, “In the recent verification surveys carried out, it was detected that in about 447 cases, Rs 3,200 crore was deducted by the companies but not deposited into the government account.’’ This is for the period April 2017 to March 2018. “We also intend to arrest some of them,’’ the official added. 

These companies are under a legal obligation under the Income Tax Act to deduct TDS on behalf of the government and deposit it into the government account within a prescribed time frame. 

I-T has initiated recovery actions by attaching bank accounts besides movable and immovable assets, a source said. “In several of the cases, they diverted the money towards working capital. Some apologised and promised to pay while some said they could not pay because of adverse market conditions. In some cases, of the amount collected from the employees, 50% was deposited with the government and the balance misused by the employer,’’ an official explained. 

Officials said it not possible to hoodwink the system since everything is digitised. 

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AO couldn't reopen assessment without dealing with objection raised by assessee in detail

Where assessee raised objections to reopening of assessment, in view of fact that Assessing Officer rejected those objections without elucidating and dealing with contentions and issues raised in objection letter, impugned order was to be set aside and, matter was to be remanded back for disposal afresh

A complaint or information from a third party before Assessing Officer, when it is 'definite' information and not mere gossip or guess or rumour, can certainly be a ground for issue of notice under section 147/148

Refer:[2018] 90 396 (Delhi)
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E-Assessment: CBDT Notifies Centralised Communication Scheme, 2018

In furtherance of Instruction No. 01/2018 dated 12th of February, 2018 issued by the CBDT regarding the conduct of electronic assessment proceedings, the CBDT has now notified the Centralized Communication Scheme 2018.

The Centralized Communication Scheme 2018 contains provisions for the electronic issuance of notices to taxpayers and prescribes the format in which the information and documents have to be furnished.

The notices to taxpayers will be issued by the centralized communication centre under Section 133C of the Income-tax Act, 1961 through email or by placing a copy in the registered account on the portal, followed by an intimation by short messaging service (SMS).

(Department Of Revenue )

New Delhi, the 22nd February, 2018

S.O. 771(E).—In exercise of powers conferred by sub-section (3) of section 133C of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following scheme for centralised issuance of notice, namely:—

1. Short title and commencement-(1) This scheme may be called the Centralised Communication Scheme, 2018.

(2) It shall come into force on the date of its publication in the Official Gazette.

2. Definitions.- (1) In this scheme, unless the context otherwise requires,—

(a) “Act” means the Income-tax Act, 1961 (43 of 1961);

(b) “Director General” means the Director General of Income-tax appointed under sub-section (1) of section 117 of the Act and authorised by the Board in this behalf;

(c) “Principal Director General” means the Principal Director General of Income-tax appointed under subsection (1) of section 117 of the Act and authorised by the Board in this behalf;

(d) “Designated authority” means the income-tax authority prescribed under sub-section (1) of Section 133C of the Act who is in charge of the Centralised Communication Centre;

(e) “Portal” means the web portal of the Centralised Communication Centre.

(2) The words and expressions used herein but not defined and defined in the Act shall have the meaning respectively assigned to them in the Act.

3. Issue and service of notice- (1) The Centralised Communication Centre shall issue notice to any person requiring him to furnish information or documents for the purpose of verification of information in his possession.

(2) The notice shall be issued under digital signature of the designated authority.

(3) The notice shall be served by delivering a copy by electronic mail, or by placing a copy in the registered
account on the portal followed by an intimation by Short Message Service.

(4) The information or documents called for under sub-paragraph (1) shall be furnished on or before the date
specified in the notice as specified in paragraph 4.

(5) The designated authority shall also run sustained campaign to ensure compliance by way of sending electronic mails, Short Message Service, reminders, letters and outbound calls.

4. Response to notice- (1) The Centralised Communication Centre may prescribe a machine readable structured format for furnishing the information or documents by the person in response to the notice issued under subparagraph (1) of paragraph 3.

(2) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) shall specify the procedure, formats and standards for furnishing response to the notices.

5. No personal appearance-No person shall be required to appear personally or through authorised representative before the designated authority at the Centralised Communication Centre in connection with any proceedings.

6. Power to specify procedure and processes-(1) The Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems) shall specify from time to time, procedures and processes for effective functioning of the Centralised Communication Centre, including the following matters, namely:-

(a) format and procedure for issue of notice;

(b) receipt of any information or document from the addressee in response to notice;

(c) mode and format for issue of acknowledgment of the response furnished by the addressee;

(d) provision of web portal facility including login facility, tracking status of verification, display of relevant details, and facility of download;

(e) call centre to answer queries and provide support services, including outbound calls and inbound calls seeking information or clarification;

(f) managing administration functions such as receipt, scanning, data entry, storage and retrieval of information
and documents in a centralised manner;

(g) grievance redressal mechanism in the Centralised Communication Centre.

[Notification No. 12/2018/F.No. 370142/22/2017-TPL]
NIRAJ KUMAR, Under Secy.
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Interest awarded under Land Acquisition Act forms part of compensation; not liable to tax

Interest awarded under section 28 of Land Acquisition Act is in nature of solatium and an integral part of compensation and receipt of same is a capital receipt whereas, interest awarded under section 34 of said act is on account of delayed payment of compensation and is revenue receipt exigible to tax

Refer:[2018] 90 285 (Pune - Trib.)
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Authority to promote and secure development of local areas was eligible for sec. 12AA registration

Authority to promote and secure development of local areas was eligible for section 12AA registration

Refer:[2018] 90 379 (Agra - Trib.)

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EPFO cuts interest rate to 8.55%. What does it mean for you?

The Central Board of Trustees (CBT) of the Employees Provident Fund Organisation (EPFO) has recommended a small reduction in the interest rate to 8.55% for the current year (2017-18) for EPFO holders. Last year, the interest paid was 8.65% to all EPFO holders.

This recommendation of 8.55% interest by the CBT will now be sent to the Ministry of Finance for approval and once approved by the Finance Minister, the interest will be credited to your EPFO account.

One missing piece in the gains passed to investors by EPFO has been the appreciation in the equity markets from its investments using ETFs (Exchange Traded Funds). Till 2014-15, EPFO used to invest only in fixed-income instruments. It started investing in ETFs in August 2015. Till now, the annual interest credited by EPFO every year is only on basis of interest from only the fixed income investments. The gains from the equity investments have still not been passed to EPFO investors as the methodology of how it should be done was under discussion. This year, as per reports, a small part of some of the ETFs have been sold to accrue the gains and this has been included in the interest rate. The debt component this year has been able a generate a return of only 8% and hence the EPFO has liquidated some of the ETFs (around Rs. 3700 cr) to accrue more gains so that the total interest rate for you could be 8.55%. However, this step in the current year seems like a stop-gap measure and a large part of the equity gains are still embedded in the investments and once the final methodology is implemented, you as an EPFO investor can benefit more.

The proposed methodology for passing on the gains from equity investments is as below and this will be implemented soon as this process has been approved by the CBT. Firstly, a cut-off date will be decided and only if you are an active EFPO member as on that date will the past equity gains will be accrued you. If you have withdrawn your EPFO balance before the cut-off date, you will not be eligible for this part. This is an important point for you to remember. As on the cut-off date, based on a formula approved, your EPFO account will be credited with units which you can withdraw, as and when you close your EPFO account.

The methodology which is based on the report of a committee led by IIM Bangalore and then operationalised with due inputs from CAG and another operational committee comprising of members from the fund management industry, CRISIL and EFPO representation has two parts viz. (a) NAV computation and (b) Units allotment to your EPFO account.

The important steps in this process are enumerated below:

1. The EPFO will announce the NAV of the composite ETFs held on a monthly basis, usually on the last date of the month.

2. The starting NAV will be Re. 1/- and the NAV will calculated upto 4 decimal places depending on the gains till date from the date of investment.

3. For the past investments i.e. from Aug 2015 till the cut-off date, units will only be credited to the EPFO accounts of holders who are active as on the cut-off date and have made contribution in the relevant prior period. If you have withdrawn or closed your account prior to the cut-off date, no units will be credited to your account.

4. On an ongoing basis, once implemented, based on the NAV, every month, your EPFO account will be credited with units on the last day of every month.

5. Your EPFO account statement now will have two parts – Debt component and the Equity component. The equity component will give you the details of the units to your credit, the NAV at which they were allotted and the current value of the same.

6. The units allotted to you will depend on your past cumulative contributions till the cut-off date proportionate to the overall ETF investments by EPFO and then on a monthly basis based on your contribution.

7. When you close your EPFO account in a particular, the units will be redeemed based on the NAV of the previous month in case the withdrawal needs are immediate and at the end of the month, if the withdrawal of same is needed after the computation of the NAV of that month.

The committee has suggested that since the contribution in the EPFO are more than the withdrawals, hence in normal cases there will be no need to sell the underlying ETFs and the withdrawals can be made from the incoming contributions. However appropriate accounting adjustments will be made to reflect the impact on the MTM (marked to market) reserves to correctly reflect the underlying value.

The above changes will require substantial changes in the accounting software of the EFPO for maintaining the unit balance of each subscriber and hence this will be implemented after making the appropriate changes and then the cut-off and implementation date will be announced by the EFPO.

As per EPFO, a total investment of over Rs. 32,298 crore was made till 31st Oct 2017. This would have crossed Rs. 40,000 cr till now with an underlying 20% gains or in that range at the current market levels. You will need to ensure that you continue to be a part of the EPFO if you want to partake of the equity gains that the EFPO has currently invested in.
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No Sec. 194H TDS on cash discount given to customers for purchasing goods in bulk

Cash discount given by assessee to its customers for purchasing goods in bulk quantity was in nature of discount in transaction of sale and, therefore, section 194H had no application to said transaction

Expenses claimed by assessee on account of cost incurred by it on repairs of goods which were returned back to it by its customers on account of low quality was directly connected with business activities of assessee and was to be allowed under section 37(1)

Where, during assessment proceedings, no details were furnished by assessee in respect of provision for doubtful debts claimed by it, but fresh details were filed by assessee before Commissioner (Appeals) who admitted same in contravention to provision of rule 46A, matter to be remanded back to Assessing Officer

Refer:[2018] 90 190 (Kolkata - Trib.)
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No protective additions in hands of shareholder if similar addition was made in hands of co. on substantive basis

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Refer:[2018] 90 175 (Delhi - Trib.)
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