Indian Income Tax: Updation10th September 16-Online filining of Appeal - Present System Options are not as per requirements

Removal of Shortcomings in filing online Income Tax Appeal:-
a. Appeal Staff needs Computer Training: To accept Online Appeals, Downloading, Verification, Acknowledgement to Appellant and Submission to Commissioner: 

b.Upto Five Chances to be provided to Appeallnts for Submissions:Supporting Documents are need to be provided in JPG/PDF FORMAT.This is must to upgrade your Appeal duly supported by recent case laws.

c. Number of Words to be provided in each submission upto10000(Ten Thousand). Further Internal restriction of Words like in Facts and  in Grounds of Appeal remove.

d. Therefore restriction to provide Upfront list of Documents & Evidences to be removed.

Precautions:- A.Intimation under Section 143-1 must be Compared with Computation and for any discrepancy Application under Section 154 must be filed.

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B. One of the Important Condition of Correct filing of Income Tax Return is Return must be filed in Applicable form only.
 

B.Central Board of Direct Taxes PRESS RELEASE DATED - 30-12-2015:Electronic filing of first appeal before CIT(Appeals): Electronic filing of appeal before CIT(Appeals) is being made mandatory for persons who are required to file the return of income electronically.


Error Free Service as Validations will be inbuilt resulting in fewer deficient appeals. 

Online Appeal filing will also facilitate fixation of hearing of Appeals Electronically.
The existing Form 35 for filing of First appeal is being substituted by a new Form. The new Format for filing of appeals is more structured, objective, systematic, and aligned with the current provisions of the Income-tax Act.


B. A detailed examination of the return of income filed by the assessee to check whether:

NOTICE:-Such notice shall be SERVED on the assessee within 6 months from the end of the financial year in which the return is furnished. It is interesting to note that if notice is SENT to assessee on the last day of the period of limitation of 6 months, but was SERVED on the assessee a few days after period of limitation, it is not a valid notice

1.    Income has been understated
- Any excessive loss has been computed

- Tax has been under-paid or not.
- The major emphasis of the Department is saving of  Loss of Revenue through Income Tax; The Assesse has not understated the Income,Have not computed Excessive Loss,or has not underpaid Income Tax in any manner: Therefore mainly following Areas are emphasized when the Cases are selected for Scrutiny:-

• Assessment must be completed within 24 Months from the end of the Assessment Year.

• To curb Recycle of Black Money through Share Capital root in Scrutiny Assessment emphasis is laid on:-

       Increase in Share Capital of a closely held    
       Company, Source of Such Share Capital 
       Section56(2)(viia) excluding Shares received  
       under Amalgamation and Merger. 
        Share Capital received without Cash/
        Inadequate consideration.
       Is there any benami transaction in the Share 
       Capital issued. 

       Under Valued Share Capital(below FMV-
       Fair  Market Value:is taxable in the hands of              Recipient .

       Therefore explain in detail Share Capital    
              Transactions till the end of this Assessment Year.

        The Share Capital need to be explained with 
       Supporting s of various ROC filing Bank-
       transactions etc.

• Figures already available with the Deptt. cross verification with Supporting Documents submitted during the course of Scrutiny Assessment.

 

• Increase or fall in Profitability % of the Company.Ascertainment of the Reasons of the same.Gross Profit as well as Net Profit of the Company both in numbers as well as%

     

• Concrete Reasons must be established in the   reply       for falling       GP and NP.

• Transactions more specifically Transactions above Rs.50000/- each in all the Bank Accounts.

      Such transactions are carried out in the Interest of

      the Company or not.

• Compliance's of Section 40,40A & 43-B are complied with or not.

 

• Vigorous follow up of TDS Provisions like TDS is correctly deducted : Deposited in Time and Quarterly Returns are correctly filed with accurate PAN numbers. TDS deducted and Deposited are matching. Further TDS deposited is matching with Quarterly TDS Returns.

•  As per requirement of Section 40a-Payment without deduction of TDS: Expenditures are not allowable.

• All Income Taxes including Advance Tax, Self Assessment Tax are correctly paid. In case of delay Income Tax under all Four Sub Sections of Section 234 are paid.

• Similarly Wealth Tax is correctly paid and Return is filed

• Various Claims of Expenditure are correct No Excess Claims in case of Section 35: Depreciation and others.

•  Reasons for increase/decrease in GP/NP rates

• Weighted deductions correctly claimed or not: Supporting from Monitoring Department is enclosed confirming that deduction claimed is correct

• Payments Expenses and Reimbursements to Related persons under Section 40A(2b) 

• Payments in Cash Exceeding Rs.20000/-40A(3)(a) read with Rule 6-D or otherwise than by Account Payee Cheque/ Demand Draft 

• Sec36: Family Planning;Bad & Doubtful debts: Contribution towards Provident Fund,Pension,Gratuity, and Staff welfare schemes. Interest on borrowed capital.Discount on zero Coupon bonds.

• Expenses under Section 37: not covered under sec.30 to 36,none of Capital,Personal,offensive & prohibited . Incurred in previous year for Business,

• Details of all Expenses(Residual) under Section 37(1) more specifically expenses above Rs.1Lac 

• Details under provisions of Section 68-Cash Credits,69-Unexplained Investments,69A to 69D Unexplained Money,  Undisclosed Investments, Unexplained Expenditures, Amount borrowed or repaid on Hundi. These details must be with complete address,PAN numbers to be provided

•   To obtain Confirmation of Accounts from Suppliers Section133(6)is applicable. The LAO is 

      is asking for Addresses and Contact particulars.

•  Whether Penalties levied under any Statutory Act is claimed as Expenses-always disallowed under Income Tax Act.

• Whether Interest on TDS is claimed as Expenses- same is always dis allowable.

• Whether Scrap value of Fixed Assets sold is reduced from WDV of the Block or not.

• Always verify in detail 26 AS with Computation and Income Tax Return before moving to reply various queries of Assessing officer.This 26 AS is also containing Recoveries on   account of TDS.

• Section 14A Expenditure incurred in relation to Income not included in Total Income.

• Expenditure incurred and Claimed without any benefit to the Assessee." To establish "Commercial Expediency" before the Assessing Officer(Superme Court in the Case of S.A.Builders).  

• Expenses claimed under Section36 like Interest on Borrowed Capital, Payment to Employees. Payment to Employees welfare funds etc.

 

• Normally Scrutiny Assessment results in Ist Appeal or at times even 2nd Appeal i.e. with ITAT.therefore the replies of Assessing Officer's queries must be submitted with complete documentation: That would also be useful at Appeal-Stage. 

•  Purchase/Sale of Immovable Property:-In this case TdS would be applicable under section 194IA.

• Foreign Tour Expenses incurred Whether for Company's Work or for Personal purpose: Supporting confirming that Expenses are incurred only for Business trip; Supporting like invitation to visit country etc. 

•  Exemptions claimed under Chapter VIA: 80IA to 80IC is verified in detail based on following documents:- 
• The deduction must be based on Audited Balance Sheet of the Individual Unit(s) and Form 10CCB

      need to be enclosed.

• Delay in depositing Advance Tax or delay in Filing Income Tax return need to be explained in detail.

• More than 3year old Debtors and Creditors need to be explained with reasons along-with PAN numbers.

• Contribution to Political Parties under section 80GGCmust be supported with Receipt. 

• Interest under all Four Sub Sections of Section 234 must be paid.

• Whether Minimum Alternate Tax is correctly paid or not & Audit Report in Form 29B need to be submitted. 

•  Concealment penalty under Section 271-1(c) is applicable or not:

• Peculiar Problem of Pharma Companies: Claim of Expiry and Breakages of the Products: The Pharma Products are having a Fixed shelf Life. As soon as Shelf Life is over the Products cannot be sold in the Market.Expiry Rules and Regulations are framed by IDMA. Therefore under all circumstances the Products need to be replaced free. 

     When New Products are Launched it takes some 

     to get the Product accepted in the Market. Even 

     branded goods sometimes expired. therefore such

     claim on account of Expiry of goods must be 

     accepted.

• Investment in Loan to Sister Concern:- It must be established that the Company is having sufficient Funds in hand and have therefore invested to meet Business exigencies and commercial expediency(SA Builders).

     If the Assessee is able to establish that Increase 

     in Share Capital and Increase in Reserves have 

     resulted in Cash Accrual of the Company and the 

     Company is having sufficient Cash in hand. 

• Where an assessee fails to comply with a notice under Section 143(2), the penalty is fixed at      Rs. 10,000 for each such failure. This is specified in Section 271(1)(b).

• Notice u/s 143(2) has been issued, proceedings for rectification u/s 154 of intimation u/s 143(1) can’t be initiated.

• Where an assessment order u/s 143(3) is passed without issuing a notice to assessee u/s 143(2), the said order is invalid –

C.Depreciation Powerful Tool for Income Tax Planning:-
   

• Energy Saving Devices:

•     Pollution Control Equipments 

    Above Two are getting Higher Rate of depreciation.

•   When Civil Construction of the Plant is carried out        as per requirement of the Machinery. Separate            HVAC, Inbuilt Air Locking System, Separate                Enclosures and as per requirement of the                    Machinery such Civil-Construction must be                  treated        as Plant.
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