CONTENTS
Chapter 1—Introduction Objective of Scrutiny Assessment……………………………………………………….. 1
Procedure of assessment under section 143(1) ………………………………………………1
Procedure of assessment under section 143(3) ………………………………………………2
Sections dealing with Income-tax Scrutiny assessment proceedings……………..2
Chapter 2—Return of Income [Section 139] What is Income-tax Return (ITR)………………………..4
Purpose of Income-tax return………………………………………………………………………..4
Benefits of filing of income-tax return …………………………………………………………..4
Different modes of filing the return of income………………………………………………4
Who can file ITR manually (i.e., paper returns) …………………………………………….5 [1]
Obligation to File Return of Income [Section 139(1)]……………………………..7 [2]
Return of loss [Section 139(3)] ……………………………………………………………….9 [3]
Belated return [Section 139(4)]……………………………………………………………..11 [4]
Return of Income of Charitable Trusts and Institutions [Section 139(4A)]…………………………12 [5]
Return of Income of Political Parties [Section 139(4B)]…………………………14 [6]
Furnishing of ITR of certain entities claiming income-tax benefits under Section 10 [Section 139(4C)…………………………………………..14 [7]
Return by University, College or other institution [Section 139(4D)]……16 [8]
Return by Business trust [Section 139(4E)]…………………………………………..17 [9]
Return by investment fund [Section 139(4F)]……………………………………….17 [10]
Revision of return [Section 139(5)]……………………………………………………….17 [11]
Updated Return [Section 139(8A)]……………………………………………………….21 [12]
Defective return [Section 139(9)]………………………………………………………….24 [13]
Return of income under section 170A [Rule 12AD of Income-tax Rules, 1962]……………………………..27
Chapter 3—Condonation of delay in filing of return of income [Section 119(2)(b)] Genuine hardship’ as occurring in section 119(2)(b) of the Income-tax Act, 1961…………………………33
Authorities who can grant or reject such condonation applications…………….35
Conditions prescribed for Acceptance/Rejection of Income-tax Refund Claim………………….35 (x)
CONTENTS Supplementary (Additional) Claim of Income-tax Refund after completion of assessment…………………………………………………………………….36
Remedy to an assessee against order under section 119(2)(b) ……………………..36
Time limit for filing Application………………………………………………………………….36
Time limit for processing Application…………………………………………………………37
Extended Time limit for Filing Application…………………………………………………37
Where to file return under section 119(2)(b)………………………………………………..37 Procedure of Condonation Request for filing ITR after time-barred ……………37
Specimen of Application for condonation of delay in filing of return claiming refunds exceeding Rs. 50,00,000…………………………………………….38
Chapter 4—Permanent account number [Section 139A] Application for allotment of a permanent account number [Rule 114]………..77
Penalty for failure to comply with the provisions of section 139A [Section 272B]…………..89
Applicability of penalty provisions of section 272B …………………………………….90
PANs are issued without de facto verification, these cannot solely divulge real identity of individual……………………………………………………….97
Chapter 5—Quoting of Aadhaar Number [Section 139AA] Fee for failure to intimate Aadhaar number [Section 234H] ………………………101
Nature of default……………………………………………………………………………………….101
How much fee is levied?……………………………………………………………………………102
Time of payment ……………………………………………………………………………………….102
Chapter 6—Scheme for submission of returns through tax return preparers [Section 139B] Text of Section 139B…………………………………………………………………………………..106
Chapter 7—Power of Board to dispense with furnishing documents, etc., with return [Section 139C]. 116
Chapter 8—Filing of return in electronic form [Section 139D]…………. 117
Chapter 9—Return by whom to be verified [Section 140A] ……………… 119
Who can verify and sign? ………………………………………………………………………….120
Prescribed person for the purposes of clause (c) and clause (cd) of section 140 [Rule 12AA]…….123
Chapter 10—Self-assessment [Section 140]……………………………………….. 130
Assessee is not entitled to interest under section 244A on refund of excess-self assessment tax deposited by assessee under section 140A voluntarily……………………133
CONTENTS (xi) Assessee would be entitled to interest under section 244A(1)(b) on amount of refund which was deposited by it by way of selfassessment tax under section 140A………….133
Refund arising on account of self-assessment tax is eligible for interest…….134
Chapter 11—Tax on updated return [Section 140B]…………………………… 138
Chapter 12—Provisional assessment {Section 141] …………………………… 141
CBDT Letter F. No. 9/30/66-IT(A-I), Dated 13.02.1967 ……………………………..142
Chapter 13—Provisional assessment for refund [Section 141A] Under section 141A,
ITO is only empowered to pass an order granting refund to assesses and not an order demanding any tax ……..150
Chapter 14—Power of Assessing Officer to make enquiry before assessment [Section 142]
Purpose of Notice under section 142(1)……………………………………………………..152
Notice under section 142(1)(i) to the Assessee to file return of income [Section 142(1)(i)]………153
Notice to the Assessee under Section 142(1)(ii) to produce, or cause to be produced, such accounts or documents as the Assessing Officer may require [Section 142(1)(ii)]………………………………………………153
Making Inquiry- Empowers him to collect information from sources other than the assessee [Section 142(2)] ……………………………………………..158
Giving Opportunity of being Heard [Section 142(3)]…………………………………158
Madras High Court quashes section 142(1) notice issued giving only one working day time to respondent …………………………………………………163
Co-operative societies being persons, can be issued notices under section 142(1) for furnishing certain information……………………………….163
Documents/information required must be specified in the body of the notice itself……………………………………………………………………………….163
Chapter 15—Special audit before assessment under Income-tax Act provisions [Section 142(2A), 142(2B), 142(2C), 142(2D), 142(3)) and 142(4] Giving direction to get Books of Account Audited [Section 142(2A)] ………..167 Direction of audit can be given even if the accounts are already audited under the Income-tax Act or under any other law [Section 142(2B)] ……….169
Form and time limit for submission of report [Section 142(2C)] ………………..169
Expense for Special Audit required to be paid by the Department [Section 142(2D)]………………………………………………………………………………..170
Chapter 16—Estimate of value of assets by Valuation Officer [Section 142A] Reference by Assessing Officer to the Valuation Officer for estimate of the value including fair market value of any asset, property, or investment [Section 142A(1) and (2)]……………………………………………..188
Power of Valuation Officer and procedure to make the estimate of the value of the asset, property or investment [Section 142A(3), (4) and (5)]………………………………………………………………188
Time period of submitting valuation report [Section 142A(6)]…………………..188
Assessing Officer may take such report into account in making assessment or reassessment [Section 142A(7)]……………………………………188
Specimen order of referenceto the Valuation Officer…………………………………189
Chapter 17—Faceless inquiry or valuation [Section 142B] Faceless inquiry or valuation [Section 142B]………………………………………………208
Purpose of Scheme…………………….209
Issue of directions ……………………………………………………………………………………..209
Faceless Inquiry or Valuation Scheme, 2022 ………………………………………………209
Chapter 18—Processing of an income-tax return – Scope of adjustments under section 143(1) [Section 143] …………………………. 211
Scope of adjustments to be made under section 143(1)(a)………………………….211
An incorrect claim, if such incorrect claim is apparent from any information in the return [Sec-tion 143(1)(a)(ii)]…………………………………214
Meaning of ‘prima facie’ ……………………………………………………………………………215
Remedy available………………………………………………………………………………………215
Chapter 19—Scrutiny notice under section 143(2) Time limit for issuance of notice under section 143(2)……………………………….252
Consequences of not complying with the notice issued under section 143(2)…………252
Revised format of Issue of notices under section 143(2) of Income-tax Act, 1961…………..255
Limited Scrutiny (Computer Aided Scrutiny Selection)…………………………….255
Complete Scrutiny (Computer Aided Scrutiny Selection)………………………….256
Compulsory Manual Selection…………………………………………………………………..257
Non-issuance of Section 143(2) notice, ‘foundational infirmity’ & fatal to reassessment…………..267
No section 143(2) notice requirement if no valid return filed by Assessee………………268
Chapter 20—Scrutiny Assessment [Section 143(3)] Assessee needs to establish genuineness of the expenditure and that expenditure was incurred wholly and exclusively for the purpose of the business of the assessee ………………………………………..280
Quashes assessment framed by Addl. CIT/ JCIT but initiated by ACIT, in absence of orders under Sections 120(4)(b) & 127 ………………..282
Income-tax proceedings cannot continue against corporate debtor during pendency of insolvency proceedings ……………………………………..283
Draft order coupled with demand, penalty notice not final assessment order where Section 144C regime duly followed ……………………………….284
CIT cannot direct Assessing Officer to add items to compute book profit for MAT without giving a reference of empowering provision……………………………………………………………………………………………285
Chapter 21—Best judgment assessment [Section 144] Reasons for Best Judgment Assessment ……….288
Assessing Officer to record finding of non-compliance ……………………………..290
Requirement of giving an opportunity – When may be dispensed with [Second proviso to section 144(1)] ……………………………………………..290
Power to reject the books of accounts by the Assessing Officer is to be exercised judicially………..290 Opportunity to the assessee……………………………………………………………………….291
Chapter 22—Concept of Protective Assessment Why protective assessments ?………………………317
Object of a protective assessment………………………………………………………………318
Protective assessment is a precautionary assessment ………………………………..318
For making substantive or protective addition satisfaction of the same Assessing Officer is necessary ……………………………………………………………318
For substantive and protective addition, income must accrue or arise and must be received or receivable ……………………………………………………318
Addition of deemed income cannot be made on protective basis………………319 Where substantive addition is confirmed, protective addition cannot survive……………………………319
Nature of income does not change in case of substantive/protective addition………….319
No Protective Recovery on Protective Assessment ……………………………………320
Chapter 23—Power of Joint Commissioner/Additional Commissioner to issue directions in certain cases—[Section 144A] Scope of the sections and procedure there under……………………………………..334
Conditions to be satisfied before invoking section 144A……………………………334
Provisions of section 144A come into play:………………………………………………..335
Direction once issued is binding on the Assessing Officer…………………………335
Chapter 24—Faceless Assessment [Section 144B] Introduction of Faceless Assessment……….348
Faceless Assessment System ……………………………………………………………………..348
Changes made in Section 144B by Finance Act, 2022, with effect from 01.04.2022……………349
Introduced faceless schemes extended to 31.03.2024………………………………….349
CBDT excludes survey cases from Section 144B, transfers them to Central Charges with exception of International Tax cases ………………..350
Chapter 25—Scheme of faceless assessment with 32 steps [Section 144B(1)] Remands assessment for ‘strict compliance’ of Section 144B(1)(xvi) procedure…………………………360
Chapter 26—Scope/Cases to be handled under Faceless Assessment Scheme prescribed by CBDT [Section 144B(2)] Cases are covered under section 144B(2)……………………………………………………362
Cases are outside the scope of the Faceless Assessment regime…………………362
Chapter 27—Centres and Units [Section 144B(3)] ………………………………..365
Chapter 28—Composition of various units [Section 144B(4)]……………..367
Chapter 29—Defines about how all communications in faceless assessment centre shall be exchanged exclusively by electronic mode [Section 144B(5)]…………………………………………………..368
Chapter 30—Internal and external communications through electronic mode [Section 144B(6)]…………………………………………………..369
Less than two days’ time for responding to Section 144B show cause notice, inadequate & illusory……………………………………………………………..370
Chapter 31—Discuss about special audit case [Section 144B(7)] ………..372
Chapter 32—In exceptional case, transfer to jurisdictional Assessing Officer [Section 144B(8)]……………………………………………….373
Chapter 33—Assessment not made in accordance with the scheme – bad in law [Section 144B(9)] Now omitted by the Finance Act, 2022, with retrospective effect from 01-04-2021…………………………………………..377
Chapter 34—Standard Operating Procedure (SOP) for Faceless Income-tax Assessment under Section 144B [dated 03.08.2022] National Faceless Assessment Centre, Delhi Letter F. No. NaFAC/Delhi/CIT-1/2022-23/112/92/, dated 03.08.2022………………..380
Subject: Standard Operating Procedure (SOP) for Assessment Unit (AU) Under the Faceless Assessment provisions of Section 144B of the Income-tax Act…………………………………………………………………………………..380
Chapter 35—Reference to Principal Commissioner or Commissioner in certain cases [Section 144BA] Reference by Assessing Officer to PCIT/CIT [Section 144BA(1)]……………….405
Formation of opinion by PCIT/CIT [Section 144BA(2)]……………………………..405
No objection is furnished by the assessee [Section 144BA(3)]…………………….406
PCIT/CIT is satisfied by reply of assessee [Section 144BA(5)]……………………406
Opportunity of being heard by Approving Panel [Section 144BA(7)]………..406
Opinion of majority of members of Approving Panel [Section 144BA(9)] …………………….406
Prior approval of PCIT/CIT before passing of order by Assessing Officer [Section 144BA(12)]……………406
No Appeal under Income-tax Act against directions of Approving Panel [Section 144BA(14)]…….407
Section 144BA(15) to (21) …………………………………………………………………………..407
Chapter 36—Reference to Dispute Resolution Panel [Section 144C] Applicability of Draft Assessment Order…………………………………………………..417
Eligible assessee[Section 144C(15)(b)]………………………………………………………..417
Matters to be considered by DRP ………………………………………………………………417
Time limit for issuing directions and passing an order ……………………………..417
Documents/information to be submitted along with Form 35A………………..418
Income-tax (Dispute Resolution Panel) Rules, 2009 …………………………………..418
Chapter 37—Method of Accounting [Section 145] What is Method of Accounting………….434
Methods of Accounting Recognized………………………………………………………….435
Apex Court’s Observation on recognized methods……………………………………435
What are Books of Account? ……………………………………………………………………..435
Choice and Change in the Method of Accounting……………………………………..436
Assessee has the choice on method, but such method should be shown as regularly followed ……….436
Only two systems of accounting recognised now………………………………………438
Cash system ………………………………………………………………………………………………438
Mercantile System……………………………………………………………………………………..440
Benefits of Mercantile System ……………………………………………………………………440
Valuation of Closing Stock ………………………………………………………………………..441
Difference between Cash Method of Accounting and Mercantile method of Accounting ……………………………………………………………………….442
Income Computation and Disclosure Standards (ICDS) [Section 145(2)]………………442
Constitutional Validity of ICDS…………………………………………………………………443
Aim of notified standards – Transparency in financial statements …………….443
Rejection of Books of Accounts [Section 145(3)]…………………………………………452
Assessing Officer’s Power to Reject Accounts ……………………………………………453
A clear finding is necessary before invoking the Section 145(3) of the Act………… 454
Power to be exercised judicially…………………………………………………………………455
Justification for rejection ……………………………………………………………………………456
Power of the Assessing Officer to estimate profits …………………………………….456
Comparing gross profit of earlier years……………………………………………………..456
Estimate of turnover………………………………………………………………………………….457
Peak credit…………………………………………………………………………………………………457
Reference to Valuation Officer…………………………………………………………………..457
Chapter 38—CBDT – Notification No. 87/2016, dated 29.09.2016
Annexure A—Income Computation and Disclosure Standard I relating to accounting policies……506
Annexure B—Income Computation and Disclosure Standard II relating to valuation of inventories……508
Annexure C—Income Computation and Disclosure Standard III relating to construction contracts…….513
Annexure D—Income Computation and Disclosure Standard IV relating to revenue recognition …….517
Annexure E—Income Computation and Disclosure Standard V relating to tangible fixed assets ……. 520
Annexure F—Income Computation and Disclosure Standard VI relating to the effects of changes in foreign exchange rates………………..523
Annexure G—Income Computation and Disclosure Standard VII relating to government grants ……….527
Annexure H—Income Computation and Disclosure Standard VIII relating to securities ……………..529
Annexure I—Income Computation and Disclosure Standard IX relating to borrowing costs………..532
Annexure J—Income Computation and Disclosure Standard X relating to provisions, contingent liabilities and contingent assets …….535
Chapter 39—Method of accounting in certain cases [Section 145A]………………………………..539
Chapter 40—Taxability of certain income [Section 145B] ……………………545
Chapter 41—Re-opening of assessment at the instance of the assessee [Section 146] [Omitted by Direct Tax Laws (Amendment) Act, 1987, with effect from 01.04.1989] ………………………….546
Chapter 42—Income Escaping Assessment [Section 147] Scope and effect of section 147 as substituted by the Finance Act, 2021 …….553
Chapter 43—Issue of notice under section 148 where income has escaped assessment [Section 148] Consequences of not complying with the notice issued under section 148………………..572
Guidelines for issuance of notice under section 148 of the Income Tax Act, 1961 [CBDT Letter F. No. 299/10/2022-Dir (lnv.III)/611, Dated: 01.08.2022]………………………….573
Substituted service of Section 148 notice without having due diligence for locating assessee is not valid …………………………………………590
Reassessment notice issued for wrong Assessment year cannot be corrected by issuing letter of corrigendum…………………………………………590
Chapter 44—Conducting inquiry, providing opportunity before issue of notice under section 148 [Section 148A] Guidelines for pre-notice procedure under new reassessment regime as amended by the Finance Act, 2022 …………………………………….603
Conducting Inquiry [Section 148A(a)]……………………………………………………….604
Granting an opportunity of being heard [Notice under Section 148A(b)]…………………………………………………………………………………604
Notice under Section 148A(d)……………………………………………………………………604
Procedure under section 148A is not applicable [Proviso to Section 148A] [Exception] ……….605
Where the Procedure under section 148A is required/not required to be followed………………605
Chapter 45—Prior approval for assessment, reassessment, or recomputation in certain cases [Section 148B] Prior Approval of superior authority before passing of the order of assessment, reassessment or recomputation………………………………………649
National Faceless Appeal Centre (NFAC) is bound to follow the circulars of the Central Board of Direct Taxes (CBDT)……………………….650
Chapter 46—Time limit for issue of notice under section 148 {Section 149] Years where limitation has expired under the old regime cannot be reopened under the new extended time limit [First proviso to Section 149]………………………………………………………………………………………..655
Searches taking places on or before 31.03.2021 would be continued to be governed by Section 153A and 153C [Second proviso to Section 149]………………………………………………………….655
Time Exclusion in case of Search/Requisition/Survey Action conducted after 15th March of a financial year [Third proviso to Section 149(1)] …………………………………………………………………..655
While calculating the limitation period as per section 149, the time allowed to respond under section 148A(b) (7 to 30 days or extended time) and if the proceedings under section 148A are stayed by any Court, period of operation of such stay is required to be excluded [Fourth proviso to Section 149]…………………….656
Extend the limitation period so as to provide atleast 7 days to Assessing Officer for passing Section 148A(d) order [Sixth proviso to Section 149(1)]…………………………………………………………656
Reopening assessments for multiple years [Section 149(1A)]…………………….656
Chapter 47—Provision for cases where assessment is in pursuance of an order on appeal, etc. [Section 150] Finding or direction (Section 149)………………………………………………………………664
Extension of Time for issue of Notice ………………………………………………………..665
Exceptions to time limits given in section 149(1) ……………………………………….665
Section 150 overrides section 149(2) also, section 151 is not applicable where section 150 applies…………………………………………………………………..665
Chapter 48—Sanction for issue of notice under section 148 [Section 151A] Approving Authority [Clause (ii) of Section 151] ………………………………………677
Competent sanctioning authority to issue notice under section 148…………..678
Chapter 49—Faceless Assessment of Income Escaping Assessment [Section 151A] CBDT Notification No. 18/2022, dated 29.03.2022 on e-Assessment of Income Escaping Assessment Scheme, 2022……..683
Chapter 50—Other Provisions [Section 152] Tax rates for the assessment year [Section 152(1)]………684
Assessment year 2017-18 or subsequent year as per section 115BBE………….685
Dropping of Proceedings [Section 152(2)]………………………………………………….686
When can the reassessment proceedings under section 147 be dropped [Section 152(2)]……….686
When real income is not more than the total income proposed to be assessed [Section 152(2)]……….687
Chapter 51—Time limit for completion of assessment, reassessment and recomputation [Section 153] Periods of Limitation in Brief…………………………………………………………………….696
Chapter 52—Assessment in case of search or requisition [Section 153A] Proviso to section 153A(1)….712
Abatement of Assessment Proceedings [Second Proviso to Section 153A(1)]………….712
No separate form prescribed for filing return of income in pursuance of notice under section 153A….712
Returns filed deemed to be filed under section 139……………………………………713
Six Assessment Years in respect of Section 153A……………………………………….715
Notice under section 153A can be issued to the assessee in whose name warrant is executed or requisition is made……………………………….715
Abated proceedings revive if assessment under section 153A is annulled [Section 153A(2)]………717
When the commencement and conclusion of search falls in two different financial years …………….717
Kind of additions can be made in the case of assessment/reassessment pursuant to notice under section 153A ………………………………………………717
Chapter 53—Time-limit for completion of assessment under section 153A [Section 153B] Time limit for passing assessment order under section 153A [Section 153B]………………………..736
Time limit for passing assessment order under section 153C [Section 153B]…………………………………………………………………………………….737
Where the time limit available with the Assessing Officer is less than 60 days after exclusion of the aforesaid period [Proviso to Section 153B]………………………………………………………………………………….739
Old provisions of section 153B shall be applicable in certain cases [Section 153B(3)] ………………………………………………………………………………..739
Chapter 54—Assessment of income of any other person [Section 153C] Assumption of jurisdiction under section 153C …………………………………………742
As per provisions of Section 153C, the other person is also required to be assessed or reassessed for earlier six years ………………………………..742
Conditions for making assessment of other persons under section 153C………………………742
Recording satisfaction ……………………………………………………………………………….743
No time limit prescribed for issuing notice under section 153C…………………743
Prior Approval of Joint/Addl. Commissioner is required …………………………743
Chapter 55—Prior approval necessary for assessment in cases of search or requisition [Section 153D] Siphoning off of funds by founder-Approval given on same day by Additional Commissioner Stationed 250 Kms. away from Assessing Officer’s Office – No record regarding movement of files – Approval given without application of mind – Assessment null and void……………………………………………………………………………………..769
Provisions of section 153D do not require any opportunity of hearing to be given to assessee by authority who has to approve draft assessment order passed by Assessing Authority ……….770
An assessment order under section 153C can be passed by Assessing Officer only after obtaining prior approval under section 153D of Joint Commissioner……………………………………………………………………….771
Chapter 56—Rectification of mistake [Section 154] [1] Order which can be rectified under section 154 – Mistake apparent from record [Section 154(1)]……………………………………………………………….774
[2] Where if any matter has been considered and decided in any proceeding by way of appeal or revision, contained in any law for the time being in force, such order shall not be amended [Section 154(1A)]………………………………………………………………………………..775
[3] Who can make application for rectification of mistake under section 154 of Income-tax Act, 1961 to authority concerned? [Section 154(2)]…………………………………………………………………………………..775
[4] Opportunity of being heard where income is to be increased or loss to be decreased, refund claimed is to be reduced or tax liability is to be increased [Section 154(3)]………………………………………….776
[5] Where an amendment is made under this section, an order shall be passed in writing by the income-tax authority concerned [Section 154(4)]…………………………………………………………………………………..776
[6] Refund can be allowed on basis of rectification order under section 154 where any such amendment has the effect of reducing the assessment [Section 154(5)]……………………………………………776
[7] Notice of demand is required to be issued in case of amendment is carried out under section 154 where any such amendment has the effect of enhancing the assessment or reducing a refund already made [Section 154(6)]…………………………………………………………………………776
[8] No amendment under this section shall be made after the expiry of four years from the end of the financial year in which the order sought to be amended was passed [Section 154(7)] ………..776
[9] Time limit for passing rectification order [Section 154(8)] ………………….777
Chapter 57—Other amendments [Section 155] Relief to sugar co-operatives from past demand [Section 155(19)] …………….815 Credit Mismatch – Facilitating TDS credit for income already disclosed in the return of income of past year [Sections 155(20), 244A]……………………………………………………………………..816
Chapter 58—Notice of Demand [Section 156] What is Demand Notice? ………………………820
No time limit prescribed for service of the notice of demand…………………….821
Time Limit for payment of tax specified in demand notice………………………..821
In appropriate cases the Assessing Officer may reduce the said period of 30 days with the approval of JC/Addl. CIT………………………..821
If there is enhancement of demand……………………………………………………………822
If there is reduction of demand………………………………………………………………….822
Form of notice of demand………………………………………………………………………….823
Assessing Officer’s power to curtail the period of payment of 30 days ………………………………….832
Chapter 59—Modification and revision of notice in certain cases [Section 156A]………..836 Background……………………………………………………………………………………………….836
Modifying Demand Orders in Insolvency Resolution Processes ……………….838
Dismisses appeal for non-impleadment of Interim Resolution Professional (IRP); Remarks on demand modification, per Section 156A ………………………………………………………………………………..838
Chapter 60—Intimation of loss [Section 157] ……………………………………….840
Chapter 61—Faceless rectification, amendments and issuance of notice or intimation [Section 157A]…………………………………..844
Chapter 62—Notice deemed to be valid in certain circumstances [Section 292BB] Background……………………………………………………………………………………………….846
Text of Section 292BB…………………………………………………………………………………847
Ingredients of section 292BB ……………………………………………………………………..847
Section 292BB provides a deeming fiction………………………………………………….848
Section 292BB incorporates principle of estoppel ………………………………………848
Chapter 63—Limited scrutiny cases Procedure for handling ‘Limited Scrutiny’ cases………859
Conversion of Limited Scrutiny into Complete scrutiny in case potential escapement of income exceeds Rs. 5/10 lakhs …………………….859
Formation of reasonable view……………………………………………………………………859
Procedure on conversion into Complete Scrutiny ……………………………………..860
Chapter 64—Complete scrutiny cases Examples of some areas requiring Deeper Scrutiny………..872
Income-tax department cannot carry out any scrutiny Assessment of Corporate debtor for period covered by resolution plan ……………………872
Chapter 65—Guidelines for compulsory selection of returns for complete scrutiny CBDT Letter F. No. 225/81/2022/ITA-II, Dated 26.09.2022……………………….874
CBDT Letter F. No. 225/61/2021/ITA-II, 10.06.2021 – during the Financial Year 2021-22 ……………………………………………………………………….880
CBDT Letter F.No.225/126/2020/ITA-II, Dated 17.09.2020……………………….882
Chapter 66—Framing of Quality Assessments Natural Justice and Assessment Procedure ……………………………………………….886
Initiatives taken by the CBDT to improve the quality………………………………..888
Chapter 67—High pitched income-tax assessments What is high pitched assessment? ……………………………………………………………..889
Wanchoo committee report—Reasons for arrears ……………………………………..889
Reasons for High-Pitched Assessments……………………………………………………..889
Role of professionals………………………………………………………………………………….890
Availability of recourses with the assessee in High Pitched Assessments under Income-tax Law ………………………………………………….890
Application to the Local committee for high pitched scrutiny assessment…………………………………………………………………………………………890
Norms for constitution of Committee to deal with taxpayers’ grievance from high pitched assessments ………………………………………….891
Chapter 68—Concept of “Real Income Theory” under Income-tax Laws Real income theory…….911
Real income and accrual of income……………………………………………………………911
Real income and Statutory Provisions ……………………………………………………….914
Income accrued must be considered from a realistic & practical angle………917
‘Statutory levy’ could not be equated as the ‘real income’ of the assessee ……………….919
Income-tax is a tax on real income …………………………………………………………….920 I
ncome-tax cannot be levied on hypothetical income ………………………………..920
What is to be subject for taxation is only real income over which the assessee possesses a right and not any other thing …………………………….920
Chapter 69—Principles of cross-examination in income-tax proceedings What is Cross-Examination? ……………………………………………………………………..923
Section 3 of Indian Evidence Act, 1872 ………………………………………………………923
Types of Evidence ……………………………………………………………………………………..923
Rules of Evidence –Cross-examination………………………………………………………924
Addition under Section 69C Bogus purchases – No opportunity provided to assessee to cross-examine the witness…………………………….929
Demand could not be set aside solely on ground of denying permission to cross-examine witness…….930
Burden was on assessee …………………………………………………………………………….931
Principles of natural justice and cross-examination …………………………………..933
Statements without cross-examination become legally fragile, deletes bogus diamond purchases disallowance………………………………..934
Opportunity for cross examination – Entire order cannot be set aside ……….937
Principles of Natural justice and Cross Examination in the Income Tax Proceedings…………….939
Cross-examination is must where Assessing Officer relies upon only on the statement of the Third Party unconnected with the appellant………………………………………………………………………………………940
Principles of natural justice are applicable to the proceedings under the Income-tax Act …………………………………………………………………………….942
Subsequent explanations cannot sustain a decision …………………………………..943
Chapter 70—Admissibility of circumstantial evidence in income-tax proceedings Meaning of evidence………………………………………………………………………………….944 Evidence – Direct Evidence ……………………………………………………………………….944
Circumstantial evidence…………………………………………………………………………….944
Circumstantial evidence how to be used……………………………………………………945
Conditions – Circumstantial Evidence ……………………………………………………….946
Assessing Officer should have ‘reason to believe’ that income chargeable to tax has escaped assessment………………………………………….947
A circumstantial evidence whenever used has to be conclusive in nature……………….947
Totality of circumstances must be considered in circumstantial evidence …………….951
Chapter 71—Theory of the test of human probabilities and surrounding circumstances and its applicability to the provisions of Income-tax Act, 1961 Revenue can look into the surrounding facts and circumstances to determine genuineness of a transaction……………………………………………..954
Surrounding circumstances and test of applying human probabilities………954
Despite lack of direct evidence, tax evasion can be assessed ……………………..965
Onus to prove that the apparent is not real is on the party who claims it to be so……………..968
Assessment could not be based on background of suspicion and in absence of any evidence to support the same …………………………………….969
No addition can be made on the basis of surmises, suspicion and conjectures …………………………………………………………………………………………970
Chapter 72—Theory of telescoping in determining the taxablity of undisclosed income What is theory of Telescoping……………………………………………………………………971
Brief background of Telescoping……………………………………………………………….972
Manner of application of the theory of telescoping……………………………………973
Income of one person can be telescoped in the hands of another ………………973
Benefit of Telescoping while making addition under Section 69C……………..974
Assessee to get benefit of telescoping if there were cash deposits and withdrawals of almost equal amounts ……………………………………………….974
Grants telescopic benefit against income offered during search; Deletes addition under section 69 on unaccounted land purchase …………………975
Addition under section 68 – Whether cash credits be deemed to have origin in the added income ………………………………………………………………..981
Same income cannot be taxed under two different heads ………………………….984
Income-taxed in earlier year telescoped to subsequent year………………………985
One type of income already taxed could be telescoped into another …………986
Telescoping – Income to investment and income to expenditure ………………986
Assessee to prove that it is income from the source which has already been taxed…………..988
Onus of proving the source of a sum of money found to have been credited by the assessse…………..990
Chapter 73—Concept of principle of natural justice in income-tax proceedings Basic principles of natural justice ………………………………………………………………992 Adjournments……………………………………………………………………………………………992
Situations of violation of principles of natural justice in taxation laws………992
Rule against bias………………………………………………………………………………………..993
Right to fair hearing…………………………………………………………………………………..995
The approach of the income-tax authorities shall not be unreasonable ……1001
Proper service of notice……………………………………………………………………………1001
Opportunity of being heard …………………………………………………………………….1002
Right to inspection of records ………………………………………………………………….1004
The government authorities must act in a fair and not partisan manner….1004
The assessing authority shall not be biased ……………………………………………..1004
An Order shall be a speaking order…………………………………………………………1004
Chapter 74—Cardinal principles of interpretation of taxing statutes
[1] Literal rule of interpretation : Language of Statute should be read as it is …………………………1014
[2] Strict rule of Interpretation – Words to be construed strictly…………….1016
[3] The Golden Rule : Purposive interpretation …………………………………….1018
[4] Harmonious Interpretation………………………………………………………………1019
[5] Rule of beneficial construction …………………………………………………………1020
[6] Rule of Ejusdem generis or noscitur a sociis …………………………………….1022
[7] The Mischief Rule of Interpretation (Heyden’s rule)………………………..1023
Chapter 75—Understanding certain legal terms Casus omissus: means “cases of omission”………………………………………………1027
Objective of Income-tax Act, 1961 ……………………………………………………………1037
Ratio decidendi ……………………………………………………………………………………….1040
Reviews
There are no reviews yet.