Income Tax – No Processing of Return When Notice Issued

By | January 14, 2015
As per Section 143(1) of the Income Tax Act,
Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely: –

(a) the total income or loss shall be computed after making the following adjustments, namely: –

(i) any arithmetical error in the return; or
(ii) an incorrect claim, if such incorrect claim is apparent from any information in the return;

(b) the tax and interest, if any, shall be computed on the basis of the total income computed under clause (a);
(c) the sum payable by, or the amount of refund due to, the assessee shall be determined after adjustment of the tax and interest, if any, computed under clause (b) by any tax deducted at source, any tax collected at source, any advance tax paid, any relief allowable under an agreement under section 90 or section 90A, or any relief allowable under section 91, any rebate allowable under Part A of Chapter VIII, any tax paid on self-assessment and any amount paid otherwise by way of tax or interest;
(d) an intimation shall be prepared or generated and sent to the assessee specifying the sum determined to be payable by, or the amount of refund due to, the assessee under clause (c); and
(e) the amount of refund due to the assessee in pursuance of the determination under clause (c) shall be granted to the assessee:

Provided that an intimation shall also be sent to the assessee in a case where the loss declared in the return by the assessee is adjusted but no tax or interest is payable by, or no refund is due to, him:
Provided further that no intimation under this sub-section shall be sent after the expiry of one year from the end of the financial year in which the return is made.
As per Section 143(1D), the processing of a return shall not be necessary, where a notice has been issued to the assessee under sub-section (2) .
Some doubts have been expressed, in view of the words “shall not be necessary” used in the said sub-section, as to whether this provision permits processing of returns having a refund claim, where notice under section 143(2) of the Act has been issued.
CBDT clarifies:
•  In cases where an unprocessed return is selected for scrutiny, the legislative intent is to prevent the issue of refund after processing as scrutiny proceedings may result in demand for taxes on finalisation of the assessment subsequently.
•  The processing of a return cannot be undertaken after notice has been issued under sub-section (2) of section 143 of the Act.
•  It shall, however, be desirable that scrutiny assessments in such cases are completed expeditiously.

Beware the Ides of March – Indirect Taxes Revenue far below target
INDIRECT Tax assessees of the Country will be the TARGET for overanxious Revenue officers in the next 75 days, for they are far below the target of the Finance Minister. While the Finance Minister told the Parliament that he hoped to collect around 6.23 lakh crores, so far in the first 9 months, the collection is 3.77 lakh crores which is about 60%. The collection should have been about 75%. Of course the Department will make it up by hook or crook – by inflating collections or collecting next year’s revenue this year.
Indirect Tax Collections up to December 2014
Tax Head Collections Budget Estimate % of B.E achieved
Central Excise
Service Tax
They have to collect about 2.5 lakh crores in the next 75 days.
Clarification on Property Returns by Babus
GOVERNMENT had amended Public Servants (Furnishing of Information and Annual Return of Assets and Liabilities and the Limits for Exemption of Assets in Filing Returns) Amendment Rules, 2014, extending the time limit for filing of revised returns by all public servants from 31st December, 2014 to 30th April, 2015.
Government clarifies that the requirement of filing of property returns under the existing Conduct Rules is an independent requirement under the applicable rules and the same can be dispensed with, only by amending those rules. In other words, the requirement of filing returns of assets and liabilities under the applicable Conduct Rules has to continue, till such time as the provisions of those rules are harmonized with the relevant provisions of the Lokpal Act and the rules framed.
Government wants all Ministries/Departments/cadre authorities to ensure that:
(a) necessary follow-up action for harmonizing the provisions of the relevant rules relating to all categories of public servants (as defined in the Act) falling under their respective jurisdiction/administrative/cadre control is completed within the revised time limit of 18 months from the date of coming into force of the Act, i.e., 16.01.2014, as now provided in the Order dated 26th December, 2014 (i.e., on or before 15th July, 2015), positively; and
(b) all public servants falling under their respective jurisdiction / administrative/cadre control, continue filing their annual property returns under the existing provisions of the applicable Conduct Rules [such as the AIS (Conduct) Rules, CCS (Conduct) Rules, etc.,] till such time as the exercise as indicated in (a) above is completed and the relevant service rules are brought in line with the provisions of the Lokpal and Lokayuktas Act, 2013 and the rules framed thereunder.

DoPT Office Memorandum No. 407/12/2014A VD-IV(B)., Dated: January 13 2015

Prosecution of Companies – Govt Authorises Officers Competent to file Complaints
AS per Section 439(2) of the Companies Act, 2013,
2) No court shall take cognizance of any offence under this Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, a shareholder of the company, or of aperson authorised by the Central Government in that behalf:

Provided that the court may take cognizance of offences relating to issue and transfer of securities and non-payment of dividend, on a complaint in writing, by a person authorised by the Securities and Exchange Board of India:
Provided further that nothing in this sub-section shall apply to a prosecution by a company of any of its officers.
In pursuance of this Section, Government has authorised certain officers of in the office of Regional Director (Northern Region) at Noida for the purposes of filing complaint under Section 159 (If any individual or director of a company, contravenes any of the provisions of section 152, section 155 and section 156, such individual or director of the company shall be punishable with imprisonment for a term which may extend to six months or with fine which may extend to fifty thousand rupees and where the contravention is a continuing one, with a further fine which may extend to five hundred rupees for every day after the first during which the contravention continues.)of the Act in respect of offences under section 155 [No individual, who has already been allotted a Director Identification Number under section 154, shall apply for, obtain or possess another Director Identification Number.] of the Act.

Ministry of Corporate Affairs Notification., Dated January 09 2015
Who will file Complaints in Tax Cases?
THOUGH Offences under Central Excise, Customs, Service Tax and Income Tax can result in prosecution and imprisonment, it is not clear as to who should file a complaint in the Court for offences under these statutes. While several laws like the Companies Act stipulate the authorities for filing complaints, the tax laws are surprisingly silent on this.
Section 280B(b) of the Income Tax Act stipulates, “a Special Court may, upon a complaint made by an authority authorised in this behalf under this Act take cognizance of the offence for which the accused is committed for trial.”
The Statutes under the Indirect Taxes are absolutely silent on this issue.
Please see my article PROSECUTION UNDER CUSTOMS & EXCISE : WHO SHOULD FILE COMPLAINT?written more than ten years ago.
Jurisprudentiol-Thursday’s cases
Legal Corner Icon
Service Tax
If the reason for waiving penalty u/s 78 in terms of the provisions of Section 80 is that there was confusion about the scope of leviability on service receivers under reverse charge mechanism, then, it is the same confusion because of which the appellants had not declared the fact of receiving service by way of import – Demand time barred: CESTAT
THE Commissioner noted that the issue of charging service tax on reverse charge basis under Section 66A was under litigation in various courts. He relied on case laws which have held that if the service tax has not been paid due to pendency of matter in judicial forums, the said aspect may be considered as reasonable cause for non payment for invoking the provisions of Section 80. Accordingly, he waived penalties under Section 76, 77 & 78 of the Finance Act. …If the reason for waiving penalty under Section 78 in terms of the provisions of Section 80 are that there was confusion about the scope of leviability on service receivers under reverse charge mechanism, then, it is the same confusion because of which the appellants had not declared the fact of receiving service by way of import. In fact, the appellants case is even stronger because it has not even been established convincingly by the Commissioner that the service received is entirely covered under the category of Intellectual Property Right Services.
Income Tax
Whether finding that there was no distribution of assets leads to conclusion that there was no transfer of assets at all – NO: High Court
THE assessee, a partnership firm, was undertaking the activity of analyzing chemical compounds and pollutants. The firm is a part of group of establishments, by name Bhagavati Ana Labs Limited. A search was conducted in the parent organization and a show cause notice was issued to the assessee u/s 158BD. Thereafter, the AO took the view that the assessee under-disclosed the sales consideration of its assets to another company, and therefore, it was liable to pay the capital gains tax. The assessee argued that the consideration for the assets was paid in the form of shares to the respective partners, however, the AO took the view that the obligation to pay capital gains tax arose on account of the transfer of capital by way of distribution of capital assets, on the dissolution of the firm. That view was upheld by the CIT(A). The Tribunal, however, held that the sale took place, before the dissolution of the firm and it is not a case of distribution of assets, contemplated u/s 45 (4) of the Act. However, the Tribunal held that even if the transaction does not fall under Section 45(4) of the Act, it would get attracted by Section 45(1) of the Act.
The issue before the Bench is – Whether finding that there was no distribution of assets leads to conclusion that there was no transfer of assets at all. NO is the answer.
Whether finding that there was no distribution of assets leads to conclusion that there was no transfer of assets at all – NO: High Court
THE retraction of the confessional statement containing admission of wrong-doings by the appellant came after more than ten years, at the stage of personal hearing only, and not before that. Had the appellant been subjected to threat, coercion or pressure – as alleged by him rather belatedly, he would have retracted his confessional statement soon after making the same, once the alleged threat, coercion or pressure ceased to influence the action of the appellant. It is not his case that the said factors continued to influence him for 10 long years. Moreover, the appellant failed to disclose as to how he was pressurized, coerced, or tortured, and by whom, when he made the earlier confessional statement. The confessional statement was also duly corroborated by the aforesaid independent evidence viz. the list of persons to whom the monies had to be distributed, received by fax from Ubaidullah of Dubai.

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