Assessment procedures - Direct tax - Budget 2015

[CS Swati Dodhi]

Assessment procedures

1. Sanction for issuance of notice in case of re-assessment proceedings

Presently, before issuance of re-assessment notice, sanctions from certain authorities are required to be obtained based on various criteria such as, whether scrutiny assessment or re-assessment has been made earlier or not, whether notice is proposed to be issued within or after four years and rank of assessing officer who is issuing such notice. Now, to simplify the procedure, section 151 has been substituted to provide that any notice issued after the expiry of four years from the end of relevant assessment year shall be issued only if Principal Chief Commissioner or Chief Commissioner/Principal Commissioner or Commissioner is satisfied with the reasons of the assessing officer for issuance of such notice. In all other cases, notice shall be issued by an assessing officer only if the Joint Commissioner is satisfied by the reasons recorded for issue of such notice.

This amendment will be effective from 1 June 2015.

2. Assessment of income of any other person

Presently, in case of search or seizure of a person, if an assessing officer is satisfied that the books of accounts or documents seized ’belong to’ any other person, then such books of accounts or documents seized shall be handed over to the assessing officer having jurisdiction over such other person and that assessing officer shall proceed against the other person if he is satisfied that such books of accounts or documents have a bearing on determination on the total income of other person.Disputes have arisen as to interpretation of words ’belong to’ in respect of a document as for instance when a given document seized from a person is a copy of original document.

Now, the words ’belong to’ in respect of books of accounts or documents have been replaced with words ’relate to’ to widen the scope.

These amendments will be effective from 1 June 2015.

APPEALS

1. Procedure of filing of appeal by tax authorities when identical question of law is pending before Supreme Court

At present, only the assessee can submit a claim that he would not agitate the same question of law before the higher appellate authorities in relevant assessment year provided the question of law arising in the relevant assessment year is identical with question of law already pending in his own case before the High Court or Supreme Court for another assessment year and the assessing officer or any appellate authority agrees to apply the final decision on the question of law in that earlier year to the present year. Now, a provision has been brought for tax authorities by way of introduction of new section 158AA.

These amendments will be effective from 1 June 2015.

2. Appealable orders before Income-tax Appellate Tribunal

The order passed by the prescribed authority to refuse to grant approval for the educational or medical institution under section 10(23)(vi) and 10(23)(via) are now, appealable before the Income-tax Appellate Tribunal as compared to earlier.

This amendment will be effective from 1 June 2015.

3. Single member bench of Income-tax Appellate Tribunal

Presently, the single member bench may pass order where total income as computed by the assessing officer does not exceed ₹ 0.5 million.

Now, the above limit has been increased from ₹ 0.5 million to ₹ 1.5 million.

The above amendment will take effect from 1 June 2015.

Penalties:

1. Penalty for concealment of income where MAT is applicable

Presently, in certain cases it has been held that where the income has been assessed as per provisions of MAT, penalty will not be levied on regular assessed income as there is no tax sought to be evaded. Now, penalty will be levied on concealment of income under above situation also.

It is also provided that where the issue is related to both, i.e. general and MAT provisions, the concealed income will be considered for general provisions only.

This amendment will be effective from 1 April 2016.

2. Penalty for accepting specified sum/advance

Presently, for accepting any ’loan or deposit’ or repaying any ’loan or deposit’ of more than ₹ 20,000 otherwise than by an account payee cheque, bank draft or online transfer, penalty equivalent to amount of loan or deposit is levied.

Now, in addition to ’loan or deposit’, penalty for accepting ’any specified sum’ or repaying any ’specified advance’ of more than ₹ 20,000 otherwise than by an account payee cheque, bank draft or online transfer will be levied where such sum or advance is related to transfer of immovable property. Penalty leviable is the amount of specified sum or specified advance as the case may be.

This amendment will be effective from 1 June 2015.

3. Penalty for not furnishing statement by eligible investment fund

Section 9A has been inserted to provide that eligible investment funds are required to furnish a statement regarding fulfilment of prescribed conditions within 90 days of the end of the financial year and also the information or any other prescribed document. Failure to file such statement will attract penalty of ₹ 0.5 million. No penalty shall be leviable if there was reasonable cause for the said failure.

This amendment will be effective from 1 April 2016.

4. Penalty for not furnishing information or documents by Indian concern in certain cases

Section 285A has been inserted to provide that if a foreign entity derives, directly or indirectly, its value substantially from assets located in India and such assets are owned through an Indian concern, then such Indian concern shall be required to furnish information/documents as may be prescribed.

Failure to furnish such information attracts penalty as follows:

1. At the rate of 2% of the value transaction which had effect of directly or indirectly transferring the right of management or control in relation to the Indian concern;
2. ₹ 500,000 in any other case.

No penalty shall be leviable if there was reasonable cause for the said failure.

This amendment will be effective from 1 April 2016.

5. Penalty for non-furnishing prescribed statements for sum payable to non-residents

Penalty of ₹ 0.01 million is leviable for non-furnishing of or furnishing inaccurate information relating to payment to non-resident or to foreign company. No penalty shall be leviable if there was reasonable cause for the said failure.

This amendment will be effective from 1 April 2016.

Audit and Auditors:

Accountants barred from audit cannot audit or issue certificates/report

It is proposed that an auditor who is not eligible to carry out any audit as per Companies Act, 2013 shall not be eligible to carry out any audit or furnishing of any report/certificate under the Income-tax Act. This amendment will be effective from 1 June 2015.