Withdrawal of recognition given to funds - Income Tax - 581/CBDT

INSTRUCTION NO. 581/CBDT Dated : August 2, 1973 Section(s) Referred: Rules 76 TO 11 Statute: Income - Tax Act, 1961 The Revenue Audit has detected a number of cases in which the provisions of rule 67(A) of the Income-tax Rules, 1962 were infringed but the recognition was not withdrawn by the Commissioner as no machinery existed to detect violations of the Rules. 2. Rule 3(3) of Part A and rule 2(3) of Part B and C of the Fourth Schedule to the Income-tax Act, 1961 authorises the Commissioner of Income-tax to withdraw recognition already given to the funds if in his opinion the funds contravene any of the conditions as prescribed under the Fourth Schedule as also under the Income-tax Rules, If any infringement comes to light, the fund will cease to have recognition or approval, as the case may be. The order of derecognition shall take effect from the date from which it is made. Timely detection of the infringement and methodical scrutiny of statement of accounts of such funds is absolutely necessary. Board by its instructions in F.No.215/28/70-ITA-II dated 12.2.71 had desired that the income-tax return should be called for from the recognised provident funds and the same should be gone through to see that the rules have not been violated. Such verification was required to be done every alternate year in Bombay and Calcutta charges and once every four years in other charges. Board is not aware of any case of infringement having been detected by any Commissioner as a result of the scrutiny directed to be made under the above referred circular. 3. With a view to tackle the problem effectively, Board desires that the following steps may be taken immediately:- (i) A list of recognised provident funds, approved superannuation funds and approved gratuity funds may be prepared immediately, and a copy forwarded to the Board by 15th August, 1973. (ii) All these cases may be assigned under section 127 by the Commissioner to the Income-tax Officer (Trust circle). If one ITO is not able to deal with these cases another ward or wards may be created. (iii) Assessment proceedings may be initiated by the Income-tax Officer by issuing notice under section 139(2) for the current assessment year. If in any of the cases it is found, on the basis of the current scrutiny, that there has been infringement of the provisions in any assessment years, appropriate proceedings may be taken. 4. The Board desires that these instructions must be strictly followed and all possible steps taken to detect the violation of the provisions of the Schedule or of the Rules by the approved funds and steps taken for withdrawal of recognition, wherever necessary, under intimation to the Board.