Para 5(vii) of the C&AG's Report for the financial year 1974-75-position of arrears of Annuity Deposit. - Income Tax - 959/CBDT

INSTRUCTION NO. 959/CBDT Dated : June 11, 1976 Undersigned is directed to say that para 5(vii) of the C AG's Report for the financial year 1974-75 depicts the position of arrears of Annuity Deposit as on 31st March of each of the years 1973, 1974 and 1975 which is as under:- 2. From the above it will be seen that while there has been some collection/reduction in the arrears of Annuity Deposit during the period 1973 to 1975, the fact that the amount of arrears as on 31-3-75 was still about Rs.23 crores shows that still greater efforts are required to recover these arrears. The problem of liquidating the arrears of Annuity Deposit was also discussed during the Commissioners' Conference held in May, 1976 and the Commissioners of Income tax have been requested, vide paragraph 84 of the minutes of the said Conference, to take "immediate and effective steps" to ensure that these arrears are adjusted/reduced/collected without any further delay. Board have also specifically desired, vide letter F.No.385/30/76-IT(B) dated 28-4-1976 that while reporting arrears of Annuity Deposit as on 31-3-76 it should be certified that all adjustments have been duly carried out. 3. Some time ago, the Commissioners of Income-tax were asked to give the reasons for the substantial amount of the arrears of Annuity Deposit several years after the abolition of the scheme. The following are the main reasons reported by the Cs.IT: i) The demands are in dispute in appeals/references; ii) The arrears are not recoverable because of the absence of assets or the assessees being not traceable or the assessees having become insolvent etc. iii) Some branches of the State Bank of India have stopped accepting payments of Annuity Deposits; iv) Failure on the part of the assessees to produce counterfoils of the Annuity Deposits in proof of the deposits made or such counterfoils being not traceable in the Income-tax offices. 4. As regards the arrears of Annuity Deposits involved in litigation, the Board desire that all such appeals, pending before the AACs/Incometax Appellate Tribunals, irrespective of the amount involved should be treated as priority appeals. These are old appeals and their expeditious disposal is imperative because of the constraint mentioned in para 6 below. Steps similar to those for the early disposal of other priority appeals should be taken to ensure that these appeals are taken up for hearing and disposal without further delay. In respect of pending references before High Courts/Supreme Court, any action required to be taken in the Department for the early hearing/disposal should be completed expeditiously. 5. Where the Annuity Deposits are irrecoverable because of the absence of assets or the assessees being not traceable or the assessees having become insolvent etc., such amounts should be segregated and appropriate Administrative action taken to process the proposals for declaring the amounts involved in them as irrecoverable. The amounts of irrecoverable Annuity Deposits should however, be not written off as required in Board's letter F.No.375/26/76-IT(B) dated 19-4-1976. This is because the question whether an irrecoverable Annuity Deposit should be written off or cancelled or its recovery waived, is under examination in the Board in consultation with the Department of Expenditure. Further instructions in this regard will follow shortly. 6. In so far as the refusal of some of the branches of the State Bank of accept payments of Annuity Deposits is concerned, the matter was taken up with the Department of Banking and that Department has issued instructions to the State Bank of India requiring the Bank to continue accepting the payments towards such deposits. It must, however, be ensured, by taking stringent coercive action, that such payments are made most expeditiously. Apart from the need of liquidating the arrears of Annuity Deposits, the scheme having been discontinued long ago, the Banks cannot be expected to continue accepting the payments indefinitely. Every effort should, therefore, be made by the ITOs/TROs to see that the payments are made in all suitable cases before the end of the current financial year. 7. In cases where the payments of Annuity Deposits have been made but are pending adjustment on account of the non-availability of counterfoils with the assessees or their being not traceable in the Income-tax offices, it has been decided that the following procedure may be adopted to give credit for the payments of Annuity Deposits expeditiously. i) The assessee should be requested to file a letter in Form No.5 of the Annuity Deposits Scheme, 1964 with the amendment that instead of enclosing the counterfoils of the Annuity Deposit Certificates, he should enclose certified copies, besides being signed by the assessee, should be verified by the ITO with reference to the original Annuity Deposit Certificates, and signed in token of such verification. Where the amount of Annuity Deposit to be adjusted in respect of anyone of the assessment year is Rs.1,000 or more, such verification on each certificate should be countersigned by the IAC who should also sign the certified copies after examining the original Annuity Deposit Certificates. A copy of Form No.5 of the Annuity Deposit Certificate, 1964, with the amendment as indicated above, is enclosed for ready reference and use. ii) The request to the assessee enclosing a copy of the letter in Form No.5 should be sent on a letter as per specimen attached herewith. In the covering letter, the concerned assessee should, among others, be requested, to indicate the particulars of other assessees with whom he may have been connected as partner of a firm/member of AOP/Karta or coparcener of HUF etc. They should also be required to certify that the credit for the payment of the Annuity Deposit as per particulars given in Form No.5 has neither been taken in any other assessment year nor in the assessments of any of the connected assessees. In cases where the counterfoils of the certificates have been lost by the assessees (and not after their presentation with Income tax office), they should be required to file a copy of their application in Form No.1 or No. 2 duly certified by the Deposit office. This requirement has been laid down to verify that the status in which the credit is being claimed, is the same as that in which the application for Annuity Deposits was made. iii) An entry should be made in the order sheet of the miscellaneous folder of the ITO's assessment record of the relevant year by the ITO in ink, under his signature to the following effect:- Certified that the true copy(ies) of the following Annuity Deposit Certificates, together with the application in Form No.5 has been placed on file:- Further certified that the amount represented by the above certificates, to the extent given credit for here viz. assessment year......has not been given credit for in any other assessment year. Moreover, the assessment records of the firm AOP/HUF/Individual (delete whichever is inapplicable) with which the assessee was connected during the assessment years 1964-65 to 1968-69 have been scrutinised and credit for the payments, to the extent given here, has not been given in any of such connected cases. In making the scrutiny, the information supplied by the assessee in his letter/application in Form No.5 dated......has also been taken into consideration and that the said letter/application in Form No.5 has been placed on file. Income-tax Officer". (iv) A record of adjustment made in this manner should be kept in a separate register in the following form and should be made available to the Revenue Audit parties for the purpose of checking by them:- a) Serial No. b) Name of assessee. c) Permanent Account Number. d) Serial No. of the Demand and Collection Register/year in which credit of Annuity Deposit has been given. (v) (a) Numbers of the Annuity Deposit Certificates; (b) Amounts (to be indicated separately); (c) Dates of payments; (d) Name and place of the Bank where payment made. 8. Column 13 is being added separately in Part III of the Quarterly Statement of Demand, Collection and Balance to record the progress of the reduction of arrears of Annuity Deposits. 9. The Board hope that with the various measures suggested and the clarifications given above, the Commissioners of Incometax will be able to ensure the liquidation of a substantial part of the arrears of Annuity Deposits during the current financial year. The target of such reduction has been placed for each charge, for the current financial year at 50% of the arrears of Annuity Deposits brought forward as on 1.4.1976. While every Commissioner is required to achieve and, if feasible, exceed this target, in case, for any special reasons, this target is considered high in any charge, the Board may please be appraised of the target which the Commissioner of that charge considers capable of being achieved with full facts and figures by 15-7-1976.