Summary assessments. - Income Tax - 1349/CBDT

INSTRUCTION NO. 1349/CBDT Dated: September 3, 1980 Attention is invited to para 8.06 of the minutes of the conference of CsIT held in May 1980 wherein it has been stated that Boards instructions regarding disposal of summary assessments would be communicated by September 1980. 2. The Finance Act, 1980 has deleted sub-clauses (ii) and (iii) to section 143(1)(b) w.e.f. 1-4-80. Under sub-clause (ii) the ITO was authorised to allow any deduction allowance or relief which on the basis of the information available in the return, accounts and documents is prima-facie admissible but is not claimed in the return. Under sub clause (iii) the ITO was authorised to disallow any deduction allowance or relief claimed in the return accounts and documents if prima-facie inadmissible. With the deletion of these two sub clauses no assessing authority has the power to make the adjustments permitted earlier by these two clauses in making an assessment u/s.143(1). In the explanatory memorandum to the finance bill, it was mentioned that the amendment will be applicable for assessment year 1980-81 and subsequent years. The board has reconsidered that matter. It is hereby clarified that the amendment will be applicable for assessment taken up for summary assessments now the assessing authorities cannot make these adjustments whatever be the assessment year concerned. The time spent by the ITOs at present in going through the returns of income and accompanying documents with a view to finding out whether any such adjustments are called for, will be saved as a result of the amendment. This should go a long way in stepping up the disposal of summary assessments. 3. The board have decided that cases covered by sec.44AA where no books of account are maintained will also be cases requiring scrutiny. Sec.44AA makes it obligatory for persons carrying on business and profession to maintain such books of account and other documents as may enable the ITO to compute his total income in accordance with the provisions of the Act. This applies to all cases of business or profession where the income exceeds Rs.25,000 or where the total sales turnover or gross receipts exceed Rs.250000 in any one of three immediately preceding previous years. In the case of the specified professions books of account are mandatory whatever be the income. 4. Thus all cases other than the types mentioned in the revised Annexure B referred to above and cases coming u/s.44AA where no accounts are maintained will be cases to be completed under summary assessment. 5. The CsIT are aware that the emphasis this year will be on making quality scrutiny assessments. In order to enable ITOs to devote adequate attention to the quality of scrutiny assessments, and free them from their attending to work of a routine nature, it has been decided that ITIs will also be empowered to make summary assessments by virtue of the functions assigned to them under clause b of section 125(1). under this clause commissioners are empowered to authorise the Inspectors to perform specified functions of the ITO. However the proviso to sec.125(1) lays down that Commissioners cannot assign certain functions unless specifically authorised by the board. Such an order authorising the Commissioners to assign such functions to the Inspectors has been passed by the board . Commissioners will in turn pass orders in writing assigning to the Inspectors the powers mentioned in the boards order. A draft of the order to be passed by the commissioner is at Annexure II. This draft may be modified as local conditions may require. It is essential that the orders are clear and specific and designate the Inspector with reference to the charge of the ITO whose cases are to be disposed of by the Inspector. 6. The scheme of vesting Inspectors with the function of making summary assessments will not apply to central circles, company circles and special circles even if these circles have cases which are covered by the summary assessment scheme. Such assessments if any will be completed by the ITOs themselves. 7. Assessments which will be completed u/s.143(1) by Inspectors will be only those non-company cases including salary cases where the returned/ finally assessed income for the assessment years is Rs.25,000 or less. No return declaring a loss will be dealt with by the Inspectors even if it falls under the summary assessment scheme. 8. No Inspector will have any independent jurisdiction. His functions will be to deal with the returns filed in the charge of ITO with whom he is attached. His functions will include making of assessments u/s.143(1) charging of interest u/s.139(8)/215/217 and initiation and disposal of penalty proceedings in cases completed by him as well as rectifications u.s.154/155 following therefrom and waiver of interest under rules 40 and 117 A in the assessments completed by him. He will not have functions of recovery and collection in regard to the assessments completed by him. He will be responsible for making the summary assessments, passing orders in such cases raising the demands making entry in the D CR and issue of demand notices. As per existing instructions, the D CR of an ITO is to be divided into two parts one to enter cases with assessed income above of Rs.25,000 or less and the other for cases with assessed income above RS. 25,000. These instructions will continue to be in force with the assessments disposed of by the Inspector being entered in the same D CR in the part relating to assessed incomes upto Rs.25,000 only. The existing instructions that in cases where there is no net demand or refund, only the ITNS 150 need be sent and no demand notice need be issued will also continue to be in force. Where a summary assessment completed by the Inspector results in a refund, the refund order will be signed by the ITO. In short the Inspector functions in terms of the order u/s.125(1)(b) as a sub-unit of the ITOs unit. The same staff as that of the ITO will handle all office matters in regard to the sub-unit. 9. The scheme for authorising Inspectors to deal with returns will at present be introduced at stations where the Commissioners have their headquarters. Having regard to the other duties on which Inspectors will have to be deployed, it has been decided that 20% of the working strength at the station where the headquarters of the Commissioner is situated should be drafted for making summary assessments. This will be subject to minor modifications to suit local conditions. In drafting Inspectors who have passed the ITOs examination and if sufficient number of such Inspectors are not available Inspectors who have completed five years of service as Inspector should be preferred. 10. The disposal, demand raised and other relevant statistics in respect of assessments disposed of by the Inspectors will be entered in the ITOs MPR. A foot note should be given to the relevant pages of the MPR to indicate the statistics in respect of the disposal by the Inspector. 11. The standing instructions regarding summary assessments will continue to be in force except as modified herein. Further all cases of summary assessments not to be done by the Inspectors will continue to be done by the ITOs. 12. Section 11(1) of the Compulsory Deposit Scheme Act, 1974 says that the Inspectors of Income tax shall have the like powers and perform the like functions under the Act as under the I.T.Act and for the exercise of his powers and the performance of his functions his jurisdiction under the CDS Act, 1974 shall be the same as under the I.T.Act and for this purpose compulsory deposit shall be declared to tax chargeable under the I.T.Act. In view of this provision Inspectors will pass necessary orders under the CDS Act in the assessment completed by them u/s.143(1). 13. This is the first time that the Department is putting through a scheme giving assessment functions to Inspectors of Income-tax. The success of the scheme largely depends on the initiative drive and involvement of ITOs Inspectors and their superior officers. The scheme has been fashioned to save manpower and time so that cases are dealt with in a truly summary manner. The ITOs can examine the other cases thoroughly, collect and shift the evidence properly and make scrutiny assessments judiciously so that quality improves, additions are made which stand the test of appeal concealments are detected and adequate punishment is awarded to the tax evador which will prove a deterrent to others. 14. The Board expect that with this amendment of law, providing for the increase in the limit for summary assessments and authorisation of Inspectors for doing summary assessments maximum number of assessments will be disposed of. The actual number of assessments that will be disposed of will depend on the enthusiasm that can be created among the Inspectors and the ITOs. 15. The Board is confident that with initiative, leadership and drive we will succeed in making a major dent in the huge pendency of assessments at the same time ensuring that adequate attention is paid to the scrutiny assessments. Commissioners are requested to explain the rationale as well as details of this new scheme to their Inspectors/ITOs/IACs and ensure that the scheme is a success.