income-tax department

CBDT E-Assessment Instruction Reg S. 142(1) Notice Format

MASTI

The CBDT vide F.No. 225/157/2017/ITA-II dated 23-06-2017 had issued revised format of notices under section 143(2) of the Act so that the language of notices are in accordance with requirement of electronic proceedings and the same have already been provided in the system.

This was done by the CBDT To facilitate conduct of e-assessment proceedings.

The CBDT has now issued a letter bearing F.No. System/ITBA/Assessment/Notice 142(1)/2017-18 Dated: 19-03-2018 on the issue of e-assessment.

The CBDT has stated that the format of notice u/s 142(1) was not amended in conformity with e-assessment procedures and old format has been continued.

To correct this inconsistency, the CBDT has revised the format of notice u/s 142(1)(ii)&(iii).

It is stated by the CBDT that the revised format now incorporates the same language as in the 143(2) notice to facilitate the taxpayer to submit the documents and respond electronically and the requirement to visit the office has been removed

Text of CBDT E-Assessment Instruction On S. 142(1) & 143(2) notices format

F.No. System/ITBA/Assessment/Notice 142(1)/2017-18 Dated: 19-03-2018

To,
All Principal Chief Commissioners of Income-tax/ PrDGsIT/ CCsIT/ DGsIT ,
All Principal Commissioner of Income-tax/ PrDsIT/ DsIT/ CsIT/CsIT (Admin&TPS),
All Assessing Officers.
Sir/Madam:

Subject: Issue of notices under section 142(1)(ii) & (iii) of Income –tax Act 1961 in revised format- regd.

The concept of electronic assessment proceeding was introduced last year and its scope was gradually enlarged. The e-assessment proceeding is now facilitated through e-filing portal. The CBDT Instruction No. 01/2018, dated 12-02-2018 has mandated that except for search related assessments and exceptional circumstance mentioned therein all other pending scrutiny assessment cases shall be conducted only through the ‘E-Proceedings’ functionality in ITBA/E-filing.

2. To facilitate conduct of e-assessment proceedings, the CBDT vide F.No. 225/157/2017/ITA-II dated 23-06-2017 had issued revised format of notices under section 143(2) of the Act so that the language of notices are in accordance with requirement of electronic proceedings and the same have already been provided in the system. It may be mentioned that specifically the need to produce documents and to be present in person has been done away with except as provided in the aforementioned Instruction.

3. However, notice u/s 142(1) was not amended in conformity with e-assessment procedures and old format has been continued. To correct this inconsistency, the format of notice u/s 142(1)(ii)&(iii) has been revised and the same is enclosed herewith. This revised format now incorporates the same language as in the 143(2) notice to facilitate the taxpayer to submit the documents and respond electronically and the requirement to visit the office has been removed. This has also been implemented in ITBA system. Therefore, all the assessing officers are requested to use this format for the cases in e-assessment proceedings.

4. In case where notice u/s 142(1) (i) &(ii) is already issued in old format to the assessees, requiring them to furnish information mentioned in notice at the date and time fixed in the office of Assessing Officer, an SMS/Email is being sent to all such assessees intimating them to furnish the said information electronically through their account in e-filing website. Therefore any compliance of the assessee through his e-filing account in response to the notice issued in old format should be considered valid.

5. This is issued with prior approval of Pr. DGIT(S).

Yours sincerely

(Ramesh Krishnamurthi)
Addl. DG(S)-3, CBDT, New Delhi

CBDT Office Memorandum On Decentralization Of Cases Under Insolvency & Bankruptcy Code 2016

MASTI

The CBDT has issued an Office Memorandum with regard to cases under Insolvency & Bankruptcy Code 2016. The OM harmonizes the guidelines under the OM dated. 16.01.2018 with Circular No. 5/2009 dated 02.07.2009 of CBDT.

It is stated by the CBDT that all pending legal processes relating to sanctioned schemes by BIFR will continue to be handled by Pr. DGIT (Admn. &TPS) as stipulated in circular no. 5/2009 dated. 02.07.2009.

It has been further clarified in the said office memorandum of the CBDT that the transfer to jurisdictional Pr.CCIT will be made only after the order is passed after processing of sanctioned schemes by the Pr.DGIT(Admn.&TPS) as prescribed in circular no. 05/2009 dated. 02.07.2009.

Text of Office Memorandum dated 7th March, 2018 issued by the CBDT

F. No. 385/04/2018-IT(Budget)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
North Block, New Delhi 07th March, 2018

OFFICE MEMORANDUM

Subject: Decentralization of handling of cases under Insolvency & Bankruptcy Code 2016- regarding.

The undersigned is directed to refer to Board’s OM of even number dated. 16.01.2018 on the above subject. In order to harmonize the guidelines under the OM dated. 16.01.2018 with Circular No. 5/2009 dated 02.07.2009 of CBDT, pars 2 (iii) of the said OM dated. 16.01.2018 is partially modified, which may now be read as under:

“All the pending legal processes relating to sanctioned schemes by BIFR will continue to be handled by Pr. DGIT (Admn. &TPS) as stipulated in circular no. 5/2009 dated. 02.07.2009. The transfer to jurisdictional Pr.CCIT will be made only after the order is passed after processing of sanctioned schemes by the Pr.DGIT(Admn.&TPS) as prescribed in circular no. 05/2009 dated. 02.07.2009”.

This issues with the approval of Member (Revenue & TPS), CBDT.

(Sandeep Singh)
Under Secretary to the Govt. of India
Tel: 011-23094182

All the Pr. CCsIT/CCsIT Pr. DGsIT/DGsIT

Copy to: –

1. ADG (Recovery), Directorate of Income-tax, Recovery and TDS.
2. Commissioner (A&J), CBDT
3. Additional Director of IT (Database Cell), CBDT, (Fax no.011-23593359, e-mail: dbc.cbdt@incometax.gov.in) for uploading on the website irsofficersonline.gov.in.

CBDT Obligation To Disclose RTI Information Explained

MASTI

The latest judgement of the Delhi High Court in CENTRAL BOARD OF DIRECT TAXES versus SATYA NARAIN SHUKLA explains the law on the obligation of the CBDT to disclose information relating to verification of the affidavits filed by the Members of Parliament (MPs) and Members of Legislative Assembly (MLAs) disclosing their assets to the Election Commission.

The CBDT claimed that it is not required to disclose information because of the exclusion in Section 24(1) of the Right to Information Act, 2005. The CBDT also claimed that the said information is exempt from disclosure under the provisions of Section 8(1)(h) of the RTI Act.

The Delhi High Court upheld the contention of the CBDT on the basis that the information sought did not pertain to allegations of corruption.

It noted that the respondent had merely highlighted that the net wealth of certain MLAs and MPs had increased fivefold and the respondent had sought verification of the same in order to bring about a higher level of transparency. No specific or general allegations of corruption were advanced by the respondent.

The Court clarified that in the event any citizen was to make an allegation of corruption, the information as sought from the CBDT under the RTI Act would not be excluded from the scope of the Act.

THE HIGH COURT OF DELHI AT NEW DELHI

Judgment delivered on: 19.02.2018

W.P.(C) 5547/2017 & CM No. 23333/2017

CENTRAL BOARD OF DIRECT TAXES ….. Petitioner

versus

SATYA NARAIN SHUKLA ….. Respondent

Advocates who appeared in this case: For the Petitioner : Mr Ruchir Bhatia, Senior Standing Counsel with Mr Gurpreet Shah Singh, Dy. CIT (O&D), CBDT.

For the Respondent: Respondent in person.

CORAM:- HON’BLE MR JUSTICE VIBHU BAKHRU

JUDGMENT VIBHU BAKHRU, J

1. The petitioner (hereafter “CBDT”) impugns an order dated 29.05.2017 (hereafter “the impugned order”) passed by the Central Information Commission (hereafter “the CIC”) in a second appeal preferred by the respondent under Section 19(3) of the Right to Information Act, 2005 (hereafter “the Act”).

2. By the impugned order, the CIC has, inter alia, directed disclosure of the information sought by the respondent and photocopies of responses received from Director Generals of Income Tax (DGs) to CBDT’s letter dated 11.08.2015. According to CBDT, the said information is excluded from the scope of the Act as it emanates from the Directorate General of Income Tax (Investigation). The said office is placed in the Second Schedule of the Act and, thus, any information received from the said office is excluded from the purview of the Act by virtue of Section 24(1) of the Act. CBDT also claims that the said information is exempt from disclosure under the provisions of Section 8(1)(h) of the Act.

3. Briefly stated, the relevant facts necessary to consider the aforesaid controversy are as under:-

4. The respondent filed an application dated 16.11.2015 seeking the following information under the Act:-

“(1) Photocopies of the letters no. F. No. 282/4/2012-IT(Inv) dated 1.10.2013 and No. 282/04/2012-IT(Inv. V)/140 dated 9.7.2015. (2) Photocopies of the responses received from the DGs to the letter No. 282/4/012-IV (Inv. V)/192 dated 11.08.2015 from Shri Rajat Mittal, Under Secretary (Inv. V) CBDT.”

5. The Central Public Information Officer (CPIO) of CBDT responded to the petitioner”s application by a letter dated 28.12.2015. He did not provide the photocopies of the letters as sought for at point no.1 but briefly indicated the contents of those letters. Insofar as the information sought at point no.2 is concerned, the CPIO responded as under:-

“Since, the matter is under investigation, hence under the provisions of Section 8(h) of RTI Act, 2005 (Information which would impede the process of investigation or apprehension or prosecution of offenders) information cannot be provided at this stage.”

6. Aggrieved by the response of the CPIO, the respondent preferred an appeal under Section 19(1) of the Act before the First Appellate Authority (hereafter “the FAA”). The said appeal was disposed of by an order dated 11.02.2016, whereby the FAA directed the CPIO to provide photocopies of the relevant letters as requested by the respondent as per point no.1 of his application. In respect of the respondent”s request for responses received from the DGs to the letter dated 11.08.2015 is concerned, the FAA upheld the CPIO”s decision that the said information was exempt under the provisions of Section 8(1)(h) of the Act and, therefore, could not be provided at that stage. However, the FAA directed the CPIO to convey the outcome of the investigations once the same are concluded.

7. Aggrieved by the decision of the FAA rejecting the request for furnishing the responses received from the DGs, the respondent preferred a second appeal before the CIC. The said appeal was allowed by the impugned order and the CPIO was directed to supply the information sought for by the respondent.

8. The controversy relates to the verification of the affidavits filed by the Members of Parliament (MPs) and Members of Legislative Assembly (MLAs) disclosing their assets to the Election Commission. The respondent had submitted a list of MPs and MLAs whose assets have allegedly increased more than fivefold after the previous election (that is, during the term of their office as elected representatives after the previous election).

9. The said list of MPs and MLAs were forwarded to the DGs for verification. By a letter dated 11.08.2015, the following instructions were issued to the DGs with regard to the list of MPs and MLAs provided by the respondent:-

“The undersigned is directed to convey that any such case, featuring in the list that is yet to be verified, should be got verified urgently. A comprehensive report of the verifications done as per guidelines fixed by the Board may also be provided, if not done earlier. The report may be submitted within a month from the date of this letter in the annexed proforma. It is requested that the “Brief outcome” column must sufficiently record the outcome and the suggested course of action.”

10. The learned counsel appearing for CBDT submitted that CBDT could not be compelled to provide the photocopies of responses received from the DGs because: (i) the information sought for is exempted from disclosure by virtue of Section 8(1)(h) of the Act; and (ii) that any information from Directorate General of Income Tax (Investigation) is excluded from the purview of the Act by virtue of Section 24(1) of the Act.
11. Section 8(1)(h) of the Act reads as under:-

“8. Exemption from disclosure of information.– (1) Notwithstanding anything contained in this Act, there shall be no obligation to give any citizen– xxxx xxxx xxxx xxxx (h) information which would impede the process of investigation or apprehension or prosecution of offenders.”

12. It is clear from the above that only such information which would (i) impede the process of investigation; (ii) impede the apprehension or prosecution of offenders, is exempted from disclosure by virtue of Section 8(1)(h) of the Act. In the present case, there is no material to indicate that any investigation is being conducted, which would be impeded by disclosure of the information sought for by the respondent. It is stated by CBDT that the Election Commission of India forwards the affidavits submitted by MPs and MLAs disclosing their assets for verification to CBDT. Such affidavits are forwarded by CBDT to the Directorate General of Income Tax (Investigation) for verification and the outcome of such verification is shared directly by the Directorate General of Income Tax (Investigation) with the Election Commission of India.

13. The petitioner further states that the verification exercise carried out by the Directorate General of Income Tax (Investigation) is only indicative in nature and any further action proposed under the Income Tax Act, 1961 has to be followed up by an assessment order, which is passed by the concerned assessing officers. The verification affidavits filed by the candidates cannot be equated with an investigation as referred to in Section 8(1)(h) of the Act. The process of investigation as contemplated under Section 8(1)(h) of the Act is one in the nature of a probe and an inquiry. Clearly, verification from records cannot be termed as an “investigation”.
14. Even if, it is assumed that the verification being conducted by the Directorate General of Income Tax (Investigation) is in the nature of an investigation, the same is no ground for denial of information. Only such information which impedes the process of investigation can be denied. Thus, it would be necessary for the CPIO to specify the CIC that: (a) the investigation was conducted or was proposed; and (b) the information sought would impede the process of investigation. It is apparent that in the present case, these conditions are not met. First of all, there is no assertion that any process of investigation is under way; and secondly, there is no material to indicate that disclosure of the information as sought would impede any such investigation.
15. The suggestion that the expression “process of investigation” includes within its ambit an assessment proceedings resulting in the assessment order is plainly unmerited. The assessment proceedings merely relate to scrutiny of the Income Tax Returns and an assessment income on tax payable by an assessee. Plainly, such proceedings do not take the colour of investigation.
16. The next question to be addressed is whether the information sought for by the respondent is excluded from the purview of the Act.
17. Section 24(1) of the Act reads as under:-

“24. Act not to apply to certain organizations.– (1) Nothing contained in this Act shall apply to the intelligence and security organisations specified in the Second Schedule, being organisations established by the Central Government or any information furnished by such organisations to that Government: Provided that the information pertaining to the allegations of corruption and human rights violations shall not be excluded under this sub-section: Provided further that in the case of information sought for is in respect of allegations of violation of human rights, the information shall only be provided after the approval of the Central Information Commission, and notwithstanding anything contained in Section 7, such information shall be provided within forty-five days from the date of the receipt of request.”

18. A plain reading of Section 24(1) of the Act indicates that the provisions of the Act would not be applicable to Intelligence and Security Organizations as specified in the Second Schedule. Further, any information received from such organizations falls under the exclusionary clause of Section 24(1) of the Act. CBDT is not one of the offices, public organizations which are specified under the Second Schedule; but, the Directorate General of Income Tax (Investigation) is. Thus, any information received from the Directorate General of Income Tax (Investigation) by any Public Authority would also fall within the exclusionary provisions of Section 24(1) of the Act. Indisputably, the information sought for by the respondent emanates from the Directorate General of Income Tax (Investigations) (various DGs who have called upon to submit a comprehensive report of verification). Thus, CBDT would be justified in denying such information to the respondent.

19. It was also contended by the respondent that since the information sought for by him related to allegations of corruption, the same falls within the exception to the exclusionary clause of Section 24(1) of the Act. The respondent is correct that by virtue of the first proviso to Section 24(1) of the Act, all information pertaining to allegations of corruption and human rights violations falls within the exception to Section 24(1) of the Act. In other words, notwithstanding that such information emanates from any of the organizations as specified under the Second Schedule of the Act, it is not excluded from the purview of the Act.
20. However, in the present case, it is difficult to accept that the information sought by the respondent pertains to allegations of corruption, as no such allegations have been made at any stage. The respondent had merely highlighted that the net wealth of certain MLAs and MPs had increased fivefold and the respondent had sought verification of the same in order to bring about a higher level of transparency. No specific or general allegations of corruption were advanced by the respondent.

21. Thus, it is not possible to accept that the information as sought for by the respondent falls within the purview of the Act even though it emanates from the organization which is placed in the Second Schedule.
22. In view of the above, the order passed by the CIC cannot be sustained and is, accordingly, set aside. However, it is clarified that in the event any citizen was to make an allegation of corruption, the information as sought by the respondent would not be excluded from the scope of the Act.

23. The petition and the pending application are disposed of. The parties are left to bear their own costs.

VIBHU BAKHRU, J FEBRUARY 19, 2018

CBDT Detects TDS scam Of Rs. 3,200 Crore | Launches Prosecution For TDS Deaults

MASTI

The CBDT has unearthed a TDS scam worth Rs 3,200 crore.

The modus operandi of the scam was that 447 companies deducted TDS from its employees but did not deposit the tax with the government.

Instead, the TDS was diverted to further business interests.

The CBDT has initiated prosecution against the TDS deductors for violation of the provisions of the Income-tax Act, 1961.

In addition, warrants have been issued by the Magistrates at the behest of the CBDT.

An official of the CBDT stated that under the Income-tax Act, TDS offences attract a minimum punishment of rigorous imprisonment of three months to a maximum of seven years with fine.

The CBDT is also empowered to initiate prosecution under Section 276 B.

There are also charges of cheating and criminal breach of trust which are punishable offenses under the Indian Penal Code.

The CBDT further stated that most of the offenders are builders.

The other offensers are from various sectors including movie production houses, infrastructure companies, start-ups and fly by night operators.

A high-ranking CBDT official revealed that pursuant to a survey, it was detected that in about 447 cases, Rs 3,200 crore was deducted by the companies but not deposited into the government account.

These defaults occurred in the period April 2017 to March 2018.

TDS deductors are under a legal obligation under the Income-tax Act to deduct TDS on behalf of the government and deposit it into the government account within a prescribed time frame.

The CBDT has already attached the bank accounts and other movable properties of the defaulters and initiated recovery action.

It requires to be remembered that the CBDT had issued a press release a few days ago in which it revealed that it has adopted a zero-tolerance approach towards any offenses committed by taxpayers.

The text of the press release issued by the CBDT is as follows:

Sharp increase in prosecutions of tax evaders by Income Tax Department

Posted On: 12 JAN 2018 2:09PM by PIB Delhi

The Income Tax Department has accorded the highest priority to tackle the menace of black money. With this objective in mind, the Department has initiated criminal prosecution proceedings in a large number of cases of tax offenders and evaders.

Prosecutions have been initiated for various offences including wilful attempt to evade tax or payment of any tax; wilful failure in filing returns of income; false statement in verification and failure to deposit the tax deducted/collected at source or inordinate delay in doing so, among other defaults.

During FY 2017-18 (upto the end of November, 2017), the Department filed Prosecution complaints for various offences in 2225 cases compared to 784 for the corresponding period in the immediately preceding year, marking an increase of 184%. The number of complaints compounded by the Department during the current FY (upto the end of November, 2017) stands at 1052 as against 575 in the corresponding period of the immediately preceding year, registering a rise of 83%. Compounding of offences is done when the defaulter admits to its offence and pays the compounding fee as per stipulated conditions.

Due to the decisive and focused action taken by the Department against tax evaders, the number of defaulters convicted by the courts has also registered a sharp increase during the current fiscal. 48 persons were convicted for various offences during the current year(upto the end of November, 2017) as compared to 13 convictions for the corresponding period in the immediately preceding year, marking an increase of 269%.

A few illustrative cases are highlighted.

A Dehradun Court convicted one defaulter for holding undisclosed foreign bank account and sentenced him to two years of imprisonment for wilful attempt to evade tax and to two years for false statement in verification alongwith monetary penalty for each default respectively.

The Court of CJM, Jalandhar convicted a cloth trader with 2 years rigorous imprisonment for trying to cheat the Department by fabricating affidavits and gift deeds, in connivance with his advocate and witness, with the motive of evading tax. The Court, while awarding the sentence to the trader, also simultaneously awarded one year’s imprisonment to the advocate notarizing the forged affidavit and also to the witness for aiding and abetting the serious offence.

In Bengaluru, the MD of a company engaged in infrastructure projects was found guilty of non-deposit of TDS of over Rs. 60 lakh(within the prescribed time), and was sentenced to rigorous imprisonment of three months alongwith imposition of fine. Similarly, a Mohali resident was held guilty of non-deposit of TDS within prescribed time and sentenced to one year jail alongwith fine.

In another case of Hyderabad, the Director of an infrastructure company was sentenced to rigorous imprisonment of six months and fine for wilful attempt to evade tax. She was simultaneously sentenced to rigorous imprisonment for six months alongwith fine for false statement in verification.

The Economic Offences Court at Ernakulam sentenced an individual to rigorous imprisonment of three months for selling property to evade payment of taxes of about Rs. 76 lakh despite issuance of the tax recovery certificate by the Tax Recovery Officer.

In yet another case reported from Agra, the Special CJM convicted one defaulter with imprisonment of one year & six months for wilful attempt to evade tax and for false statement in verification respectively alongwith fine.

The Income Tax Department is committed to carry forward the drive against tax evasion and action against tax evaders will continue in all earnest in the remaining part of the current Financial Year.

This was also revealed in a press report in the The Economic Times that Taxman is pressing ahead with prosecution.notices

CBDT For Stern Action Against Fake CA In Tax Refund Fraud

MASTI

The CBDT has initiated action against the fake CA and officials of Infosys for fraudulent processing of tax refunds.

According to the Times of India, the CBI is investigating a “revised tax returns” fraud involving several unknown employees of Infosys Technologies, officials from the I-T department and a fake CA from Bengaluru.

The CBDT has filed a complaint in the matter.

The scam was unearthed by the CBDT and the Income-tax department in January 2018.

The FIR has alleged that I-T officials and Infosys’ employees connived with the fake CA and filed 1,010 revised tax returns using forged documents in the names of 250 taxpayers of various private firms, during three assessment years and claimed refunds illegally.

The Institute of Chartered Accountants of India (ICAI) issued a press release stating that the culprit is not a CA.

The CBDT is also investigating whether the officials of the income-tax department circumvented the system and get the required approvals.

According to the CBDT, the loss suffered by the income-tax department is Rs 5 crore.

The FIR states that the processing of e-returns is outsourced to Infosys Technologies Limited, who validate the returns in bulk and generate list of cases where refunds have to be approved. The Assessing Officers of the I-T department posted in CPC give the approval for release of refunds to assessees through their bank accounts.

It was found by the CBI that the assessment system tags revised returns and gives pop-up messages to draw the attention of the person processing them and also to assessing officers who approve refunds.

It appears that unknown officials of Infosys Technologies who were entrusted with the work of processing the returns and the I-T officials at CPC, who were authorised to approve issue of refunds are suspected to have connived with the CA in processing these revised returns based on false information or documents knowingly and issued income-tax refunds.

The CA would file revised returns of income claiming refund, in cases of assessees whose original returns were already processed by the CPC.

All these revised returns are filed with inflated claims on account of payments towards housing loan.

In some cases, original returns reflected no income or loss under the head ‘income from house property’ but the revised ones did. And, in some cases, original returns reflected income or loss from self occupied house property and in the revised returns, higher loss was claimed.

CBDT Instruction On Conduct of Assessment Proceedings in scrutiny cases electronically

MASTI

Instruction No. 0I/2018
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
North Block, New Delhi, the 12th of February, 2018

Subject: Conduct of Assessment Proceedings in scrutiny cases electronically-regd.-

5ub-section (23C) of Section 2 of the Income-tax Act, 1961 (Act), applicable from 01.06.2016, provides that “hearing” includes communication of data and documents through electronic mode. Accordingly to facilitate conduct of assessment proceedings electronically, vide letter dated 23.06.2017, in file of even number, Board had issued a revised format of notice(s) under section 143(2) of the Act. Para 3 of these notice(s) provided that assessment proceedings in cases selected for scrutiny would be conducted electronically in ‘E-Proceeding’ facility through assessee’s account in E-filing website of Income-tax Department.

2. In accordance with the procedure outlined in revised 143(2) notice(s) for conduct of assessment proceedings electronically, it is hereby directed that except for search related assessments, proceedings in other pending scrutiny assessment cases shall be conducted only through the ‘E-Proceeding’ functionality in ITBA/E-filing. However, in cases where the concerned assessee objects to conduct of assessment proceedings electronically through the ‘E- Proceeding’ facility, such cases, for the time-being, may be kept on hold.

3. Further, considering the situation that some of the stations have limited bandwidth, being VSAT stations and stations with limited capacity where bandwidth is in the process of being upgraded, it has been decided that till 31.03.2018, such stations, in accordance with target stipulated in Centra! Action Plan for financial year 2017-18, may undertake and complete only ten percent scrutiny cases (which are getting barred by limitation on 31.12.2018) having the potential to effect recovery during the current year itself. The list of such stations shall be specified by the Pr. DGIT(Systems). Accordingly, at these stations, till 31.03.2018, the assessment proceedings in cases to be completed as per Central Action Plan target, may be conducted manually if e-assessment is not possible. It is reiterated that at other stations covered under para 2 above, subject to exceptions mentioned therein, the assessments would be conducted electronically only.

4. Some of the important procedural aspects while conducting assessment proceedings through ‘E-Proceeding’ are as under:

4.1 Enquiry before assessment in electronic mode: For enquiries before assessment in terms of section 142(l)(ii) of the Act, notice shall be issued electronically and delivered upon the assessee in his ‘E-Filing’ account. While filing the response electronically in compliance with notice under section 142(l)(ii) of the Act, the concerned assessee shall verify it in the manner prescribed under Rule 14 of Income-tax Rules, 1962.

4.2 Use of digital signature by Assessing Officer: All departmental orders/communications /notices being issued to the assessee through the ‘e-Proceeding’ facility are to be signed digitally by the Assessing Officer.

4.3 Time for compliance: Online submissions may be filed till the office hours on the date stipulated for compliance.

4.4 Availability of facility for electronic submission of documents in time barring situation or where case has been finally heard by the Assessing Officer: The facility for electronic submission of documents through ‘E- Proceeding’ shall be automatically closed seven days before the time barring date. In other situations, upon completion of proceedings, before passing the final order, concerned Assessing Officer, on his volition, shall close the e-submission facility after mentioning in electronic order sheet that ‘hearing has been concluded’. However, if required, in exceptional circumstances, the concerned Assessing Officer may enable further filing of submissions electronically under intimation to the Range Head in ITBA.

4.5 In assessment proceedings being carried out through the ‘E-Proceeding’ facility, a particular proceeding may take place manually in following situation(s):

i. where manual books of accounts or original documents have to be examined;

ii. where Assessing Officer invokes provisions of section 131 of the Act or a notice is issued for carrying out third party enquiries/investigations;

iii. where examination of witness is required to be made by the concerned assessee or the Department;

iv. where a show-cause notice contemplating any adverse view is issued by the Assessing Officer and assessee requests for personal hearing to explain the matter.

4.6 Maintenance of ‘Record’ in the context of ‘E-Proceeding’: In cases being assessed through ‘E-Proceeding’, from now on, as far as possible, case-records as well as note sheet of proceedings shall be maintained electronically.

5. This instruction may be brought to the notice of ail concerned for immediate compliance.

6. Hindi version to follow.

(Rohit Garg) Director (ITA.II), CBDT

(F.No. 225/1572017-ITA.II)

Copy to:-
1. PS to FM/OSD to FM/PS to MoS(F)/OSD to MoS(F)
2. PS to Secretary (Revenue)
3. Chairman, CBDT & All Members, CBDT
4. All Pr.CCsIT/ Pr.DsGIT
5. ITCC Section
6. O/o Pr. DGIT(Systems) for uploading on official website
7. Addl. CIT (Database Cell) for uploading on departmental website

LTCG: CBDT Answers To Frequently Asked Questions (FAQ)

MASTI

F. No. 370149/20/2018-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes New Delhi,
Dated 4th February, 2018

Subject: Frequently Asked Questions (FAQs) regarding taxation of long-term capital gains proposed in Finance Bill, 2018-reg.

Under the existing regime, long term capital gains arising from transfer of long term capital assets, being equity shares of a company or a unit of equity oriented fund or a unit of business trust, is exempt from income-tax under clause (38) of section 10 of the Act. However, transactions in such long-term capital assets are liable to securities transaction tax (STT). Consequently, this regime is inherently biased against manufacturing and has encouraged diversion of investment to financial assets. It has also led to significant erosion in the tax base resulting in revenue loss. The problem has been further compounded by abusive use of tax arbitrage opportunities created by these exemptions.

2. In order to minimise economic distortions and curb erosion of tax base, it is proposed to withdraw the exemption under clause (38) of section 10 and to introduce a new section 112A in the Income-tax Act, 1961 (‘the Act’) vide clause 31 of the Finance Bill, 2018 so as to provide that long-term capital gains arising from transfer of such long-term capital asset exceeding one lakh rupees will be taxed at a concessional rate of 10 percent.

3. Since the introduction of the Finance Bill, 2018 on 1st February, 2018, several queries have been raised in different fora on various issues relating to the proposed new tax regime for taxation of long-term capital gains. The responses to these queries are provided below.

Q 1. What is the meaning of long term capital gains under the new tax regime for long term capital gains?

Ans 1. Long term capital gains mean gains arising from the transfer of long-term capital asset. The Finance Bill, 2018 proposes to provide for a new long-term capital gains tax regime for the following assets–

i. Equity Shares in a company listed on a recognised stock exchange;

ii. Unit of an equity oriented fund; and

iii. Unit of a business trust.

The proposed regime applies to the above assets, if–

 

a. the assets are held for a minimum period of twelve months from the date of acquisition; and

b. the Securities Transaction Tax (STT) is paid at the time of transfer. However, in the case of equity shares acquired after 1.10.2004, STT is required to be paid even at the time of acquisition (subject to notified exemptions).

Q 2. What are the modes of acquisition of equity shares which are proposed to be exempted from the condition of payment of STT?

Ans 2. The Central Government had exempted certain modes of acquisition of equity shares for the purposes of clause (38) of section 10 of the Act vide notification no. 43/2017 dated 5th of June, 2017. This notification is proposed to be reiterated for the purposes of clause 31 of the Finance Bill, 2018 after its enactment.

Q 3. What is the point of chargeability of the tax?

Ans 3. The tax will be levied only upon transfer of the long-term capital asset on or after 1st April, 2018, as defined in clause (47) of section 2 of the Act.

Q 4. What is the method for calculation of long-term capital gains?

Ans 4. The long-term capital gains will be computed by deducting the cost of acquisition from the full value of consideration on transfer of the long-term capital asset.

Q 5. How do we determine the cost of acquisition for assets acquired on or before 31st January, 2018?

Ans 5. The cost of acquisition for the long-term capital asset acquired on or before 31st of January, 2018 will be the actual cost.

However, if the actual cost is less than the fair market value of such asset as on 31st of January, 2018, the fair market value will be deemed to be the cost of acquisition.

Further, if the full value of consideration on transfer is less than the fair market value, then such full value of consideration or the actual cost, whichever is higher, will be deemed to be the cost of acquisition.

Q 6. How will the fair market value be determined?

Ans 6. In case of a listed equity share or unit, the fair market value means the highest price of such share or unit quoted on a recognized stock exchange on 31st of January, 2018.

However, if there is no trading on 31st January, 2018, the fair market value will be the highest price quoted on a date immediately preceding 31st of January, 2018, on which it has been traded. In the case of unlisted unit, the net asset value of such unit on 31st of January, 2018 will be the fair market value.

Q 7. Please provide illustrations for computing long-term capital gains in different scenarios, in the light of answers to questions 5 and 6.

Ans 7. The computation of long-term capital gains in different scenarios is illustrated as under –

Scenario 1 – An equity share is acquired on 1st of January, 2017 at Rs. 100, its fair market value is Rs. 200 on 31st of January, 2018 and it is sold on 1st of April, 2018 at Rs. 250.
As the actual cost of acquisition is less than the fair market value as on 31st of January, 2018, the fair market value of Rs. 200 will be taken as the cost of acquisition and the long-term capital gain will be Rs. 50 (Rs. 250 – Rs. 200).

Scenario 2 – An equity share is acquired on 1st of January, 2017 at Rs. 100, its fair market value is Rs. 200 on 31st of January, 2018 and it is sold on 1st of April, 2018 at Rs. 150.
In this case, the actual cost of acquisition is less than the fair market value as on 31st of January, 2018. However, the sale value is also less than the fair market value as on 31st of January, 2018. Accordingly, the sale value of Rs. 150 will be taken as the cost of acquisition and the long-term capital gain will be NIL (Rs. 150 – Rs. 150).

Scenario 3 – An equity share is acquired on 1st of January, 2017 at Rs. 100, its fair market value is Rs. 50 on 31st of January, 2018 and it is sold on 1st of April, 2018 at Rs. 150.

In this case, the fair market value as on 31st of January, 2018 is less than the actual cost of acquisition, and therefore, the actual cost of Rs. 100 will be taken as actual cost of acquisition and the long-term capital gain will be Rs. 50 (Rs. 150 – Rs. 100).

Scenario 4 – An equity share is acquired on 1st of January, 2017 at Rs. 100, its fair market value is Rs. 200 on 31st of January, 2018 and it is sold on 1st of April, 2018 at Rs. 50.
In this case, the actual cost of acquisition is less than the fair market value as on 31st January, 2018. The sale value is less than the fair market value as on 31st of January, 2018 and also the actual cost of acquisition. Therefore, the actual cost of Rs. 100 will be taken as the cost of acquisition in this case. Hence, the long-term capital loss will be Rs. 50 (Rs. 50 – Rs. 100) in this case.

Q 8. Whether the cost of acquisition will be inflation indexed?

Ans 8. Sub-clause (5) of clause 31 of the Finance Bill, 2018, inter alia, provides that the long-term capital gain will be computed without giving effect to the provisions of the second provisos of section 48. Accordingly, it is clarified that the benefit of inflation indexation of the cost of acquisition would not be available for computing long-term capital gains under the new tax regime.

Q 9. What is the date of commencement of the proposed new tax regime?

Ans 9. The proposed new tax regime will apply to transfer made on or after 1st April, 2018. The existing regime providing exemption under clause (38) of section 10 of the Act will continue to be available for transfer made on or before 31st March, 2018.

Q 10. What will be the tax treatment of accrued gains upto 31st January 2018?

Ans 10. As the fair market value on 31st January, 2018 will be taken as cost of acquisition (except in some typical situations explained in Ans 7.), the gains accrued upto 31st January, 2018 will continue to be exempt.

Q 11. What will be the tax treatment of transfer of share or unit between 1st February 2018 to 31st March 2018?

Ans 11. As replied in answer 9, the new tax regime will be applicable to transfer made on or after 1st April, 2018, the transfer made between 1st February, 2018 and 31st March, 2018 will be eligible for exemption under clause (38) of section 10 of the Act.

Q 12. What will be the tax treatment of transfer made on or after 1st April 2018?

Ans 12. The long-term capital gains exceeding Rs. 1 Lakh arising from transfer of these asset made on after 1st April, 2018 will be taxed at 10 per cent. However, there will be no tax on gains accrued upto 31st January, 2018 as explained in Ans 10.

Q13. What is the date from which the holding period will be counted?

Ans 13. The holding period will be counted from the date of acquisition.

Q 14. Whether tax will be deducted at source in case of gains by resident tax payer?

Ans 14. No. There will be no deduction of tax at source from the payment of long-term capital gains to a resident tax payer.

Q 15. Whether tax will be deducted at source in case of payment of long-term capital gains by non-resident tax payer (other than a Foreign Institutional Investor)?

Ans 15. Ordinarily, under section 195 of the Act, tax is required to be deducted on payments made to non-residents, at the rates prescribed in Part-II of the First Schedule to the Finance Act. The rate of deduction in the case of capital gains is also provided therein. In terms of the said provisions, tax at the rate of 10 per cent. will be deducted from payment of long-term capital gains to a non-resident tax payer (other than a Foreign Institutional Investor). The capital gains will be required to be computed in accordance with clause 31 of the Finance Bill, 2018.

Q 16. Whether tax will be deducted at source in case of payment of long-term capital gains by Foreign Institutional Investors (FIIs)?

Ans 16. No. There will be no deduction of tax at source from payment of long-term capital gains to a Foreign Institutional Investor in view of the provisions of sub-section (2) of section 196D of the Act.

Q17. How will the gains in the case of FIIs be determined?

Ans 17. The long-term capital gains in case of FIIs will be determined in the same manner as explained in earlier answers in the case of resident tax payers.

Q 18. What will be the treatment of the gains accrued upto 31st January 2018 in the case of FIIs?

Ans 18. In case of FIIs also, there will be no tax on gains accrued upto 31st January, 2018 as explained in Ans 10.

Q 19. What will be the tax treatment of transfer of share or unit between 1st February 2018 to 31st March 2018 in the case of FIIs?

Ans 19. As explained in Ans 11, in case of FIIs also, the transfer made between 1st February, 2018 and 31st March, 2018 will be eligible for exemption under clause (38) of section 10 of the Act.

Q 20. What will be the tax treatment of transfer made on or after 1st April 2018 in case of FIIs?

Ans 20. As explained in Ans 12, in case of FIIs also, the long-term capital gains exceeding Rs. 1 Lakh arising from transfer of these asset made on after 1st April, 2018 will be taxed at 10 per cent. However, there will be no tax on gains accrued upto 31st January, 2018 as explained in Ans 10.

Q21. What will be the cost of acquisition in the case of bonus shares acquired before 1st February 2018?

Ans 21. The cost of acquisition of bonus shares acquired before 31st January, 2018 will be determined as per sub-clause (6) of clause 31 of the Finance Bill, 2018. Therefore, the fair market value of the bonus shares as on 31st January, 2018 will be taken as cost of acquisition (except in some typical situations explained in Ans 7), and hence, the gains accrued upto 31st January, 2018 will continue to be exempt.

Q 22. What will be the cost of acquisition in the case of right share acquired before 1st February 2018?

Ans 22. The cost of acquisition of right share acquired before 31st January, 2018 will be determined as per sub-clause (6) of clause 31 of the Finance Bill, 2018. Therefore, the fair market value of right share as on 31st January, 2018 will be taken as cost of acquisition (except in some typical situations explained in Ans 7), and hence, the gains accrued upto 31st January, 2018 will continue to be exempt.

Q 23. What will be the treatment of long-term capital loss arising from transfer made between 1st February, 2018 and 31st March, 2018?

Ans 23. As the exemption from long-term capital gains under clause (38) of section 10 will be available for transfer made between 1st February, 2018 and 31st March, 2018, the long-term capital loss arising during this period will not be allowed to be set-off or carried forward.

Q 24. What will be the treatment of long-term capital loss arising from transfer made on or after 1st April, 2018?

Ans 24. Long-term capital loss arising from transfer made on or after 1st April, 2018 will be allowed to be set-off and carried forward in accordance with existing provisions of the Act. Therefore, it can be set-off against any other long-term capital gains and unabsorbed loss can be carried forward to subsequent eight years for set-off against long-term capital gains.

(Pravin Rawal)

Director (TPL-II), CBDT
Tel. 011-23093765

Press Release: Sharp increase in prosecutions of tax evaders by Income Tax Department

MASTI

CBDT, Ministry of Finance

Sharp increase in prosecutions of tax evaders by Income Tax Department

Posted On: 12 JAN 2018 2:09PM by PIB Delhi

The Income Tax Department has accorded the highest priority to tackle the menace of black money. With this objective in mind, the Department has initiated criminal prosecution proceedings in a large number of cases of tax offenders and evaders.

Prosecutions have been initiated for various offences including wilful attempt to evade tax or payment of any tax; wilful failure in filing returns of income; false statement in verification and failure to deposit the tax deducted/collected at source or inordinate delay in doing so, among other defaults.

During FY 2017-18 (upto the end of November, 2017), the Department filed Prosecution complaints for various offences in 2225 cases compared to 784 for the corresponding period in the immediately preceding year, marking an increase of 184%. The number of complaints compounded by the Department during the current FY (upto the end of November, 2017) stands at 1052 as against 575 in the corresponding period of the immediately preceding year, registering a rise of 83%. Compounding of offences is done when the defaulter admits to its offence and pays the compounding fee as per stipulated conditions.

Due to the decisive and focused action taken by the Department against tax evaders, the number of defaulters convicted by the courts has also registered a sharp increase during the current fiscal. 48 persons were convicted for various offences during the current year(upto the end of November, 2017) as compared to 13 convictions for the corresponding period in the immediately preceding year, marking an increase of 269%.

A few illustrative cases are highlighted.

A Dehradun Court convicted one defaulter for holding undisclosed foreign bank account and sentenced him to two years of imprisonment for wilful attempt to evade tax and to two years for false statement in verification alongwith monetary penalty for each default respectively.

The Court of CJM, Jalandhar convicted a cloth trader with 2 years rigorous imprisonment for trying to cheat the Department by fabricating affidavits and gift deeds, in connivance with his advocate and witness, with the motive of evading tax. The Court, while awarding the sentence to the trader, also simultaneously awarded one year’s imprisonment to the advocate notarizing the forged affidavit and also to the witness for aiding and abetting the serious offence.

In Bengaluru, the MD of a company engaged in infrastructure projects was found guilty of non-deposit of TDS of over Rs. 60 lakh(within the prescribed time), and was sentenced to rigorous imprisonment of three months alongwith imposition of fine. Similarly, a Mohali resident was held guilty of non-deposit of TDS within prescribed time and sentenced to one year jail alongwith fine.

In another case of Hyderabad, the Director of an infrastructure company was sentenced to rigorous imprisonment of six months and fine for wilful attempt to evade tax. She was simultaneously sentenced to rigorous imprisonment for six months alongwith fine for false statement in verification.

The Economic Offences Court at Ernakulam sentenced an individual to rigorous imprisonment of three months for selling property to evade payment of taxes of about Rs. 76 lakh despite issuance of the tax recovery certificate by the Tax Recovery Officer.

In yet another case reported from Agra, the Special CJM convicted one defaulter with imprisonment of one year & six months for wilful attempt to evade tax and for false statement in verification respectively alongwith fine.

The Income Tax Department is committed to carry forward the drive against tax evasion and action against tax evaders will continue in all earnest in the remaining part of the current Financial Year.

Press Release: Prohibition of Benami Property Transactions Act

MASTI

Income Tax Department steps-up actions under Prohibition of Benami Property Transactions Act : Benami properties of more than Rs. 3,500 crore in more than 900 cases attached

Posted On: 11 JAN 2018 12:54PM by PIB Delhi

Due to intensive efforts undertaken by the Income Tax Department, provisional attachment has been made in more than 900 cases of properties under the Prohibition of Benami Property Transactions Act (the ‘Benami Act’), which came into force w.e.f 1st November, 2016. These attachments include plots of land, flats, shops, jewellery, vehicles, deposits in bank accounts, fixed deposits etc. The value of properties under attachment is more than Rs. 3,500 crore including immovable properties of more than Rs. 2,900 crore.

In five cases, the provisional attachments of Benami properties, amounting to more than Rs. 150 crore have been confirmed by the Adjudicating Authority. In one such case, it was established that a Real Estate Company had acquired about 50 acres of land, valued at more than Rs.110 crore, using the names of certain persons of no means as benamidars. This was corroborated from the sellers of the land as well as the brokers involved. In another case, post demonetization, two assessees were found depositing demonetized currency into multiple bank accounts in the names of their employees, associates etc. to be ultimately remitted to their bank accounts. The total amount attempted to be remitted to the beneficial owners was about Rs. 39 crore. In yet another case, a cash amount of Rs. 1.11 crore was intercepted from a vehicle with a person who denied the ownership of this cash. Subsequently, no one claimed ownership of this cash and it was held to be benami property by the Adjudicating Authority.

Earlier, the Income Tax Department had stepped-up actions under the Prohibition of Benami Property Transactions Act (the ‘Benami Act’. The Act provides for provisional attachment and subsequent confiscation of benami properties, whether movable or immovable.

It also allows for prosecution of the beneficial owner, the benamidar and the abettor to benami transactions, which may result in rigorous imprisonment up to 7 years and fine upto 25% of fair market value of the property.

The Department had set-up 24 dedicated Benami Prohibition Units (BPUs) under its Investigation Directorates all over India in May, 2017 to ensure swift action in respect of Benami properties.

The Department is committed to continue its concerted drive against black money and action against Benami transactions will continue to be intensified.

Remove long-term capital gains tax exemption: BSE

MASTI

One of the most important stock market participants is making a case for reinstating of long-term capital gains (LTCG) tax on equity investments.

According to sources, the BSE has made a presentation to the Union finance ministry that LTCG exemptions cause huge revenue loss to the government and also lead to market manipulation. LTCG is tax-exempt on the sale of listed securities, since 2005. This had made India one of the most liberal markets in this regard, the BSE said in a presentation last Friday.

LTCG are profits on sale of shares on a stock exchange platform after a holding period of at least a year. Short-term capital gains (STCG) are profits on sale of shares held for less than 12 months; these are taxed at a flat 15 per cent.

“Since India has one of the lowest tax collection to GDP (gross domestic product) ratio within G-20 countries, every effort must be taken to shore up the revenue collection. LTCG taxation could help,” it had reportedly said. The exchange pegs the loss to the exchequer at Rs 49,000 crore annually for not charging LTCG.

“LTCG exemption is a great concept. It is aimed at encouraging long-term equity investments, necessary for the economy. There have, regrettably, been some instances of its misuse. Instead of a blanket abolition, it would be better to fine-tune the tax provisions to encourage its bona fide use,” said Prithvi Haldea, founder, Prime Database.

“A lot of investors have made good returns from the market in the past year. However, the tax outgo from these investors is barely anything, thanks to the exemption under LTCG. There is definitely a case to look into this,” said a senior legal expert, asking not to be named.

Market players said re-introduction of LTCG, however, could trigger a sell-off in the stock markets. In the run-up to last year’s Union Budget, investors were worried at adverse tax changes for capital market investors. The government, however, had not tinkered with that structure.

“Talk of LTCG tax has been doing the rounds in the past few years. It remains to be seen whether the government will muster the courage to do it, as this will be a huge market disruptor. After demonetisation and the GST (goods and services tax) roll-out, the government would like to play safe till the 2019 election,” said the official cited earlier.

Unscrupulous entities have also been using this tax benefit to launder money by dealing in shell company shares. In early August, the markets regulator had suspended trading in 331 suspected shell companies identified by the ministry of corporate affairs. BSE says the LTCG leeway opens the door for tax arbitrage and manipulation.

Among the other suggestions from the bourse are curbs on derivatives trading to ensure it is largely used for the purpose of hedging. The exchange has also raised concerns over manipulation of stock prices through algorithm trading.

long-term capital gains tax exemption

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