Income Tax Rules provide that the following persons shall pay tax electronically (i.e. internet banking facility or through credit/debit cards) on or after the 1st day of August, 2008: i. A company; and ii. A person (other than a company), to whom the provisions of section 44AB of the Income-Tax Act 1961 are applicable. As per the report of Central Board of Excise and Customs (CBEC): i. With effect from 01.10.2014, it is mandatory for all Central Excise assesses and service provider/tax payer to electronically pay duty through internet banking. ii. E-payment of duty is mandatory for Accredited Clients Programme (ACP) importers paying duty of ₹ 1.00 lakh or more per Bill of Entry. Further, Government in August 2011 had asked Public Sector Banks (PSBs), Financial Institutions (Fls) and Public Sector Insurance Companies (PSICs) to deal with payments to staff, vendors, suppliers and disbursement of loans and payments towards instalments and investments only through direct credit to accounts. This was stated by Shri Jayant Sinha, MoS in the Ministry of Finance in written reply to a question in the Lok Sabha.
SAD Refund cannot be denied on sales made to non registered buyer despite no endorsement on invoice -22/12
Vijay Steel Industries Vs. Commissioner of Customs (EP), Mumbai [2014-TIOL-2240-CESTAT-Mum] Vijay Steel Industries (the Appellant) is a small trader who, imported stainless steel industrial raw material (the goods) on payment of proper customs duty and 4%Special Additional Duty of Customs (SAD) under Section 3(5) of the Customs Tariff Act, 1975 and subsequently domestically sold such goods on payment of CST/ VAT. They were issuing invoice to the buyers making an endorsement that the credit of SAD will not be available. However, in respect of one buyer,who is not registered with the Central Excise Department, the Appellant did not make endorsement on the invoice with regard to the fact that Cenvat credit is not available to the buyer being non-registered assessee. Thereafter, the Appellant filed refund of SAD under Notification No. 102/2007-Customs dated September 14, 2007 (“the Notification”) which was rejected by the Department on the ground that the endorsement to the effect that ‘No Cenvat credit of the SAD is admissible’ in respect of the goods covered therein, as required in terms of the Notification was not made on the invoice issued for sale of the goods.Being aggrieved, the Appellant preferred an appeal before the Hon’ble CESTAT, Mumbai. The Hon’ble CESTAT, Mumbaiheld that although there is no endorsement on the invoice, the buyer is also not able to take Cenvat credit as the buyer is not registered with the Central Excise Department and as the buyer is not able to take Cenvat credit of SAD, the condition of the Notification is fulfilled to entitlement of the refund of SAD. Accordingly, the Hon’ble Tribunal allowed the appeal and held that the Appellant is entitled for refund of SAD.
CAG Reports non-adherence to various provisions of Income Tax Act by CAs
Report no.-32 of 2014-Union Government (Department of Revenue-Direct Taxes) – Report of the Comptroller and Auditor General of India on Performance Audit on Appreciation of Third Party (Chartered Accountant) Reporting in Assessment Proceedings. The Report has been laid on the table of the Parliament house on 19-12-2014 Preface This Report for the year ended March 2014 has been prepared for submission to the President under Article 151 of the Constitution of India. The Report contains significant results of the performance audit of Appreciation of Third Party (Chartered Accountant) Certification in Assessment Proceedings of the Department of Revenue – Direct Taxes of the Union Government. The instances mentioned in this Report are those, which came to notice in the course of test audit for the period 2010-11 to 2013-14 conducted during January to May 2014. The audit has been conducted in conformity with the Auditing Standards issued by the Comptroller and Auditor General of India. Audit wishes to acknowledge the cooperation received from the Department of Revenue – Central Board of Direct Taxes at each stage of the audit process. Executive Summary The Income Tax Act, 1961 (Act) contains several provisions which mandate the assessees to furnish audit reports and certificates issued by the ‘Accountant’ in the prescribed Form for meeting the specific objectives. Tax audit under Section 44AB under the Act was introduced in 1984 in order to ensure that the books of account and other records of the assessees are properly maintained and faithfully reflect the true income of the taxpayer. The objective of reporting/ certification is to discourage tax avoidance and tax evasion. The Act defines an ‘Accountant’ as a Chartered Accountant (CA) within the meaning of the Chartered Accountants Act, 1949 under explanation to Section 288(2) of the Act. Audit reporting and certification by CAs under the Act are thus Third Party Reporting. The CAs are regarded as facilitators for the Income Tax Department (ITD) in administering the provisions of the Act correctly. The Tax Audit Reports (TARs)/certificates issued by them serve as a valuable reference guide to the Assessing Officers (AOs) while making assessments. We conducted Performance Audit on “Appreciation of Third Party (Chartered Accountant) Certification in Assessment Proceedings” with the objectives to see whether (a) all the requisite reports/certificates were obtained and kept on record at the time of assessments; (b) tax audit reports were complete to provide sufficient and requisite information to the AO, thereby, aiding him in completing the assessment as required under the Act; (c) the AO had evaluated and utilized the information while completing assessments, (d) in case of professional negligence of the Accountant, the matter has been taken up by the Commissioners with the Institute of Chartered Accountant of India (ICAO and (e) there are lacunae or ambiguities in the provisions of the Act/reports. This Performance Audit covered assessments completed during the period from financial years 2010-11 to 2012-13 and upto the date of audit. In case of major audit observations, assessment records of previous assessment years were also linked wherever found necessary. All circles/wards taken up for regular audit during the period from January to May 2014 were treated as selected units. All cases of scrutiny assessments, appeal and rectification cases within the selected units were examined in audit. We conducted entry meeting with CBDT in February 2014 in which audit objectives, scope and methodology were discussed. We found cases (a) where the CAs failed to report full and correct information in 367 cases leading to short levy of taxes of Rs. 2,813.11 crore and (b) where the AOs failed to utilize the information available in 102 reports/certificates submitted to them leading to short levy of taxes of Rs. 1,310.05 crore. Some of the important audit findings are as follows: a. Tax auditors failed to give correct information relating to allowance of depreciation in 66 cases involving short levy of tax of Rs. 457.79 crore (Paragraph 2.3). b. Tax auditors did not report correct information regarding brought forward loss/depreciation resulting in irregular brought forward loss/depreciation allowance in 46 cases involving short levy of tax of Rs. 557.79 crore (Paragraph 2.4). c. In 42 cases personal/capital expenditure was incorrectly allowed as the tax auditors did not report the amount in their tax audit reports which resulted in short levy of tax of Rs. 477.89 crore (Paragraph 2.5). d. CAs have certified wrong information/claims for various exemptions and deductions in 74 cases having tax effect of Rs. 259.72 crore (Paragraph 2.7). e. CAs gave incorrect/incomplete information in TARs/certificates in 132 cases having a revenue impact of Rs. 1,037.61 crore (Paragraph 2.8). We also found in another 616 cases where CAs committed mistakes viz. in allowance of exemption/deductions, charging of tax on Book Profit under Section 115JB, adoption of Arm’s Length Price and reporting on cash payments exceeding Rs. 20,000 per day (Paragraphs 2.6 and 2.10-2.12). In 109 cases, assessees did not furnish requisite Form 3CEB on verification of ALP and Form 29B relating to certification for Book Profit (Paragraphs 2.10-2.11). We have also commented on lacunae in the existing Forms which need modification in order to capture full information of the affairs of assessees so that taxes are applied correctly (Paragraph 3.2-3.4). Regarding monitoring of work of CAs and ensuring quality tax audit, ICAI issued guidance to its members for limiting the tax audit assignments in a financial year. We found that 18.87 per cent of CAs (12,435 CAs) for AY 2013-14 issued more tax audit reports than prescribed by ICAI (Paragraph 3.6). We also got cases where CAs did not mention their membership numbers (Paragraph 3.7). ITD did not refer any case for professional negligence to ICAI for taking action against erring CAs in terms of Section 288 of the Act (Paragraph 3.9). The audit findings on non-adherence to various provisions of the Act by CAs led to deny proper dues to the Government. AOs have also failed to utilize information available in Accountant’s reports/certificates. CBDT have emphasized the use of information available in Accountant’s reports/certificates by AOs at the time of assessments. In our recommendations, we have suggested ITD to utilize information available in tax audit reports/certificates at the time of assessment proceedings. To improve the quality of work done by CAs, we recommend referring the cases of professional negligence to ICAI. Besides, we also recommended to make provisions in the Act to limit the number of tax audit, provide suitable controls in the ITD system and validating the membership of CAs at the time of e-filing (Paragraph 3.11). Since the introduction of Section 44AB in the Act in 1984, we have evaluated the system of tax audit/certification by Accountants in 1997 (Para 3.2 of Audit Report No. 12 of 1997) and again in Audit Report No. PA 7 of 2008. In both the Audit Reports, we pointed out non-utilization of information by AOs in assessment proceedings and incorrect information furnished by CAs in TARs/Certificates. These irregularities are still persisting. Thus objective of introducing tax audit and certification by Accountants gets defeated. With growing revenue forgone every year and complex nature of business environments, Accountant’s role in ensuring true picture of accounts and taxes due to the Government as per the Act is very crucial. It is joint responsibility of ITD and ICAI to ensure compliance to the Act. Necessary control mechanism over the third party certification in assessment proceedings must be ensured, by making suitable provisions in the Act, if necessary. Summary of Recommendations 1. The Ministry may ensure that the AOs shall not grant exemptions/ deductions if the assessee does not submit necessary certificates/ reports. (Paragraphs 2.06-2.07) The Ministry replied (October 2014) that there are sufficient provisions in Sections 10A, 10(23C), 80IA, 8018, etc. of the Act which ensure that tax audit reports are available with the ITD. These provisions themselves ensure that in case of failure to file prescribed audit reports, exemptions/deductions thus claimed are not allowed. The Ministry also replied that the CBDT’s Instruction No.9/2008 also reiterated that the tax audit reports as well as other statutory audit reports should be critically examined along with connected records and other available evidence while scrutinizing the cases. The Ministry also replied that a proviso to Rule 12 of IT Rules 1962 has been substituted with retrospective effect from 01 April 2013 requiring the assessee, claiming exemptions/ deductions under various provisions of the Act, to file the prescribed reports of audit electronically. Audit is of the opinion that though sufficient provisions are available in the Act, however, AOs did not follow during assessment meticulously which need attention by the Ministry. 2. The Ministry may ensure that the AOs fully utilize the available information in CAs report/certificates. (Paragraph 2.14) The Ministry replied (October 2014) that necessary instructions have been issued in 2008 to critically examine tax audit reports as well as other statutory audit reports and to utilize effectively the information available in these reports while finalizing scrutiny assessments. The Ministry further replied (October 2014) that e-filing of audit reports has been introduced from AY 2013-14. Information furnished in e-filed audit reports was used in selecting cases for scrutiny under Computer Assisted Scrutiny Selection. The reason for selection of case was also displayed to the AOs for effective utilization of available information. 3. The Ministry may consider modifying the Form 3CD to incorporate date of declaration/ payment of distributed profits in order to verify whether the tax has been paid within the stipulated period or any interest is to be charged due to delay. (Paragraph 3.2) 4. The Ministry may consider modifying the Form3CD or 29B certificate to give details of the available MAT credit assessment year-wise that can be carried forward by the assessee in order to ensure the correctness of the claim for credit under Section 115JAA of the Act. (Paragraph 3.3) On recommendations 3 and 4 above, the Ministry replied (October 2014) that Tax Audit Report (Form 3CA, Form 3CB and Form 3CD) have been comprehensively revised in July 2014 therefore it would not be advisable to again revise the same for capturing the date of declaration/payment of dividend for the purpose of verifying whether DDT is paid within the specified time or capturing the available MAT credit assessment year-wise. The Ministry also mentioned that the required details are already being captured in the Income-tax Return forms in schedules MATC and DDT of Form ITR-6 from 2013-14 onwards. However, the Ministry has noted the suggestions raised by audit and replied that it would be considered for incorporation in the next revision of forms of Tax Audit Report. 5. The Ministry may consider modifying Form 10B and 1OBB for providing details regarding last ten years accumulation or utilization of amounts set aside as application by the Charitable Trusts/Institutions in order to check correctness of investment and application of the accumulated fund (Paragraph 3.4) The Ministry stated (October 2014) that the required details were already being captured in the Income-tax Return forms. Incorporating similar details in Form 10B and 1OBB would amount to duplication. Audit is of the opinion that though ITR captures the relevant information, the certification by CAs would ensure the correctness of information furnished in ITR. 6. The Ministry may ensure limiting the tax audit assignments in order to ensure quality of tax audit. (Paragraph 3.6) The Ministry replied (October 2014) that it would be for the regulatory body i.e. the Institute of Chartered Accountants of India (ICAI) to lay down restrictions on the number of tax audit and to enforce the same. The Ministry further replied (October 2014) that it is difficult to place control in ITD systems to regulate the number of tax audit reports (TAR) as CAs affix their signatures on TAR in their individual capacity and also while representing Firms of CAs and certain types of audits are exempted from the maximum number specified as per ICAI guidelines. ITD provides the list of cases where the number of TARs is apparently exceeded to ICAI for their action. Reply of the Ministry is not acceptable as the Act requires tax audit under Section 44AB is to be conducted by an Accountant, not by a firm of CAs. Further, limit on tax audit assignment has been fixed by ICAI for all tax audits to be done under Section 44AB. Audit is of the opinion that CAs has been assigned the work of tax audit which is very crucial in claiming exemptions/deduction by assessees. Therefore, in the interest of revenue and ensuring quality of tax audit, the Ministry may introduce suitable control mechanism in the IT system to adhere to the limit on tax audits in consultation with ICAI. 7. The Ministry may ensure to prohibit a CA who is a relative of the assessee or directors of a company, from signing any report or certificates. (Paragraph 3.9) The Ministry stated (October 2014) that prohibiting a CA who is relative of the assessee or director of a company from signing any report or certificates may be examined during budgetary exercise of 2015. 8. The Ministry may ensure the implementation of CBDT instruction no.1959 of 1999 and Section 288 of the Act. (Paragraph 3.9) The Ministry stated (October 2014) that in view of the initiatives already taken vide instructions nos. 1959 of 1999 and 09/2008 and provisions contained in section 288 of the Act, no further action was required on this issue. Audit is of the opinion that though instructions have been issued in past, audit has come up with cases where AOs have not fully utilise the information available in CA reports/certificates. The Ministry may provide intensive training to AOs on utilisation of information and strengthen its internal audit in this regard. 9. The Ministry may put in place a mechanism in the ITD system for AO to record instances of mistakes committed by CAs in order to take action under Section 288 of the Act. (Paragraph 3.9) The Ministry stated (October 2014) that suggestion of audit can be incorporated by DGIT (System) to facilitate AOs for recording such instances in the system.
Abuse of process of law –filing of appeals/revisions by the Tax Authorities in ‘covered’ matters
It has become a custom not to accept decisions of the Appellate Authorities/Tribunals in Tax matters although they are covered by the binding decisions of the Apex Court/ Jurisdictional High Court. Knowing very well that the matters are covered by the binding ‘precedents’, the Tax Department/Revenue have made it a ‘convention’ to challenge the matters in higher forums and do not bring this fact to notice of the court as a result of which precious judicial time of the Court is wasted.
Recently, the Courts have taken a strict view on such malpractices which cause harassment of the assessees and also usurp the valuable time of the Court. In a recent case of CIT vs. Kishan Ratilal Choksey (Income Tax Appeal No. 1001 of 2011 decided on 17 April, 2014), the department did not point out that its appeal for the earlier years in the case of the same assessee had been dismissed by the Bombay High Court. The High Court took a serious view of the matter and imposed an exemplary cost of Rs. 1 lakh on the department for “gross abuse of process of Court“. The Court held thus:
“It is unfortunate that the Revenue insists in arguing Appeals in this manner and for subsequent Assessment Years. The Revenue ought to have been fair and brought to the notice of this Court the fact that its Appeal challenging the very findings and conclusions for prior Assessment Years has been dismissed by this Court on merits. The reasons assigned ought to have been pointed out to us and thereafter, any explanation should have been offered for admission of this Appeal … It is a gross abuse of the process of this Court. It is dismissed with costs quantified at Rs.1,00,000/ (Rupees One lakh). Costs be paid to the assessee within 4(four) weeks from today”.
However, on the assurance of the department that hereafter judicial orders and directions would be abided by in all matters, the order on levy of costs was recalled. The Court made it clear that appropriate averments will have to be made in the memo of Appeal as to whether the orders of the Tribunal for prior assessment years and in the case of very assessee have been either challenged or otherwise. If the challenge is pending even that statement has to be made and if it is decided, the outcome thereof has to be indicated.
In yet another case of CIT vs. Kirloskar Oil Engines Ltd, (Income Tax Appeal No.2646 OF 2011 decided on 17 April, 2014) the Bombay High Court reprimanded the Department and gave “last opportunity” and warned of “heavy costs” for wasting judicial time by filing appeal on ‘covered matters’.
The brief facts of the case are that the assessee received an incentive/ subsidy from SICOM for setting up a new undertaking. The assessee claimed that the subsidy was a capital receipt but the Assessing Officer held the receipt to be a revenue receipt. The CIT(Appeals) and Tribunal upheld the claim of the assessee as the issue was covered by the decision of the Jurisdictional High Court in Chaphalkar Brothers 351 ITR 309 (Bom) & the decision of the Apex Court in Ponni Sugars 306 ITR 392 (SC). The Department filed an appeal to the High Court. While dismissing the appeal, the High Court held as under:
“We are afraid that if the Revenue persists with such stand and as has been turned down repeatedly, that would defeat the very object and purpose of the schemes and packages devised by the States. That would also result in frustrating the entrepreneurs and defeating the purpose of setting up new industries and particularly in backward areas. The Revenue, therefore, should bear in mind that in every such case and whenever the funds or receipts are from the schemes and packages devised by the State, it should note the object and purpose of the same. If that is of the nature specified in the judgments of this Court and equally that of the Hon’ble Supreme Court, then, the Revenue must act accordingly. We hope that this much is enough so as to dissuade the Revenue from bringing such matters repeatedly to this Court. Ordinarily and for wasting judicial time and which is precious, we would have imposed heavy costs on the Revenue while dismissing this Appeal, but we refrain from doing so by giving last opportunity to the Revenue.”
Recently in the case of CIT vs. Larsen and Toubro, the Bombay High Court in Income Tax Appeal nos.424/2012, 425/2012 & 483/2012 decided on 10 July 2014, held that frivolous appeals filed by the Government Departments result in harassment of the assessee and waste the precious judicial time of the High Court. Dismissing the appeals, the Bombay High Court imposed Rs. 1 lac in each appeal and directed that this cost be recovered from the erring official and ordered disciplinary action against such official. The Court held thus:
“i) We are surprised if not shocked that such appeals are being brought before us and precious judicial time is being wasted that too by the Revenue. The least and minimum that is expected from the Revenue officers is to accept and abide by the Tribunal’s findings in such matters and when they are based on settled principles of law. If they are not deviating from such principles and are not perverse but consistent with the material on record, then, we do not find justification for filing of such appeals. We have found that merely expressing displeasure orally is not serving any purpose;
(iv) It would be open for the superior/competent authority to recover the costs personally from the officer responsible and equally take disciplinary action against him if the power to decide about filing such appeals is abused or the decision making authority is utilized to harass innocent Assessees.”
In a recent decision of the ITAT, Mumbai in the case of ITO vs. Growel Energy Co. Ltd (ITA no. 338/Mum/2011) decided on 13 June 2014, the Tribunal passed strictures against the AO & CIT & also fined them for filing a frivolous appeal. Dismissing the appeal of the Department, it was observed thus:
“The ITO, the Appellant, as well as the CIT, who has authorized the AO to prefer an appeal, did not apply their mind in the correct perspective and in a very lacklustre and routine manner filed the appeal which, in turn, resulted in wastage of time of the court … At this juncture it may be noticed that the power is vested in the CIT and not with the AO because the Legislature, in its wisdom, thought that a superior/ senior officer can take a more balanced decision so as to avoid filing frivolous appeals in routine manner. However, even the CIT has not given his reasons as to why he has authorized the AO to file an appeal on this issue…. we are of the firm view that the AO has raised a soulless ground which deserves to be dismissed in limine. We could have saved a lot of time had the CIT not given his authorization on such frivolous issues. On the contrary, it is incumbent upon the Commissioner, as a supervisory authority, to admonish the AO for making an addition without basic understanding of legal position…. this is a peculiar case where even the CIT (Admin) who is supposed to supervise the proper functioning of the AO, under his charge, has allowed him to file appeals without properly examining the assessment order and the order of the CIT(A), which results in unnecessary expenditure to the assessee when appeal is filed by the Revenue and the assessee had to undergo the trauma of engaging counsel and paying substantial fees to defend the case when the Revenue has no case at all … Therefore we award a token cost of Rs. 5,000 upon the CIT who has given the authorization and cost of Rs. 10,000 upon the AO who has filed this appeal… The said payment should be made to the assessee within one month from the date of receipt of this order. Registry is also directed to mark a copy to the Chairman, CBDT so that in future the Income Tax Commissioners, who are responsible for filing appeal before the Tribunal, would take proper care to scrutinise the issues before authorising the AO to file appeals before the Tribunal.”
Very recently in the case of CIT vs. Reliance Infrastructure Ltd. (Appeal no. 803 of 2012) decided on 12-09-2014 & 01-10-2014, the Bombay High Court was annoyed for filing appeal in a matter covered by a binding precedent of the Apex Court. The Court sought an explanation from the counsel for the Income Tax Department why appeal u/s 260A of the Income Tax Act has been filed by him when there was an authoritative pronouncement on the issue by the Hon’ble Supreme Court in CIT v/s Tulsyan NEC Ltd. 300 ITR 226 (SC). On his pretext that the decision to file an appeal is taken by the Jurisdictional Commissioner and he has merely abided by his directions, the Court irked by his explanation held thus:
“These state of affairs can hardly be termed as satisfactory. It is unfortunate that the Revenue is unable to make any distinction with regard to the legal position noted in the judgment of the Supreme Court of India and it is bound by the said judgment of the highest court in the country. The Revenue seems to be unaware of Article 141 of the Constitution of India and mandate thereof. Once there is nothing to the contrary, then, the authoritative pronouncement should bind all. The Tribunal then cannot be approached and equally this Court to complain about an adverse order. We are shocked that when such is the concession recorded that the Appeals of this nature are brought before this Court and it’s precious judicial time is wasted.
… It is very unfortunate that we had to secure the presence of the highest officers in the department of Income Tax, for seeking an explanation on the points which we have raised in our order dated 12.09.2014.
.. The only intent to secure personal appearance of higher officials is to impress on the Revenue that larger public interest mandates and requires it not to waste precious time of the highest Court in the State by engaging it in frivolous Appeals and applications. It may be that, at the departmental level, the officers are not satisfied with adverse orders and desire to contest the issue or raise it before the Income Tax Appellate Tribunal. However, when the Tribunal follows and applies the ratio of a judgment of the Hon’ble Supreme Court of India, then, we would expect the officers to gracefully accept an adverse verdict. Where no distinguishing feature can be pointed out, then, the law of the land must be allowed to prevail. The mandate of Article 141 of the Constitution of India is known to all. The further mandate of the Constitution as enshrined in Article 261(1) is giving of full faith and credit to public acts, records and judicial proceedings of the union and of every State. Therefore, the law declared by the Supreme Court binds all and cannot be brushed aside. The repeated attempts to raise the same issues and questions in relation to same Assessee and year after year results in loss of precious judicial time and public revenue. We do not expect hereafter such an irresponsible conduct from the higher officers. Ordinarily, we would have in the absence of any explanation forthcoming, passed severe structures against the department and the officers in particular but we refrain from doing so since the concerned officials present in Court sincerely apologized for the lapse and urged that the Appeal may be disposed against the Revenue and in terms of our earlier orders so also the judgment of the Hon’ble Supreme Court of India, both of which are binding on us. Hence, the Appeal is dismissed.”
Needless to say that the decisions of the Apex Court are binding on all authorities and Courts under Article 141 of the Constitution and the decisions of the Jurisdictional High Court are binding under Article 227 of the Constitution. Judicial Discipline warrants that the decisions of the Jurisdictional High Court & the Apex Court be followed unreservedly by all subordinate Courts & Authorities. The ‘strictures’ passed by the Court are a welcome step to curb the highhandedness of the department but for providing a lasting solution to such malpractices, a strict monitoring system should be evolved to make both the department and the counsel accountable. Moreover, mechanism should be evolved to ensure that the Revenue Authorities concerned comply with the directions of the Court & adopt remedial measures
How to file Income Tax Return & Tax Audit report as a legal heir
Ques: How is the income tax return of a deceased person filed?
Ans: The Income Tax return of a deceased person is filed on his/her behalf by the legal heir of the assessee under the provisions of the Income Tax Act’1961.
The income tax return of the deceased assessee will be signed on behalf of the deceased assessee by his legal heir.
Ques: What if the income tax return is to be accompanied by a tax audit report?
Ans: The procedure for filing tax audit report is similar to filing the return. Here the tax audit report will be approved by the legal heir before filing of income tax return.
Ques: What is the procedure for filing Income Tax Return alongwith with the tax audit report in case of a legal heir?
Ans: The procedure to file income tax return and tax audit report of a deceased assesse as a legal heir is as follows:
The Legal heir has to submit a request to become a legal heir under the Income Tax Act’1961 for filing the return of income of the deceased i.e he has to register as a legal heir in the income tax login.
Go to ‘My Account’ TAB under the income tax login of the Legal Heir and click on ‘Register as Legal Heir’.
Under the Register as Legal Heir option the following details of the deceased assessee are to be entered:
PAN
Date of Birth
Surname
Middle Name
First Name
4. The following documents are also to be uploaded as a ZIP file for making a request to act as a legal heir:
Copy of Death Certificate of the deceased
Copy of the PAN of the deceased
Self-attested PAN Copy of the Legal Heir
Affidavit in presence of the notary by the legal heir
Legal Heir Certificate.
Following documents will be accepted as Legal Heir Certificate:
Legal Heir certificate issued by the court of law.
Legal Heir certificate issued by the Local Revenue authorities.
The surviving members’ certificate issued by the local revenue authorities.
Registered will of the deceased.
Family pension certificate issued by the Central/State Government.
After the documents are ready, scan the same and make a zip file of the same. The size of the ZIP file should not be more than 1 MB.
After attaching the zip file of the required documents, click on the submit button to register a request for becoming a Legal Heir to the e-filing Administrator. You will be provided a number for your request.
The E-filing Administrator after examining the submitted documents may approve or reject the request.
You can view the status of your request by going to the ‘My Request List’ Tab.
After approval of your request, the PAN of the deceased will start showing in the login of the Legal Heir. The Login of the deceased will be blocked after the approval of the request.
Now for filing the tax audit report of the deceased, the following procedure is to be followed:
Add CA for the deceased by clicking on the ‘Add CA’ option in the Login of the Legal Heir by choosing the PAN of the deceased.
After adding CA by the legal heir, the CA can upload the tax audit report of the deceased from his login by giving the PAN of the deceased.
After the CA has uploaded the tax audit report, the same will be approved by the legal heir by using his digital signature. The tax audit report of the deceased for approval will be available in the ‘For Your Action’ Option in the ‘Worklist’ Tab in the login of the legal heir by clicking on the PAN of the deceased.
After approval of the of the tax audit report, the legal heir can proceed to file the return of the deceased.
For filing the return after approval of tax audit report, the Legal Heir has to enter his PAN in the verification part section of the ITR Form, validate and generate the xml file.
Adding the PAN of the legal heir in the verification part means that the legal heir is stating that he is filing and signing the return as a representative assessee. Therefore, the PAN of the legal heir is to be entered in the representative assessee section of the return in some of the softwares.
After generating the xml by following the above, the xml can be uploaded by using the login of the Legal Heir.
Notes: For filing the return as a legal heir, the Legal Heir must have a PAN and the same must be registered in the online portal of the income tax department for filing online return.
Hope you find the above information in order.
CPC (TDS) – Consequances of Non-Registration on TRACES
As per the records of Centralized Processing Cell (TDS), there are many deductors who have filed TDS return for different quarters, but not not yet registered on the web portal TRACES
Such Un-registered Deductor will not be able to download TDS Certificates (Form 16/ 16A) and avail several other facilities offered by TRACES unless they register.
Please refer to the following provisions of the Income Tax Act, 1961 which may attract due to non-registration :
Downloading of TDS Certificates from TRACES made mandatory:
In this regard, your attention is invited to the CBDT circulars 04/2013 dated 17.04.2013, No. 03/2011 dated 13.05.2011 and No. 01/2012 dated 09.04.2012 on the Issuance of certificate for Tax Deducted at Source in Form 16/16A as per IT Rules 1962. It is now mandatory for all deductors to issue TDS certificates after generating and downloading the same from “TDS Reconciliation Analysis and Correction Enabling System” or http://www.tdscpc.gov.in (hereinafter called TRACES Portal).
TDS Certificates downloaded only from TRACES hold valid :
In view of above circulars, it may kindly be noted that the TDS Certificates downloaded only from TRACES Portal will be valid. Certificates issued in any other form or manner will not comply to the requirements referred in the Income-tax Act 1961 read with relevant Rules and Circulars issued in this behalf from time to time.
Due Date for downloading and Penalty for non-compliance:
Please be advised that under the provisions of section 203 of the Income Tax Act, 1961 read with rule 31A, Certificate of tax deducted at source is to be furnished within fifteen (15) days from the due date for furnishing the statement of tax deducted at source. Failure to comply with the provisions of the Act will attract penalty under the provisions of section 272A of the Act, a sum of one hundred rupees for every day during which the failure continues.
SC grants stay on Delhi HC verdict on service tax audits
In August,2014, Hon’ble High Court of Delhi in the matter of UNION OF INDIA & ORS. v. M/S TRAVELITE (INDIA) pronounced that the service tax audits conducted u/r 5A(2) of Service tax rules, 1994 are not valid in law.
Thereafter, department moved to SC against the impugned judgement. The matter was admitted by the court and on 18th Dec’14, Hon’ble Apex Court has granted a stay on the operation of the judgement made by High Court.
It would be quite interesting to see the fate of service tax audits in the eyes of this case. And it might become a landmark judgement with respect to service tax audits conducted by department since inception.
Source- UNION OF INDIA & ORS. Vs. M/S Travelite (India)- (Supreme Court) , Petition(s) for Special Leave to Appeal (C) No(s). 34872/2014, Date : 18/12/2014
Seizure of goods cannot be made on mere presumption
CA Sandeep Kanoi M/S Seema Enterprises Vs. The Commissioner, Commercial Tax,U.P.,Lucknow (Allahabad High Court, SALES/TRADE TAX REVISION No. – 571 of 2013, Date of Decision – 12/7/2013 In the present case, admittedly, the driver of the vehicle possessed the documents relating to the goods and the Transit Declaration Form and the same were produced before the Commercial Tax Officer at the time of checking. Neither such Transit Declaration Form was found non-genuine or improper nor any details relating to the goods furnished in the Transit Declaration Form were found incorrect. No such finding has been recorded by any authority in this regard. There is absolutely no material on record to presume that the goods may be unloaded inside the State of U.P. and may not cross the State of U.P. The reasons given by the authorities for the seizure of the goods is hopeless, baseless and beyond the reasonable thoughts. The authority concerned has acted illegally and arbitrary manner, without any reason or basis merely on presumption, surmises and conjectures, appears to be with ulterior motive. In case, if there is any discrepancy in respect of the earlier transaction, it is always open to the authority concerned to take necessary action in respect of such transaction. However, prima facie it appears that even in respect of earlier transaction also there is no material that the goods have been unloaded inside the State of U.P and did not cross the State of U.P. The inference is merely based on presumption, surmises and conjectures. In reply to the show cause notice, the applicant has categorically stated that no such statement has been given by the driver. In the seizure order nothing has been stated about such plea. Therefore, the reliance placed on the statement of the driver, is wholly unjustified. Further the presumption that the driver can not go and come from Delhi to Orissa within nine days, is merely based on presumption and inasmuch as has no relevance to the present transaction. No reason has been given by the Tribunal for saying that the applicant was not registered in respect of the goods. No such ground has been taken by the authorities below and there is no basis for the same. Even otherwise it has no relevance. It is also relevant to note that in the Transit Declaration Form, 22.06.2013 was the date mentioned, by which the vehicle had to leave the State of U.P. and that period had not been expired and the goods have been detained on 19.06.2013. In such situation the question of drawing the inference of sale of goods inside the State of U.P. does not arise. Commissioner, Commercial Tax, reported in 2012 NTN (Vol.49), 19 this Court observed that “admittedly in the present case the goods were seized immediately on their entry in the State of U.P. without allowing the time for its exit to expire. In such situation, it is wrong to presume that the goods have been retained for the purposes of sale. Apart form the above, as the goods were duly accompanied by the requisite documents, no presumption arises under law that they were likely to be sold within the State of U.P.” Similar view has been taken in the case of Commissioner, Commercial Tax Vs. M/s Gautam Pandey, reported in 2012 NTN (Vol.48), 194, wherein it has been held that the stage of inquiry or any investigation as to whether the goods have been imported in U.P. or are on the transit only, had not arrived as the detention was made prior to the time stipulated for the exit of goods mentioned in the transit declaration form. Rbbrl Contractors And Another Vs. Commissioner, Commercial Tax, U.P., Lucknow, (Supra), this Court has held that the past conduct of the transport or the driver in obtaining transit declaration form and the doubt expressed about the possibility of the said vehicle being against used within a short span for transporting goods from Delhi to Patna is not the relevant criteria for inferring that the present goods are likely to be sold in U.P. In the case of Sahara Quick Transport Service Vs. State of U.P. And others, in Writ Petition (Tax) No.637 of 2013, the Division Bench of this Court has held as follows: “Prima facie we find that the Asstt. Commissioner, Mobile Squad, Commercial Tax has not given any findings with regard to validity of the transaction in question. He has relied upon some previous transportation of the goods by the same carrier for a different owner of the goods, which was not relevant for the purposes of exercising powers for seizure of the goods.” In the case of New Indore Delhi Road Lines Vs. Commissioner, Commercial tax, reported in 2012 NTN (Vol.49), 19 while dealing with Section 52 and seizure of the goods this Court has held as follows: “It may be relevant to note that seizure of the goods in transit through U.P. Can be made only on the grounds mentioned under section 48 of the Act and the presumption that the goods are meant for sale in U.P. would only be available when they are not accompanied by the requisite documents, i.e. bills and bilties and the transit declaration form. It is not the case of the department that the goods were not accompanied by the relevant bills, bilties and transit declaration form. It is not even the case that the good have entered from the wrong place or were likely to be taken out from a different place or was not following the disclosed route as contained in the transit declaration form. There is no whisper that toe goods have over stayed in U.P., which may be a reason for the authorities to believe that they were meant for sale in U.P.” In the case of Commissioner of Trade Tax, U.P. Lucknow Vs. S/s Sagir Khan and Zahir Khan, Rampur, reported in 2005 NTN (28) 129 the learned Single Judge of this court observed as under:- “The provision to issue transit pass at the entry check post and to surrender at the exit check post is to ensure that the goods, which entered inside the State of U.P. had gone outside the State of U.P. and has not been sold inside the State of U.P. The power to seize the goods is only available at the exit check post when it is found that the transporter is trying to import different goods. Under aforesaid provisions there is no power to seize the goods at the entry check post. At the entry check post if driver of the vehicle applied for transit pass, authority has to verify the goods loaded in the vehicle and mention the name and quantity of the goods sought to be transported through the State of U.P. in the transit pass to that at the entry check post, the same may be verified at the time of surrendering the transit pass.” In another case reported in 2003 NTN (23) 1009 Madhya Bharat Transport Carrier, Agra Vs. Commissioner of Trade Tax, U.P. Lucknow this court was dealing with the question whether the goods can be seized before the expiry of time allowed in transit pass. His Lordship after considering the various provisions came to the conclusion that the stage of seizure arises only at the exit point and the goods cannot be seized before the expiry time allowed in the transit pass. In the case of M/s New Mahavir Transport Company of Bharat Vs. The Commissioner, Commercial Tax, U.P. Lucknow, reported in 2009 NTN (41) 224 which was also a case of seizure under Section 52 of the U.P. Value Added Tax Act, it was held that the goods cannot be seized on minor technical defect and should be allowed to be released without security. It is settled principle of law that seizure can not be made merely on presumption. There must be a material to show that the Section 52 Rule 58 or the procedure prescribed in the circular issued by the Commissioner has been violated. The Apex Court in the case of State of Kerala Vs. M.M.Mathew and another, reported in 42 STC, 348 has held that the presumption may be very strong but it can not take the place of evidence. It has been held that strong suspicion, strange coincidences, and grave doubts cannot take the place of legal proof. This is also the case of seizure of account books. Reliance is also placed on the decision of this Court in the case of S/S Ram Gopal Agarwal Galla Vyapari Att, Jalaun Vs. Commissioner of Trade Tax, reported in 2007 NTN (Vol.35), 39, M/s Rathi Industries Ltd. Vs. Commissioner of Commercial Tax, reported in 2009 (Vol.39), 279, M/s Jain Irrigation System Limited Vs. The Commissioner, Commercial Tax, U.P., Lucknow, reported in 2009 (Vol.39), 279, M/s New Mahavir Transport Company of Bharat Vs. The Commissioner, Commercial Tax, U.P., Lucknow, reported in 2009 NTN (Vol.41) 224, Balaji Timber Paint Vs. Commissioner, Commercial Tax, U.P., Lucnkow, reported in 2010 NTN (Vol.43), 53, Rbbrl Contractors And Another Vs. Commissioner, Commercial Tax, U.P., Lucknow, reported in 2011 NTN (Vol.46) 26. In the present case, no case has been made out that Section 52 of the Act or Rule 58 or circular of the Commissioner has been violated. No case has been made out that the goods were not traceable to bonafide dealer and are not recorded in the books of accounts, document or register. The inference that the goods may likely to be unloaded inside the State of U.P. And may not be taken to other State, while the goods were in transit and vehicle was on declared route is merely based on presumption, suspicion and doubts, which is not sustainable in law. The goods have been detained illegally, arbitrarily and without any basis and merely on surmises and conjectures and whims of the authorities concerned despite the settled principle of law laid down by the Court referred hereinabove. The goods have been seized despite the settled principle of law referred hereinabove, on 19.06.2013 and since then goods are in the custody of department. The applicant has suffered huge substantial loss for no fault on his part and subjected to harassment. It is unfortunate that the Joint Commissioner (S.I.B.) and Tribunal have affirmed the seizure of the goods. In view of the aforesaid facts and circumstances, in my view the applicant is entitled for the exemplary cost, which I assess at Rs.1 lac. I also direct the Commissioner, Commercial Tax to look into the matter and take the appropriate action against the officials in accordance to law, who have seized the goods. It will be open to the department to realise the amount of cost from the concerned official.
Strong suspicions/ coincidences & grave doubts cannot take the place of legal proof .
STATE OF KERALA Vs. MATHEW ( M. M. ) AND ANR. (SUPREME COURT), DATE OF JUDGMENT – 18/08/1978, CITATION: 1978 AIR 1571, 1979 SCR (1) 264, 1978 SCC (4)65 ACT: Proof of account books of business in criminal trials, ingredients to be proved, explained-Presumption in favour of acts of public servants charged with bringing home economic and other crimes-Kerala General Sales Tax Act, 1963, Sections 46(1)(a), 46(1)(c) and 46(2)(c). Judgment analysis During the course of a surprise raid by the Intelligence Wing of the Sales Tax Authorities for verification of accounts of the respondents pertaining to their sales tax returns submitted by them on the 1 8th of each of the months of February, ‘March and April 1969, respondent No. 1 produced certain books of accounts viz. current note books, bill books, stock register of the sales and purchases and purchase bills in current use relating to the “Kallupalam Lad’s Jawellery Mart” business and placed the same in a room adjacent to the firm’s show room for inspection. While examining these account books, the inspecting party noticed some other account papers in the form of diarysize account books, ledger size account books, exercise account books lying on that very table. Finding that a number of transactions of sales and purchase of the jewellery entered in the second set of account books noticed by them, revealing a large turnover for the months of January, February and March 1969, these account books were seized. On the basis of the result of the aforesaid inspection three complaints were under sections 46(1)(a) (for submission of untrue returns), 46(1)(c) (for failure to keep true and complete accounts) and 46(2) (c) (for fraudulent evasion of tax) of the Kerala General Sales Tax Act, 1963 and the rules made thereunder. on a consideration of the evidence adduced in the case, the Trial Court acquit ted the respondents under s. 46(2) (c) but convicted them under section 46(1)(a) and 46(1)(c) of the Act and imposed a fine of Rs. 600/- and Rs. 500/- respectively on each of the respondents under the aforesaid two counts. On appeal the Additional Sessions Judge, set aside the conviction and acquitted the respondents of the charges under Sections 46(1)(a) and 46(1)(c) of the Act as well. The State’s appeal before the Kerala High Court failed and hence the appeal by special leave. Dismissing the appeals the Court, HELD: 1. Courts of law have to judge evidence before them by applying the well recognised test of basic human probabilities. Some of the observations made by the Sessions Judge especially the one to the effect that ‘the evidence of officers constituting the inspecting party is highly interested because they want that the accused are convicted’ cannot be accepted as it runs counter to the well recognised principle that prima facie public servants must be presumed to act honestly, conscientiously and their evidence has to be assessed on its intrinsic worth and cannot be discarded merely on the ground that being public servants they are interested in the success of their case. [268 A-C] 265. 2. The observations of the High Court to the effect that ‘the mere fact that two sets of accounts which are conflicting are being maintained, it cannot be taken that the accounts books evidencing less turn-over or profits are false. lt may well be that the secret accounts are false and the other accounts are true. It is not unusual to find business men keeping two sets of accounts one the correct one and the other. showing exaggerated turnover and profits, the purpose of the latter being only to attract investments in dealing with the business”, cannot be accepted as statement of law. [268 C-D] 3. Strong suspicions, strange coincidences and grave doubts cannot take the place of legal proof. [269 B] (a) In the instant case, there is absolutely no legal evidence on the record to prove the secret books of account, the seizure of which was effected by or under the order of the Inspecting Assistant Commissioner were recovered from a place which formed part of the business premises of the respondents or. was in their exclusive possession and control. [268 E-F] (b) The prosecution could have established that the secret books of account related to the business transections carried on by the respondents and none else in a variety of ways viz. (1) by adducing satisfactory proof to the effect that the place from which the secret books of account were seized formed part of the place of business of the respondents or was in their exclusive possession and control, (2) that the secret books of account were maintained by or under the orders of the respondents, (3) that the said books of account were in the handwriting of either of the respondents or their account, our clerk or some other person employed by them. The third method indwelled above could have been adopted by following one or more of the ordinary modes provided in the Evidence Act for proving the handwriting i.e. (i) by calling the accountant or clerk or some other employee of the respondents who is supposed to have posted the entries in the account books, (ii) by calling a person in whose presence the account books were written, (iii) by calling a handwriting expert to testify that the entries in the secret books of account tallied with the admitted specimen writing of the respondents or any of their employees, (iv) by calling a person acquainted with the handwriting of the person by whom the secret books of account were supposed to have been written, (v) by having the comparison done in Court of the P secret books of account with some admitted writing as provided in section 73 of the Evidence Act, (vi) by proof of an admission made by any one of tho respondents that the secret books of account related to the business transactions carried on by their firm or that any one of them had written the same, (vi) by adducing other unimpeachable circumstantial evidence. No attempt or step seems to have been made or taken in that behalf by the prosecution [269 (c) The connection of the respondents with the entries in the secret books of account could also have been established by producing some of the customers whose names are admittedly to be found in the secret books of account to testify that the deals evidenced by the entries were transacted by them with the Kallupalam Lad’s Jewellery Mart of which the respondents were the proprietors. As the prosecution has failed to resort to any of these methods the respondents have to thank themselves for the result of the prosecutions upon which it seems to have launched without seeking expert legal assistance. [269 G-H, 270 A] 266 Girdharilal Gupta and Anr. v. D. N. Mehta, collector of Customs and Anr., [1971] 3 S.C.R. 748 distinguished.
ITAT hauled up AO and DRP for ‘Blatantly frivolous & unsustainable’ additions.21/12
Bharti Airtel Limited Vs. ADIT (ITAT Delhi), I.T.A. No.: 5816/Del/2012, Date of pronouncing the order : March 11, 2014
Learned counsel for the assessee submitted that it is a case of frivolous double addition on deliberate misconception of the facts. He took us through the year-end financial statements of the assessee and its computation of income to demonstrate that the impugned addition made by the Assessing Officer amounted to making an addition for loss on transfer of telecom assets whereas no deduction in respect of such loss was claimed by the assessee. He invited our attention to the observations made in the stay order to the effect that it is a case of “prima facie” double addition and it was also submitted that at the stage of hearing of stay petition in this case, the Assessing Office himself has accepted that it is a case of double addition. Learned Departmental Representative, on the other hand, dutifully placed his rather bland reliance on the stand of the Assessing Officer and the Dispute Resolution Panel. It was in this backdrop that we called for personal appearance of the Assessing Officer concerned. When the Assessing Officer appeared before us, and we asked him to justify this addition of Rs 5,739.60 crores, whereas, for all practical purposes, the assessee has not even claimed deduction of the same in the computation of business income, he had nothing to say. When he was asked why DRP’s directions about verifications were not complied with, he stated that, as stated in the assessment order itself, there was no fresh material at that stage over and above what was produced in the original assessment proceedings, and thus it was not open to the Assessing Officer to take any other view of the matter than the view originally taken. The Assessing Officer submitted that the loss on sale of assets could not be allowed as a deduction but that does not justify the addition on merits, because the assessee has not challenged this proposition at any stage and has merely contended that no such disallowance is warranted on the facts of this case as the said amount has not been debited to the profit and loss account at all. In effect thus, we are dealing with a situation that here is a Rs 5,739.60 crore addition, which has been made by the Assessing Officer and sustained by the Dispute Resolution Panel, and effectively there is no argument to defend it.
It is not an uncommon sight that even the most distinguished and learned Departmental Representatives, as also other revenue authorities appearing before us, simply place their bland reliance on the impugned orders- as in this case, rather than dealing with specific justification for the additions or disallowances made therein and with the arguments advanced by the taxpayer’s representatives. By such a conduct, any transparent debate about correctness or otherwise of such additions impugned in appeal is pre-empted. Of course, such an exercise does render our adjudication process a one way street but, as long as legal and factual position warrants due relief to the assessee and as long as impugned additions are so frivolous, there is nothing wrong in it. However, if an action of the Assessing Officer is so blatantly unreasonable that such seasoned senior officers well versed with functioning of judicial forums, as the learned Departmental Representatives are, cannot even go through the convincing motions of defending the same before us, such unreasonable conduct of the Assessing Officer deserves to be scrutinized seriously. At a time when evolving societal pressures demand greater degree of accountability in the governance also, it does no good to the judicial institutions to watch such situations as helpless spectators. If it is indeed a case of frivolous addition, someone should be accountable for the resultant undue hardship to the taxpayer -rather than being allowed to walk away with a subtle, though easily discernable, admission to the effect that yes it was a frivolous addition, and, if it is not a frivolous addition, there has to be reasonable defence, before us, for such an addition. The case before us, for the reasons we will set out now, appears to be in the category of a wholly frivolous, and simply indefensible, addition to the income returned by the assessee.
Let us take a look at the related entry, as per the profit and loss account of the assessee, related note to the accounts and the treatment given by the assessee in the computation of income, which are reproduced below:
Note 2 (b) to Schedule 21 of the annual accounts
Extracts from the computation of income filed by the assessee (as reproduced from page 84 of the assessment order)
| Particulars | Amount | Amount |
| Profit as per profit and loss account | 6972,54,21,461 | |
| Add: | ||
| XXXX | XXXX | |
| XXXX | XXXX | |
| Loss on transfer of telecom infrastructure to Bharti Airtel Limited | 5739,60,05,089 | |
| Less: | ||
| XXXX | XXXX | |
| XXXX | XXXX | |
| Amount withdrawn from Reserve for Business Restructuring | 5739,60,05,089 | |
| Income from Business and Profession | 7161,63,56,718 |
A plain look at the above material shows that there was no effective debitto the profit and loss account as the amount of Rs 5739,60,05,089 reflected in the “Loss on transfer of telecom infrastructure to Bharti Airtel Limited” was squared up against the credit amount of Rs 5739,60,05,089 representing “Amount withdrawn from Reserve for Business Structuring” in the inner column of the profit and loss account. These entries were absolutely profit neutral so far as the profit as per profit and loss account is concerned, and since it is this profit which is starting point for computation of business income, effectively no adjustments thereto were required. Even if no adjustment was carried out in the computation of income, the resultant income would have been the same, but the adjustments, if at all required for the sake of completeness and transparency, were required for both the entries, i.e. loss on transfer of assets as also amount withdrawn from business restructuring. This is precisely what the assessee has done. As much as the loss on transfer of assets is not a tax deductible item, the amount transferred from reserves is also not a taxable item. The assessee thus reversed both these entries, as depicted above, in the computation of income. The Assessing Officer has taken note of the fact that in the computation of income attached to the return of income, the assessee has first added Rs 5739,60,05,089 as “Loss on transfer of telecom infrastructure to Bharti Infratel Limited” and then reduced Rs 5739,60,05,089 as “amount withdrawn from Reserve for Business Restructuring”, but then, instead of taking note of the unambiguous fact that these two distinct entries representing two facets duly reflected in the profit and loss account, the Assessing Officer assumes that since debit and credit of the same amount, resulting in neutralizing each other, he is justified in adding the loss of transfer of telecom infrastructure to the profit as per profit and loss account. Neither there was an effective debit to the profit and loss account, since the loss was squared up by transfer from reserve rather than by debit to profit and loss account, nor was it open to the Assessing Officer to take into account loss on transfer of assets, though reflected in the inner column, without taking into account another inner column item reflecting transfer from reserves to square up this loss. Whichever way one looks at these entries, the inescapable conclusion is that the addition made by the Assessing Officer is wholly erroneous and devoid of any legally sustainable merits. In this case, the Dispute Resolution Panel has also been somewhat superficial in its approach in confirming the addition by observing that, “the disallowance of Rs.5739,60,05,000 by the AO in normal computation provisions as capital loss representing loss on transfer of Telecom Infrastructure to Bharti Infratel Limited is held as perfectly in order” because the grievance raised by the assessee was specifically against the erroneous approach of the Assessing Officer in not taking a holistic view of the accounting entries. There is no, and there was never, any dispute on whether such a loss is tax deductible or not. The dispute was confined to the question whether, on the given facts, the Assessing Officer could have made an addition for this amount to the income returned by the assessee. The contention of the assessee was that no such addition was justified because the assessee has, on his own, made appropriate adjustments in the computation of taxable income and an addition by the Assessing Officer will result in double disallowance of the said amount. No doubt, the Dispute Resolution Panel did mention that, “as regards the claim of assessee of not reducing the equivalent sum from the computation of income, it is noted that it is a matter of pure verification” and directed the Assessing Officer “to verify the claim of the assessee from the records and take necessary action”, but then it was the inaction and inability of the Assessing Officer in correctly doing so that the objection was raised before the Dispute Resolution Panel and all the related facts, including accounting entries and treatment given in the computation of taxable income, were placed before the Dispute Resolution Panel. The fact that even such purely factual issues are not adequately dealt with by the DRPs raises a big question mark on the efficacy of the very institution of Dispute Resolution Panel. One can perhaps understand, even if not condone, such frivolous additions being made by the Assessing Officers, who are relatively younger officers with limited exposure and experience, but the Dispute Resolution Panels, manned by very distinguished and senior Commissioners of eminence, will lose all their relevance, if, irrespective of their heavy work load and demanding schedules, these forums do not rise to the occasion and donot deal with the objections raised before them in a comprehensive and effective manner. While we delete the impugned addition of Rs 5739,60,05,089, we also place on record our dissatisfaction with the way and manner in which this issue has been handled at the assessment stage. Let us not forget that the majesty of law is as much damaged by not rendering justice to the conduct which cannot be faulted as much it is damaged by a wrongdoer going unpunished; not giving relief in deserving cases is as much of a disservice to the cause of justice and the cause of nation as much a disservice it is, to these causes, by granting undue reliefs. The time has come that a strong institutional check is put in place for dealing with such eventualities and de-incentivizing this kind of a conduct. With these observations, the impugned addition of Rs 5739,60,05,089 is deleted. The assessee gets the relief accordingly.
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