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1.
Vide Order under section 143(3)(ii), the Assessing
Officer determines the income of the assessee. If there is any refund
due on the basis of the order whether he is bound to grant the refund?
Ans. The Assessing Officer, if passes an order u/s. 143(3)(ii)
in pursuance to the notice issued u/s. 143(2)(ii), shall determine either
the sum payable or refund due to the assessee. The words "or refund
of any amount due to him" are inserted vide the Finance (No.2) Act,
1998 and based on that the assessing officer has to grant the refund if
due while making an order of assessment.
2. Where a valid notice under section 143(2) is not served on
the assessee within the prescribed period would it invalidate the assessment
order or it is a mere case of procedural irregularity?
Ans. The income tax assessment proceedings commence with
the issue of a notice. The time limit for issue of notice mentioned in
section 143(2) is mandatory and non-compliance thereof vitiates the assessment
order of the Assessing Officer. The assessment order passed in pursuance
to invalidate notice served on the assessee would be bad in law. The Mumbai
Tribunal in Aegis Chemical India Ltd. vs. ITO (65 ITD 147) have propounded
the view that the notice served after the expiry of time limit prescribed
u/s. 143(2) is not valid and any proceedings undertaken in pursuance of
such an invalid notice is ab initio void.
3. An unsigned Notice u/s 143(2) for regular assessment was served.
Can assessing officer rectify the omission?
Ans. A notice, which does not contain the signature of
the Assessing Officer, who issues it is invalid and all the proceedings
taken in pursuance of such a notice are invalid as held by the Calcutta
High Court in B. K. Gooyee vs. CIT (62 ITR 109). However, Assessing Officer
can rectify the omission by serving fresh notice if the time limit prescribed
under section 143(2) in the Act has not expired.
4. In case of Limited Scrutiny, whether Refund can be granted?
Ans. Assessing Officer has to pass the assessment order
based on limited scrutiny
u/s. 143(3)(i). The said clause mentions that the assessing officer shall
make an assessment and determine the sum payable by the assessee. The
words "refunds due to him" as stated in the Clause (ii) of section
143(3) are missing in clause (i) dealing with the limited scrutiny. Hence,
it seems that the legislature’s intention is not to issue refund based
on assessment order passed u/s. 143(3)(i). However, the assessing officer
is duty bound to issue the legitimate refund due to the assessee under
the law.
However in such case, normally the
officer shall issue refund u/s 143(1) and hence amount due would not get
"pocketed" by the department. Ultimately u/s 237 refund has
to be issued.
5. In case of Limited Scrutiny, if the amount actually allowable
is more than the returned claim, whether the Assessing Officer is supposed
to pass Order accordingly?
Ans. The Assessing Officer can issue notice u/s. 143(2)(i)
where he has reason to believe that any claim of loss, exemption, deduction,
allowance or relief made in the return is inadmissible. Once the Assessing
Officer has issued the notice for limited scrutiny, he has to grant the
deduction in accordance with the law. Thus, Assessing Officer having satisfied,
based on the evidence given by the assessee, that the assessee is entitled
to relief more than what is claimed in the return, on the subject matter
of the notice, he should grant the claim as permissible under the law.
Assuming law in the meantime is amended
by virtue of the Supreme Court’s judgement or by CBDT circular etc., effect
has to be given on it while passing an order u/s 143(2)(i).
6. In case of limited scrutiny under section 143(2)(i), as the
proceedings progress, the scope of scrutiny is extended to several other
issues also, besides the issue already raised in the Notice. Whether the
Assessing Officer is within his powers to do so? Can Assessing Officer
switch over from clause (i) to clause (ii) under section 143(2)?
Ans. The law casts an obligation on the Assessing Officer
to specify the particulars of the claim of loss, exemption, deduction,
allowance or relief which in his opinion are inadmissible. Once the particulars
or issues which he intends to scrutinise are mentioned in the notice,
he cannot go beyond the scope of notice issued to the assessee. He cannot
start roving inquiries on the matters which are neither mentioned in the
notice nor relevant to the issue given in the notice. Even section 143(3)(i)
states that the Assessing Officer shall by an order in writing allow or
reject the claim specified in the notice. Thus, the legislative intents
suggests that he has to restrict himself to the issues mentioned in the
notice itself. Even the Explanatory Memorandum on section 143(2) states,
"after hearing such evidenceand considering such particulars, he
will make an assessment of total income or loss under the proposed clause
(i) in sub-section (3) of section 143, limiting himself to the claims
he had set out to verify".
7. As per the terms of the Deed of Partnership, interest was not
paid to partners on credit balance and on debit balance interest was not
charged. The Assessing Officer calculated interest at 15% p.a. on debit
balance and addition was made. Can the Assessing Officer do so?
Ans. The Assessing Officer has made an addition towards
interest on debit balance of the partners capital account. Any income
which the assessee has neither realized nor earned cannot be taxed on
notional basis. The Supreme Court in CIT vs. A. Raman & Co. (67 ITR
11) held that "the income which accrued to a trader was taxable in
his hands and the income which he could have, but had not earned, was
not taxable as income accrued to him. The assessee could not therefore
be charged on fictional or notional income which in fact did not accrue
to her." Even a similar view is taken by the Gauhati High Court in
Highways Construction Co. P. Ltd. vs. CIT (111 CTR 143) and Allahabad
ITAT in Smt. Sumanlata Didwania vs. ITO (17 ITD 830). Thus, the Assessing
Officer cannot make addition of notional interest on debit balance of
partners capital account.
However if debit balance arises on
account of withdrawals and can be linked to borrowed funds, interest debited
on the borrowed funds can be disallowed.
8. It is learnt that this year; i.e., assessment year 2001-2002,
all the cases selected for the scrutiny are being monitored by the Joint
/ Additional the Commissioner of Income Tax. Sometimes the Assessing Officer
requests the tax practitioner to appear before his senior for explaining
on certain queries / issues, though no Notice is received from his senior.
Whether the tax practitioner is supposed to so appear before such higher
authority?
Ans. It is the choice of the tax-practitioner but it
seems that it is better to co-operate and not stand on formalities and
technicalities. Sometimes it happens that the tax practitioner suo motu
goes to the senior if it is found that the officer is unreasonable in
his view of the matter.
9. In view of Circular No 14(XL-35) dated 11-4-1955, an Assessing
Officer is supposed to grant deduction, etc. legally available to the
assessee, even though the same is not claimed in the Return of Income.
However, no Assessing Officer follows the circular. Please comment.
Ans. (a) The Assessing Officer should have that attitude
and "positive vigilance"! (b) One can always apply for rectification
or go to CIT u/s 264.
10. As regards Letter of Authority (LoA), some Assessing Officers
ask for such Authority from the Chartered Accountants with stamp of Rs.
5 and some ask for the stamp of Rs. 100. What is the correct amount of
Stamp Duty payable? Is it feasible to give only one such LoA for the current
as well as future years? Every year, photocopy may be handed over to Assessing
Officer.
Ans. Correct amount of stamp duty for POA/LOA to CA is
Rs. 100 in Maharashtra (see entry 48 in Sch. 1 of the Bombay Stamp Act).
Yes, LOA, if general, can be used year after year with photocopy duly
certified as true copy.
11. The Assessee Company having Registered Office in Mumbai and
factory at Thane filed its first Return of Income, through oversight,
with Assessing Officer, Thane. Second and subsequent Returns of Income
were filed with the Assessing Officer, Mumbai. Respective Assessing Officers
made an assessment for respective years. The assessee requested the Assessing
Officer, Thane to transfer its file to Assessing Officer, Mumbai. The
Assessing Officer, Mumbai made ex parte assessment under section 144 for
first year as he had ascertained from the figures of the first year appearing
in the Annual Accounts of second year. Can he do so? If not, what should
he have done?
Ans. The assessee has inadvertently filed its return
of income at the jurisdiction of the Assessing Officer pertaining to the
address of the factory. The Assessing Officer, Thane has assessed the
income of the assessee. Once the assessment is completed by the Assessing
Officer, though having no jurisdiction, the act done by him cannot be
invalidated and the assessing officer cannot pass an order u/s. 144 of
the same assessee for the same year. (The querist has not stated as to
what it did after the notice u/s 144 was received by it. That is the relevant
and vital information to give the complete reply).
12. The Assessing Officers sometimes do not accept even genuine
TDS Certificates just for the reason that some of them are with full name,
some with initials. For example, Mr. R. Ramchandran and Mr. Ravi Ramchandran.
Similarly, say, Mr. A. B. Shah and Mr. Ashok B. Shah. How to convince
the Assessing Officer?
Ans. The TDS certificate issued in the name of the assessee
may be with the initials of the assessee, it is still the valid TDS certificate
issued by the payer under the law. The Assessing Officer, cannot refuse
to grant credit for TDS based on such facts, if in substance it pertains
to the assessee himself and more so, when the income mentioned in the
TDS certificate is offered for tax by him.
13. Credit for TDS certificate attached with Return of Income
is denied because it is undated or not bearing rubber stamp of issuer?
Can the Assessing Officer do so?
Ans. The defect in the TDS Certificate for not putting
date is not fatal to the assessee’s claim for TDS. If the TDS certificate
is conformity in substance with the law merely because it is not dated,
the credit of taxes should not be denied to the assessee more particularly
when the income shown in the TDS certificate is taxed.
The TDS certificate in Form No. 16
and Form No. 16A prescribed under the Rules, does not cast an obligation
on the payer to put the seal of the payer in the certificate. The said
form only requires the "signature of the person responsible for deduction
of tax". Hence, there is no requirement to put the rubber stamp in
the TDS certificate. If the rule making authority has intended to have
a rubber stamp on the certificate, they would have specifically provided
in line with Form No. 15 or Form No. 15AA prescribed for certificate relating
to deduction of tax wherein it is provided in the certificate itself to
put "Seal".
However, such practice does exist and
only course is to apply for rectification or file an appeal.
14. The Assessing Officer did not accept at the time of assessment
the payment of proof under section 43B and disallowed that expense. Is
he supposed to accept the proof?
Ans. The proof u/s. 43B can be submitted at the time
of assessment proceeding this being procedural/technical requirement.
This view is supported by the Hon’ble Supreme Court in the case of Mangalore
Chemicals and Fertilisers Ltd. vs. Dy. Commissioner & Others (21 Tax
Gazette 193) wherein it is held that the stringency and the mandatory
nature of a provision for exemption must be justified by the purpose intended
to be served. The mere fact that it is a statutory condition does not
matter one way or other. The conditions which belong to the area of procedure
has got to be construed liberally. Hon’ble Delhi Tribunal in Ishar Dass
Sahani’s case (77 ITD 256) on the issue of filing certified copy of the
partnership deed, have held that if it is submitted before completion
of the assessment, it is sufficient compliance u/s. 184. Hence, the assessing
officer should have taken cognizance of the proof submitted during assessment
proceeding and allowed the assessee’s claim.
15. With a view to get more finance from bank, assessees many-a-times
inflate the quantity and the value of the stock in the stock statements
submitted to bank in respect of the working capital facility. In such
a situation, in case of scrutiny assessment under section 143(3), if the
Assessing Officer requests for a copy of stock statement submitted to
the bank, how the assessee should deal with the situation?
Ans. In the event, discrepancy in the quantity mentioned
in the Bank statement and the stock statement is noticed, the assessee
should produce inventory records and submit that all the purchases and
sales are inventoried and the stock in the books is taken as per the inventory
register. If the Assessing Officer does not find any defect in the inventory
register, he has to accept the stocks as per books for the purpose of
assessment. This is supported by the decision of Madras High Court in
CIT vs. Sri Padmavathi Cotton Mills (236 ITR 340) (148 CTR 371) wherein
it is held that if the stock quantity tallies with the books and excise
records no addition could be made.
16. Nowadays the Assessing Officers fix up only the date of hearing
without fixing the exact time on that date. As a result, the tax practi-tioner
wastes considerable time in waiting for his turn. How to handle such a
situation?
Ans. The CBDT has issued Circular No. 230(F.No.225/109/77-IT(A-II)
dated 27th October, 1977 stating that while fixing the hearing of cases
by the issue of statutory notice, the ITOs should not indicate the same
time for attendance in all cases, but should give each assessee a different
timing. "Again, the instruction No. 1395(F.No.201/28/81-IT(A-II)
dated 15th May, 1981 instructs the Assessing Officers that if the ITO,
due to any unavoidable circumstances, cannot adhere to the schedule of
hearing, the assessee should be informed in advance either through a letter
or through telephone, wherever possible". Thus, if the CBDT’s circular/instruction
is followed in its true spirit, the grievance for waste of time would
be resolved.
If the problem is chronic, the group
of persons affected may meet Jt./Addl. CIT with above instruction/circular
and resolve the issue.
17. What is the significance of issuing Notice under section 142(1)
simultaneously with the Notice under section 143(2)?
Ans. Section 142(1) empowers the officer to call for
accounts, documents, information etc. Section 143(2) empowers the officer
to call for hearing etc. Section 142(1) is more specific and section 143(2)
is general. |
