Common sense can help you reduce your taxes

Most people think of tax planners as wise old men in white hair who study the arcane tax laws and come up with brilliant interpretations of little known sections of the income tax law. Many times, it is indeed so. But a number of times, the tax planning consists of simple common-sense approach to understand the final objective and aim to achieve it in a slightly different fashion to obtain a tax effective solution.

My friend Rakesh Mehra’s case illustrates this point perfectly. Rakesh’s father Roshan Mehra is an 84-year old retired IAS officer. He has pension income of Rs 60,000 per month. He lives with Rakesh in Mumbai. Rakesh has a brother Rishi who lives in Delhi. Both Rakesh and Rishi are financially well off. The father Roshan Mehra has a flat in Panvel that he had bought in 2001. Its indexed cost is around Rs 18 lakh. Its current value is around Rs 1.1 crore. He wishes to sell the flat and distribute the sale proceeds equally among both Rishi and Rakesh even while he is living. He does not wish to purchase another flat but still wants to save on capital gains tax to the extent legitimately possible.

In the normal course if Roshan Mehra were to sell the flat he would have taxable long-term capital gains of Rs 92 lakh. If he does not do any tax planning he would have to pay capital gains tax of Rs 21 lakh approximately (calculated at 22.66% of Rs 92 lakh). The balance amount left from the sale consideration of Rs 1.10 crore after paying long-term capital gain tax of Rs 21 lakh would be Rs 89 lakh which he can gift equally to both Rakesh and Rishi who would end up getting Rs 44.50 lakh each.

A straight forward tax planning suggestion was for Mehra to invest in capital gain bonds of National Highways Authority of India (NHAI) or Rural Electrification Corporation (REC) for Rs 50 lakh. This would bring down the taxable capital gains to Rs 42 lakh and the capital gains tax would come down to Rs 9 lakh approximately (20.60% of Rs 42 lakh).

The balance amount left from the sale consideration after the investment of Rs 50 lakh and the tax of Rs 9 lakh would be Rs 51 lakh. Mehra could gift Rs 25.50 lakh each to Rishi and Rakesh. Additionally, he could gift another Rs 25 lakh each after three years when the capital gain bonds mature. In this way Rakesh and Rishi would get Rs 50.50 lakh each in two tranches (instead of Rs 44.50 lakh in scenario one) and Mr Mehra could also enjoy the interest on the bonds during the three-year holding period.

Instead, I suggested that Mr Roshan Mehra gift the flat itself to his two sons. Gifts to close relatives enjoys concessional stamp duty rates in Maharashtra (total cost around Rs 40,000 all inclusive) and there are no income tax implications on any of the parties. The sons could now sell the flat and the taxable capital gains in the hands of each of them would be Rs 46 lakh as the capital gains would be divided up between the two of them in the proportion of their ownership. Each of them would now receive Rs 55 lakh on which they need not pay any capital gain tax if they invest in capital gain bonds of Rs 46 lakh each. Also, Rishi had just bought a residential property in Delhi and hence would not even need to invest in capital gain bonds to claim exemption.

This is a common-sense application of the tax planning maxim called gift the asset rather than gifting the money obtained from selling the asset. Nothing complicated about this tax planning technique.

Source : DNA/13.10.2017

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Income from Other sources – Basis of Charge- U/s 56

General Provision- Section 56 (1)
Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head Income from other sources, if it is not chargeable to income-tax under any other of the heads such as
1) Salaries
2) House Property.
3) Profit/ Gains from Business
4) Capital Gains

Basis of Charge- U/s 56
Special Provision- Section 56 (2)
1. Dividends *
2. income by way of interest on securities *
3. Family pension *
4. Winning of Lotteries, crossword puzzles, races or card games or any sort of gambling & betting *
5. Rental Income of Letting out of Plant, Machinery or furniture along with letting out of building, if the lettings are not separable. *
6. Any sum received under a Keyman Insurance Policy including bonus if not taxable as Salary or Business Income. *
7. Sum Received by Assessee from his employees as contribution to Staff welfare scheme

Basis of Charge- U/s 56
8. Subletting of house property by a tenant
9. Examiner-ship fees received by a teacher (not from employer),
10. Agricultural income from agricultural land situated outside India,
11. Any sum of money received as an advance or otherwise in the course of negotiations for transfer of a capital asset shall be charged to tax under this head, if: a) Such sum is forfeited; and b) The negotiations do not result in transfer of such capital asset.
12. Director’s commission for standing as guarantor to bankers,

Basis of Charge- U/s 56
13. Interest received from IT Dept. on delayed refunds,
14. Remuneration received by Members of Parliament,
15. Casual receipts and receipts of non-recurring nature,
16. Insurance commission,
17. Income from royalty,
18. Gifts (Receipts without/inadequate consideration/) *
i) Any sum of money total exceeding Rs 50,000 is received by Individual/ HUF. Then Entire Amount
ii) Any immovable & Movable property exceeding Rs 50,000

AO cannot treat Agricultural land as capital Asset on mere assumptions

Case Law Details
Case Name : Mohit Suresh Harchandrai Vs. ACIT (ITAT Mumbai)
Appeal Number : IT Appeal Nos. 364, 365 & 367 (Mum.) of 2014
Date of Judgement/Order : 28/02/2017
Related Assessment Year : 2010- 11
Courts : All ITAT (4259) ITAT Mumbai (1422)

Assessing officer has decided the issue involved in this case without rebutting the direct and circumstantial evidence on record which is in favour of the assessee. No verification was conducted by the assessing officer to falsify the documentary and circumstantial evidence placed on record by the assessee. Even the persons who carried out the agricultural activities at the instance of the assessee were not examined to controvert the contents of the affidavits sworn by them. Before us, the counsel for the assessee placed on the record the copy of application dated 23-3-2010 under sub-section (1) of section 44 of Maharashtra Land Revenue Act, 1966 submitted by the purchaser of the land Shri Abhijit Bhandari for permission for using the land for horticulture or similar purposes.

The contents of the said application further establish that the land in question was agricultural land in the year 2010 when the said application was moved. Further we find that the facts of the present case are different from the facts of the case of Smt. Sarifabibi Mohmed Ibrahim (supra) relied on by the learned Commissioner (Appeals) on certain material points. In the said case, the property was situated within the limits of Surat Municipality and at the distance of one kilo meter from Surat Railway station. A portion of the plot had already been converted to non-agricultural purposes after obtaining requisite permission from the concerned authority. The land was sold at per square yard basis to a co-operative housing society for constructing house and buildings.

No agricultural operations such as growing of wheat, Bajra, jawar, rice or any other crop had been carried on for the last four years. On the other hand in the present case the land was sold to an agriculturist who later on converted the land for non-agricultural purposes after obtaining permission from the competent authority. Moreover, in the present case neither there is any cogent evidence to rebut the presumption of truth attached with the revenue record maintained by the department nor any verification was conducted by assessing officer during assessment to rebut the documentary evidence placed on record by the assessee to falsify contention of the assessee.

The authorities below have not given any cogent and convincing reason for disbelieving the documentary and circumstantial evidence discussed in the foregoing paras which, in our considered opinion, prima facie establish that the land in question was an agricultural land within the provisions of the Act at the time of sale to the purchaser. Since, in our considered opinion the assessee has been able to establish that the land in question at the time of its sale was an agricultural land and not a capital asset within the definition of section 2(14) of the Act, the learned Commissioner (Appeals) has wrongly affirmed the findings of the assessing officer. We, therefore, set aside the impugned order and allow this ground of appeal of the assessee.

Assessee need not be intimated before attachment of his bank account

Case Law Details
Case Name : Gecas Services India Pvt. Ltd. Vs Income Tax Officer & Ors. (Delhi High Court)
Appeal Number : W.P.(C) 3127/2017
Date of Judgement/Order : 11/07/2017
Related Assessment Year :
Courts : All High Courts (3690) Delhi High Court (1171)

In the present case there was no illegality committed by the Department in not issuing to the Assessee a notice under Section 226 (3) (iii) of the Act simultaneously with or prior to the notice issued to its bank under Section 226 (3) (i) of the Act for recovery of the tax demand from its account. The Court accepts the submission of the Revenue that requirement under Section 226 (3) (iii) is only that a copy of the notice should be “forwarded to the assessee” and not that a copy should be served on the Assessee in advance or simultaneously.

O R D E R
11.07.2017
%
Dr. S. Muralidhar, J.
Question involved
1. An interesting question of law that has been raised in this writ petition by GECAS Services India Pvt. Ltd. is whether it was mandatory for the Income Tax Department (‘Department’) to have issued a notice to the Petitioner under Section 226 (3) (iii) of the Income Tax Act, 1961 (‘Act’) prior to issuing a notice dated 27thFebruary, 2017 to the garnishee, i.e., the Branch Manager, HSBC (with which the Petitioner has an account) under Section 226 (3) (i) of the Income Tax Act, 1961 (the Act)?

Background facts
2. The background facts are that the Petitioner (hereinafter ‘Assessee’) is a wholly-owned subsidiary of the GE Group. 99.5% of the shares in the Petitioner are held by GECAS Services Ltd., Ireland and the remainder is held by GE Capital Aviation Funding, Ireland. The Petitioner is stated to be engaged in the business of providing marketing support, liaising and administrative services in connection with leasing of aircrafts in India to its parent company.

3. The Assessee filed its return of income for Assessment Year (‘AY’) 2014- 15 declaring an income of Rs. 21,37,610. The return of income was picked up for scrutiny. By an order dated 19th December, 2016 the Income Tax Officer, Ward 11(3) [(hereinafter Assessing Officer (‘AO’)] framed the assessment under Section 143 (3) of the Act making an addition of Rs. 2,14,78,118.90 to the Assessee’s income thereby raising a tax demand of Rs. 94,51,390.

4. The Assessee states that it received a copy of the aforementioned assessment order on 24th December, 2016. On 23rd January, 2017, the Assessee electronically filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. According to the Assessee, the AO was electronically intimated about the filing of the appeal before the CIT (A).

5. It is stated that on 25th March, 2017, the Assessee received a notice dated 27th February, 2017 issued under Section 226 (3) (i) of the Act addressed to the HSBC bank attaching the Assessee’s bank account held there and any other amount held in recurring deposit/fixed account and current account held with the said bank towards the recovery of the entire tax demand of Rs. 94,51,390.

6. The Assessee states that it was shocked to learn that the AO had already recovered the entire demand of Rs. 94,51,390 on 9th March, 2017 much before the dispatch of notice dated 27th February, 2017 to the Assessee. A copy of the transaction statement of the debit entry in the Assessee’s bank account has been enclosed with the petition.

The present petition
7. It is in the above circumstances that the present petition was filed praying that this Court should quash the said notice dated 27th February, 2017 issued by the AO to the HSBC Bank under Section 226 (3) (i) of the Act and further direct the Department to refund to the Assessee the amount recovered in excess of 15% of the entire demand for AY 2014-15.

8. When this petition came up for hearing on 12th April, 2017, the Court directed notice to issue to the Respondents. Pursuant thereto, a counter-affidavit has been filed on behalf of the Department in which it is inter alia stated that a demand notice in the sum of Rs. 94,51,390 under Section 156 of the Act was served upon the Assessee on 24th December, 2016. The period of 30 days for payment of the demanded sum expired on 24th January, 2017. Although the Assessee filed an appeal before the CIT(A), it, admittedly, did not file any application for stay of recovery of the demand. Since the Assessee had neither paid the demand nor filed the said stay application till 24th January, 2017, it was deemed that the Assessee was in default under Section 220 (4) of the Act.

9. It is claimed by the Department in para 2.6 of its counter-affidavit that on 1st February, 2017 a notice under Section 221 (1) of the Act was issued to the Assessee asking it to furnish a reply by 9th February, 2017 as to why penalty should not be levied on it for being an Assessee in default. It is claimed that no reply was received to the said notice.

10. Thereafter, in para 2.7 of the counter-affidavit, it is stated as under:
“2.7 In view of the above facts, notice under Section 226 (3) of the Act was issued by the Assessing Officer to the Petitioner’s banker on 27.02.2017 to recover the outstanding demand of Rs.94,51 ,390/-. The banker issued a Cheque/Pay Order of the aforesaid amount which was received at the DAK Counter of the Ward on 15.03.2017, and was put up before the AO on 16.03.201 7. 18.03.2017 (Saturday) and 19.03.2017 (Sunday) were holidays. On 21.03.2017 copy of the notice (dated 27.02.217), was sent to the Speed Post Department by the Assessing Officer and was, thereafter, finally booked/sent by the Speed Post Department on 22.02.2017 to the Petitioner/Assessee. The aforesaid copy of the notice sent by speed post was received by the Petitioner/Assessee on 25.03.2017.”

Submissions on behalf of the Assessee
11. Sachit Jolly, the learned counsel appearing for the Assessee, submitted that it was incumbent upon the Department to have issued notice to the Assessee, if not prior to the sending a notice to the Bank, at least simultaneously and should have allowed the Assessee an opportunity of showing why it should not be treated as an Assessee in default. He relied on the CBDT Instruction No. 1914 dated 2nd December, 1993 partially modified by Office Memorandum (‘OM’) dated 29th February, 2016 which states that the Department should not recover more than 15% of the total outstanding tax demand which stands disputed before the CIT (A). He submitted that it was evident from the counter affidavit filed by the Department that although the notice issued to the Assessee was dated 27th February 2017, it was withheld and dispatched only on 21st March, 2017. This itself demonstrated the illegality of the action of the Department.

12. Jolly placed reliance on the decisions of the Division Benches of the Allahabad and Bombay High Courts in Farrukhabad Gramin Bank v. Additional Commissioner of Income Tax (2005) 277 ITR 320 (All) and UTI Mutual Fund v. Income Tax Officer (2012) 345 ITR 71 (Bom.) and of the Single Judges of the Calcutta, Punjab and Haryana and Kerala High Courts in Purnima Das v. Union of India (2010) 329 ITR 278 (Cal), Mohan Singh v. Commissioner of Income Tax 1993 (204) ITR 571 (P&H) and Suntec Business Solutions Private Ltd. v. Union of India 2014 (3) KLJ 226.

13. Jolly submitted that an amount in excess of 15% of the total tax demand could not possibly have been sought to be recovered at this stage from the Assessee when its appeal before the CIT(A) was pending. He also disputed the assertion of the Department that the Assessee had been served a notice dated 1st February, 2017 under Section 221(1) of the Act. He pointed out that no proof of service of such notice was enclosed with the counter affidavit.

Submissions on behalf of the Revenue
14. Countering the above submission, Mr. Rahul Chaudhary, the learned Senior Standing Counsel for the Department maintained that the Assessee had in fact been issued a notice under Section 221 (1) of the Act on 1st February, 2017. He stated that the proof thereof would be available in the records of the Department. He pointed out that the CBDT Circular No. 1914 applied only if a stay application had been preferred by the Assessee along with its appeal before the CIT(A). Likewise, the decisions of the Division Bench of the Allahabad High Court in Farrukhabad Gramin Bank v. Additional Commissioner of Income Tax (supra) and of the Bombay High Court in UTI Mutual Fund v. Income Tax Officer (supra) would apply only in the circumstances where an application for stay had been filed by the Assessee along with its appeal. In the present case, admittedly, no such application for stay has been filed till date.

15. Chaudhary pointed out that in Purnima Das v. Union of India (supra), the learned Single Judge of the Calcutta High Court had failed to notice an earlier judgment of the another Single Judge of the same High Court in Golam Momen v. Asstt. Commissioner of Income Tax (2003) 263 ITR 69 (Cal) which held to the contrary. This anomaly was noticed in a subsequent judgment of another learned Single Judge of the Calcutta High Court in Anil Kumar Banerjee v. Union of India (2014) 44 taxmann.com465 (Cal). Therefore, as far as the Calcutta High Court is concerned, the two judgments of the learned Single Judge held that it was not mandatory under Section 226 (3) (iii) of the Act for a notice to be issued to the Assessee prior to attachment of its bank account towards recovery of the tax demand.

16. Chaudhary submitted that Section 226 (3) (iii) of the Act only required a copy of the notice to be “forwarded to the assessee” and not served upon the Assessee prior to or simultaneously with the issuance of notice to the bank under Section 226 (3) (i) of the Act. In support of this proposition, he placed reliance on the decision in P.P. Kanniah Chetty v. Income Tax Officer & Anr. (1976) 105 ITR 622 (Mad.) and Third ITO v. Damodar Bhat, (1969) 71 ITR 806 (SC). He pointed out that even according to the Assessee, it was under liquidation and there is no prospect of the tax demand being recovered from it in the event of its appeal being dismissed.

Analysis and reasons
17. The above submissions have been considered. Under Section 156 of the Act, it is incumbent on the AO to serve upon the Assessee a notice of demand of tax, interest, penalty, fine or any other sum specifying the same to be payable. In the present case, it is not in dispute that such a notice was in fact issued to the Assessee by the AO on 19thDecember, 2016 and was served on the Assessee on 24th December, 2016.

18. Under Section 221 (1) read with Section 220 (4) of the Act, the Assessee is deemed to be an Assessee in default if it fails to make the payment of the demand within 30 days of the service of notice under Section 156 of the Act. In the present case, the Assessee acknowledges that it was served with a notice of demand under Section 156 of the Act on 24th December, 2016. Therefore, the Assessee was aware that under Section 221 (1) read with Section 220 (4) of the Act, it would be deemed to be an Assessee in default upon its failure to pay tax within 30 days. The Assessee is unable to explain why it did not file an application for stay of recovery of demand along with its appeal filed on 23rd January, 2017 before the CIT(A). In fact, it has not filed any such stay application till date.

19. With the Assessee not having paid the amount within 30 days of the service of notice under Section 156 of the Act, the Department was justified in proceeding to treat it as an Assessee in default and in proceeding to take the necessary action to recover the demanded amount.

20. At this juncture, it requires to be noticed that Para 2B of Instruction No. 1914 of the CBDT dated 2nd December, 1993 on the subject of recovery of demands is titled ‘Stay Petitions’. Para 2C gives ‘Guidelines for Staying Demand’ wherein the AO “may impose such conditions as he may think fit.” The above Instruction No. 1914 was further modified by the OM dated 29th February, 2016. In para 4 of the OM, it is stated that the guidelines were being modified in order to streamline the process of grant of stay. Paras (A) and (B) therein, which are relevant for the present purpose, read thus:
“(A) In a case where the outstanding demand is disputed before CIT(A), the assessing officer shall grant stay of demand till disposal of first appeal on payment of 15% of the disputed demand, unless the case fails in the category discussed in para (B) hereunder.
(B) In a situation where,
(a) the assessing officer is of the view that the nature of addition resulting in the disputed demand is such that payment of lump sum amount higher than 15% is warranted (e.g. in a case where addition on the same issue has been confirmed by appellate authorities in earlier years or the decision of the Supreme Court or jurisdictional High Court is in favour of Revenue or addition is based on credible evidence collected in a search or survey operation, etc.) or,
(b) the assessing officer is of the view that the nature of addition resulting in the disputed demand is such that payment of a lump sum amount lower than 15% is warranted (e.g. in a case where addition on the same issue has been deleted by appellate authorities in earlier years or the decision of the Supreme Court or jurisdictional High Court is in favour of the assessee, etc.), the assessing officer shall refer the matter to the administrative Pr.CIT/CIT, who after considering all relevant facts shall decide the quantum/ proportion of demand to be paid by the assessee as lump sum payment for granting a stay of the balance demand.”

21. Instruction No. 1914 dated 2nd December, 1993 and the OM dated 29th February, 2016 are in the context of the AO considering a stay application filed by the Assessee. The Instruction or the OM will have no application where there is no application for stay filed by the Assessee. The decisions of the Division Bench of the Allahabad High Court in Farrukhabad Gramin Bank v. Additional Commissioner of Income Tax (supra) and of the Bombay High Court in UTI Mutual Fund v. Income Tax Officer (supra) have to be understood in this context.

22. In Farrukhabad Gramin Bank Bank v. Additional Commissioner of Income Tax (supra), the AO had attached two bank accounts maintained by the Assessee by giving a period of only 1 day’s time in the notice of demand under Section 156 of the Act and without serving a notice under Section 226 (3) of the Act. What appears to have weighed with the High Court is that instead of granting 30 days’ time under Section 221 of the Act, the AO had reduced the time for making payment of the demand to just one day.

23. The further observations of the Allahabad High Court that the action of the Department in proceeding to recover the demanded amount from the accounts of the Assessee without serving a notice under Section 226 (3) of the Act rendered the action arbitrary and illegal appears to run contrary to the decision of the Supreme Court in Third ITO v. Damodar Bhat (supra) where the contention of the Assessee that it should have been issued a notice under Section 226 (3) prior to the AO issuing the garnishee order to the third part was negatived by the Supreme Court. Following the said decision of the Supreme Court, the Madras High Court in P. Kanniah Chetty v. Income Tax Officer (supra) held: “in order to issue a garnishee order, it is not necessary that the person from whom the tax is due in respect of which the garnishee order is issued be a defaulter within the meaning of Section 46 of the Indian Income Tax Act 1922 or the corresponding provision of the Income Tax Act 1961.”

24. Consequently, this Court is unable to accept the contention of the Assessee that the decision of the Allahabad High Court in Farrukhabad Gramin Bank v. Additional Commissioner of Income Tax (supra) on the question of the mandatory nature of the requirement of prior service of notice upon the Assessee under Section 226 (3) (iii) of the Act reflects the correct position in law.

25. Turning to the decision of in UTI Mutual Fund v. Income Tax Officer (supra), it is plain from the facts of the case that there was an application for stay moved by the Petitioner before the AO immediately on the receipt of the demand. Thereafter, the Petitioner moved the CIT seeking his intervention apprehending that the AO may not entertain the application for stay. The application for stay was disposed of by the AO thereafter. Within 3 days of the disposal of the stay application, the AO took action under Section 226 (3) of the Act calling upon the bankers of the Petitioner to pay to the Revenue the demanded amount. It was in the above context that the Division Bench of the Bombay High Court held that “when a bank account has been attached, before withdrawing the amount, reasonable prior notice should be furnished to the assessee to enable the assessee to make a representation or seek recourse to a remedy in law.” All of the guidelines issued by the Division Bench of the Bombay High Court in UTI Mutual Fund v. Income Tax Officer (supra) were in the context of the Assessee having filed an application for stay. However, in the context of the present case where the Assessee has not filed any such application for stay, the question of application of those guidelines does not arise.

26. Likewise, the Court is not persuaded to hold that the decisions of the learned Single Judges of the Punjab & Haryana High Court in Mo/ian Sing/i v. Commissioner of Income Tax (supra) or of the Kerala High Court in Suntec Business Solutions Private Ltd. v. Union of India (supra) correctly expostulate the legal position under Section 226 (3) (iii) of the Act. As far as the Calcutta High Court is concerned, the two decisions of the learned Single Judges of that Court in Golam Momen v. Asstt. Commissioner of Income Tax (supra) and Anil Kumar Banerjee v. Union of India (supra) correctly explain the legal position. The Court considers the contrary view of another learned Single Judge in Purnima Das v. Union of India (supra) as not laying down the correct legal position.

27. In other words, the Court respectfully follows the view expressed by the Supreme Court in Third ITO v. Damodar Bhat (supra) and concurs the view of the Madras High Court in P. Kanniah Chetty v. Income Tax Officer (supra).

28. In the present case there was no illegality committed by the Department in not issuing to the Assessee a notice under Section 226 (3) (iii) of the Act simultaneously with or prior to the notice issued to its bank under Section 226 (3) (i) of the Act for recovery of the tax demand from its account. The Court accepts the submission of the Revenue that requirement under Section 226 (3) (iii) is only that a copy of the notice should be “forwarded to the assessee” and not that a copy should be served on the Assessee in advance or simultaneously.

Conclusion
29. For all the aforementioned reasons, the Court finds no merits in this writ petition which is dismissed but in the circumstances, with no other as to costs.

Cash Deposit Verification Guidelines

Cash Deposit Verification Guidelines given by CBDT to Assessing Officers[Instruction No. 3/2017 dated 21-02-2017]:

1. In case of an individual (other than minors) not having any business income, no further verification is required to be made if total cash deposit is up to Rs. 2.5 lakh.

2. In case of taxpayers above 70 years of age, the limit is Rs. 5.0 lakh per person.

3. In non business cases, where the person under verification has filed return of Income, a reasonable quantum can be considered as explained while quantifying the undisclosed amount, if any

4. In case of persons engaged in business or requirement to maintain books of accounts, no additional information is required to be submitted by the person under verification if total cash out of earlier income or savings (sum of responses for all cash transactions) is not more than the closing cash balance as on 31st March 2016 in the return for AY 2016-17

5. However, if the AO has reason to believe that the closing cash balance as on 31st March 2016 has been increased by revising the return or backdating transactions in the books of account, further verification may be carried out.

6. For cash received from identifiable persons without PAN, The AO needs to verify if the cash receipts are not in line with the normal practices of concerned business as mentioned in the earlier returns of Income after considering the remarks provided by the taxpayer, nature of business and earlier history before seeking additional information.

7. For Cash received from Unidentifiable persons, normal practice of business to be verified

8. AO may seek relevant information e.g. monthly sales summary (with breakup of cash sales and credit sales), relevant stock register entries, bank statement etc. to identify cases with preliminary suspicion of back-dating of cash sales or fictitious sales

9. Some indicators for suspicion of back dating of cash sales or fictitious sales could be :

i) Abnormal jump in the cash sales during the period Nov to Dec 2016 as compared to earlier history.
ii) Abnormal jump in percentage of cash sales to unidentifiable persons as compared to earlier history.
iii) More than one deposit of specified bank notes in the bank account late in the demonetization period
iv) Non-availability of stock or attempts to inflate stock by introducing fictitious purchases.
v) Transfer of deposited cash to another account/entity which is not in line with earlier history.

10. In cases where online response has not been submitted, AO shall generate a letter from the Verification portal on ITBA to the person under verification for submission of online response on the e-filing portal and ensure its service. This process should be completed within 7 days of availability of information on the portal.

11. The person under verification is not required to attend the Income-tax office personally under any circumstance and at any stage during the verification exercise.

12. The Assessing Officer will also be able to send a request for additional information, if required.

13. No independent enquiry or third party verifications are required to be made by the Assessing Officer outside the online portal. Whatever information is necessary during verification, the same has to be collected through the person under verification using online platform only

14. Even telephonic queries are to be avoided.

15. It should be ensured that the communications made online with the persons under verification should be in very polite language without containing any element of threat or warning. No show cause of any kind should be given.

16. In cases of non compliance to cash verification window, if the cash deposit is not in line with the earlier return or information profile of the person under verification, necessary facts may be collected inter-alia by exercising the powers under section 133(6) with the approval of prescribed authority.

17. In appropriate cases depending upon the online response or otherwise, survey action u/s. 133A can be considered. During survey, where there is suspicion of back dating or fictitious cash transactions, CCTV recording of the cash counter at relevant banks may also be checked, if necessary. Reference can also be sent to the Investigation wing in appropriate cases.

Section 234C – Shortfall in payment of advance tax on account of impossibility to estimate income – Assessee not liable to pay interest.

Kumari Kumar Advani vs. Asstt. CIT (Mum) Members: G.S.Pannu (A. M.) and Ram Lal Negi (J. M.) ITA No.: 7661 /MUM/2013 A.Y.: 2012-13.

FACTS
The assessee, an individual, had filed her return of declaring income of Rs. 13.91 crore. While processing such return u/s. 143(1), interest u/s. 234C of the Act was levied on account of shortfall in payment of advance tax on first and second installments, due on 15/09/2011 and 15/12/2011, in respect of gift of Rs.10.00 crores claimed to have been received on 17/12/2011. On such deferment in payment of instalments, interest of Rs.7.66 lakh was charged. On appeal, the levy was confirmed by the CIT(A).

Before the Tribunal, the assessee argued that the income in question, namely gift of Rs.10.00 crore received on 17/12/2011 was in the nature of a windfall gain and, therefore, it was not possible for the assessee to estimate its accrual or receipt at any time when the payment for first and second installments of advance tax were due. However, the revenue justified the orders of the lower authorities on the ground that the charging of interest u/s. 234C of the Act was mandatory in nature and relied on the judgment of the Delhi High Court in the case of Bill and Peggy Marketing India Pvt. Ltd. vs. ACIT (350 ITR 465).

HELD
The Tribunal noted that section 209 provides the computational mechanism of calculating advance tax to be paid. According to it, section 209 envisages calculation of advance tax based on the ‘estimate of current income’. A reading of section 209 would reveal that in order to calculate the amount of advance tax payable, an assessee is liable to estimate his income. Considered in this light, the facts of the present case clearly show that the gift of Rs. 10 crore, which has been received by the assessee on 17/12/2011 could not have been foreseen by the assessee so as to enable him to estimate such income for the purpose of payment of advance tax on an anterior date viz., 15/09/2011 or 15/12/2011. In such a situation, according to the Tribunal, the decision of the Hyderabad Bench of the Tribunal in the case of ACIT vs. Jindal Irrigation Systems Ltd. (56 ITD 164) relied upon by the assessee clearly militates against charging of interest u/s. 234C. As per the Hyderabad Bench of the Tribunal, an assessee could not be defaulted for a duty, which was impossible to be performed. To the similar effect is the decision of the Chennai Bench of the Tribunal in the case of Express Newspaper Ltd (103 TTJ 122). Therefore, the Tribunal held that the levy of interest u/s. 234C was untenable.

How to bequeath wealth to our legal heirs using nomination, joint accounts and will? •

Writing and Registering a Will is the best Option

The best way to pass on one’s wealth after death is to write and register a Will in favor of those persons whom one would like to get the estate.

Also Have Joint Accounts
However, other than writing and registering a Will, there are other ways to pass on the wealth without any hassles is by having joint accounts with the person whom you want to pass on the wealth (namely, one’s spouse). Joint accounts are more hassle free even compared to a Will.

On the death of the person, the estate automatically passes on to the surviving account holder with minimum of paper work. The operation instructions in the joint account has to be mentioned as ‘Either or Survivor’. By producing a copy of the death certificate the remaining account holder will become the sole account holder.

If a person is unwilling to allow the joint account to operate the account along with him during his life time, s/he may simply change the operation instructions to ‘Former or Survivor’ and s/he will operate the account as long one is alive and only after the death the other account holder will be able to access the account.

Nominations Helps Further

The nomination facility in banks and elsewhere helps further in passing on one’s wealth to the desired person. In such case, the person may not open a joint account, but appoint the person as nominee in the account. In case of his/her death, the nominee has to provide identity and address proof along with death certificate of the deceased account holder to get the account transferred in his/her name.

Nominations also helps when one has a joint account with one’s spouse, and s/he feels that it may happen that of they may die at the same time (accident or sickness), in that case having a nominee to whom they would desire to pass on the wealth, s/he can be nominated and when the death happens the person becomes the owner of the wealth.

However, one has to be careful to see that the person’s name as beneficiary in the will should be the same as nominee. If the persons are different in the will and in the nomination, then the beneficiary in the Will, will not receive the wealth in the account, it will go to the nominee, though the beneficiary is entitled to receive it.

Then beneficiary needs to legally claim it and get it from the nominee. To avoid this make the beneficiary in the will as the nominee. Then it becomes easy for the beneficiary to transmit the asset in his/her name.

Please Review Your past Wills/ Joint Accounts/ Nominations

People when they are young and are not married and do not have children, they often have joint accounts with father/ mother/ brother/ sister and also may nominate them in the accounts with banks and other investments like LIC policies/ provident fund/ shares/ mutual funds etc. Sometime they also make a will in which some or of them are the beneficiaries. Once a person gets married and have children, they should review the names in the joint accounts/ nominations and their will from time to time and make suitable changes as and when required.

This will prevent the following situation from happening…

“I am Sapna and I am having a big problem. My husband before our marriage had written a WILL stating that all the wealth will go to his elder sister after his death. After marriage he was thinking to change the will, but by the time he could do it he died of an accident. His sister has claimed all our property and bank balance because of that WILL. What can I do?”

Truly speaking, the lady can’t do anything … her husband was lazy and ignorant about these things and now she will pay for his mistakes!

To summarize

One should have a joint account, as the first account holder, with the person to whom s/he desires to pass on the wealth after his/her death…

Wherever, possible nominate a person, to whom you want your money should go after your death…

Review past Wills, names of persons in investment and nominations to make it up to date with changing times and your preferences to pass on your wealth after your death.

Source : Taxguru