SECTION 1431 l ASSESSMENT

865. Summary assessment scheme - Steps for accelerating pace of assessment without appearing before Income-tax Officers

1. The Board attaches very great importance to the successful implementation of the “summary assessment scheme” so that the genuine small taxpayers, who form nearly 70 per cent of the number of taxpayers borne on our registers, are not put to the avoidable inconvenience of appearing before the Income-tax Officers to prove the correctness of the income returned by them. During the current year, the Board has fixed a target of 70 per cent of all assessments to be completed under the “summary assessment scheme” and only a small percentage of cases are selected on an objective and rational basis for scrutiny. The remaining cases will be completed summarily without calling the taxpayer to appear before the Income-tax Officer with his books of account, etc. With a view to bring home the advantages of this scheme to the taxpayer, a massive campaign of taxpayer education was recently undertaken by the Department explaining the various provisions of the tax laws with particular emphasis on the details and advantages of the “summary assessment scheme”. This programme of taxpayer education will be a continuing process.

2. However, the success of this scheme depends, to a large extent, on the cooperation of the taxpayers and their advisers. In order to enable the Income-tax Officer to complete the assessment in a summary manner and in accordance with law, the returns of income should be correct and complete in all respects, and be accompanied by copies of trading, profits and loss accounts, balance-sheets, etc., that are required under the rules. It is also necessary that evidence in support of rebates, reliefs and tax credit, etc., claimed should accompany the returns. To remove any misgivings regarding the safety of these documents steps have been taken to streamline the procedure for receipt and registration of returns in the income-tax officers and to ensure that documents accompanying the returns are properly docketed.

3. The above steps taken to accelerate the pace of assessments in a summary manner in all suitable cases may be brought to the notice of the general public.

Circular : No. 201 [F. No. 237/16/76-A & PAC-II], dated 5-7-1976.

866. Types of assessments to be completed under sub-section (1) and procedure to be followed by income-tax authorities

1. During the Commissioners’ Conference 1985, certain recommendations were made to speed up the disposal of income-tax assessments with the manpower available and to reduce the ever increasing back-log. The recommendations made in this Conference have been examined by the Board and I am directed to say that in supersession of all existing instructions on the subject, the following procedure will now be adopted.

2. Assessments in the following types of cases will be completed under section 143(1) on the basis of the returns after linking them with the assessment records :

l All cases, other than company and trust cases, with returned income/loss up to Rs. 1 lakh.

l Company cases with returned income/loss up to Rs. 25,000 and paid-up capital not exceeding Rs. 5 lakhs. However, the first assessment in all new company cases will be a scrutiny assessment.

l All trust cases and cases of charitable institutions having income below Rs. 1 lakh before applying the provisions of section 11 provided the corpus of the trust does not exceed Rs. 5 lakhs. However, the first assessment in all trust cases will be a scrutiny assessment.

3. In the above cases, the arithmetical accuracy of computation of total income and taxes will be ensured and liability for penalty, interest, compulsory deposit, etc., if any, will be checked. No other checking of any sort will be necessary. All pending assessments in such cases will also be completed in the same manner along with the current assessments.

4. However, cases assigned to Inspecting Assistant Commissioners (Assessment), Central Circles Special investigation Circles, Special Circles, search and seizure cases, cases re-opened under section 147 and those selected for scrutiny on a random sample basis, etc., will not come under the purview of this scheme.

5. All other cases (i.e., cases where the assessments are not to be completed in a summary manner), will be dealt with under the normal procedure of law.

6. When assessments in cases mentioned in para 2 above are completed under section 143(1) and there is no additional demand or refund, demand notices and copies of assessment orders will not be issued but an intimation that the assessment has been completed under section 143(1) resulting in ‘nil’ demand/refund will be issued in the attached form. This intimation may be got printed in the form of an inland letter and issued after writing the name and address of the assessee.

7. Summary and scrutiny cases should be entered separately in the Demand and Collection Registers.

8. The initiation of penalty proceedings/completion of penalty proceedings already initiated will be governed by the instructions which are being issued separately. However, interest under the relevant provisions will be levied.

9. Five per cent of the cases where assessments are completed in a summary manner will be taken up for scrutiny on a random sample basis. The Commissioners shall lay down the random number and the Income-tax Officers should complete selection of cases for random scrutiny by 31st August of the year. This should be done under the supervision of the Inspecting Assistant Commissioner. The number of cases so selected and disposed of should be shown separately in the Central Action Plan-II Statement. The instructions laid down for completion of assessments in cases selected for scrutiny on random basis will continue to be observed.

Instruction : No. 1617, dated 18-5-1985, extracted from 38th Report of Public Accounts Committee (1985-86), pp. 88 and 89.

JUDICIAL ANALYSIS

Explained in - In Om Trading Co. v. Second ITO [1991] 188 ITR 641, the above scheme was explained with the following observations :

‘The new scheme adopted by the Revenue basically  reposes faith in  assessees and expects them to disclose full particulars of their income and claim only proper deductions; this procedure referred as “summary assessment procedure” reduces the volume of the department’s work as otherwise the time of the authorities would be spent in scrutinising each and every  “return of income” irrespective of the income; similarly, a large number of assessees are saved the trouble of attending to their cases at the time of scrutiny. However, a likelihood of a scrutiny under section 143(2) would always act as a deterrent against an assessee taking undue advantage of the scheme by filing incorrect returns. The scheme is beneficial and is liberal scheme from the point of view of the assessees. Its success depends on the honesty of the assessees; the faith reposed in the assessees has to be properly reciprocated by them. The power vested in the authorities to verify the correctness and completeness of the return requiring the presence of the assessee or the production of evidence, if the Income-tax Officer considers it necessary or expedient, is a salient provision to effectuate the purposes of the summary assessment scheme, this is one of the  provisions by which the assessees are warned to be truthful while filing their returns. Though the condition for invoking the power under section 143(2)(b) is the opinion of the Income-tax Officer that it is “necessary” or “expedient” to do so, and these words are wide in their scope, the Board has taken sufficient care against indiscriminate resort to this power by the assessing authorities. When  already an order of assessment is made, this power cannot be invoked without the prior approval of the Inspecting Assistant Commissioner as per the proviso to section 143(2)(b). The circulars issued by the Board disclose the cases that will be normally covered by this provision for the scrutiny of the returns.

Cases under section 143(2)(b) are not comparable to the assessments falling under section 147; in the latter case, a reasonable belief exists that income has escaped assessment and the statutory consequences are different when an order is made thereunder. Section 143(2)(b)  contemplates a “first assessment” as part of the power of making the initial assessment.

The two relevant words are “necessary” or “expedient” in section 143(2)(b). The word “expedient” is more comprehensive and would cover a wider range than “necessary”. The circumstances warranting “expediency” are incapable of precise formulation. In the context of the practical measures taken under section 143 for summary assessments and the faith reposed on the assessees, the word “expediency” would cover a case for selective scrutiny of the returns, solely to act as a deterrent measure to prevent filing of incorrect returns.

It was contended that exercise of any unguided power which would compel an assessee to face fresh proceedings without any reason will be arbitrary.

The above principle, if taken in isolation, certainly would aid the petitioners. But, here, the exercise of the power has to be viewed in the context of the “Summary Assessment Scheme”.

It is necessary to remember that, normally, every assessee is bound to prove the correctness of his “return” and the claims preferred therein; it is for him to produce the books of account in support of his “return”. An order of assessment is to be made only after scrutiny of the return and the materials produced in support of the return. The summary scheme envisaged under section 143 is an exception to the normal rule. Therefore, no assessee can, as a matter of right, demand to be treated as an exceptional case. The notice under section 143(2)(b) restores the normal procedure of assessment and, therefore, the assessee cannot question the exercise of such a power by the Revenue, unless patent arbitrariness of mala fides are established on the part of the authorities’.

Explained in - Dadamchand Keshrimal & Co. v. CIT [1996] 222 ITR 433 (MP) with the following observations :

“Instructions do not in any way interfere with the operation of the provisions contained in the statute. The provision contained in the statute and the instruction had different fields to operate in and different purposes to serve. They were not mutually destructive of each other. The Tribunal was justified in holding that the assessment completed under section 143(1) could be reopened under section 143(2)(b) otherwise than in terms of the procedure for scrutiny of 5 per cent, cases laid down in Instruction No. 1617, dated May 18, 1985.”

867. Summary Assessment Scheme, scope of remedial action — Clarification regarding

This Directorate had received several references from different Commissioners seeking guidance as to whether remedial action under section 263 could be taken in cases completed under “Summary Assessment Scheme” where glaring and apparent mistakes in computation of income have been detected resulting in substantial loss of revenue. For instance, CIT Poona had cited a case where a partnership firm had claimed a wrong deduction of Rs. 2.34 lacs in respect of medical expenses on the treatment of partner. In another case a totally incorrect deduction in respect of investment allowance was claimed by a firm and allowed under section 143(1). On a reference made by the Directorate to the Board seeking clarification as to whether provision of section 263 should be invoked in such cases the Member (R & A) has observed as under :—

“No remedial action is necessary in summary assessment cases, as the revenue loss if any is consciously suffered by the Government to utilised resources for scrutiny and investigations of larger cases. In such cases, CIT should only inform Audit that the cases are completed under the Summary Assessment Scheme.”

The above observations of the Member (‘R & A’) reflect the views of the Board on the subject and are being brought to the notice of all the Commissioners of Income-tax for their information and guidance.

Circular : No. 176 [F.No. RA/1/86-87/DIT], dated 26-8-1987 issued by the Directorate of Inspection (Audit), New Delhi. [Source: Puranmall Narayan Prasad Kedia v. Asstt. CIT 1994 Tax LR 224 (ITAT - Cal.), at pp. 226-227]

Judicial analysis

Explained in : The above circular was quoted and explained in Puranmall Narayan Prasad Kedia v. Asstt. CIT 1994 Tax LR 224 (ITAT-Cal.)*, in the following words:

‘It is therefore clear that the Government is prepared to suffer the loss of revenue by making summary assessments under section 143(1) on the ground that the time and effort involved in unearthing the loss is not commensurate with the benefit likely to be obtained and they may be better channelised in scrutiny of cases involving larger revenue. A monetary limit of Rs. 1 lakh has therefore been fixed and returns showing income or loss up to that limit will be accepted under section 143(1). In view of the circular, which contains the view of the Board on the matter, the proceedings under section 263 must be held to be without jurisdiction. Mr. Lahiri contended that the circular was not binding on the CIT. We do not see how such a contention can be countenanced. The circular expressly states that the observations of the Member (R & A) on the question of taking remedial action under section 263 against assessments made under section 143(1) “reflect the views of the Board on the subject”. If that is the view of the Board, surely it cannot be said that the CIT is not bound by the view. The CIT is an income-tax authority under section 116 of the Act bound by the orders, instructions and directions issued by the Board for the proper administration of the Act, under section 119 of the Act. That section also makes it mandatory for the income-tax authorities to observe and follow instructions.

It is therefore beyond question that such instructions have binding effect and the taxpayer is entitled to enforce their application in his favour. . .’ (p. 227)

868. Selection of summary assessment cases for sample scrutiny

1. Attention is invited to Instruction No. 1072, dated 1-7-1977. At para 15 of this Instruction it was stated as follows :

“Some of the cases in which assessments have been made under the summary assessment scheme should be picked up for scrutiny. This should not be done by reopening under section 143(2)(b) an assessment already complete in summary manner under section 143(1). The scrutiny should relate to the assessment which will be taken up in the following year.”

The same instruction was reiterated in Board’s Instruction No. 1173, dated 8-5-1978. Further as per the existing procedure, as laid down in Instruction No. 1072 and reiterated in Instruction Nos. 1381, dated 5-2-1981 and 1508, dated 13-5-1983, cases for sample scrutiny are to be selected in the month of August in every financial year.

2. In view of the decision to computerise summary assessments from the financial year 1987-88, in place where computers have been introduced it is intended to centralise receipt of returns and forward all returns failing under the summary assessment scheme to the Computer Centre for processing. Thus it may be difficult to segregate the returns relating to the cases chosen for sample scrutiny. It is also possible that in some cases assessments would have been completed before August when cases are chosen for sample scrutiny.

3. In this background Board have re-examined the procedure for selecting cases for sample scrutiny and it has been decided that in cases chosen for sample scrutiny, if the assessment has already been completed under section 143(1) by the computer, the proceedings should be reopened under section 143(2)(b) of the Income-tax Act in scrutiny. The existing instructions on the subject are, therefore, modified to this extent only.

4. These Instructions may be brought to the notice of all the officers working under you.

Instruction : No. 1753, dated 1-4-1987 [Source : 173rd Report of Public  Accounts Committee (1989-90) (Eighth Lok Sabha) (p. 56)].

869. Scrutiny assessment guidelines for assessment year 1996-97

The Income-tax Department has decided not to select returns for the assessment year 1996-97, for detailed scrutiny if the total income declared is at least 30 per cent more than the total income declared for the assessment year 1995-96.

The following further conditions should be fulfilled :

(a)  The total income for both the assessment years should exceed the basic exemption limit ;

(b)  the total income for the assessment year 1995-96 should not exceed Rs. 5 lakhs ; and

  (c)  tax is fully paid for the assessment year 1996-97 before the return is filed.

In these cases the taxpayers will not be required to attend income-tax offices in connection with their assessments.

However, some of these cases will be scrutinised if there is positive information of tax evasion or there is a large claim of refund.

Press Release : Dated 12th March, 1996.

870. Hearing fixed by the Income-tax Officers for completion of the assessments

1. It has been time and again brought to the notice of the Board that the Income-tax Officers are issuing notices under section 143(2) indiscriminately and mechanically without acquainting themselves in advance as to what is their requirement. This has been a source of harassment to the taxpayers and also delaying the completion of assessment proceedings, more particularly so in Salary Circles.

2. In the Action Plan for 1980-81, also the Chairman has desired that before fixing up the cases, the files should be studied and requirements specified for the purpose of scrutiny. In cases, which would normally fall under the Summary Assessment Scheme, only a deficiency letter may be issued as required by Board’s Instruction No. 1072, dated 1-1-1977 or under section 139(9) of the Income-tax Act, 1961.

3. Where the case is to be fixed for hearing, it will be advisable to either issue notice under section 142(1) which requires production of certain documents or books or notice under section 143(8) specifying the point on which the clarification is needed. Issue of notices under section 143(2) which requires the assessee to produce evidence in support of the return should not be done mechanically and the Income-tax Officer should be well aware of the points on which he desires the assessee to produce evidence issue of such notice.

4. The Commissioners and the Inspecting Assistant Commissioners should make it a point to see during the course of surprise or regular inspections as to whether the notices have been issued mechanically or not. In case some Officers are in the habit of issuing notices mechanically, they may be suitably pulled up.

5. The Board desire that the contents of the above instructions may be brought to the notice of all the Officers working in your charge.

Instruction : No. 1367, dated 18-11-1980. [Source : 114th Report of P.A.C. (1981-82) (Seventh Lok Sabha) (pp. 14-15)].

871. Hearing of case by Income-tax Officer - Assessee to be informed in advance if schedule of hearing is not adhered to due to unavoidable circumstances

1. Complaints continue to come to the Board from various quarters of inconvenience to the assessees by the Income-tax Officers not adhering to the schedule of hearing fixed by them and not informing them wherever possible, in advance, of the adjournments which are effected due to sudden pre-occupation of the Income-tax Officer with other urgent work.

2. The Estimates Committee have also taken note of this fact and it has been decided by the Board that the format of the assessment order should include a column for noting the dates of hearings as in the case of appellate orders. This will enable the supervisory officers to keep a check on the number of occasions on which the assessees were called upon to appear before the Income-tax Officers. It has also been decided that if the Income-tax Officer, due to any unavoidable circumstance, cannot adhere to the schedule of hearing, the assessees should be informed in advance either through a letter or through telephone, wherever possible. The information about cancellation or adjournment of hearings should also be displayed on the notice board outside the office of the Income-tax Officer concerned and also on the general notice board of the department for the benefit of the assessees who may come to the department unaware of the cancellation of the hearing.

Instruction : No. 1395 [F. No. 201/28/81-IT(A-II)], dated 15-5-1981. [Source : 114th Report (1982-83) of the Public Accounts Committee, pp. 16-17].

872. Hearing of cases by Income-tax Officers - Each assessee should be given different timing for attendance

1. It has been brought to the notice of the Board that while fixing the hearing of cases by the issue of statutory notice, the Income-tax Officers indicate the same time for attendance in all cases, e.g., 10.00 a.m. As a result, many assessees have to wait for a long time before they are given a hearing as obviously all the assessees cannot be heard at 10.00 a.m. The inconvenience and harassment caused to the assessees is, therefore, quite obvious but avoidable. It is, therefore, desired that the Income-tax Officers should give each assessee a different timing.

2. The above aspect of the Income-tax Officers’ work should be kept in view by the Inspecting Assistant Commissioners while making inspections. You should also look into this matter during the course of your visits.

Circular : No. 230 [F. No. 225/109/77-IT(A-II)], dated 27-10-1977.

873. Hearing of cases by Income-tax Officer - Taxpayers to be heard on the date fixed therefor - Requisition for information or evidence to be sent to assessee in advance

1. The point raised related to the wasteful and unnecessary hearings fixed  by the Income-tax Officers in completing the assessments. It was suggested that the Income-tax Officers should, wherever practicable, be asked to inform the assessees in advance about the information and documents they require so that the assessee may be able to supply the information in advance or at the time of hearing.

2. The Committee was assured that instructions already issued in this behalf would be reiterated. D.P.M. observed that on the date fixed for hearing, the taxpayer must be heard and any requisition for information or evidence should, as far as possible, be sent to him in advance. Where the Income-tax Officer was not in a position to take up the hearing on the appointed date, the taxpayer should be informed in advance of the change in the date and, as far as possible, the next date for hearing should be fixed in consultation with the taxpayer.

Source : Relevant extracts from minutes of 12th meeting of CDTAC held on 17-8-1967.

874. Prevention of unrealistic over-assessments

1. Reference is invited to the Board’s Instruction No. 376 [F. No. 277/2/70-IT(J)], dated the 1st February, 1972 and the earlier instruction cited therein.

2. Instances continue to come to the notice of the Board about unrealistic over-assessments made by assessing officers under various direct tax Acts. This causes unnecessary hardship to the assessees and tarnishes the image of the Department; there is avoidable litigation and recovery problems arise in respect of the consequential insupportable and exaggerated tax demands.

3. The Board would like therefore to impress once again upon the Commissioners that they should advise the assessing  officers in their charge to eschew unjustified over-assessments. The assessments have to be made in a reasonable and fair manner after considering all the relevant circumstances of the case. Even where an assessment has to be made  ex parte, the information available should be reasonably weighed and a proper estimate made in the exercise of best judgment in the circumstances. There should be no tendency to frame assessments even in such  cases mechanically on past basis, if there is evidence to the contrary e.g., the business of the concern has become defunct or is in clearly adverse circumstance.

4. If unjustified over-assessments are avoided, this will inter alia curtail the feature of exaggerated demands which unnecessarily inflate our arrears figures.

5. These instructions may be brought to the notice of all officers in the charge and very careful watch kept over their compliance. The erring officials should be properly advised and where necessary pulled up. [F. No. 246/27/73-A & PAC, dated the 27th July, 1973 from C.B.D.T.].

Instruction : No. 574, dated 27-7-1973. [Source : 193rd Report of Public Accounts Committee (1983-84) (Seventh Lok Sabha), (pp. 26-27)].

875. Avoidance of unnecessary adjournments in assessment of important cases

1. Attention is invited to Board’s Instruction No. 521 [F. No. 231/4/71-A & PAC-II], dated the 12th March, 1973 wherein it was impressed upon the Assessing Officers that the cases should not be adjourned unless for compelling reasons and the assessee’s requests for adjournment should be weighed by the Officers very carefully and only if the circumstances pleaded are convincing, genuine and unavoidable, adjournments should be granted. It was impressed upon the IACs that while inspecting the ITO’s work, they should specifically look into this aspect and take note of avoidable and unnecessary adjournments.

2. The Public Accounts Committee in their 157th Report have again adversely commented upon the tendency on the part of the assessing officers in granting adjournments freely and sometimes on flimsy grounds. A subsequent study by D.I. (IT) has confirmed this to some extent.

3. Everyone will please realise that it is important to improve our performance at all levels. The Inspecting Assistant Commissioners are also requested to specifically report on this aspect of the matter during their regular inspection. They may also take up special/vigilance inspections and report on this aspect of the work. The CIT/IAC should also draw up a monthly plan regarding the completion of big assessments and keep a watch over the progress of this plan. This will not only accelerate the pace of work in this key area but will also obviate the tendency of granting uncalled for adjournments on the part of the Income-tax Officers.

4. The above instructions may please be brought to the notice of all the officers working under you.

Instruction : No. 1517, dated 13-7-1983. [Source : 220th Report of Public Accounts Committee (1984-85) (Seventh Lok Sabha), (pp. 11-12)].

876. Supply of copies of assessment orders to assessees along with demand notice

CLARIFICATION I

1. Reference Board’s Circular No. 10-D [C. No. 9(22)-IT/47], dated 15-4-1948 [printed as Clarification 2] on the above subject.

2. It has been represented to the Board that there is no uniform practice regarding supply to assessees of copies of assessment orders along with the demand notice and that the time limit provided under section 67A of the Indian Income-tax Act, 1922 (corresponding to section 268 of the 1961 Act) is also varied in many cases.

3. The Board, therefore, desire that instances, where the copy of the assessment order is not sent to the assessee simultaneously with the demand notice, should be few and in any case the copy should be sent within a week of the date of assessment.

4. The time taken for obtaining a copy of the assessment order should be excluded in computing the period of limitation only when a valid application is presented to the income-tax authority for a copy.

Circular : No. 1 [C. No. 9(17)-IT/50], dated 24-4-1950.

CLARIFICATION 2

1. It has been reported to the Board that the practice obtaining in Madras should be followed in other provinces also and that a copy of the assessment order should be supplied to the assessee along with the demand notice.

2. The Board consider this request to be reasonable and have, therefore, decided that in future a copy of the assessment order should be supplied in each case in all the provinces. However, in the cities of Bombay and Calcutta if the assessment order is not typed at the very outset, manuscript’s carbon copy of the assessment order should be sent only in cases where the total income assessed exceeds Rs. 5,000. It should be possible to start this practice from July 1948, if not earlier.

Circular : No. 10-D [C. No. 9(22)-IT/47], dated 15-4-1948.

877. Auditor’s certificate in non-company cases - Consideration thereof while completing assessment and other matters connected therewith

CLARIFICATION 1

1. In the Board’s Circular No. 47(XXIV-1), dated 18-12-1952 [printed as Clarification 2], instructions were issued to the effect that as no statutory duty was cast on a chartered accountant for auditing the accounts of non-company  cases, his report or certificate in such cases should not be given more credence than what a certificate of the assessee’s own accountant was entitled to, and that where necessary but not otherwise, the Income-tax Officer should not hesitate to go behind the “audited” accounts and balance-sheet and to probe into the accuracy thereof. It has since been represented to the Board that non-existence of any such statutory duty should not necessarily and invariably be a bar to the acceptance of an auditor’s certificate, in non-company cases, and that where a certificate is unqualified and given after due audit of the accounts by a chartered accountant, it should be treated with the same consideration as is accorded to a certificate given by qualified auditor in company cases.

2. The Board have carefully considered this suggestion and decided that, with a view to encouraging non-company assessees to get their accounts fully audited, if a chartered accountant gives unqualified certificate in the form given below, and agreed to by the Institute of Chartered Accountants, then such a certificate should ordinarily be treated with the same consideration that would be given to a certificate given in the case of a company. The Income-tax Officers should not, however, hesitate to go behind the certificate and call for detailed accounts where in their opinion the facts of a case justify that course.

FORM OF CERTIFICATE

“We have audited the foregoing Balance Sheet as at............. and the Profit and Loss Account for the year ended on that date...........with the books and vouchers, as maintained by the said...........and report that—

  (i)  we have obtained all the information and explanations we required,

(ii)  the said Profit and Loss Account and Balance Sheet are drawn up in accordance with the  said books, and

(iii)  in our opinion, the Balance Sheet contains a correct summary disclosing the general nature of property and assets and capital and liabilities and the basis of valuation of fixed assets and stocks and it exhibits a true and correct information and the explanations given to us and as shown by the books of the said....................

Place...................                                  Signature.................................

Date......................                                            Chartered Accountant(s)

3. The Board is advised that if a chartered accountant gives a certificate in the above form in a non-company case and any deliberate inaccuracy if found in it, he can possibly be held guilty of misconduct  under one or more clauses (o), (p), (r), (s) and (u) of section 22 of the Chartered Accountants Act, 1949, and the schedule thereto, provided that the other circumstances specified therein are satisfied. Where it is prima facie established in a case that a certificate given was found to be incorrect or inaccurate in material respects, then full facts of the case should be brought to notice of the Board so that the matter can be taken up with the Institute of Chartered Accountants.

Circular : No. 18(XL-37), dated 28-4-1955.

CLARIFICATION 2

1. A case has been reported to the Board where an auditor gave a certificate in the case of an assessee who is not a company on examination of incomplete accounts but did not probe into them as to ascertain their genuineness.

2. On the basis of the report of the Disciplinary Committee of the Council of the Institute of Chartered Accountants of India that the auditor was guilty of negligence, the case came up before the High Court. The High Court, however, approached the question from the standpoint that there can be no negligence in law unless there is a duty cast upon the person to do a particular action and he fails to do it. The Court observed that only in the case of audit of companies is there a statutory duty cast on an auditor to probe into the transactions if the facts are such as should rouse his suspicion. As the particular case related to a non-company assessee, the auditor was held not guilty. In the light of this decision, the Board feel that it is necessary to amplify the instructions contained in paragraph 3 of their Circular No. 3 of 1942, dated 16-1-1942.

3. It has, accordingly, been decided that  an auditor’s report or certificate in the case of an assessee, other than a company, should not be given more credence than the certificate of the assessee’s own accountant. Therefore, wherever necessary but not otherwise, the Income-tax Officer should not hesitate to go behind the “audited” profit and loss account and balance sheet in order to probe into the accuracy thereof. Of course, where the accounts appear prima facie correct and reliable he should not, merely as a matter of routine, hold the auditor’s certificate as open to suspicion and the accounts unreliable. The stress is only that the auditor’s certificate should not be taken to be so sacrosanct as to make accounts of the assessee more reliable than what they are intrinsically.

Circular : No. 47(XXIV-I), dated 18-2-1952.

878. Court fee or stamp duty payable on power of attorney or vakalatnama filed before Income-tax Officer/on applications or petitions filed before Commissioner and other income-tax authorities

CLARIFICATION 1

1. The Institute of Chartered Accountants of India have represented to the Board requesting for reconsideration of its earlier instructions that a power-of-attorney in favour of chartered accountants was required to be stamped in the manner prescribed in the Stamp Act.

2. The issue raised by the Institute of Chartered Accountants of India was considered earlier in the Board’s Circular No. 9 (XL-48) of 1958, dated 18-5-1958 and No. 3-P(LX-69) of 1968, dated 20-2-1968 [printed here as Clarifications 3 and 2]. In the Circular of 1958 the Board directed, after a very careful consideration of the question whether accountants and income-tax practitioners should file vakalatnama or power-of-attorney and, if the latter, what were the scales of court fees or stamp duty leviable thereon:

“A document purporting to authorise a person who is not a pleader or mukhtar duly appointed under section 7 of the Legal Practitioners Act, 1879, is not a vakalatnama or a mukhtarnama and requires to be stamped as a power-of-attorney under the Stamp Act. Therefore, the power-of-attorney in favour of registered accountant or an income-tax practitioner or any other person who is not a duly appointed mukhtar under section 7 of the Legal Practitioners  Act is a power-of-attorney (and not a vakalatnama or mukhtarnama) and requires to be stamped not under the Court Fees Act, but under the provisions of the Stamp Act as in force in the particular area, i.e., subject to the local amendments.”

These instructions were reviewed in the light of the judgment of the Bombay High Court (Nagpur Bench) in the case of L.M. Mahurkar v.STO [1967] 66 ITR 561, wherein it was held that the sales tax authority was a revenue Court and the letter of authorisation presented before it should be governed by the Court Fees Act and not by the Indian Stamp Act. The Board were advised that no reconsideration of the earlier instructions was necessary and that the instructions contained in Circular of 1958 may continue to be followed till there was a contrary decision from the Courts. In the Circular of 1963, therefore, the earlier instructions were reiterated.

3. In the light of the representation made by the Institute of Chartered Accountants of India the matter has again been considered carefully. The Board are advised that the existing instructions may continue to be followed in all charges except the Punjab charges. Insofar as the Punjab charges are concerned the letter of authorisation presented by the income-tax practitioners and chartered accountants before the income-tax authority may be governed by the Court Fees Act in view of the decision of the erstwhile Punjab Chief Court in Ganpat v. Prem Singh [1912] 15 IC 122 wherein it was held that the power-of-attorney empowering any person to represent another in a civil court should be governed only by the provisions of the Court Fees Act and not by the Stamp Act.

Circular : No. 125 [F.No. 274/1/73-ITJ], dated 26-11-1973.

CLARIFICATION 2

1. In the case of L.M. Mahurkar v. STO [1967] 66 ITR 561, the Nagpur Bench of the Bombay High Court have held that as sales tax authority is a revenue court, the letters of authorisation presented before it should be governed by the Court Fees Act and not by the Indian Stamp Act. A question has been raised whether following this decision, letters of authorisation to be presented by income-tax practitioners and chartered accountants before an income-tax authority should be governed by the Court Fees Act or by the Indian Stamp Act.

2. The Board are advised that the instructions contained in Circular No. 9(XL-48), dated 18-5-1958 [printed here as Clarification 3] may continue to be followed until there is a contrary decision from the Supreme Court.

Circular : No. 3-P(XL-69), dated 20-2-1968.

CLARIFICATION 3

After the issue of the Board’s Circular No. 50 (XL-43) of 1956, dated 28-12-1956 [printed here as Clarification 5], the question has been raised whether accountants and income-tax practitioners should file vakalatnamas or powers-of-attorney and if the latter, what the scales of court fees or stamp duties were leviable thereon.

The Board have been advised that a document purporting to authorise a person who is not a pleader or mukhtar duly appointed under section 7 of the Legal Practitioners Act, 1879, is not a vakalatnama or a mukhtarnama and requires to be stamped as a power-of-attorney under the Stamp Act. Therefore, the power-of-attorney in favour of a registered accountant or an income-tax practitioner or any other person who is not a duly appointed mukhtar under section 7 of the Legal Practitioners Act is a power-of-attorney (and not a vakalatnama or mukhtarnama) and requires to be stamped not under the Court Fees Act, but under the provisions of the Stamp Act as in force in the particular area, i.e., subject to the local amendments.

Circular : No. 9 (XL-48), dated 18-5-1958.

Clarification 4

A question has been raised as to which of the applications or petitions presented before the Commissioner of Income-tax and the Central Board of Revenue are liable to Court fees as per item No. 3 of the Schedule annexed to the Board’s Circular No. 50(XL-43), dated 28-12-1956 [printed here as Clarification 5].

The Board have been advised that all applications or petitions or representations which invoke any jurisdiction, authority, power, discretion, etc., whether real or supposed, vested in the Commissioner of Income-tax or the Central Board of Revenue under the Income-tax Act or any other Act, shall be liable to court fee under article 1(c) of Schedule II to the Court Fees Act, 1870. Applications or representations which are in the form of complaints such as excessive delay in disposal of any matter, ill-treatment, etc., which are not strictly referable to any provisions in the Income-tax Act or any other Act, would not be liable to court fee. There would, of course, be borderline cases when allegation regarding misconduct, etc., form the grounds of an application or a petition for exercising any jurisdiction, etc., vested in the authority concerned under the Income-tax Act. Such cases would be liable to court fee under article 1(c) of Schedule II to the Court Fees Act, 1870.

In order to illustrate the above classification, the following illustrations are given :

A. Liable to court fee :

(a)  applications for stay of recovery or for grant of instalments for payment of tax ;

(b)  applications for compromise assessments or for issue of directions to Income-tax Officers when assessments are pending ;

  (c)  applications for transfer of cases from one Income-tax Officer to another ;

(d)  applications for hearing or for adjournment in connection with sections 33A and 33B proceedings ;

  (e)  applications under section 23A and subsequent applications for adjournments, etc. ;

  (f)  applications for recognition of provident funds ;

(g)  applications for rectification of mistakes, under section 35 of the Income-tax Act, in the orders of the Commissioner or Income-tax ; and

(h)  applications for remission of post-certificate interest (or cost) demanded by the Certificate Officer.

B. Not liable to court fee :

(a)  petitions requesting for directions to the Income-tax Officer about undue delay in the issue of refunds ; and

(b)  complaints and representations against harassment caused by the Officers of the Income-tax Department.

The above illustrations are by no means exhaustive. The Commissioners, however, need not be unduly meticulous in this matter and in doubtful cases the discretion should always be exercised in favour of the assessees.

So far as petitions under section 33A are concerned, the exemption from court fees, as mentioned on page 542 of the Income-tax Manual, Part III (10th edition), will continue.

Circular : No. 36 (XL-52), dated 19-11-1958.

CLARIFICATION 5

A question has been raised as to what are the current amounts of court fees payable on applications and other documents presented before the various income-tax authorities. The Board have been advised that court fees on documents presented before the income-tax authorities are chargeable according to the scales laid down in the Court Fees Act, 1870 and the amendments made in different States are not to be taken into consideration. The amounts of court fees payable at present on various documents filed before the various income-tax authorities in all the charges of the Commissioners of Income-tax are shown in the Schedule annexed hereto.

SCHEDULE

SHOWING THE AMOUNTS OF COURT FEES PAYABLE ON VARIOUS DOCUMENTS PRESENTED BEFORE THE INCOME-TAX AUTHORITIES

Sl. No.

Nature of the Document

Income-tax authority

Provision of Court Fees Act, 1870

Amount of court fees payable

 

 

 

 

Rs.

1

2

3

4

5

1.

Vakalatnama

Income- tax Officer, Inspecting Assistant Commissioner, Appellate Assistant Commissioner, Commissioner of Income-tax, Central Board of Revenue

Art. 10(a) of Sch. II

8

1

 

 

2

2.

Application obtaining copy of any order passed by IT authorities or any other document on the record of the IT authorities

 

Art. 10(b) of Sch. II Art. 10(c) of Sch. II Art. 1(a) of Sch. II

1

3.

Application other than an application for copy of any order (passed by IT authorities) or of any other document on the record of the IT authorities when presented to the CIT or CBR

Commissioner of Income-tax, Central Board of Revenue

Art. 1(c) of Sch. II

1

4.

Certified copy of any order of the IT authorities (not for private use nor intended for filing before the ITAT)

 

Art. 6 of Sch. I

8

5.

Certified copy of any other document on the record of the IT Department (not for private use)

 

Art. 9 of Sch. I

8 for every 360 words or fraction thereof

6.

Memorandum of Appeal

Appellate Assistant Commissioner of Income-tax, Central Board of Revenue -

Art. 11(a) of Sch. II

8
2

Circular : No. 50(XL-43) of 1956, dated 28-12-1956.

879. Applications for transfer of files from one Income-tax Officer to another or one Commissioner to another - Whether require court fee stamp

Applications for transfer of files from one Income-tax Officer to another or one Commissioner to another can be divided into two categories. The first category would be that where due to change of address or such other valid reasons the existing Income-tax Officer has ceased to hold jurisdiction. Application for transfer in such cases would not require the court fee stamp. The application in such a case is more of an intimation to the authority to send the record to the officer who will hold the jurisdiction due to change in address or such other valid reasons. The other category would be where transfer of records is sought on grounds of personal convenience. There may be cases where the assessees could like their assessment records to be transferred from the jurisdiction of one officer to some other officer. In such cases court fee stamps would be necessary and should be insisted upon as such a request would invoke discretion/authority vested in the Commissioner or the Board.

Letter : F.No. 91/41/67-ITJ(25), dated 3-7-1967.

880. Fees for inspection of assessment and other records for obtaining copies of documents

1. The Board understand that the rates of fees charged for inspection of assessment and other records by assessees, or by their authorised representatives for obtaining copies of documents therefrom, are not uniform in all Commissioner’s charges. With a view to having a uniform scale of fees for these purposes in all charges, the Board have decided that such fees shall be charged at the following rates :

1. FOR INSPECTION OF RECORDS

   a.  for the first hour or part thereof                                         12 annas

   b.  for every additional hour or part thereof                              8 annas

2. FOR CERTIFIED COPIES

   a.  for the first 200 words or less                                           12 annas

   b.  for every additional 100 words or fraction thereof                6 annas

2. Where under the rules or instructions for the time being in force an assessee is initially entitled to a free copy thereof, no charge may be made for the first copy; but subsequent copies should be charged for.

3. Normally, applications for inspection or copies must be complied with within three days of their receipt. Where, however, an inspection or a copy is urgently required, i.e., on the very day on which an application for the same is received by the Income-tax Officer, the above rates of fees shall be increased by 100 per cent thereof.

4. Fees for copies and for inspection of records shall be recovered in advance and the amount, so recovered, shall be credited to the head “IV—Taxes on income other than Corporation Tax (3)—Miscellaneous—Other Items”. Except in very exceptional circumstances, such fees should not be recovered in cash and assessees or their representatives should be required to pay them in the treasury.

Circular : No. 17(XL-36), dated 28-6-1965.

881. Role of Public Relation Officers in providing assistance to assessees for getting their assessments completed

1. Public Relation Officers have a definite and important role to play in the matter of giving guidance to assessees and also in improving the relations between the Department and the public in general.

2. It is a common grievance of the taxpayer that the income-tax law and procedure is getting more and more complicated with the result that it is difficult for a layman to understand the implications of the various laws, the reliefs and rebates allowed therein, the additional liabilities imposed, etc. An important function of the Public Relation Officers would be to draw the attention of assessees to the rebates and reliefs provided by the Act. The Public Relation Officers should, for this purpose, move outside the office and render assistance to the taxpayers at the latter’s place of work. Instead of adopting a purely official attitude of functioning within the four walls of the Income-tax Office, the Public Relation Officer should assist all categories of assessees who stand in need of this advice. The Public Relation Officer should visit disabled persons, invalids, widows and pardanashin ladies, at their residence if they require his assistance.

3. The Public Relation Officer may also visit big Government and commercial establishments and explain the reliefs due under the Income-tax Act and the procedure for filling in the returns, and for applying for reliefs, etc. He should fix specific days in a month for visiting the establishments concerned in consultation with the establishments. When he visits an establishment, he may help the persons to fill in the returns then and there without taking any legal responsibility for accuracy.

4. Another way to render assistance to small assessees in the local areas in a big city could be for the Public Relation Officer to camp in a central public place in the various localities on fixed days published in advance. Small assessees of a particular locality can meet the Public Relation Officer at such public place for such assistance as they desire. The Public Relation Officer can render such assistance on the spot as may be possible and take note of such other grievance as need to be pursued with the Income-tax Officers.

5. Since utmost importance is attached to effective improvement in relations with the public at large, Commissioners are requested to ensure that the functions of Public Relation Officer working under them are discharged in an efficient manner. To achieve this, the work should be assigned to energetic, zealous and senior officers.

6. In some charges whole-time Public Relation Officers are functioning and in some an officer at the headquarters of the Commissioner of Income-tax attends to this work part-time. However, in some charges no Public Relation Officers are functioning at all. Having regard to the importance of the work the Board have decided that in charges where no Public Relation Officers are functioning, the Commissioner of Income-tax should designate an officer to attend to this work in addition to his duties.

7. In order to ensure the successful carrying out of the functions assigned to the Public Relation Officer, adequate publicity should be given to the existence of the Public Relation Officer and his availability to the public. His functions as Public Relation Officer should be subordinated to his other functions, if any. Where an officer functions as a Public Relation Officer only for a part of the day, specific hours should be fixed when he would perform the functions of the Public Relation Officer exclusively so that the public may know that he is available at a particular time. Adequate and trained staff should be put at his disposal. A proper record should be kept of the work performed by him.

8. The Public Relation Officer should be asked to analyses the nature of complaints received by him and send them quarterly to the Commissioner of Income-tax who would then take appropriate action.

9. It is claimed that the Public Relation Officer does not exercise any kind of authority over Inspecting Assistant Commissioners or Income-tax Officers and it is, therefore, for the Commissioner of Income-tax to take action on the matters reported to him by the Public Relation Officer, as deemed necessary.

The public relations of the Department will improve only if every officer of the Department functions as a Public Relation Officer, in his particular sphere.

LIST SHOWING FUNCTIONS OF THE PUBLIC RELATION OFFICERS

(1) To give publicity and make education programme so that the assessees may be made aware of their rights and obligations under the statute. For this purpose, the Public Relation Officer should have with him an adequate supply of departmental literature both priced and free.

(2) Offering of services to the tax paying public in such matters  as :

(a)  supplying of forms and returns ;

(b)  explaining assessments and refund procedures ;

  (c)  rendering help in filing returns ;

(d)  bringing the assessee in direct touch with the Income-tax Officer or Inspecting Assistant Commissioner concerned, when there is a complaint of delay in refund or assessment or grant of tax clearance certificate.

(3) Where the provision of law and departmental instructions are clear, offering advice on technical matters like :

(a)  filing of option under section 113(3) in the cases of non-residents ;

(b)  provisions regarding deduction of tax on payment to non-residents ;

  (c)  procedure for registration of partnership firms ; and

(d)  concessions and reliefs from taxes under different provisions of the Income-tax Act, etc.

However, if any advice or clarification is sought on matters which require an interpretation of the Act, the Public Relation Officer should bring such representation to the notice of the Commissioner of Income-tax concerned for his disposal.

(4) Ensuring that the basic amenities are made available to the assessees in the Income-tax Office like fresh-drinking water, a clean waiting room, fans and newspapers, etc.

Letter : F. No. 81/27/65-IT(B), dated 18-5-1965.

882. Administrative instructions for guidance of Income-tax Officers on matters pertaining to assessment

CLARIFICATION 1

1. The Board have issued instructions from time to time in regard to the attitude which the Officers of the Department should adopt in dealing with assessees in matters affecting their interests and convenience. It appears that these instructions are not being uniformly followed.

2. Complaints are still being received that while Income-tax Officers are prompt in making assessments likely to result into demands and in effecting their recovery, they are lethargic and indifferent in granting refunds and giving reliefs due to assessees under the Act. Dilatoriness or indifference in dealing with refund claims (either under section 48 or due to appellate, revisional, etc., orders) must be completely avoided so that the public may feel that the Government are actually prompt and careful in the matter of collecting taxes and granting refunds and giving reliefs.

(3) Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the department for it would inspire confidence in him that he may be sure of getting a square deal from the department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessee on whom it is imposed by law, officers should—

(a)  draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other ;

(b)  freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs.

4. Public Relation Officers have been appointed at important centres, but by the very nature of their duties, their field of activity is bound to be limited.

The following examples (which are by no means exhaustive) indicate the attitude which officers should adopt :

(1) Section 17(1) of the 1922 Act [section 113 of the 1961 Act] - While dealing with the assessment of a non-resident assessee the officer should bring to his notice that he may exercise the option to pay tax on his Indian income with reference to his total world income if it is to his advantage.

(2) Section 18(3), (3A), (3B) and (3D) of the 1922 Act [sections 193, 197(1), 195(1), 195(2) and 194 of the 1961 Act] - The officer should in every appropriate case bring to the assessee’s notice the possibility of obtaining a certificate authorising deduction of income-tax at a rate less than the maximum or deduction of super tax at a rate lower than the flat rate, as the case may be.

(3) Section 25(3) and 25(4) of the 1922 Act - The mandatory relief about exemption from tax must be granted whether claimed or not ; the other relief about substitution, if not time barred, must be brought to the notice of a taxpayer.

(4) Section 26A of the 1922 Act [sections 184 to 186 of the 1961 Act] - The benefit to be obtained by registration should be explained in appropriate cases. Where an application for registration presented by a firm is found defective, the officer should point out the defect to it and give it an opportunity to present a proper application.

(5) Section 33A of the 1922 Act [section 264 of the 1961 Act] - Cases in which the Income-tax Officer or the Assistant Commissioner thinks that an assessment should be revised, must be brought to the notice of the Commissioner of Income-tax.

(6) Section 35 of the 1922 Act [sections 154 and 155 of the 1961 Act] - Mistakes should be rectified as soon as they are discovered without waiting for an assessee to point them out.

(7) Section 60(2) of the 1922 Act [sections 89(1) and 103 of the 1961 Act] - Cases where relief can properly be given under this sub-section should be reported to the Board.

5. While officers should, when requested, freely advice assessees the way in which entries should be made in various forms, they should not themselves make any in them on their behalf. Where such advice is given, it should be clearly explained to them that they are responsible for the entries made in any form and that they cannot be allowed to plead that they were made under official instructions. This equally applies to the Public Relation Officers.

6. The intention of this circular is not that tax due should not be charged or that any favour should be shown to any

Circular : No. 14(XL-35), dated 11-4-1955.

JUDICIAL ANALYSIS

Explained in : The above circular was referred to in Parekh Bros. v. CIT [1984] 150 ITR 105 (Ker.), with the following observations :

‘We are referring to this circular only to highlight the spirit behind this circular. In our opinion, the circular envisages that “Officers of the Department”—which will certainly take in the Head of the Department—the Commissioner of Income-tax (1st respondent herein) should bear in mind the spirit of the said circular in affording relief to the assessee, as indicated therein. At least when the matter is brought to their notice, without raising technical objections, the matter should receive attention. The circulars have got the force of law. The circulars, at any rate, are binding on the Department. The assessee is entitled to the benefit of such circulars. It is unnecessary to refer to the scope and enforceability of such circulars in view of the fact that we are not resting our decision on the above circular. But we are referring to that circular only to highlight the spirit behind the circular in the approach to be made by the departmental officials, when a claim for deduction or relief is claimed. The binding nature of the circulars has been considered in the decisions reported in CIT v. B.M. Edward, India Sea Food [1979] 119 ITR 334 (FB) (Ker.), CIT v. Venkiteswaran [1979] 120 ITR 675 (Ker.) and CWT v. Gammon (India) (P.) Ltd. [1981] 130 ITR 471 (Bom.).’ (p. 118)

Explained in - In Dattatraya Gopal Shette v. CIT [1984] 150 ITR 460 (Bom.), the above circular was referred to with the following observations :

“It is now well settled that even if the contents of a circular may amount to a deviation on a point of law, a circular of the Central Board of Revenue which confers some benefit on the assessee is binding on all officers concerned with the execution  of the I.T. Act ; and they must carry out their duties in the light of the circular. In the present case, therefore, it was, in the first place, the duty of the ITO to have drawn the attention of the assessee-firm to the defect in the application for renewal of registration. The ITO, however, granted registration to the firm. In such a situation it was equally the duty of the CIT to have given an opportunity to the assessee-firm to remedy the defect in their application. The CIT, in view of this circular, clearly should not have cancelled the renewal of registration of the assessee-firm without giving an opportunity to the assessee-firm to remedy the defect in the application.

The attention of any of the officers concerned as well as of the Tribunal does not appear to have been drawn to this circular. We have no doubt that had the circular been pointed out to the CIT or to the Tribunal, the directions contained in the circular would have been carried out.” (pp. 463-464)

u The above circular was quoted and relied on, in Smt. Gopi Devi v. ITO [1989] Taxation 92(4) - 101 (ITAT - Delhi), pp. 104-105.

CLARIFICATION 2

1. As a result of a joint discussion with several Indian Chambers of Commerce in Calcutta, the following instructions are issued for the guidance of Income-tax Officers.

2. Budget estimates - It has been alleged that when a budget estimate for his charge is communicated to an Income-tax Officer, he feels that he is bound to collect that amount, somehow or other within the year and it is even suggested that he feels constrained to collect it illegally if he cannot collect it legally. While the Board do not believe that there is any foundation for this latter allegation, there appears to be some foundation for the complaint that the budget figure exercises too great an influence on the Income-tax Officer’s disposals. This reacts on the progress of work in two opposite ways: (a) it makes the Income-tax Officer rush his work towards the end of the year, or (b) it makes him slacken off if he had already reached his budget figure. Except that he should give precedence to cases which are likely to yield more revenue, the Income-tax Officer should not be obsessed by the budget figure. He has certain number of assessments to complete in a year and his merits will be judged by the way in which he completes those cases and not by the extent to which he has collected his budget estimate. He should, therefore, concentrate on completing his cases carefully and in good time; if he does so, the budget can take care of itself.

3. Calling for accounts in company cases - Subject to the qualification that the Income-tax Officer is free to call for books of account, vouchers, etc., in any company case where he feels that such a course is advisable, books of account, vouchers, etc., should not be called for either in the case of public companies or in the case of private companies where the accounts have been audited by an auditor qualified to audit a public company’s accounts and he has given a certificate similar to that given in the case of a public company.

4. Enquiries regarding membership of association such as fatka markets - Complaints were made that those enquiries were made indiscriminately and were even addressed to Indian ladies. In future such enquiries should not be made unless the Income-tax Officer has some reason to believe that the person addressed is a member of the association referred to.

5. Request for affidavits - Complaint has been made that the affidavits sworn or affirmed before magistrates are unnecessarily asked for. Unless there is some material basis for suspicion, such affidavits should not be called for.

6. Methods of accounting - The function of the Income-tax Officer is to use, what he can make, of the assessee’s accounts as he finds them and not to lecture the assessee—as some Income-tax Officers are alleged to be doing—as to how he should keep his accounts. But where the method of keeping accounts is such that the Income-tax Officer cannot accept them, there is no objection to his explaining the assessee how he can put them right.

7. Refusal to renew registration of a firm, or cancellation of its registration - When a firm hitherto assessed as registered is assessed under section 23(4) as an unregistered firm, the refusal to register, being in itself of the nature of a penalty, should be taken into account in any penalty proceedings that may be initiated.

8. Reopening questions of registration of firm and of separation of Hindu undivided family - Complaints have been made that without any good reason Income-tax Officers have been worrying assessees by reopening decided questions regarding registration of firm and separation of Hindu undivided family. Insofar as such enquiries are mere fishing enquiries, they are indefensible. No decision on these matters should be reopened unless some new facts have come to the Income-tax Officer’s notice indicating that the decision was based on a wrong interpretation of the law.

Circular : No. 3 of 1942, dated 16-1-1942.

883. Assessment of existing banks and their shareholders and corresponding new banks in the context of nationalisation and payment of compensation - Guidelines therefor

1. The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (hereinafter referred to as the 1970 Act), was enacted by Parliament with a view to nationalising the undertakings of 14 commercial banks on payment of compensation aggregating to Rs. 87.40 crores. In terms of section 4 of the 1970 Act, the undertaking of every “existing bank” (i.e., the old bank) stands transferred to and vests in the “corresponding new bank” (i.e., the nationalised bank), on the commencement of the 1970 Act, namely, July 19, 1969. Under section 5(1) of the 1970 Act, the “undertaking” of each existing bank includes all assets, rights, powers, authorities and privileges and all movable and immovable property, cash balances, reserve funds, investments and all other rights and interests in, or arising out of, such property as were, immediately before July 19, 1969, in the ownership, possession, power or control of the existing bank in relation to the undertaking, whether within or without India, and is also deemed to include all borrowings, liabilities and obligations  of whatever kind then subsisting of the existing bank in relation to the undertaking.

2. The following questions arise for consideration in regard to the taxation of the income of the existing banks and their shareholders and the corresponding new banks in the context of nationalisation and payment of compensation as stated in the preceding paragraph :

(1)  What is the position regarding continuance of assessment and other proceedings in the case of the existing banks for assessment year up to and including the assessment year 1969-70 ?

(2)  How and against whom are the proceedings for the assessment year 1970-71 in respect of the income of the existing bank for the calendar year 1969 to be initiated and completed ?

(3)  What is the scope of the income liable to tax for the assessment year 1970-71 in the case of—

(a)  the existing bank,

(b)  the corresponding new bank ?

       In particular, will the income of the part of the calendar year 1969 up to July 18, 1969 (i.e., prior to the transfer of the undertaking to the new bank) be chargeable to tax as the income of—

(a)  the existing bank, or

(b)  the corresponding new bank, or

(c)  not at all ?

       What is the position regarding the taxability of the income of a foreign branch of an existing bank which falls within the scope of section 5(6) of the 1970 Act ? Will such income be chargeable to tax as the income of—

(a)  the existing bank, or

(b)  the corresponding new bank?

(4)  Does any capital gain arise on the transfer of the undertaking of the existing bank to the corresponding new bank? If so, how is such gain to be computed, and will such gain be assessable to tax as income of the existing bank for the assessment year 1970-71 ?

(5)  Will there be any income liable to tax as “balancing charge” under section 41(2) of the Income-tax Act, in relation to transfer of assets on which depreciation has been allowed to the existing bank in past years?

(6)  What are the tax liabilities of the existing bank which stand transferred to the corresponding new bank by virtue of the provisions in section 5(1) of the 1970 Act? In particular, are the tax liabilities in relation to the following incomes, if any, of the existing bank required to be met by the corresponding new bank :

  (i)  incomes assessable for the assessment years up to and including the assessment year 1969-70, to the extent these had not been discharged by the existing bank before July 19, 1969 ;

(ii)  incomes assessable for the assessment year 1970-71 :

(a)  income of the period January 1, 1969 to July 18, 1969,

(b)  other income, if any, of the year 1969,

  (c)  capital gains arising on the transfer,

(d)  income of foreign branches for the year 1969 where section 5(6) of the 1970 Act applies,

  (e)  balancing charge under section 41(2) of the Income-tax Act.

(7)  If any existing bank distributes to its shareholders the compensation received by it, either in cash or in the form of promissory notes or stock certificates, will such distribution be liable to tax as dividends and, if so, to what extent and under what circumstances ?

(8)  If any refund of tax falls due to any existing bank in respect of any year, should such refund be granted to the existing bank or to the corresponding new bank ?

(9)  If any assessment for a past year is required to be reopened for any reason, or if any penalty proceedings are to be taken in respect of past years, should the proceedings be initiated and completed against—

(a)  the existing bank, or

(b)  the corresponding new bank?

These issues are dealt with in the following paragraphs :

3. Assessment and other proceedings in the case of the existing banks for assessment years up to and including the assessment year 1969-70 - According to the scheme of the 1970 Act, there is succession to the business of the existing bank by the corresponding new bank and where any proceeding was pending on the appointed day, which has been defined in section 2(a) of the 1970 Act to mean February 14, 1970, these may, under the specific provisions of section 5(5) of the 1970 Act be continued against the corresponding new bank. Section 17 of the 1970 Act also lays down that any reference to any existing bank in any law or in any contract or other instrument is to be construed as a reference to the undertaking referred to in section 4 of the 1970 Act. It follows that all proceedings relating to assessment years up to and including the assessment year 1969-70 which were pending on February 14, 1970 in respect of the existing bank will have to be continued and completed against the corresponding new bank.

4. Assessment of the existing bank for the assessment year 1970-71 - As the assessment proceedings for the assessment year 1970-71 were not pending on February 14, 1970, section 5(5) of the 1970 Act has no application to such proceedings, and, accordingly, these have to be initiated and completed against the existing bank itself. The existing bank will be assessed to tax for the assessment year 1970-71 on the following items of income :

(a)  capital gains arising as a result of the transfer of the undertaking to the corresponding new bank;

(b)  profits of foreign branches, if any, which fall within the scope of section 5(6) of the 1970 Act, for the whole of the calendar year 1969 ; and

  (c)  other income, if any, for the whole of the calendar year 1969.

5. Capital gains - The existing banks will be liable to tax on the capital gains arising to them as a result of the transfer of their “undertakings” to the corresponding new banks in pursuance of the 1970 Act. For this purpose, the capital asset which has been transferred is the entire undertaking of the existing bank and not the individual assets comprising that undertaking. The amount of the capital gain will be ascertained by deducting from the amount of the compensation, the aggregate of the cost of acquisition of the undertaking and the cost of any improvements thereto.

6. Where the existing bank has been in existence from a date prior to January 1, 1954, it has the option, under section 55(2)(i) of the Income-tax Act, of substituting the market value of the capital asset as on January 1, 1954, for the cost of acquisition.

7. Liability to balancing charge under section 41(2) of the Income-tax Act - There will be no liability to tax on the existing bank in respect of the “balancing charge” under section 41(2) of the Income-tax Act.

8. Taxation liabilities of the existing bank which stand transferred to the corresponding new bank - The effect of the provision in section 5(1) of the 1970 act is that the liabilities and obligations of whatever kind of the existing bank subsisting on the commencement of the Act, i.e., July 19, 1969, are comprised within the meaning of “undertaking” and by virtue of section 4, all such liabilities and obligations stand transferred to, and vest in, the corresponding new bank. On the basis of this test, the position in regard to the various items of tax liabilities will be as under:

1. Tax liabilities for assessment years up to and including the assessment year 1969-70 : All these liabilities [barring those relating to the income of foreign branches referred to in section 5(6) of the 1970 Act] stand transferred to the corresponding new bank and will have to be met by it.

2. Tax liability in respect of income assessable for the assessment year 1970-71:

l Income of the period from January 1, 1969 to July 18, 1969 - As the accounts of the existing bank in respect of the “undertaking” were closed and a profit and loss account and balance sheet drawn up as at the close of business on July 18, 1969, the tax liability on the profits for the period January 1, 1969 to July 18, 1969, arose on the closure of such books on July 18, 1969. Accordingly, in terms of section 5(1), this liability will have to be discharged by the corresponding new bank.

l Capital gains on the transfer - As the gains arose only on and as a result of the transfer, the tax liability relating to such gains did not subsist at the commencement of the Act. Accordingly, such tax liability will be the liability of the existing bank.

l Income of foreign branches to which section 5(6) applies - This liability also continues to be that of the existing bank.

l Other income, if any, of the existing bank for the whole of 1969 - This continues to be the liability of the existing bank.

l Balancing charge under section 41(2) - As there can be no balancing charge, as stated in para 7 above, there can be no tax liability in relation to it.

9. Distribution to shareholders - Any distribution by the existing bank to its shareholders out of the compensation moneys received by it would ordinarily constitute dividends under the Companies Act and will be chargeable to tax as the income of the shareholders. Even a distribution of securities received as compensation will be liable to be treated as dividend under the special definition of this term in section 2(22) of the Income-tax Act, as such distribution would entail release of assets by the company to its shareholders. If the existing bank goes into liquidation, the distribution made by the liquidator will rank as dividend to the extent to which it is attributable to the accumulated profits (whether capitalised or not) of the existing bank immediately before the liquidation. Such accumulated profits will include capital gains arising in consequence of the transfer of the undertaking and receipt of compensation in pursuance of nationalisation. If the liquidation of the existing bank is “consequential” to the compulsory acquisition of its undertaking, then, any profits which arose prior to a period of three accounting years of the existing bank immediately preceding the accounting year in which the compulsory acquisition took place will be excluded from the pool of accumulated profit for the purpose of this provision.

10. If the existing bank effects a reduction of its capital, then also the distribution made to the shareholders will be treated as dividends to the extent to which the existing bank possesses accumulated profits which arose after the end of the previous year relevant to the assessment year 1953-54.

11. Refunds falling due to the existing bank - Under the definition of “undertaking” in section 5(1) of the 1970 Act, this term includes, inter alia, all rights in the ownership, possession, power or control of the existing bank in relation to the undertaking. Accordingly, if the existing bank becomes entitled to a refund in relation to the undertaking for the period up to July 18, 1969, such refund becomes the property of the corresponding new bank. However, any refund arising to the existing bank in relation to its income from a source which is outside the scope of the term “undertaking”, such refund will continue to be granted to the existing bank. This applies also to any refund arising in relation to the income of a foreign branch of the existing bank which falls within the purview of section 5(6) of the Act.

12. Reopening of assessments for past years - In view of the wide scope of section 5(5) of the Act, any proceedings to be commenced in regard to the existing bank for a past period, by way of reopening of assessments, will have to be taken against the corresponding new bank. This is because the liability to tax on the income of past years has already accrued and proceedings are designed only to quantify these liabilities.

Circular : No. 63 [F.No. 207/6/70-IT(A-II)], dated 16-8-1971.

884. Framing of double assessments must be avoided

1. In one of the reports of the Public Accounts Committee the P.A.C. has given an instance of harassment and callousness, where an Income-tax Officer, in spite of being assured by an assessee that she had filed her return and paid the tax six years earlier, proceeded with the assessment (for the second time), without caring to verify the assessee’s assertions for which documentary proof was available. The Committee had, therefore, observed that the Income-tax Officer in this case had become a law unto himself, instead of acting in a quasi-judicial capacity.

2. The Board have taken a very serious view of the matter and desire that such types of cases should be avoided and utmost care should be taken to ensure that such lapses do not occur in future.

3. These instructions may be brought to the notice of the field officers working in your charge.

Instruction : No. 1540, dated 30-11-1993. [Source : 193rd Report of Public Accounts Committee (1983-84) (Seventh Lok Sabha), (pp. 60-61)].

885. Guidelines for selection of cases for income-tax assessment under section 143(3)

The Central Board of Direct Taxes has issued instruction for picking up cases for assessment under section 143(3) in respect of certain pending returns and those received during the current financial year. Under the new policy initiative introduced in the Finance Act, 1999, all returns will now be accepted under section 143(1). However, a very limited number of returns will be selected for assessment under section 143(3). The procedure adopted for this purpose has laid stress on transparency and accountability and is expected to enhance revenue yield.

The salient features are:

Cases are to be picked up in a joint meeting of Assessing Officer and his next superior authority on the basis of the credible information after recording the reasons in writing. The selection process is to be completed all over the country by 30-9-1999 to be followed by individuals letters to assessee, whose cases have been selected. This will be followed by press note from respective Chief Commissioners/Director General specifying the fact of completion of selection process and regarding intimation to the concerned assessees. Certain exceptional cases can be picked up only at the level of Chief Commissioner of Income-tax for reasons to be recorded in writing even after 30th September, 1999. However, all assessments relating to search and seizure, survey under section 133A, reassessment under section 147 and set aside assessment will continue to be made under section 143(3).

The end result/findings of the assessment under section 143(3) will have to justify the selection of a particular case against specified norms.

PIB Press Release : Dated 8-6-1999.

 

885A. Cases of certain assessees owning power-looms not to be selected for scrutiny assessment

1. The Central Board of Excise and Customs, Department of Revenue, has amended the CENVAT Credit Rules, 2002 vide notifications No. 25/2003-Central Excise (N.T.) dated 25th March, 2003 and No. 35/2003-Central Excise (N.T.) dated 10th April, 2003. The new rule 9A of CENVAT Credit Rules, inter alia, provides that a manufacturer, producer, first stage dealer or second stage dealer of yarn and unprocessed fabrics or a manufacturer of processed fabrics, who is unable to produce the document evidencing actual payment of duty, shall be granted to avail credit, calculated on the basis of rates notified by the Central Government, on inputs lying in stock or in process or contained in finished products lying in stock as on 31st day of March, 2003 upon making a written declaration of the description, quantity and value of the stock of each of such goods.

2. In this connection, the Hon’ble Finance Minister in his speech in Lok Sabha on 30th April, 2003 has also made the following announcement :

“I had also taken a number of measures to simplify the procedures for registration and filing of returns. A mechanism for getting one time credit on inputs in stock as on April 1, 2003, without the requirement of producing any duty paying documents, has already been prescribed.

Let me further announce that it is possible that a number of power-loom owners have until now not been filing any income-tax returns. They may not even have proper books of account. However, they may now wish to declare their stocks for the purposes of CENVAT. Therefore, to encourage new assessees from the power-loom sector to come into the mainstream, the Income-tax Department will encourage power-loom owner to declare their stocks. Wherever the value of stocks declare do not exceed Rs. 10,000 per power-loom, such declaration will not be subject to any scrutiny for tax purposes. Also, this will not have any retrospective application or consequences.”

3. It is hereby clarified that where an assessee, being an owner of power-looms, filed income-tax return for the first time for assessment year 2004-05, the same shall not be selected for scrutiny, provided the assessee makes a true disclosure of his stock of yarn and finished goods not exceeding Rs. 20,000 per power-loom, and furnishes along with the return of income evidence in support of ownership of power-looms in his name. And as announced by the Finance Minister, this will not have retrospective application or consequences.

Circular : No. 4/2003, dated 14-5-2003.

 

885AA. Clarifications regarding allocation of work between CIT (DRS) And SrDRs

1. I am directed to state that consequent to the cadre restructing proposal approved by the Union Cabinet, additional posts of CIT(DRs), ITAT were created all over the country. The objective is to improve the quality and level of representation before ITAT. In order to fully realise the objective underlying the creating of posts of CIT (DR), the Board has decided to lay down the parameters for allocation of work between the CIT(DRs) and the Sr. DRs.

2. The allocation of work argued by the CIT(DRs) and Sr. DRs would be as under:

(A) Cases to be argued by the CIT(DRs):

  (i)  All appeals relating to core cases of Search/Block assessment and such other cases of search, as are assigned by the CCIT.

(ii)  All appeals referred to a Special Bench or Third Member Bench of ITAT.

(iii)  All appeals filed against order passed under section 263.

(iv)  All appeals in which the aggregate of the additions made by the Assessing Officer in a case is more than Rs. 1 crore in major cities (Mumbai, Delhi, Chennai, Kolkata, Ahmedabad, Hyderabad & Bangalore) and Rs. 50 lakh in other cities.

(v)  All Scam related cases.

(vi)  Any other case which in the opinion of the CCIT deserves to be argued by the CIT(DR), keeping in view the complexity of the case.

(B) Cases to be argued by Sr. DRs: All cases other than those mentioned above.

3. The CCIT may, in relaxation of the above parameters, assign cases to CIT(DRs)/Sr. DR. in exceptional circumstances.

4. The CIT(DRs) and Sr. DRs would also submit a Monthly performance report on the cases/category of cases represented by them before the Bench.

5. The performa for such report will be intimated separately.

This should be brought to the notice of all CIT(DRs) and Sr. DRs. for immediate compliance.

Source : Instruction No. 9/2003, dated 15-9-2003.

 

885B. Selection of Cases for “Scrutiny” of Corporate Assessees

1. In supersession of earlier instruction on the above subject, I am directed to state the procedure for selection of cases of Corporate Assessees for Scrutiny during the current financial year 2003-04.

Compulsory Scrutiny

2. The following categories of cases shall be compulsorily scrutinised :

   u  All Public Sector Undertakings and Banks.

   u  All Cases wherein Addition/Disallowance of Rs. 1 lakh and above has been sustained by the CIT (Appeals) in the preceding year.

   u  All Search & Seizure Cases.

   u  All Survey (u/s 133A) Cases.

   u  Cases in respect of which information is received from other Agencies pointing out tax evasion.

   u  In any other case, where the Department receives information regarding credible evidence of tax evasion.

   u  Cases where the value of International Transaction (as defined under section 92B of the Income-tax Act, 1961) exceeds Rs. 5 crore.

Random Selection

3. In addition to the above cases, cases are to be selected on a “Random Basis” from the list of companies, as contained in the CMIE CD-Rom. These cases may be segregated into two categories :

   1.  Companies whose paid-up capital exceeds Rs. 1 crore.

   2.  Companies having a paid-up capital of Rs. 1 crore and below.

These cases may be arranged alphabetically in two separate lists. In case of companies whose paid-up capital exceeds Rs. 1 crore, one out of every four cases is to be selected for scrutiny out of the list so prepared, i.e., serial. Nos. 1, 5, 9 . . . in case of companies having a paid up capital of Rs. 1 crore and below one out of every 15 cases is to be selected for scrutiny out of the list so prepared, i.e., serial Nos. 1, 16, 31...

Instruction : No. 10/2003, dated 26-9-2003

 

885C. Selection of Cases for Scrutiny for Non-Corporate Assessees

1. In supersession of earlier Instructions on the above subject. I am directed to state that the criteria and procedure for selection of cases of Non-Corporate Assessees for scrutiny during the current financial year 2003-04, shall be as under :

Compulsory Scrutiny

2. The following categories of cases shall be compulsorily scrutinised :

   1.  All cases wherein Addition/Disallowance of Rs. one lakh and above has been sustained by the CIT (Appeals) in the preceding year.

   2.  All Search & Seizure Cases.

   3.  All Survey (under section 133A) Cases.

   4.  Cases in respect of which information is received from other Agencies pointing out tax evasion.

   5.  In any other case, where the Department receives information regarding credible evidence of tax evasion.

   6.  Cases where the value of International transaction (as defined under section 92B of the IT Act, 1961) entered into by the assessee exceeds Rs. five crore.

Random Selection

3. (a) This will be applicable only to the non-corporate non-salary returns of income pertaining to assessment year 2002-03, filed up to 31-3-2003 and processed on AST software.

(b) Random selection of cases will be done by the CIT and monitored by the CCIT concerned.

(c) Taking a CIT charge as basis, all the cases of the CIT charge (not assessing officer-wise or Range-wise (should be arranged in descending order of income by running a query on AST as per procedure enclosed in the Annexure. It is clarified here that no separate lists for the cases related to each Assessing Officer or Range shall be prepared and only one consolidated list for all the cases of the CIT Charge should be prepared.

  (i)  Out of the top 1000 cases of the charge, one out of three cases from the list so prepared should be selected, i.e. serial Nos. 1, 4, 7, etc.

(ii)  Out of the next 3000 cases, one out of five cases from the list so prepared should be selected, i.e., serial Nos. 1001, 1006, 1011, etc.

(iii)  Finally, out of the remaining cases, one out of hundred cases from the list so prepared should be selected, i.e., cases at serial Nos. 4001, 4101, 4202, etc.

(d) In case, the case so selected is a company or a salary case, or a case when the time limit for issue of notice has elapsed, the same should not be selected for scrutiny and ignored, irrespective of the fact that this may lead to reduction in the number of cases finally selected for scrutiny.

(e) The final list of cases so selected shall be certified by the CCIT concerned before the same is sent to the Assessing Officer for further action.

(f) The final list of cases so selected for scrutiny shall be segregated Assessing Officer-wise by the O/o CIT concerned before the same is sent to the Assessing Officer for issue of notices and further necessary action.

(g) The above process must be completed by 31st October, 2003.

4. These instructions may be brought to the notice of all concerned.

Annexure

Commissioner, income-tax, should log on to ITD Application and follow the instructions as below :

   u  Go to AST Menu

   u  Go to Query menu - Option - Selection of cases for scrutiny income details.

   u  Enter 2002-03 - against Assessment year

   u  Click on icon - Executive Query (or Press F8)

This will display list of cases selected for scrutiny as per the criteria mentioned in the instruction.

   u  Press “Generate Report” button to print the above list.

In case of any information/clarification, the following officer may please be contacted :

Ms Vibha Bhalla, Joint Director (Systems)-III, Office of the Directorate General of Income-tax (Systems) ARA Centre, E-2, Ground floor, Jhandewalan Extension, New Delhi - 110055, Tel. No. 011-23614881.

Instruction : No. 11/2003, dated 17-10-2003

 

885D. Selection of cases for scrutiny for corporate assessees

1. In continuance of the Instruction No. 10/2003, dated 26th September, 2003, on the above subject. I am directed to state the procedure for selection of cases of corporate assessees being assessed with the Directorates of International Taxation during the current financial year 2003‑04.

Random selection

2. Cases are to be selected on random basis from the list of companies as contained in the Return Registers. These cases may be segregated into two categories :

  (i)  companies whose paid-up capital exceeds Rs. 1 crore;

(ii)  companies having a paid-up capital of Rs. 1 crore and below.

These cases may be arranged chronologically in two separate lists. In case of companies whose paid-up capital exceeds Rs. 1 crore, one out of every four cases is to be selected for scrutiny out of the list so prepared i.e., serial Nos. 1, 5, 9 . . . . In case of companies having a paid-up capital of Rs. 1 crore and below, one out of every 15 cases is to be selected for scrutiny out of the list so prepared, i.e., serial Nos. 1, 16, 31. . . .

Instruction:  No. 13/2003, dated 31-10-2003.

 

885E. Procedure for Selection of cases for “Scrutiny” for Corporate assessees

1. In supersession of earlier instructions on the above subject, the Board hereby lays down the following procedure for selection of returns/cases of Corporate Assessees for Scrutiny during the current financial year i.e., 2004-05.

2. The following categories of cases shall be compulsorily scrutinized :—

(a)  All assessments pertaining to Search & Seizure.

(b)  All assessments pertaining to Survey/conducted under section 133A.

  (c)  All returns where deduction claimed under Chapter VIA of the Income-tax Act is Rs. 25 lakhs or above in Delhi, Mumbai, Chennai, Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad; and Rs. 10 lakhs or above in other places.

(d)  All returns where refund claimed is Rs. 50 lakhs or above in Delhi, Mumbai, Chennai, Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad and Rs. 20 lakhs or above in other places.

  (e)  All cases wherein Addition/Disallowance has been sustained by the CIT (Appeals) in any of the three preceding years amounting to Rs. 10 lakhs and above in Delhi, Mumbai, Chennai, Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad; and Rs. 5 lakhs or above in other places.

  (f)  All Banks and Public Sector Undertakings.

(g)  All NSE-500 companies & BSE-A group companies as on 31-8-2004 listed on Bombay Stock Exchange.

(h)  All cases of companies liable to pay tax under section 115JB with book profit exceeding Rs. 50 lakhs.

  (i)  All cases where income exceeding Rs. 10 lakhs has been claimed as exempt.

  (j)  Cases where value of International Transaction (as defined under section 92B of the Income-tax Act) exceeds Rs. 5 crores.

(k)  All cases of non-residents where returns have been filed disclosing income less than that determined under section 195 or 197, as the case may be.

  (l)  All Non-Banking Financial Corporations (NBFCs)/Investment companies having a paid up capital of more than Rs. 10 crores.

(m)  All cases of stockbrokers (including sub-brokers) where gross brokerage disclosed is Rs. 1 crore and above and income declared is less than 10% of gross brokerage.

(n)  All cases of stockbrokers (including sub-brokers) with claim of bad debts of Rs. 10 lakhs or more.

(o)  Cases of amalgamated companies claiming set off of loss under section 72A of the IT Act.

(p)  All cases of deduction under sections 10A and/or 10B of the IT Act with export turnover exceeding Rs. 10 crores.

(q)  All cases of contractors whose gross contract receipts exceed Rs. 5 crores and net income declared is less than 5% of gross contract receipts.

3. Cases not falling in the above categories and where the Assessing Officer is of the opinion that scrutiny is required for specific reasons, viz., cases of builders/contractors following project completion method to declare their income, cases where there is prima facie evidence of dividend/bonus stripping, etc., may be selected for scrutiny offer recording the reasons in writing and with prior approval of CCIT concerned.

4. The process of selection of cases for scrutiny for returns filed up to 31-3-2004 must be completed by 15th October 2004. For returns filed during the current financial year 2004-2005, the selection of cases for scrutiny will have to be completed within 3 months of the date of filling of the return.

5. All returns filed in response to notice issued under section 148 of the IT Act will be selected for scrutiny.

6. In addition to the above, returns processed on AST will be selected through a Computer Assisted Scrutiny System (CASS). The selection criteria will be determined by the Board and the process, which will be run by the Central System, will be completed in the first week of October 2004. Separate Instructions in this regard will be issued by the Directorate of Income-tax (Systems).

Source : Instruction No. 9/2004, dated 20-9-2004

 

865F. Procedure for Selection of cases for “Scrutiny” for Non-corporate assessees

1. In supersession of earlier instructions on the above subject, the Board hereby lays down the following procedure for selection of returns/cases of Non-Corporate Assessees for Scrutiny during the current financial year i.e., 2004-05.

2. The following categories of cases/return shall be compulsorily scrutinized :—

(a)  All assessments pertaining to Search & Seizure.

(b)  All assessments pertaining to Survey conducted under section 133A.

  (c)  All returns where deduction claimed under Chapter VIA of the Income-tax Act is Rs. 10 lakhs and above in Delhi, Mumbai, Chennai, Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad; and Rs. 5 lakhs and above in other places.

(d)  All returns where refund claimed is Rs. 10 lakhs or above in Delhi, Mumbai, Chennai, Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad and Rs. 5 lakhs and above in other places.

  (e)  All Cases wherein Addition/Disallowance has been sustained by the CIT (Appeals) in any of the three preceding years amounting to Rs. 5 lakhs and above in Delhi, Mumbai, Chennai, Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad; and Rs. 1 lakh or above in other places.

  (f)  All returns filed by local authorities assessable to income-tax.

(g)  All cases of banks and Non-banking Financial institutions with deposits of Rs. 5 crores and above.

(h)  All cases where the proviso to section 143(3) is applicable.

  (i)  All cases where exemption is claimed under section 11 of IT Act and the gross receipts exceed Rs. 5 crores.

  (j)  All cases where income exceeding Rs. 2 lakhs has been claimed as exempt.

(k)  Cases where value of International Transaction (as defined under section 92B of the Income-tax Act) exceeds Rs. 5 crores.

  (l)  All cases of non-residents where returns have been filed disclosing income less than that determined under section 195 or 197, as the case may be.

(m)  All cases of stockbrokers (including sub-brokers) where gross brokerage disclosed are Rs. 50 lakhs and above and income declared is less than 10% of gross brokerage.

(n)  All cases of stockbrokers (including sub-brokers) where there are claims of bad debts of Rs. 5 lakhs or more.

(o)  All cases of professionals with gross receipts of Rs. 50 lakhs or more and income declared is less than 20% of gross professional receipts.

(p)  All cases of deduction under section 10A and/or 10B of the IT Act with export turnover exceeding Rs. 5 crores.

(q)  All cases of contractors whose gross contract receipts exceed Rs. 2 crores and net income declared is less than 5% of gross contract receipts.

3. Cases not falling in the above categories and where the Assessing Officer is of the opinion that scrutiny is required for specific reasons, viz., cases of builders/contractors following project completion method to declare their income, cases where there is prima facie evidence of dividend/bonus stripping, etc. may be selected for scrutiny after recording the reasons in writing and with prior approval of CCIT concerned.

4. The process of selection of cases for scrutiny for returns filed up to 31-3-2004 must be completed by 15th October, 2004. For returns filed during the current financial year 2004-2005, the selection of cases for scrutiny will have to be completed within 3 months of the date of filing of the return.

5. All returns filed in response to notice issued under section 148 of the IT Act will be selected for scrutiny.

6. In addition to the above, returns processed on AST will be selected through a Computer Assisted Scrutiny System (CASS). The selection criteria will be determined by the Board and the process, which will be run by the Central System, will be completed in the first week of October 2004. Separate Instructions in this regard will be issued by the Directorate of Income-tax (Systems).

Source : Instruction No. 10/2004, dated 20-9-2004.

 

885G. Instructions regarding revision of Instruction No. 8/2001 on Restructuring of Internal Audit System

1. Consequent to the decision to restructure the system of Internal Audit in the Income-tax Department, the Board issued Instruction No. 8/2001, laying down guidelines for the new audit set-up, the criteria for determining auditable cases, timeframe for audit functions to be completed, functions of auditors and auditees and the supervision procedure.

2. Subsequently, in May 2003, parameters for selection of cases for audit were modified vide letter No. DIT (Audit)/Inst./CBDT/2003-04/1286, dated 26-5-2003.

3. On the basis of feedback received from officers of the department at various levels and on the basis of outcome of inspections carried out by the Directorate of Income-tax (Audit), the Board has now decided to make further modifications in the norms for checking of cases prescribed in Para 7 of Instruction No. 8/2001.

4. The Board has decided that cases processed under section 143(1) need not be audited. However, there should be audit for refund cases, including those processed under section 143(1), as per norms prescribed in Para 6.III.C below. Such audit should be a comprehensive audit covering all aspects of the case.

5. To grant limited flexibility to auditing officers in planning the audit programme, the audit work may be done on quarterly basis. All auditable cases pertaining to a quarter should be audited in the following quarter.

6. In order to incorporate the above changes in Instruction No. 8/2001, relevant paras, namely paras 5, 6 and 7 are being modified as under :

6. I. Amended Para 5 will read as under :—

A. Audit functions of Addl. CIT/Jt. CIT (Auditing) Range

   1.  He will create “Audit Chains” of Assessing Officers, TROs and Superintendents and keep record of such chains and send copy to his CIT.

   2.  He will conduct audit of cases with assessed income/loss of Rs. 25 lacs and above and cases involving refunds exceeding Rs. 10 lacs. The corresponding monetary limits for Mumbai, Delhi, Chennai and Kolkata will be Rs. 50 lacs and Rs. 20 lacs (respectively). Such cases will be identified by the Addl. CIT/Jt. CIT (Auditing) Range from the monthly list of auditable cases received from Addl. CIT/Jt. CIT (Auditee) Range. Such cases shall be entered in Register IAR-I.

   3.  As the auditor, the Jt. CIT can plan his work in such a manner that all auditable cases are audited by the end of the following quarter.

   4.  He will maintain audit records in prescribed registers and folders.

   5.  He will consolidate the list of audit paras raised by him and his officers separately for major and minor objections, and forward such list, along with copies of audit memos to the Addl. CIT/Jt. CIT (Audittee) Range and to the CsIT concerned.

   6.  He will inform the auditee range about the number of cases audited by him and his AOs by the 5th of the month following end of each quarter, viz., June, September, December and March.

   7.  He shall ensure that he himself and his AOs complete the internal audit work of auditee range and auditee AOs before the receipt audit.

B. Audit functions of Addl. CIT/Jt. CIT (Auditee) Range

   1.  He will obtain the list of auditable cases (category-wise) from his Assessing Officers and, after consolidation, will send the list to the Addl. CIT/Jt. CIT (Auditing Range) by the 10th of each month. He shall maintain a monthly folder of such cases.

   2.  He will record the receipt of audit objections in the prescribed registers on monthly/quarterly basis, as the case may be.

   3.  He will decide on the acceptance/non-acceptance of an audit objection with tax effect of Rs. 5,000 to Rs. 50,000 within a period of 3 months from the receipt of the audit objection. He will ensure that speedy remedial action is taken in cases with tax effect of Rs. 5,000 to Rs. 50,000.

   4.  He will inform the Addl. CIT/Jt. CIT Auditing Range, about acceptance/non-acceptance of audit objections within three months from the date of receipt of such objections.

   5.  He will ensure that the Internal Audit in respect of the work done by each Assessing Officer is completed by the auditors before the commencement of Receipt Audit.

   6.  He will ensure the timely submission of monthly (IAMS) and quarterly (QAR) statements in proforma A-13/A-14. Modified IAMS and A-14, incorporating the changes made in parameters for determining auditable cases are enclosed.

C. Auditing functions of Assessing Officer (Auditing Range)

   1.  Each Assessing Officer will keep record of list of auditable cases received every month from the Auditee Officer. A permanent folder shall be maintained containing the list which should be handed over to his successor in the event of his transfer.

   2.  He will select the cases to be audited out of the list of auditable cases received by him as per the Board’s Instruction on the subject. The case shall be entered in the auditing register (IAR-1A). He shall furnish the list of cases picked up for audit to the Auditee Officer.

   3.  He shall plan his work in such a manner that all auditable cases are audited by the end of next quarter.

   4.  He shall inform the Auditee Officer about his audit programme at least a week before commencement of audit work so that the Auditee Officer keeps the records ready.

   5.  He shall provide audit memo to the concerned Assessing Officer and forward copies of the same in duplicate to his Addl. CIT/Jt. CIT Range, for onward transmission to the Addl. CIT/Jt. CIT (Auditee) Range.

   6.  He shall keep a record of cases audited and of audit objections raised in the prescribed register (IAR-1A).

   7.  He will inform the Auditee Officer and his Addl. CIT/Jt. CIT Range about the number of cases audited and objections raised, by the 5th of the month following end of each quarter, viz., June, September, December and March.

   8.  He shall ensure the timely submission of monthly (IAMS) and quarterly audit report (QAR) in the modified format.

D. Audit functions of Assessing Officers (Auditee Range)

   1.  Each Assessing Officer shall prepare the list of auditable cases by the 7th of each month and send a copy to the Auditing Officer and Addl. CsIT/JCsIT (Auditing Range and Auditee Range) and he shall obtain the acknowledgement in token of receipt of list of auditable cases by the Auditing Officer and Addl. CsIT/Jt. CsIT of both Auditing and Auditee Range. He shall keep record of such lists along with the acknowledgements received from the auditing Addl. CIT/Jt. CIT and Assessing Officer and hand over this folder to his successor in the event of his transfer etc.

   2.  He will provide the records to the Auditing Officer and extend all co-operation to him.

   3.  The Assessing Officer shall keep a record of audit objections received in prescribed register (IAR-2A).

   4.  He will help the Addl. CIT/Jt. CIT Range to maintain the audit records pertaining to his jurisdiction.

   5.  The auditee officer will decide the acceptance/non-acceptance of audit objections with tax effect up to Rs. 5,000. Cases with tax effect of Rs. 5,000 to Rs. 50,000 will be decided with the approval of Addl. CIT/Jt. CIT Range and in objections involving tax effect exceeding Rs. 50,000, the issue of acceptance or non-acceptance will be decided by the CIT.

   6.  He will inform the Auditing Officer whether objection is accepted or not accepted.

   7.  He will initiate suitable remedial action if audit objection is found to be acceptable. The remedial action will be completed within a period of three months from the end of the quarter in which the audit objection was received.

   8.  He will ensure the audit of his Circle/Ward before the Receipt Audit.

6. II : Amended para 6 will read as under :—

List of Auditable cases

The auditable cases shall be from the following categories :—

A. Immediate Cases

  (i)  All search and seizure cases.

(ii)  All cases of foreign companies.

(iii)  All scrutiny assessments under the Income-tax Act.

(iv)  Refund cases exceeding refunds of Rs. 10 lacs each (Rs. 20 lacs for Mumbai, Delhi, Chennai, Kolkata).

(v)  TDS cases exceeding TDS of Rs. 50 lacs each.

(vi)  All scrutiny assessments under Other Direct Tax Acts.

B. Priority cases

  (i)  TDS cases with TDS of Rs. 10 lacs to Rs. 50 lacs in each case.

(ii)  Refund cases exceeding Rs. one lac and above.

(iii)  Company/non-company scrutiny assessments with Income/Loss up to Rs. 10 lacs in each case.

C. Other cases

  (i)  TDS Cases with TDS of less than Rs. 10 lacs.

(ii)  Cases with refund upto Rs. 1 lac.

(iii)  Informant Reward matters requiring Certification by Audit.

6.III: Amended para 7 will read as under:—

A. Norms for Checking of cases

Considering the workload of auditable cases that are generated every year and the manpower available for audit work, the percentage of cases to be audited is fixed, by Instruction No. 8/2001 and revised vide letter No. DIT(Audit)/Inst./CBDT/2003-04/1286, dated 26-5-2003, is further modified as under:—

Category

 

Target for Scrutiny

 

 

assessments

A

Company assessments with income/loss below Rs. 50,000 and non-company assessments with income/loss below Rs. 2 lacs.

100%

B

Company  assessments  with  income/loss  of Rs. 50,000 and above but below Rs. 10 lacs and non-company assessments with income/loss of Rs. 2 lacs and above but below Rs. 10 lacs.

100%

C

Company and non-company assessments with income/loss of Rs. 10 lacs and above

100%

D

Search and seizure assessments

100%

E

Foreign companies

100%

F

Expenditure Tax

100%

G

Wealth Tax Cases exceeding Rs. 20 lacs

100%

H

Sur-tax and Interest Tax Cases. Old pending cases and scrutiny assessment.

100%

B. Norms For TDS Cases

The percentage of TDS Returns for audit is fixed as under :—

(a)

upto Rs. 10 lacs

10%

(b)

Rs. 10 lacs to 50 lacs

50%

(c)

Rs. 50 lacs and above

100%

C. Norms for Checking of Refund Cases

The percentage for checking of refund cases is fixed as under:—

(a)

Cases with a refund upto Rs. 50,000

Salary cases - 2%

 

 

Others - 5%

(b)

Refunds exceeding Rs. 50,000 and upto Rs. 1 lacs -

20%

(c)

Refunds exceeding Rs. 1 lacs

100%

Note: 1. All cases of refunds where processing is done under section 143(1) and internal audit points out a mistake in grant of refund, including for reason that the refund has been sought incorrectly due to irregular clause under law or fact, remedial action under section 143(2) - if time is available - or 147 should invariably be taken.

2. The reporting format for IAS(IA), IAS(IB) and IAS(IC) have been revised to cater to new norms for audit of refund cases. The same is included in Annexure.

7. The guidelines on “Chain Audit” contained in Instruction No. 08/2001, therefore, stand modified to the above extent. All other directions contained in the said Instruction, will continue to hold good.

Annexure

Format of internal audit statement(IAS)-1A

Format of monthly statement of “immediate cases” to be furnished
by the Assessing Officer to the Auditing Officer and his
Addl. CIT/JCIT auditee range

Income-tax Ward/Circle .................

Statement for the month of ...............

Addl.CIT/JCIT Auditee Range ..............

Name of the Assessing Officer ................

CIT Charge ........................

Addl. CIT/JCIT Auditing Range ................

Part A

All search and seizure Cases

Sl. No.

Name of

PAN

Status

Assessment

Date of

Total Income/

 

assessee

 

 

year

Assessment/

Loss

 

 

 

 

 

Rectifications/

 

 

 

 

 

 

appeal effect,

 

 

 

 

 

 

revision

 

 

 

 

 

 

 

 

Part B

All cases of foreign companies

Sl. No.

Name of

PAN

Status

Assessment

Date of

Total Income/

 

assessee

 

 

year

Assessment/

Loss

 

 

 

 

 

Rectifications/

 

 

 

 

 

 

appeal effect,

 

 

 

 

 

 

revision

 

 

 

 

 

 

 

 

Part C

All scrutiny assessment under the it act, expenditure
tax, sur-tax, interest tax and wealth-tax

Sl. No.

Name of

PAN

Status

Assessment

Date of

Total Income/

 

assessee

 

 

year

Assessment/

Loss

 

 

 

 

 

Rectifications/

 

 

 

 

 

 

appeal effect,

 

 

 

 

 

 

revision

 

 

 

 

 

 

 

 

Pard D

Refund cases exceeding refund of Rs. 10 lacs

Sl. No.

Name of

PAN

Status

Assessment

Date of

Total Income/

 

assessee

 

 

year

Assessment/

Loss

 

 

 

 

 

Rectifications/

 

 

 

 

 

 

appeal effect,

 

 

 

 

 

 

revision

 

 

 

 

 

 

 

 

Part E

TDS cases of Rs. 50 lacs and above

Sl. No.

Name of

PAN

Status

Assessment

Date of

Total Income/

 

assessee

 

 

year

Assessment/

Loss

 

 

 

 

 

Rectifications/

 

 

 

 

 

 

appeal effect,

 

 

 

 

 

 

revision

 

 

 

 

 

 

 

 

Part F

All summary assessments with assessed income/
loss exceeding Rs. 10 lacs

Sl. No.

Name of

PAN

Status

Assessment

Date of

Total Income/

 

assessee

 

 

year

Assessment/

Loss

 

 

 

 

 

Rectifications/

 

 

 

 

 

 

appeal effect,

 

 

 

 

 

 

revision

 

 

 

 

 

 

 

 

Format of Internal Audit Statement (IAS)-1B

Format of Monthly Statement of “Priority Cases” to be furnished
by the Assessing Officer to the Auditing Officer and his
Addl. CIT/JCIT Auditee Range

Income-tax Ward/Circle..............

Statement for the month of...............

Addl.CIT/JCIT Auditee Range...........

Name of the A.O. ..................

CIT Charge........................

Addl. CIT/JCIT Auditing Range...................

Part A

TDS Cases with TDS of Rs. 10 Lacs to Rs. 50 Lacs

Sl. No.

Name of

TAN

Status

Assessment

Date of

Total Income/

 

assessee

 

 

year

Assessment/

Loss

 

 

 

 

 

Rectifications/

 

 

 

 

 

 

appeal effect,

 

 

 

 

 

 

revision

 

 

 

 

 

 

 

 

Part B

Refund Cases exceeding Rs. 1 Lacs

Sl. No.

Name of

PAN

Status

Assessment

Date of

Total Income/

 

assessee

 

 

year

Assessment/

Loss

 

 

 

 

 

Rectifications/

 

 

 

 

 

 

appeal effect,

 

 

 

 

 

 

revision

 

 

 

 

 

 

 

 

Format of Internal Audit Statement (IAS)-1C

Format of Monthly Statement of “Residual Cases” to be furnished
by the Assessing Officer to the Auditing Officer and his
Addl. CIT/JCIT Auditee Range

Income-Tax Ward/Circle...........

Statement for the month of.............

Addl. CIT/JCIT Auditee Range...........

Name of the A.O. ............

CIT Charge..........

Addl. CIT/JCIT Auditing Range...........

Part A

Non-Scrutiny Company and Non-Company Assessment
with Income/Loss below Rs. 10 Lacs

Sl. No.

Name of

PAN

Status

Assessment

Date of

Total Income/

 

assessee

 

 

year

Assessment/

Loss

 

 

 

 

 

Rectifications/

 

 

 

 

 

 

appeal effect,

 

 

 

 

 

 

revision

 

 

 

 

 

 

 

 

Part B

Refund Cases upto Rs. 1 Lacs

Sl. No.

Name of

PAN

Status

Assessment

Date of

Total Income/

 

assessee

 

 

year

Assessment/

Loss

 

 

 

 

 

Rectifications/

 

 

 

 

 

 

appeal effect,

 

 

 

 

 

 

revision

 

 

 

 

 

 

 

 

Part C

TDS cases upto Rs. 10 lacs

Sl. No.

Name of

TAN

Status

Assessment

Date of

Total Income/

 

assessee

 

 

year

Assessment/

Loss

 

 

 

 

 

Rectifications/

 

 

 

 

 

 

appeal effect,

 

 

 

 

 

 

revision

 

 

 

 

 

 

 

 

Internal Audit Monthly Statement (IAMS) (A-13)

  (i)  To be sent by AO to JCIT Range by 5th of following month

(ii)  To be sent by JCIT Range to CIT by 10th of the following month

(iii)  To be sent by CIT to CCIT by 15th of the following month

Auditing Officer .............

Month ...........

Auditee Officer ..............

Charge ..........

Part A

Auditing Functions

A. Auditable

Target for

Pendency

Prog.

Total

Prog.

Balance

No. of objection raised +

Cases and their

Audit

as on 1st

Additions

 

Disp.

at the

Tax effect

Disposal

 

April

upto

 

upto

month

 

 

 

 

 

 

 

month

 

month

end

 

 

 

 

 

 

 

end

 

end

 

Major obj.

Minor obj.

 

 

 

 

 

 

 

No.

Amt.

No.

Amt.

 

 

 

 

 

 

 

 

(000)

 

(000)

(a) above 25 lacs (50 lacs for Metro charges)

Scrutiny cases - 100%

 

 

 

 

 

 

 

 

 

(b) Company cases below 50,000 and Non-company cases below 2 lacs

Scrutiny cases - 100%

 

 

 

 

 

 

 

 

 

(b) Company cases from 50,000 to 10 lacs

Scrutiny cases - 100%

 

 

 

 

 

 

 

 

 

(c) Non-company cases from 2 lacs to 10 lacs

Scrutiny cases - 100%

 

 

 

 

 

 

 

 

 

(d) Company and non-company cases exceeding 10 lacs other than (a) above

Scrutiny cases - 100%

 

 

 

 

 

 

 

 

 

(e) Search & Seizure cases

Scrutiny cases - 100%

 

 

 

 

 

 

 

 

 

(f) Foreign companies

Scrutiny cases - 100%

 

 

 

 

 

 

 

 

 

(g) Expenditure Tax

Scrutiny cases - 100%

 

 

 

 

 

 

 

 

 

(h) W.T. Cases above 20 lacs

Scrutiny cases - 100%

 

 

 

 

 

 

 

 

 

(i) Sur-tax

Scrutiny cases - 100%

 

 

 

 

 

 

 

 

 

(ii) Interest Tax

 

 

 

 

 

 

 

 

 

 

(Old pending and scrutiny assessments)

 

 

 

 

 

 

 

 

 

 

(j) TDS Cases

All Cases

 

 

 

 

 

 

 

 

 

(i) upto 10 lacs

10%

 

 

 

 

 

 

 

 

 

(ii) Rs. 10 lacs to 50 lacs

50%

 

 

 

 

 

 

 

 

 

(iii) Rs. 50 lacs and

100%

 

 

 

 

 

 

 

 

 

above

 

 

 

 

 

 

 

 

 

 

(k) Refund Cases

 

 

 

 

 

 

 

 

 

 

(i) upto 50,000

2% Salary cases

 

 

 

 

 

 

 

 

 

 

5% others

 

 

 

 

 

 

 

 

 

(ii) exceeding 50,000 and upto 1 lacs

20% both for salary and others

 

 

 

 

 

 

 

 

 

(iii) exceeding 1 lacs

100% both for salary and others

 

 

 

 

 

 

 

 

 

(l) Grand total

 

 

 

 

 

 

 

 

 

 

Part B

Auditee functions (Audit objections and their disposal)

 

 

Arrear progressive

Current progress

 

 

upto month end

upto month end

 

 

Work-

Settle-

Balance

Work-

Settle-

Balance

 

 

load

ment

 

load

ment

 

Internal Audit Major Obj.

No.

 

 

 

 

 

 

with RE above Rs. 50,000

Amt. (000)

 

 

 

 

 

 

Internal Audit Minor Obj.

No.

 

 

 

 

 

 

with RE between Rs. 5,000

Amt. (000)

 

 

 

 

 

 

to Rs. 50,000

 

 

 

 

 

 

 

Internal Audit Minor Obj.

No.

 

 

 

 

 

 

with RE below Rs. 5,000

Amt. (000)

 

 

 

 

 

 

Receipt Audit Major Obj.

No.

 

 

 

 

 

 

with RE above Rs. 50,000

Amt. (000)

 

 

 

 

 

 

Receipt Audit Minor Obj.

No.

 

 

 

 

 

 

RE below Rs. 50,000

Amt. (000)

 

 

 

 

 

 

Quarterly Audit Report (QAR) (A-14)

AO will send to JCIT by 7th of the following quarter

Quarter........

JCIT will send to CIT by 12th of the following quarter

Charge.......

CIT will send to CCIT by 17th of the following quarter

 

CCIT will send to DIT by 20th of the following quarter

 

Office of the Chief Commissioner of Income-tax Quarterly
Audit Report of the Audit Work

1. Audit Set up

JCIT (Range)

Assessing Officer

(i) Sanctioned Strength

..........

.........

(ii) Working Strength

..........

.........

2. Auditable cases and their disposal (Details to be provided as per proforma on the reversed side

Pendency of

Prog.

Total

Prog. Disp

Balance at

No. of obj. raised + Tax effect

auditable

additions

(1+2)

upto quarter

the quarter

 

 

 

 

cases as on

upto quar-

 

end

end

 

 

 

 

1st April

ter end

 

 

 

Major

objections

Minor

objections

 

 

 

 

 

No.

Amt. (000)

No.

 Amt. (000)

 

 

 

 

 

 

 

 

 

3. Audit objections and their disposal

 

 

Arrear progressive

Current progress upto

 

 

upto quarter end

quarter end

 

 

Work-

Settle-

Balance

Work-

Settle-

Balance

 

 

load

ment

 

load

ment

 

Internal Audit Major Obj.

No.

 

 

 

 

 

 

with RE above Rs. 50,000

Amt. (000)

 

 

 

 

 

 

Internal Audit Minor Obj.

No.

 

 

 

 

 

 

with RE between

Amt. (000)

 

 

 

 

 

 

Rs. 5,000 to Rs. 50,000

 

 

 

 

 

 

 

Internal Audit Minor Obj.

No.

 

 

 

 

 

 

with RE below Rs. 5,000

Amt. (000)

 

 

 

 

 

 

Receipt Audit Major Obj.

No.

 

 

 

 

 

 

with RE above Rs. 50,000

Amt. (000)

 

 

 

 

 

 

Receipt Audit Minor Obj.

No.

 

 

 

 

 

 

RE below Rs. 50,000

Amt. (000)

 

 

 

 

 

 

4. No. of meetings with AG OBJS settled upto quarter end (total)

Opening Balance

No. of

Major objection

Minor objection

Pending with AG at

with AG

meetings

settled

settled

the quarter end

 

 

 

 

 

5. Analysis of pending objections

 

 

 

Arrear objections

 

 

 

Internal

Internal

Receipt

Receipt

 

 

 

Audit

Audit

Audit

Audit

 

 

 

Major

Minor

Major

Minor

(i)

Pertaining to 97-98

No.

 

 

 

 

 

and earlier years

Amt. (000)

 

 

 

 

(ii)

Pertaining to 98-99

No.

 

 

 

 

 

 

Amt. (000)

 

 

 

 

(iii)

Pertaining to 99-00

No.

 

 

 

 

 

 

Amt. (000)

 

 

 

 

(iv)

Pertaining to 00-01

No.

 

 

 

 

 

 

Amt. (000)

 

 

 

 

(v)

Pertaining to 01-02

No.

 

 

 

 

 

 

Amt. (000)

 

 

 

 

 

Total

No.

 

 

 

 

 

 

Amt. (000)

 

 

 

 

Signature of the CIT/Jt. CIT/Dy. CIT

Hq.(Admn.)/AC(Hq.)

Details of auditable cases

A. Auditable

Target for

Pendency

Prog.

Total

Prog.

Balance

No. of objection raised +

Cases and their

Audit

as on 1st

Additions

 

Disp.

at the

Tax effect

Disposal

 

April

upto

 

upto

month

 

 

 

 

month

 

month

end

 

 

 

 

end

 

end

 

Major obj.

Minor obj.

 

 

 

 

 

 

 

No.

Amt.

No.

Amt.

 

 

 

 

 

 

 

 

(000)

 

(000)

(a) above 25 lacs (50 lacs for Metro charges)

Scrutiny cases -100%

 

 

 

 

 

 

 

 

 

(b) Company cases below 50,000 and Non-company cases below 2 lacs

Scrutiny cases - 100%

 

 

 

 

 

 

 

 

 

(c) Company cases from 50,000 to 10 lacs

Scrutiny cases -100%

 

 

 

 

 

 

 

 

 

(d) Non-company cases from 2 lacs to 10 lacs

Scrutiny cases - 100%

 

 

 

 

 

 

 

 

 

(e) Company and non-company cases exceeding 10 lacs other than (a) above

Scrutiny cases - 100%

 

 

 

 

 

 

 

 

 

(f) Search & Seizure cases

Scrutiny cases - 100%

 

 

 

 

 

 

 

 

 

(g) Foreign companies

Scrutiny cases - 100%

 

 

 

 

 

 

 

 

 

(h) Expenditure Tax

Scrutiny cases - 100%

 

 

 

 

 

 

 

 

 

(i) W.T. cases above 20 lacs

Scrutiny cases - 100%

 

 

 

 

 

 

 

 

 

(j) Sur-tax

Scrutiny cases - 100%

 

 

 

 

 

 

 

 

 

(i) Interest Tax

 

 

 

 

 

 

 

 

 

 

(Old pending and

 

 

 

 

 

 

 

 

 

 

scrutiny assessments)

 

 

 

 

 

 

 

 

 

 

(k) TDS cases

All cases

 

 

 

 

 

 

 

 

 

(i) upto 10 lacs

10%

 

 

 

 

 

 

 

 

 

(ii) Rs. 10 lacs to 50 lacs

50%

 

 

 

 

 

 

 

 

 

(iii) Rs. 50 lacs and above

100%

 

 

 

 

 

 

 

 

 

(l) Refund cases

 

 

 

 

 

 

 

 

 

 

(i) upto 50,000

2% Salary cases

 

 

 

 

 

 

 

 

 

 

5% others

 

 

 

 

 

 

 

 

 

(ii) exceeding 50,000 and

20% both for salary

 

 

 

 

 

 

 

 

 

upto 1 lacs

and others

 

 

 

 

 

 

 

 

 

(iii) exceeding 1 lacs

100% both for salary

 

 

 

 

 

 

 

 

 

 

and others

 

 

 

 

 

 

 

 

 

(m) Grand total

 

 

 

 

 

 

 

 

 

 

Signature of the CIT/Jt. CIT/Dy. CIT

Hq.(Admn.)/AC(Hq.)

S. No.

CCIT Charge

No. of refunds

No. of refunds

No. of refunds

 

 

issued between

issued between

issued between

 

 

Rs. 10,000 to

Rs. 50,000 to

Rs. 1,00,000 &

 

 

Rs. 50,000

Rs. 1,00,000

above

1.

Kolkata

29,917

5,018

5,314

2.

Cochin

16,337

1,402

1,146

3.

Bangalore

47,879

4,814

4,345

4.

Kanpur

7,404

737

458

5.

Amritsar

9,674

652

417

6.

Hyderabad

29,511

3,064

2,795

7.

Delhi

57,371

7,745

8,645

8.

Jalandhar

7,857

579

448

9.

Rohtak

20,727

1,985

1,079

10.

Patiala

19,222

1,659

1,334

11.

Jaipur

15,709

1,734

1,459

12.

Ahmedabad

26,901

3,139

2,796

13.

Chennai

39,404

5,130

4,712

14.

Coimbatore

8,734

1,082

1,009

15.

Madurai

8,385

1,021

665

16.

Rajkot

11,806

1,388

1,168

17.

Shillong

18,010

1,823

1,371

18.

Surat

12,313

1,232

889

19.

Patna

12,879

1,018

548

20.

Pune

35,320

3,590

2,639

21.

Bhubneshwar

11,543

987

425

22.

Mumbai

118,424

16,523

20,858

 

 

565,327

66,322

64,520

 

Source :  Instruction No. 11/2004, dated 4-10-2004