Taxation
How Modi government has just injected more uncertainty in I-T assessments
The unwarranted amendment in Section 263, empowering the Income Tax Commissioner to disrupt settled assessments based on personal opinion will adversely affect the fragile business environment in India and lead to fresh litigations
 
Consider this – the assessment in your case gets completed where the tax officer allows the expenses claimed in the profit and loss account after verification on a sample basis instead of a 100% verification. Do you think your tax wrangles are over? Consider another case – While completing the assessment of a taxpayer, the tax officer accepts written confirmation statements given by creditors but does not consider it necessary to summon the creditors to record a statement on oath. Would you think that this would be the end of the matter? 
 
If your answer to the above was “Yes”, be prepared to be surprised. The amendments made by the Finance Act, 2015 empower the Commissioner of Income-Tax (CIT) to revise the assessments simply because he is of the opinion that the assessing officer did not make inquiries or verification, which the Commissioner himself would have made if he were the assessing officer. 
 
Prior to the amendment, section 263 of the Income Tax (I-T) Act empowered the Commissioner to cancel or modify a settled assessment if he considered that an order passed by the assessing officer was “erroneous and prejudicial to the interests of the Revenue”. There are a plethora of court rulings, which serve as a framework for the interpretation of the phrase “erroneous and prejudicial to the interests of the Revenue”. 
 
What has been certain over the years is that the Commissioner could not cancel orders based on an opinion, which differs with that of the assessing officer. In other words, the Commissioner was duty bound to conclusively prove that an order was both erroneous as per law and also prejudicial to the interest of the revenue so as to assume jurisdiction to cancel or modify an assessment. 
 
This settled position has been upended by the amendments to section 263 giving a Commissioner wide, sweeping powers to cancel or modify settled orders if, in his opinion: 
 
(a) the order is passed without making inquiries or verification which, should have been made; or 
(b) the order is passed allowing any relief without inquiring into the claim; or  
(c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or
(d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.
 
An opinion is formed by a person based on his subjective analysis of the facts and is susceptible to be tainted because of personal bias. These factors lead to situations where even expertly trained, learned and skilled persons can arrive at a diametrically opposite conclusion on the same set of facts. With this in mind, this amendment appears to be archaic and regressive as it will only serve to erode certainty with the Commissioner being permitted to annul or modify concluded assessments based on his personal opinion on the facts.  
 
In the current business environment where the Indian tax administration has been subjected to intense criticism in recent times, this amendment empowering the Commissioner to disrupt settled assessments on the basis of a personal opinion further dampens the mood. There is general consensus of opinion amongst taxpayers that this amendment is unwarranted and will adversely affect the fragile business environment prevailing in the country. In every assessment that is concluded, the specter of section 263 will now loom large serving a telling blow to taxpayer confidence. 
 
The Government’s basis for the amendment is that it has become necessary to ‘provide clarity on the issue’. This comes at the back of claims that the Government is doing all it can to create a non-adversarial tax regime in India. With amendments of such nature however, the Government itself is expressly permitting a high level of subjectivity in tax matters. This will only lead to fresh litigation, a situation, which does not reconcile with the Government’s dream of a non-adversarial tax regime. 
 
(Rakesh Nangia is Managing Partner and Rahul Jain is Partner at Nangia & Co)

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COMMENTS

CA Wali Ur Rehman

2 years ago

This is almost against the principles of ACCHE DIN for taxpayers and the commitments of Modi Govt to stop tax terrorism.

IPL 2015: In the arena of youngsters, 'golden oldies' shimmer
Mumbai Indians' 35-year-old offie Harbhajan Singh yet again showed why he is called a fighter. The feisty cricketer sizzled with the ball, and at times even with the bat, to play a crucial role in his team winning their second IPL crown
 
Cricket's shortest format is usually said to be suited for the fresh legs and young blood but a number of players in the latest edition of Indian Premier League (IPL) have yet again proved that age is just a number.
 
If 17-year-old Sarfaraz Khan fearlessly hitting bowlers is a sight to behold, veterans like Ashish Nehra, Chris Gayle and Brad Hogg have turned back the clock and literally made the adage 'old is gold' come true.
 
Spearheading the Chennai Super Kings (CSK) pace attack, Nehra stood out scalping 22 wickets at 20.40 runs apiece.
 
"I have got three Man-of-the-Match awards this season and that says it all. It is not easy for a fast bowler to pick up that many awards in one season. People are noticing it more because I am 36 and a guy at this age is doing something unbelievable in Twenty20s," the left-armer said.
 
Mumbai Indians' 35-year-old offie Harbhajan Singh yet again showed why he is called a fighter. The feisty cricketer sizzled with the ball, and at times even with the bat, to play a crucial role in his team winning their second IPL crown.
 
Bowling with his usual guile, the 'Turbanator' took 2/26 against CSK in Qualifier 1 to take Mumbai to their third final. In the summit clash at the Eden Gardens, he yet again proved to be Chennai's nemesis, scalping the prized wickets of dangerous opener Dwayne Smith and middle-order mainstay Suresh Raina.
 
With 18 wickets to his name in IPL-8 and a 19-ball fifty to boast, the selectors did fulfil the man's 'burning desire' to play for India again as he made a comeback to the national Test squad for the Bangladesh tour after more than two years.
 
Yet another 'oldie' who has drawn the spotlight is Kolkata Knight Riders' (KKR) chinaman bowler Bradd Hogg. At 44 - the oldest player in IPL history - the Australian made full use of the limited chances he was offered. Besides bamboozling the batsmen, he was also a livewire on the field.
 
Playing just his second game this season, Hogg took 4/29 to enable KKR canter towards a seven-wicket victory over CSK at home. With nine wickets to his name from six matches, the tweaker earned lavish praise, both from his teammates and rivals for his grit, determination and hard work.
 
CSK all-rounder Dwayne Bravo, who took 26 wickets to win the purple cap, is also no youngster. At 32, the Trinidadian was skipper Mahendra Singh Dhoni's go-to-man and his knack to pick up wickets at crucial junctures powered the team to their sixth IPL final, although they faltered at the last hurdle losing to Mumbai Indians by 41 runs.
 
Delhi Daredevils did finish a poor seventh in the standings, but their 36-year-old South African leg-spinner Imran Tahir earned plaudits. Picking up 15 wickets, he contributed significantly in the team's five victories in 14 games.
 
Well, it's not the bowlers alone, in the batting department too, the weather-beaten pros have left their mark.
 
Only four centuries were scored in the latest edition of the cash-rich league and the youngest of the four centurions is Royal Challengers Bangalore's (RCB) AB de Villiers, who is 31. Arguably the best batsmen in contemporary cricket, the South African skipper notched up 513 runs from 16 matches to be the RCB's batting mainstay.
 
RCB opener Gayle, at 36, yet again lived up to the billing of being the world's most destructive batsman. Besides winning the maximum sixes award with as many as 38 hits over the boundary, the Jamaican cracked his fifth century in IPL, scoring 117 against Kings XI Punjab. Plundering 491 runs this season, he has now 3,199 runs to his name to be third highest run-getter in IPL history.
 
The other centurions -- Shane Watson of Rajasthan Royals and CSK's big hitting opener Brendon McCullum, both 34, -- have defied age to contribute significantly for their respective teams.
 
After going down to Mumbai in the final, CSK skipper Dhoni attributed the absence of McCullum as one of the reasons for his side's loss.
 
The opener, who left the tournament to join his New Zealand side for the Test series in England, had scored 436 from 14 outings, giving a solid start in most matches.
 
He may not have lit the stage on fire, but CSK's 40-year-old Michael Hussey once again justified his nickname -- Mr. Cricket. Still fit as a fiddle and a safe fielder, Hussey struck a 46-ball 56 against RCB to shepherd CSK through a tricky chase and take them to their sixth final.

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Jaitley asks taxmen to squeeze parallel economy
Finance Minister Arun Jaitley on Monday asked the Income Tax department to squeeze the parallel economy, also called black economy, in a fair manner without being harsh.
 
"The parallel economy has to be squeezed and this has to be done in a very fair manner, not in a harsh manner. In doing so, as senior officers you have to maintain the highest standard of integrity," Jaitley said, addressing the annual conference of senior officials of the Central Board of Direct Taxes (CBDT).
 
"Black money has to be squeezed," he said, adding that the government has taken a series of measures to curb black money, including passage of the black money law by parliament and the introduction of the Benami Transactions (Prohibition) Bill to deal with domestic illegal wealth.
 
"No honest taxpayer has anything to fear. It's (black money law) is targeted only against those who have stashed assets abroad," the finance minister said.
 
He said only those have to worry who had defied the system in the past and intend to defy the compliance window to come clean.
 
Earlier this month, parliament approved the Undisclosed Foreign Income and Assets Bill providing for heavy penalties for stashing black money away in foreign accounts. The Rajya Sabha passed the measure two days after the Lok Sabha did so.
 
"For the first time, unlawful, undisclosed income abroad has been taxed under this law at a tax rate of 30 percent with an additional 30 percent penalty on it," Jaitley had said replying to the parliamentary debate on the bill.
 
Explaining that a time-frame will be provided as a "compliance window" for declaring and paying penalty, Jaitley said that failure to meet the compliance timeline will attract an additional penalty of 90 percent for a total tax liability of 120 percent on the quantum of black money abroad.
 
The finance minister earlier this month warned corporates not to take unfair advantage of the liberalised tax environment.
 
"I think, for every assessee, every person in the commercial business also, it is a judgement call that in a liberal economic environment of reasonable and lower taxation rates, 'go straight'," he said at the foundation day celebrations of the Enforcement Directorate.
 
"And, therefore, if you transact within the limits of law, it is much safer. If you breach it, gone are the days where offences would go undetected," he added.
 
Admitting that there was no official estimation of black money within India or stashed away abroad, Jaitley also told parliament this month that the government was examining the reports of three institutes on the matter.
 
An unofficial estimate puts the illegal money stashed away overseas somewhere between $466 billion and $1.4 trillion.

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COMMENTS

Ganesh Kamat

2 years ago

GST=1 %of sale
For Rs.10L sale pay Rs.10K GST
Advisable to take1% from 20 Taxpayer
than 20% from One
If Taxpayers=40Cr
Tax collection=40L-Cr

Gopalakrishnan T V

2 years ago

The prevention of black money generation requires only small steps with very effective monitoring, follow up and supervision involving Information Technology and social auditing by people of eminence. The corrupt practices and irregularities widely practiced all around the trade and commerce need to be systematically fixed and it does not require super intelligence. The readiness of the Government is all that requires to fix black money generation.Involve people who aspire welfare for the pople and maintain honesty, integrity and sincerity and support the NDA's ideologies in curbing black money generation. The country can think of progress only if corrupt practices aiming at maximisation of black money generation are fully stopped with improved Governance standards and checks and balances to really fix the problem introduced.

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