I-T dept cannot Re-Open the Assessment U/S.147 of the Income Tax Act Arbitrarily, SC

I-T dept cannot Re-Open the Assessment U/S.147 of the Income Tax Act Arbitrarily, SC

In a reprieve to the assessees, the Supreme Court has ruled that the Income-Tax Department cannot re-open the assessment cases arbitrarily but on the basis of some ''tangible material''. If armed with unrestricted power to re-open the cases against assessees, it will amount to review of the assessment by the assessing authority, said the apex court. As mentioned by Economic Times.
"Re-assessment has to be based on fulfilment of certain pre-condition and if the concept of ''change of opinion'' is removed, as contended on behalf of the department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of ''change of opinion'' as an in-built test to check abuse of power by the assessing officer", said a three-judge bench headed by justice SH Kapadia.

According to section 147 of the Income-Tax Act amended by virtue of the Direct Tax Laws (Amendment) Act of 1989 which came into effect from April 1, 1989, cases could be re-opened if the assessing officer has reason to believe that the income has escaped assessment.

The court, however, said: "One needs to give a schematic interpretation to the words ''reason to believe'' failing which, we are afraid, section 147 would give arbitrary powers to the assessing officer to re-open assessments on the basis of ''mere change of opinion'', which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to re-assess. The assessing officer has no power to review; he has the power to re-assess".

The court noted that after April 1, 1989, the assessing officer has power to re-open, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. However, reasons must have a live link with the formation of the belief, it said.

The court dismissed a bunch of appeals of the Income-Tax Department against the assessees. The issue before the court was whether by virtue of the Direct Tax Laws (Amendment)Act of 1989, the condition of ''change of opinion'' stood obliterated for re-opening of assessment cases.

The court pointed out that under Direct Tax Laws (Amendment) Act,1987, the words ''reason to believe'' was deleted and the word ''opinion'' was inserted in section 147 of the Act. However, on receipt of representations from the companies against omission of the words ''reason to believe'', Parliament re-introduced it and deleted the word ''opinion'' on the ground that it would vest arbitrary powers in the hands of assessing officer.

To substantiate its order, the apex court also perused a circular issued by the government on October 31, 1989 reiterating the same thing.

Prior to Direct Tax Laws (Amendment) Act, 1987, the assessing officer was empowered to make back assessment on fulfilment of two conditions. But section 147 of the Act was amended which came into effect from April 1, 1989, these two conditions were given a go-by.

The only condition remained was that where the assessing officer has reason to believe that income has escaped assessment, it confers jurisdiction to re-open the assessment. Therefore, after April 1, 1989, the revenue's power to re-open the cases was widened.

According to the unamended section 147 of the Act, on fulfilment of two conditions, the assessing officer was empowered to re-open the cases. First, if the assessing officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return under section 139 of the Act for any assessment year to the income-tax officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year.

Second, notwithstanding that there has been no omission or failure on the part of the assessee, the income- tax officer has in consequence of information in his possession has reason to believe that income chargeable to tax has escaped assessment for any assessment year.

New Income Tax Return Forms - Assessment Year 2009-10

New Income Tax Return Forms - Assessment Year 2009-10

The Central Board of Direct Taxes have, vide notification S.O. No.866 (E) dated 27th, March,
notified the following new forms for Assessment Year 2009-10 :-

(i) ITR-1 return of income for individuals having income from salary/ pension/ family
pension and not having any other income except income by way of interest
chargeable to income-tax under the head Income from other sources;

(ii) ITR-2 return of income for Individuals and Hindu Undivided Families (HUFs) not
having any income under the head Profits or gains of business or profession;

(iii) ITR-3 return of income for Individuals and HUFs being partners in firms and not
carrying out business or profession under any proprietorship;

(iv) ITR-4 return of income for individual and HUFs having proprietory business or
profession;

(v) ITR-5 combined form for return of income and fringe benefits for Firms/ Association
of Persons / Body of Individuals;

(vi) ITR-6 combined form for return of income and fringe benefits for companies (other
than companies claiming exemption under section 11;

(vii) ITR-7 combined form for return of income and fringe benefits for persons including
companies required to furnish return under section 139(4A) or section
139(4B) or section 139(4C) or section 139(4D);

(viii) ITR-8 stand alone form for return of fringe benefits for persons who are not
required to furnish return of income but are required to furnish return of
fringe benefits.

Download the New Income Tax Return Forms - Assessment Year 2009-10

PAN No. mandatory for TDS Returns

TAXPAYERS LIABLE TO TDS / TCS ARE ADVISED TO FURNISH THEIR CORRECT PAN WITH THEIR DEDUCTORS

Sept 26 : The government Tuesday said it will not accept tax returns for the quarter ending September 30 and thereafter if companies fail to provide PAN details of a majority of their employees.

As per the Press note, ll tax deductors / collectors are required to file the TDS / TCS returns in Form No.24Q (for tax deducted from salaries), Form No.26Q (for tax deducted from payments other than salaries) or Form No.27EQ (for tax collected at source).

These forms require details of all tax deductions with name and permanent account number (PAN) of parties from whom tax was deducted.

However, it has been observed that in most of the TDS / TCS returns, the PAN of the deductees is either missing or incorrect. As the requirement of filing TDS / TCS certificates has been done away with, the lack of PAN of deductees is creating difficulties in giving credit for the tax deducted and collected.

It has, therefore, been decided that TDS returns for salaries, i.e. Form No.24Q with less than 90% of PAN data, and TDS returns for payments other than salaries and TCS returns, i.e. Form No.26Q and Form No.27EQ respectively, with less than 70% of PAN data will not be accepted for the quarter ending on 30.9.2007 and thereafter.

Tax deductors and tax collectors are, therefore, advised to obtain correct PAN details of all deductees and quote the same in the TDS / TCS returns, failing which the TDS / TCS returns will not be accepted and all penal consequences under the Income Tax Act will follow.

Taxpayers liable to TDS / TCS are also advised to furnish their correct PAN with their deductors, failing which they will also face penal proceedings under the Income Tax Act.

For and from the quarter ending 30.9.2007, in addition to government offices and companies, filing of TDS / TCS returns in electronic form is mandatory for (i) deductor / collector required to get his accounts audited under section 44AB of the Income-tax Act in the immediately preceding financial year, and (ii) where the number of deductees’ / collectees’ records in a quarterly statement for any quarter of the immediately preceding financial year is equal to more than fifty. TDS / TCS returns in paper form will no longer be accepted from such tax deductors / collectors.

IT "Refund Banker Scheme" to be extended to other Metros

Refund banker scheme to be extended to Chennai, Kolkata, Mumbai and Banaglore

July 12 (PIB Press Release) - The Income Tax Department launched the ‘Refund Banker Scheme’ to issue refunds expeditiously and correctly. Presently the scheme is operative in Delhi and Patna charges. The CBDT plans to extend the scheme to Chennai, Kolkata, Mumbai and Bangalore from 30.09.2007.

While implementing the ‘Refund Banker Scheme’ in Delhi and Patna charges, it has been noticed that a number of refund vouchers are received back due to incorrect address given by the taxpayers. Some of the taxpayers do not give their correct bank account number on the Income Tax return or fail to give correct MICR code of the bank because of which refund cannot be credited to their account.

Out of 72,397 refunds dispatched by speed post between February and June 2007, as many as 7,264 have been returned undelivered by the postal authorities.

To avoid inconvenience, the taxpayers are suggested to fill up the Tax Return form properly mentioning the correct address at which refund voucher may be delivered, correct bank details i.e. account number, name and branch of the bank, and MICR code of the bank. Taxpayers must also intimate the change of address, if any, to the assessing officer immediately.

Download Income Tax Return Forms

UP Income Tax Lawyers against New Tax Return Forms

Lucknow, June 22 (IANS) The Income Tax Bar Association of Uttar Pradesh is up in arms against the union finance ministry's decision to replace the traditional 'SARAL' form by a new set of forms for filing annual tax returns.

"The new forms being introduced by the finance ministry were not only lengthy but also cumbersome and certainly against the larger interest of the people," the bar association spokesman S.K. Kohli told a press conference here Friday evening.

"It was really strange that even while our top leaders always talk about simplifying procedures for the common public, the new forms were clearly aimed at complicating things for an assessee," Kohli said.

"As against the earlier single-page 'SARAL' form, assessees of different categories would now have to fill in seven to 27 pages," he pointed out.

The association has demanded immediate withdrawal of the revised set of forms and reversal to the earlier one. They were already in the process of mobilising their counterparts across the country to build further pressure on the central government.