The All India Federation of Tax Practitioners (AIFTP Western zone) had organized a Webinar on June 14, 2020 on the subject of “Principles of Natural justice as applicable to Tax proceedings and Writs in taxation”. The speaker was Advocate Mr. Manish J.Shah, Ahmedabad and Chairman was Dr K. Shivaram, Senior Advocate, Mumbai. For the benefit of the readers, a brief summary of the proceedings has been prepared by Advocate Shashi Bekal

Chairman in his introduction referred the Article 265 of the Constitution of India 1950. 

“No tax shall be levied or collected except by authority of law”

Article 265 is the foundation for various Writ Petitions under the Income tax Law.

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Advocate Aditya Ajgaonkar has described the Faceless Assessment Scheme & the Faceless Appeal Scheme as a big tax reform and game-changer because they seek to streamline, and bring greater transparency and accountability into, the tax administration. He has, however, cautioned that the non-grant of a personal hearing via video conference as a default choice vested in the assessee may be a violation of the principles of natural justice and may put the schemes into jeopardy. He has given convincing reasons for his views

The Delhi High Court in the case of Lakshya Budhiraja v. UOI & Anr. W.P.(C) 8044/2020has issued notice on 16th October 2020, on the grounds of the Petitioner that the mechanism where the approval of the Chief Commissioner or the Director General of Income-tax is required for video conference facility is discriminatory in nature as it gives them the discretion to deny the same and that no person should be judged without a fair hearing in which each party is given an opportunity to respond to the evidence against them.

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Advocate Shashi Ashok Bekal has explained the applicability of the Scheme of TCS, its compliance procedure and the consequences of non-compliance. He has also highlighted the concerns of taxpayers regarding the levy of TCS on sale of goods above specified limits. He has also identified certain lacuna and ambiguities in the law and requested that these be addressed at the earliest so as to avoid unwanted litigation

Abstract

The Article attempts at explaining the evolution of the Tax Collection  at Source (TCS) provisions, and the intention of the Parliament, each time the widened the TCS base. Further, it explains the applicability of the Scheme of TCS, its compliance procedure, and consequences of non-compliance. The Finance Act, 2020 has amended the provisions of TCS by widening its base with new transactions. Some aspects of the new transactions can be held ultra vires the Constitution. Further, the Article explains the current concerns with the issue of levy of TCS on sale of goods above specified limit. Although the Administration has issued certain clarifications, a minor lacuna still exists. It is imperative to address these ambiguities at the earliest so as to avoid unwanted litigation.

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The disruption caused by Covid-19 has compelled the Government to extend from time to time the due dates for various compliances. Advocate V. P. Gupta has methodically set out in a tabular format all the extended due dates. This will help avoid confusion and prevent unintended breaches of the law by taxpayers. The ld. author has also identified a few important issues which need the attention of CBDT and suggested the action required to be taken by it

On account of COVID-19 there was complete lockdown w.e.f. 25.03.2020 and all the offices etc. could not work. Therefore, an Ordinance dated 31.03.2020 called “The Taxation and Other Laws (Relaxation of Certain Provision) Ordinance, 2020” was promulgated providing that any action or compliance, due date for which was falling between 20.03.2020 to 29.06.2020, shall be extended to 30.06.2020 or any other date as may be further extended by the Central Government by way of notification. Thereafter, a notification dated 24.06.2020 was issued by the government further extending time limit for certain compliances under the Income Tax Act.A notification dated 29.07.2020 was also issued subsequently by the Central Government further extending time limit for filing return of income for A.Y.2019-20. In order to validate the Ordinance and above refereed notifications, a Bill called “The Taxation and Other Laws (Relaxation of Certain Provision) Bill, 2020” was introduced in the Parliament. The aforesaid Bill was duly passed by the Parliament and on receiving assent of the President of India on 29.09.2020 it became the Act. Thereafter, notification dated 30.09.2020 has also been issued by the Government further extending time limit for filing return of income of A.Y.2019-20.

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The Comptroller and Auditor General of India (CAG) conducted a performance audit on search and seizure assessments of the Income Tax Department. The report has several interesting insights and makes valuable recommendations. CA Mohit Gupta has summarized the key points of the report in a succinct and clear manner

Overview:-
Search and Seizure is a very powerful tool available with the  Income Tax Department to unearth any concealed income or valuables and to check the tendencies of tax evasion thereby mitigating the generation of black money. Authority and power to conduct search and seizure operations is strident and caustic power authorized by law to be taken recourse to when the conditions mentioned under different clauses of Section 132 (1) of the Act are satisfied. The jurisdictional facts that have to be established before a search under Section 132 (1) of the Act can be authorised are that (i) the authority issuing the authorisation is in possession of some credible information, other than surmises and conjectures (ii) that the authority has reason to believe that the conditions stipulated in clauses (a), (b) and (c) of Section 132 (1) qua the person searched exist; and (iii) the said information has nexus to such belief. Section 153A provides for the procedure for completion of assessment in case of a person where a search is initiated under Section 132 or books of account or other documents or any assets are requisitioned under Section 132A after 31st May, 2003.

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CA Pratik Sandbhor has highlighted the important aspects of the newly introduced Faceless Appeals Scheme and also explained its implications. He has dwelt upon the consequences of non-grant of a personal hearing and also the concept of “review” of the draft appellate order. The ld. author has also pointed out that there are several issues that need clarification from the CBDT for the smooth implementation of the scheme

A New Innings of Appeals

There has been a long driven move of the Government to digitize the Indian Economy with an innuendo to bring a larger population under the tax radar. Accordingly the Government has introduced many moves to suppress the cash transactions and advance a cashless economy. At behest of said trajectory there has been a hustle to reduce the physical interface between the Assessing Officer and assesse to speed up the assessments process through efficient disposals andquality Assessment Order. The said move foreshadowed the convergence towards faceless assessments. Remarkably the Hon’ble Prime Minister launched the Faceless Assessments & Taxpayer’s Charter on 13/08/2020 as a part of the “Transparent Taxation – Honoring the Honest’ platform and accordingly the machinery of ‘National e-assessment Center’ has been put into motion.

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Advocate Fenil Bhatt has submitted that the prevalent judicial view that ‘education cess’ is not affected by the bar in section 40(a)(ii) of the Income-tax Act, 1961 and is allowable as a deduction requires reconsideration. He has argued that education cess is nothing but the State’s right in the profits of the Assessee, akin to income tax, is in the nature of distribution of income, and is not eligible for deduction

Much water has flown under the bridge in relation to allowability of education cess as a deduction. We have the benefit of two High Court decisions elucidating as to why education cess can be claimed as a deduction, being the recent decision of the Bombay High Court in the case of Sesa Goa Ltd. vs. JCIT (117 taxmann.com 96) and the decision of the Rajasthan High Court in the case of Chambal Fertilisers and Chemicals Ltd. vs. CIT (ITA No. 52/2018 dated July 31, 2018). There are a catena of Tribunal decisions as well allowing education cess as a deduction, to refer to few:

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Advocate V. P. Gupta has argued that sub-section (1H) of section 206C of the Income-tax Act, 1961, which comes into effect on 1st October 2020, will not serve any purpose but will instead raise a number of difficulties in implementation. The ld. author has requested the CBDT to either withdraw the statutory provision or to at least clarify the issues identified by him

Vide Finance Bill, 2020 sub-section (1H) was proposed to be inserted in section 206C of the Income Tax Act providing for tax collection at source (TCS) w.e.f. 01.04.2020 by a Seller having turnover exceeding Rs. 10 Crores from a buyer on receipt of sale consideration exceeding Rs.50 lacs in any previous year. Rate of TCS was proposed @ 0.1% of sale consideration exceeding Rs.50 lacs. Proposed amendment was further modified to provide that section will not apply to transactions of goods to be exported out of India and to person importing the goods into India. It was also provided that section will come in force w.e.f. 01.10.2020. Sub-section (1H) as has been inserted in section 206C reads as under:

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Advocate Arjun Gupta has prepared a comprehensive guide in which the entire law relating to the grant of stay of demand has been explained. All possible scenarios have been visualized by the ld. author. He has referred to all the CBDT Circulars and judicial pronouncements and also provided valuable comments to explain the law clearly

Introduction

When the Assessing Officer (the “AO”) makes certain additions or disallowances by anorder of assessment and the total income returned by the assessee is enhanced, the assessee is subjected to tax on such total income and is liable to pay such tax pursuant to the notice of demand issued by the tax authorities. However, it is common knowledge that the assessee never pays this amount and instead, appeals to the Commissioner (Appeals) against such an order of assessment of the AO. If the assessee is unsuccessful before the Commissioner(Appeals) he may appeal to the Income Tax Appellate Tribunal (the “ITAT”) and then to the High Court and finally to the Supreme Court. A question arises as to whether the assessee can delay payment of the tax demanded by the AO till his appeal is finally decided by the appellate forums which in some cases may take several years? The answer seems obvious i.e the assessee cannot be expected to delay such payments. This is because otherwise every assessee would take advantage of appellate procedure and delay the payment of tax by filing appeal after appeal, especially in cases where it knows fully well that the demand is payable by it. The demand thus becomes as good as infructuous on account of inflation in prices. Also, if eventually the Revenue is successful in appeal, the demand of tax will be enforceable only after several years. This would be prejudicial to the Revenue and cannot possibly be countenanced. Atleast a percentage of the tax demanded must be deposited. Thus, provision is made under Section 220(6) of the Income Tax Act, 1961(the “Act”) for the AO to exercise discretion in not treating the assessee to be in default till its appeal is decided, i.e to stay the demand of income tax, till the appeal of the assessee is decided by the Commissioner(Appeals). The provision is invoked by the assessee by making an application for stay of demand till the disposal of its appeal. However, before stay of demand can be granted, the Revenue would have to comply with a host of conditions as laid down by the Courts and Appellate fora. In this Article, I will be focusing on the CBDT Circulars, and the various case-law on Section 220(6) of the Act and I have given my personal opinion/comments where I feel they are required.

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CAs Pankaj Agrwal and Sandeep Kumar Jain have dealt with the interesting issue whether a professional is entitled to rely on Section 44ADA of the Income-tax Act, 1961 and declare his income as being 50% of the gross receipts even though the actual income is in fact higher. They have also considered whether there is a risk of the Department claiming in later years that the difference between the actual income (reflected by investments) and returned income is “undisclosed income”

In a professional group discussion, a member raised the following query which evoked mixed response: 

(a) Can a professional declare his income equal to 50% of his gross receipts as per provisions of Section 44ADA "EVEN" if his actual income comes to, say 75% of his gross receipts after meeting all his expenses related to profession?

(b) Can the Department in future claim the difference of his investments and returned income as undisclosed income in later years?”

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