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Answers By Expert: Dr. K. Shivaram (Sr. Advocate)
Query

The Assessee was not filed return of income for AY 2013-14 though his income was taxable. Further on receipt of notice u/s 148 he filed his return within 30 days. AO passed order u/s 143(3)/147, against which he filed appeal. AO issued notice for penalty u/s 271F, assessee requested for kept in abeyance till disposal of appeal. Thereafter assessee opted for VSV and Form 5 has been issued by Jurisdictional PCIT. Now he received notice for penalty proceedings u/s 271F again. What is remedy?

Answer

The  assessee has to furnish reply on merit ,  what was the  reasonable cause for not filing of the return as per section 139 (1) of the Act . As per section 273B  penalty is not leviable  if the assessee proves that there was reasonable cause . Please refer Circular No . 21/2020 dt .4th  December , 2020.  Q.No 80  . Whether appeal against penalties that are not related to quantum assessment like penalty u/s 271B  271BA , 271DA of the  Act etc. are also waived upon settlement of appeal relating to ‘ disputed tax ‘ ?

Ans : No , appeal against such  penalty order is required to be settled separately .  

 
Query

Sir, assessee is a proprietor and claimed expenses as labour charges amounting to Rs. 2,50,000/-. In the assessment order, it is mentioned vide notice u/s 142(1) dated 20.09.2019, the assessee was again asked to furnish complete details of expenses. In response to notice, the assessee furnish reply dated 05.10.2019 stating therein that labour charges are paid in cash to the paid labour and on hire basis available at the time of shipment as the assessee was an exporter for A.Y. 2017-18. The assessee filed copy of the ledger account of labour charges. The Assessing Officer in the assessment order observed as under:

The assessee has not furnished the names all the persons to whom the labour charges were paid. Not complete evidence with regards to payment made by him. Explanation furnished by the assessee has been considered and not found satisfactory. In the absence of any satisfactory reply / justification of expenses claimed by the assessee, it will be fair to make a disallowance of Rs. 70,000/- out of expenses claimed by the assessee. Accordingly, addition of Rs. 70,000/- is made to the returned income of the assessee, penalty proceedings u/s 270A are also initiated for mis-reporting of income. In the assessment order, it is also mentioned initiate penalty u/s 270A for mis-reporting of income.

Now, the assessee has received show cause penalty notice u/s 270A through NEAC Centre on portal. Now the assessee wants to have your views and how to file the reply of show cause notice of the penalty.

The assessee has not mis-reported any income. The assessee filed copy of the ledger account of labour charges. The addition has been made on estimated basis. The penalty has been initiated for mis-reporting of income. The assessee has not mis-reported any income and it is not covered in section 270A(9). Clause (a) mentioned as mis-representation or suppression of facts. The assessee did not file any appeal against the addition as the amount of addition was very small and deposit the tax within a month of the order. Also filed form no.68 for claiming immunity u/s 270AA but that does not cover mis-reporting of income. As per my knowledge, it covers only under-reporting of income.

Sir, I seek your opinion on the above query. Mostly, while passing the assessment order, the assessing officer made lump sum addition on estimated basis. If such addition are treated as mis-reporting then the assessee will have to pay 200% of the penalty. It is a general query and may be facing most of our colleagues. Assessing Office has not specified any date / amount and name of person etc. for making addition. Please guide us as it is likely to come this problem in future in every case.

Thanking You,

With Regards,

CA S.K. Goyal

Answer

Ad -hoc disallowance is not legally permissible . In  Katira Construction Ltd. v. ACIT  (2020)  185 ITD 173 (Rajkot)  (Trib.) held that when the books of account is not rejected  ad-hoc addition is held to be not justified  .  Though the assessee has not filed  an appeal against the quantum addition , the assesee can  contest in penalty appeal that how the addition itself is bad  in law . Misrepresentation applies only to statement of fact and not opinions . on the facts it is the opinion of the Assessing Officer hence it is not misrepresentation .In   CIT v. Reliance Petroproducts (P) Ltd. (2011) 220 Taxation 278/(2010) 36 DTR 449/322 ITR 158/189 Taxman 322/230 CTR 320 (SC) the Court held that merely because the assessee claimed of deduction of interest expenditure has not been accepted by the Revenue, penalty under section 271(1)(c) is not attracted . The ratio laid down by supreme Court should apply to levy of penalty u/s 270A of the Act also .  

The assessee should file detailed reply how the addition it self is not justified and also make a request to drop the penalty proceedings .

 
Query

Is the scheme still available for settlement of order for demand issued in 2019/2020
Answer

No scheme is  not available .  The scheme was ended on 31 st March 2021, however  for the  payment of tax the period was extended up to 30 th June 2021   

 
Query

SIR I HAVE OPTED FOR VSV SCHEME AND FORM 5 HAS BEEN RECEIVED IN RESPECTED CASE AFTER THAT I HAVE RECIEVED THE NOTICE OF PENALTY PERCIDING 271(1)(C) WHAT TTO DO ?
Answer

The assessee should send a  reply to the notice stating that  the assessee has opted VSV Scheme for the year under consideration  hence the penalty proceedings initiated may be dropped .  The assessee also furnish the relevant documents along with reply .  Please  refer Circular No 9/2020 dt 22 -4 -20200,   Q. No. 45 and answer ,  it is specifically stated that As per section  6 subject to the provisions of  section  5 , the DA shall not institute any proceedings in respect of an offence , or impose or levy any penalty ; or charge any interest under the Income -tax Act in respect of tax arrears. This shall be reiterated in the order under section 5 (2) passed by DA .   The assessee may also write stating that in case the Assessing Officer decided to proceed further one more opportunity of hearing may be given to the assessee.   
Query

Company is in appeal pending with Hon ITAT for AY 08-09. In notice of demand u/s 156 AY was wrongly mentioned as AY 13-14. Company opted for VSV scheme and in form 1 and 2 AY wrongly mentioned as 13-14 in place of 08-09. The fact was communicated to DA thru various mails, however no communication and form 3 is still awaited.Query is
– How to proceed further under VSV scheme and
– as no notice of demand u/s 156 for AY 08-09 issued by AO , is demand sustainable ????
Answer

The assessee may have to wait for getting communication from the Designated Authority. It may be desirable to write one more letter to the Designated Authority . Designated Authority has to look in to substance  of the transaction . The wrong mentioning of the Assessment year in the notice of demand is a curable defects which can be rectified u/s 292BB of the Act .  The assessee can make an application to the Assessing Officer to issue rectified demand notice mentioning the correct assessment year .In case the application of VSV Scheme is rejected by the Designated Authority the assessee may have to file Writ petition before High Court against rejection order.  

 

 
Query

Respected Sir,
In response to Form 1 & 2 filed by the declarant, PCIT issued Form 3 in December,20. The Declarant paid taxes accordingly. On 10th March,21, PCIT uploaded the revised Form 3 determining liability @ 125% invoking FAQ 70.

Q1:- Whether PCIT has power to revise Certificate issued due to CHANGE OF OPINION?

Subsequently on 24th March, 2021, the declarant made submission to restore original Form 3in terms of modification (clarification)of FAQ 70 since declarant case was neither covered under search or survey nor assessment was made thereunder.Further, in an identical case of the declarant, the Hon.Bombay HC has allowed the petition in the matter of Bhupendra Harilal Mehta V PCIT 19 (same PCIT of Querist). Till now PCIT has not revised and restored original Form 3.

Q2: Kindly suggest remedy.

Q3: Is it not contempt of the court for not following jurisdictional court order?
Answer

According to us ,PCIT should have passed the rectified order in accordance with the Judgement of Jurisdictional High Court . Jurisdictional  High Court is binding on the all Authorities with in the State   In CIT v. Raghuvir Synthetics Ltd. (2017) 394 ITR 1 (SC)  and  ACIT v. Saurashtra Kutch Stock Exchange Ltd. (2008) 305 ITR 227 (SC) the Court

 held that the law laid down by the High Court is binding .

It may be desirable to make one ,more application pointing out the jurisdictional High Court also referring the ratio of Supreme Court to the PCIT and also Chairman CBDT. In case no response is received the assessee may file Writ before the High Court .  

 .

 
Query

Sir,

There is no provision to fill the refund details in Form 4. Only payment details can be filled. I have uploaded the withdrawal of all pending cases letter, but I can’t fill refund details. Please guide me how to fill and submit Form 4 to get Form 5
Under vivad se vishwas.
Answer

There is no separate  form for getting the refund . The  assessee has to follow the normal procedure for getting the refund . The assessee has to write the tax paid details  if more tax is paid under normal provision of the Act , the Assessing Officer concerned will issue the refund in due course of time after receipt of the Certificate from the Designated Authority .  
Query

Sir, my father (deceased) received a tax notice after his demise. As his legal heir, I had appealed against the order but later I opted to settle the issue under VSV scheme and paid the full amount of tax in the first week of November.
Despite this I have received 3 notices from different AO s under the faceless Assessment scheme asking me to file a reply. I have always complied same. I have also received a notice for Penalty Proceedings on 1st March, which again has been suitably attended to.
How much time should I wait for receiving the Form 5 so the case can be closed?Whom should I approach for redressal of my grievance? Its now 6 months since I have paid the tax in full. Kindly advise.
Answer

According to us you may receive  form No 5 at the  earliest . You may write to Chairman CBDT   Shri Pramod Chandra Mody  e mail is , chairmanabcbdt@nic.in   . 

 

 
Query

Sir I have received form 5 issued by cit.i have clear full n final desputed tax amount after deducted.but demand of interst shows on e filling site ie income tax site . It should be nill.how demand would be nill.and how much time it takes . After participating vivad se vishwas schme.? What should I do form 5 hard copy is submitted to Assessing officer or not.?? Department will do online.?
Answer

:  It may be desirable to approach the Designated Authority .  What ever tax in dispute payable by the  Designate  Authority may have to be paid .  If there is calculation a  mistake   in the portal the assessee may file rectification application .   

 
Query

assessee hide turnover and file return us 44AD at 8 percent. during assessment u/s 143(3) ito determined turnover based on bank statement and propose penalty u/s 270A and 271B of non submission of audit report. Penalty was not imposed during this period assessee file application under vived se vishwas which was approved and form no 5 issued.
whether immunity will be available from both penalties or not

Answer

Please refer CBDT Circular  No 21 /2020    dt. 4 -12-2020   Question No 80 and Answer . Q.80. Whether appeal against penalties that are not related to quantum assessment like penalty u/s 271B 271BA , 271DA of the Act  etc. are also waived upon settlement of appeal relating to ‘ disputed tax’ ?

Answer : No . appeal against such penalty order is required to be settled separately .

Accordingly the penalty under section 270A being for underreporting of income  the assessee will get the immunity . As regards the immunity u/s 271B of the Act , the assessee may have to contest in appeal .