Messages

Though I have posted this query nearly one year back, it didnot attract any attention from the stake holders... Recently, I found a decision of Telangana high court  in the case of kankanala Ravindra reddy on the same issue.. The notices issued by JAOs without following the procedure of faceless manner are found to be knocked down by the honourable high court... Other than, Telangana high court any other high court has given decision on similar lines or different lines...

Though I have posted this query nearly one year back, it didnot attract any attention from the stake holders... Recently, I found a decision of Telangana high court decision in the case of kankanala Ravindra reddy on the same... The notices issued by JAOs without following faceless manner are found to be knocked down by the honourable high court... Other than, Telangana high court any high court has given decision on similar lines or different lines...

The above notification clearly says the notice u/s 148 should be issued in the faceless manner through automated allocation. But the notices were found to be issued by AOs without being followed the procedure of automated allocation. Under these circumstances whether the said notice issued by normal AOs without following the procedure of automatic allocation and without following faceless procedure are valid in law.

It is observed that incometax department is issuing notices u/s 148 without following the prescribed procedure u/s 149 especially for the period more than 3 years but less than 10 years  which reads as per enclosure.
which means the AO should have in his possession the books of accounts or documents or evidence but it is observed that basing on the information flagged by risk management strategy the department started issuing notices but they don't have books of accounts of documents or evidence in their possession.  Whether anybody challenged the notices on this ground.

It is observed that public are receiving large number of notices issued u/s 148A of the IT act asking clarifications on various financial transactions entered into by the assessees before the department issuing the reopening notices u/s 148. In this connection, it is observed it is observed that the new section 148A which has come into existence with effect from 01.04.2021 and this section was governed by sec.151A. Further, the new section ie section 151A  is not activated till a notification is issued on 29.03.2022. Since, sec 151A is not activated till 29.03.2022 automatically the new section 148A is also not activated till 151A was activated ie. till 29.03.3022. Since the new section u/s 148A is dormant till 29.03.2022, whether the department can issue notices under a dormant section which was not activated till a notification is issued on 29.03.2022. accordingly, the notices issued u/s 148A before 29.03.3022 are valid in the eyes of law.

secondly, on 29.03.2022, a notification is issued u/s 151A which is enclosed ...




The above notification clearly says the notice u/s 148 should be issued in the faceless manner through automated allocation. But the notices were found to be issued by AOs without being followed the procedure of automated allocation. Under these circumstances whether the said notice issued by normal AOs without following the procedure of automatic allocation and without following faceless procedure are valid in law.

Why the demand has come for the sake of discussion. Where is the difference between the taxpayer and the department.

Yes it is applicable. As the section 50C speaks of transfer. transfer from one person to another person. Here in the case cited, the transfer is from coperative society to its member. both are distinct and separate persons as per incometax Act. Therefore, sec 50C is applicable.

Please see kerala high court decision reported in 167 ITR 103 and Gujarat high court decision in 118 taxman 526.....

It is very difficult to come out of  the situation once the taxes are not paid as per the declaration made under ids ..... there is a possibility that the department may reopen the assessment and therefore will be subjected to further harassment.

first of all without consulting any professional, your wife has accepted the departments demand and consequently paid the part of the corresponding taxes also... in my opinion there is no way you can come out of the situation except filing a writ in court  or else the chief Commissioner of Income Tax concerned may be approached and situation may be appraised.... As per provisions, there is no possibility...... other than this there is no solution.....

[tax]

          Whether non payment of advance tax as per the order of Assessing Officer u/s 210(3) attracts penalty and prosecution.  Of late, people are receiving notices from IT department that they should show cause as to why prosecution should not be launched against them for non payment of advance tax during the current financial year when compared to last financial year.

          Before going into intricacies, whether the recovery provisions of incometax act 1961, ie.e sec. 222 to 229 are applicable to the advance tax.  Sec. 221 and 222 starts with the language " When an assessee is in default or deemed to be in default in making a payment of tax,.......

Whether "advance tax" defined in sec. 2(1) amounts to tax as envisaged in the above sentence. Let us examine.. Till 1989, advance tax is not separately defined in incometax act. Therefore, we can say tax includes advance tax also. But however, the position was  changed with effect from 01.04.1989 as advance tax is separately defined u/s 2(1) which was introduced vide finance Act 1987. "TAX" was defined in sec. 2(43). Though, tax was separately defined in sec. 2(43) what made the legislature to bring one more definition in the form of advance tax in sec. 2(1) was neither explained in circular 495 which is explanatory memorandum of finance act, 1987 nor in the finance act itself.  However, it was separately defined. Since Advance tax was separately defined,  we safely conclude that both are not one and the same and are different. Therefore, the recovery measures which are meant for 'TAX" collections are not attracted to "ADVANCE TAX'.

           For advance tax,  a different demand notice is prescribed as per IT Rules 1962. i.e. Form 28 which says non payment of advance tax will attract penal interest u/s 234B and 234C. Other than these interests nothing else is mentioned in form 28 whereas in form 7 which is meant for regular tax collections, interest u/s 220(2), penalty u/s 221(1) and recovery measures sec. 222 to 229 and 232 are all mentioned and it was clearly specified  that non payment of the demand specified in the notice will attract all these interest/penalties besides the demand mentioned therein. 

           On further verification, it is observed that form 28 as existed before 1989 { before the date of 01.04.1989 wherein advance tax was separately defined in sec. 2(1)}, it was clearly mentioned that non payment of advance tax will attract penalty u/s 221(1). However, recovery measures like sec. 222 to 229 and 232 were neither mentioned in the form 27 before 1989 nor amended form 27 which is applicable from 1989.   Whether the omission of penalty u/s 221(1) in form 28 is intentional nor a typo graphical (clerical) mistake. That too, form 28 is statutory form and cannot be changed as per whims and fancies. Therefore, It can safely be concluded that the legislature has intentionally omitted the penalty u/s 221(1) in form 28 as it has brought out statutory interests u/s 234B and 234C and also the definition of advance tax in sec. 2(1).

Thus, it is evident that Advance tax is tax only upto 1989 and thereafter it is separately defined in sec. 2(1) as such it is not tax for any purpose of income tax act, 1961. It can never be recovered by resorting to measures 222 to 229 and 232 nor any penaltyU/s 221(1)  is leviable for non payment of advance taxes as on date.

      since in prosecution provisions ie. 276C also  it is mentioned as tax  only but not advance tax as such non payment of advance tax will not attract prosecution ..

Any contrary view in this regard is whole heartedly welcome. 

What you are expecting. Where is the need of issuing 143(2).. See the section 143(2)..... it starts with the words....Where a return has been furnished u/s 139(1), or in response........which means notice u/s 143(2) is required only when a return is filed. in the given case, there is no return.. then where is the question of issuing 143(2),,,,Therefore, the idea of 143(2) is not good. If you have merit, fight it otherwise, ........

Please ask for the reason on the basis of which fresh notice u/s 148 was issued. ......whether four years are already lapsed or not. Change of opinion also to be verified. First of all, please file the return of income and seek the reasons.....

your question can be viewed two angles....
1.. Since funds are not from the sale proceeds of the flat sold by your wife, you have a apprehension that whether 54F would be allowed by AO or not.

suppose, your wife has taken a loan from you of Rs. 25 lakhs and pay Rs. 50 lakhs to the builder then whether AO can disallow it. the answer is a big no.  why because, the courts have held that the same money received out of sale consideration need not be invested in new house to get deduction u/s 54/54F.. What is relevant is whether the new house is in her name or not... So far, the new house is in her name, no problem, even if AO didnot allow it, I am sure, you will ultimately win the case ... please see the case laws in the case of PS pasricha ( reported in this website) and 206 taxman 150 and finally 382 ITR 56....

2. If the entire sale consideration is paid by your wife from the sale proceeds of the house , though the house is registered in the name of yourself as well as your wife .... then also your wife will get dedcution. this issue has also been set at rest by somany high courts in the decisions reported in 351 ITR 4, 342 ITR 38, 349 ITR 80,  327 ITR 278... There may be so many case laws....

In view of the above, you may purchse the new house in the name of your wife and proceed to claim the deduction.  But dont forget to deposit the proceeds in the joint account from which the amount of Rs. 25 lakhs has been paid  after the sale consideration is received.. Dont worry at all .... go ahead..

Yes, why not ....you can purchase the land and start constructing house. However, within 3 years entire amount is to be spent though the house could not be constructed.

From a plain reading of the provisions of sec. 40(a)(ia), it is understood that it deals with two situations....

i) the persons who have not deducted TDS during the financial year;
ii) persons who have deducted TDS, but the deducted TDS has not been paid to the government's kitty within the stipulated time limit;

For first category of persons, the dis-allowance will attract invariably for the year under consideration and the said expenditure will be allowed only during the subsequent  financial years whenever the relevant TDS is deducted and paid ( emphasis supplied to the words deducted and paid) to the governments account as per the first proviso. 

For the second category of persons if the deducted TDS is paid before the due date of filing of return of income u/s 139(1), no disallowance during the year under consideration and if the deducted TDS is not paid as mentioned above, then only the relevant expenditure will be disallowed for the year and will be allowed for the year in which the deducted TDS is paid to the government's account.

As per my understanding and experience as of now, if TDS is not deducted during the financial year and was deducted during the April month of the subsequent F.Y and paid to the government account during the same month (ie. April) then also, disallowance will be attracted for current year and the disallowed expenditure will be allowed in subsequent F.Y. This is not a new innovation, even Singhania in his book law and practice has stated the same.  Further, in the cases where second proviso is attracted, during the current financial year dis-allowance will be attracted and the said dis-allowance will be made good during the next financial year because, the non deducted TDS would be  deemed to have been deducted and paid to the governments account only when the deductee has paid the taxes and filed the return of income. In this case also, date of deduction is next financial year when the deductee would be filing his return of income and therefore the case falls under first category but not under second category.

From a Harmonious reading of the section as well as provisos, it is abundantly clear that in order to get the expenditure allowed, the TDS which was not deducted earlier should be deducted ( emphasis supplied to the word deducted) subsequently and should be paid to the governments account.

Once the entire amount of the expenditure is already paid to the deductee, how can the TDS amount be deducted from that expenditure again. if at all it is required by law that it should be paid, then the same can be paid only from the personal coffers of the deductor. But nowhere it is specified  that if the amount is paid ( even from the amounts belonged to the assessee) by any means then the relevant expenditure will be allowed. The provisos clearly says that non deducted TDS should be deducted and paid to the government account in order to get the allowance of the expenditure.

Therefore, some incometax AOs may argue that since the amounts subsequently paid is not from the deducted funds ( entire expenditure amounts have already been paid to the deductee) and what is paid now is the personal amount of the assessee and therefore, the requirement of law is not fulfilled and accordingly,  he is unable to  allow the said expenditure. If this argument is taken by any incometax AO, is there any remedy to counter the said argument. If we accept this argument, the relevant expenditure will never be allowed because, the TDS can never be deducted from the paid amount. This is not the intention of the legislature. Therefore, it is just impossible to pay the deducted funds again as stated by the law in the cases where the amounts have already been paid to the deductees.     

Therefore, what is envisaged by the section framers is that it is applicable only to the cases where the amounts are still outstanding and payable to the deductees. If the amount is payable, then the amount can be deducted subsequently and balance amount can be paid to the deductees and the deducted amount can be paid to the government in the form of TDS.

Further, as per my understanding, sec. 40(a)(ia) is introduced only to prevent the persons not to reduce the profit just before filing of return of income by claiming some bogus(?) expenditures. If the amount of expenditure is paid during the financial year it cannot be bogus expenditure by any stretch of imagination because if the intention of the deductor is to claim the bogus expenditure he will plan in such way that he will deduct TDS also and the balance amount will only be paid to the recipient. Whereas in the cases where entries are made just before filing return of income, he will show that the expenditures are still payable and accordingly try to reduce the profits ( only this type of entries can be made in the books of accounts subsequently and he cannot manipulate the books with paid amounts that too through banking channel). In order to prevent such cases, this sec has been introduced so that the such expenses will be allowed only when TDS is deducted and paid to the governments kitty.

Thus, the section is applicable only to the cases where expenditures are payable and not applicable to the cases where expenses were already paid during the current financial year itself. This is my understanding of law... if anybody contradicts and come with a logical reasoning I have no objection to change my opinion. I hope all our fraternity will roam on this issue and come out with different opinions so that a solution can be found to a long persisting problem(?).

suppose a listed company, the  share of which was quoted in stock exchanges at a particular rate, issues bonus shares then as stated by Sai Prasad garu, the said bonus shares are deemed to have been alloted at a value of  nil where as fair market value of such share is the price quoted in stock exchanges, then the individual is liable to be taxed for the difference amount of share rate  in the stock exchange on that particular date (ie., listed share price on that date - Nil) as per the provisions of sec. 56(2)(vii)(c). With this intention only, the incometax AOs are arguing that bonus shares are also covered by this provision.  Will the answer now change.