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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.

[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. 

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(?).

Sometimes, the amendments made will extend to cover the unintended situations also. Only to prevent the persons from introducing his own unaccounted money ( either in the form of cash or in kind) in the form of bogus gifts received from non relatives, sec. 56(2)(vii) has been enacted. But now the incometax AOs say that the provision also covers  the situations wherein the existing share holders receives bonus shares and  the  promoters were allotted shares for a less consideration than the consideration received from other persons other than the promoters.  It is very difficult to argue with them going by the language used to frame the section.  The possibility of such additions being confirmed by appellate authorities is also very high in the present legal system. Some AOs also  argue that the said section covers situations wherein the partner retires from the firm and takes away more amount than the amount in his capital account credit or takes away an asset, the value ( as per books ) of which is equivalent to capital in the firm but the fair market value of the said property is more than the value in the books of accounts even though the Apex Court long back has held that there are no capital gains in the hands of the partner when a partner retires from the firm in a decision reported in 247 ITR 801.  How to argue such cases.   

After introduction of new provisions of sec. 56(2) for inadequate consideration, sec. 50C has become irrelevant as it amounts to double taxation. Same amount is taxed in the hands of seller and purchaser.  Further, it is taxed in the hands of the purchaser as inadequate consideration u/s 56(2), then when the said property is sold by him then whether the amount on which he pays tax is allowable as cost of acquisition? if So under which section? I hope the legislation will dwell upon these issues before finalising the enactment of the proposed Finance BIll.

An A.O. after conducting a survey u/s 133A in a case of builder, referred the stock in trade i.e. constuction cost  to valuation cell with a doubt that expenditure incurred may be more than what has been recorded in books of accounts. The Valuation Officer is behind the builder asking to produce vouchers for the expenditure incurred. Now, can the builder request the A.O. under what section the reference is made because, as per the provisions of the Act, only sec. 142A empowers the AO to refer the case to valuation cell. However, fortunately/unfortunately sec. 69C is not mentioned in sec. 142A which means that the law makers didnot envisage that this type of  situation will also arise wherein the stock in trade is to be referred to valuation cell and therefore, they didnot include sec. 69C in sec. 142A. The consequent of which is that this type of  cases cannot be referred to valuation cell asking to estimate the value of stock in trade.  Under the above mentioned circumstances, the builder came across a case of Delhi High Court reported in 319 ITR 276 wherein it was categorically held that there is no provision in IT Act to refer the case of a builder to valuation cell. When this is brought to the notice of AO, he says that in any case, if excess valuation, if any,  estimated by the Valuation Officer  will be added u/s 69, 69B if not under 69C and directed the builder to cooperate with the valuation officer. Under these circumstances, what is the remedy available to the builder except filing a writ.

carbon credits were not taxed in the hands of one assessee. However, the same AO, in next year taxed the same in case of other assessee and reopened the case of first assessee u/s 148. Accordingly reopened assessment was also completed in the case of first assessee bringing to tax the said carbon credits. When an appeal is filed before appellate authorities against the reopened assessment, it was argued that the AO had changed his opinion and it is not permissable u/s 147 as per the Supreme Court decision in the case of Kelvinator India. The appellate authorities have held that no tangible material has come into the possession of the AO and as argued the AO had changed his opinion which is not permissable u/s147. RElying on the decision cited, the assessment was held as bad in law and therefore, the reassessment was cancelled. Accordingly, the carbon credits were not taxed in the hands of the first mentioned person.

              Now the second mentioned person without going into merits, can take the argument that since the same carbon credits were not taxed in the hands of one assessee it cannot be taxed in his hands also. He wanted to place reliance on Sec. 268A of the IT Act which was brought into the statute only to overcome the supreme Courts decision reported in 266 ITR 99. He further wanted to support his argument with the Apex Courts decisions reported in 229 ITR 219, 229 bITR 221, 254 ITR 606, 308 ITR 161. What are the chances of the assessee to win his appeal if he takes this argument without going into merits.

can the deduction/exemption u/s 54F or 54EC can be denied on the ground that the assessee is a non resident.