AMIT BAJAJ ADVOCATE

I have had a discussion lately on the topic whether penalty u/s 271B is imposable in case the audit report u/s 44AB is obtained within the due date of filing the ITR u/s 139 but the ITR is filed after such due date? I have tried to examine such situation out of my Legal conscience as follows:


The due date for filing Income Tax Return for corporate and those assessees who are required to get their accounts audited is 30th september every year. But it has been extended to 15th October this year. The Due date for furnishing Audit report u/s 44AB to the Income Tax Department is also 30th september every year which also has been extended to 15th october this year.

Earlier before the introduction of annexure less forms the audit report was required to be submitted with the department before the due date of return of Income, otherwise it attracted penal provisions u/s 271B. Penalty under section 271 B is a sum equal to half per cent of the total sales, turnover or gross receipts from business or profession as the case may be , in such financial year or one lakh rupees, whichever is less.

But after the introduction of annexure less forms i.e ITR4, ITR5, ITR6 etc., the Tax Audit Report is not required to be submitted along with the Return of Income nor it is to be submitted separately any time before or after the due date. But one should get the Tax Audit Report from his CA before the due date of submitting the Return of Income and fill the relevant columns of the Return of Income on the basis of such report.

"7. Following clarifications are also issued in respect of certain issues arising from furnishing
the returns in the above mentioned forms:


(i) An assessee should obtain the report of audit from an accountant under
section 44AB of the Act on or before the due date of the furnishing of the return and
should fill out the relevant columns of the return forms on the basis of such report.
However, the report of audit should not be attached with the return or furnished
separately any time before or after the due date. The assessee should retain the report
with himself. If called for by any income-tax authority during any proceeding under the
Act, it shall be incumbent upon the assessee to furnish/produce the same in original. No
penalty under section 271B shall be initiated or levied for not furnishing the tax audit
report on or before the due date. However, if the audit report has not been obtained before
the due date, provisions of section 271B shall continue to be attracted."

The Kerala High Court in an important Judgement namely Vodafone Essar Cellular vs. ACIThas decided that the discount given on the SIM cards and recharge coupans to the dealers of the telecom company is commission u/s 194H and is liable to TDS. The court held that "The terminology used by the assessee for payment to the distributors is immaterial. In substance the discount given at the time of sale of Sim Cards or Recharge coupons by the assessee to the distributors is a payment for services rendered to the assessee and falls within s. 194H."

• The use of the expression “falsely represents” is indicative of the fact that the offence under Section 10(b) comes into existence only where a dealer acts deliberately in defiance of law or is guilty of contumacious or dishonest conduct; therefore, in proceedings for levy of penalty under Section 10A burden would be on the revenue to prove the existence of circumstances constituting the said offence

GUIDELINES FOR SELECTION OF CASES FOR SCRUTINY DURING 2010-11

1. Selection of cases for scrutiny during the financial year 2010-11 will be done primarily through CASS this year. Manual Selection for scrutiny this year will be limited only to a few categories of cases listed below.
2. List of cases selected during each month in accordance with the selection criteria mentioned below shall be submitted by the Assessing Officers to their respective Range heads by the 15^th of the following month and also displayed on the Notice Board of their office.

The Madras High court has held in Infotech software Dealers Association vs UOI that though software is a good but a supply of it may be a service and not a sales. When a person enters into an agreement with the developer of software like an end user licence agreement for marketing the software to end user, then such transaction between the end user and the person marketing such software is only a service and not a sale.

The cabinet has cleared new Direct tax code which is proposed to be implemented from 01-04-2011 onwards. The new Direct Tax code proposes to raise the basic exemption limit for individual tax payers from Rs 1.6 lakh to Rs 2 lakh. So there will be no tax on incomes below Rs 2 lakh. The exemption for senior citizens has been raised to Rs 2.5 lakh, up from 2.4 lakh at present.

Direct Tax Code incorporates all three direct tax act; IT Act of 1961, Wealth Tax of 1957, Dividend Distribution Tax of 1997.The Bill also seeks to remove surcharge and cess on corporate tax, providing relief to business houses. According to the new direct tax code corporate tax rate will be 30 per cent including all taxes, down from the existing 33 per cent.

T.D.S means the Tax deducted at source. Whenever a person liable to deduct tax of another person under Income Tax Act, deducts tax, the credit of such tax is given to the deductee when his liability to pay income tax is calculated. Such credit is given on the basis of the information given by the deductor to the Income Tax Department by way of filing his T.D.S statements, wherein the full detail about the tax deducted, the PAN No of deductee etc are given, so that the right credit of T.D.S can be given to the deductee.

Rule 37BA(1) provides that credit for tax deducted at source and paid to the Central Government in accordance with the provisions of Chepter XVII, shall be given to the person to whom payment has been made or credit has been given (i.e.Deductee), on the basis of information relating to deduction of tax furnished by the deductor to the income tax authority or the person authorized by such authority.

The Punjab Govt has imposed entry tax on some new items and rate of entry tax on certain items has been revised. These revised rates of entry tax and imposition of entry tax on new items will come into force w.e.f 18/08/2010. The new items and revised rate of entry tax is given herebelow in the public notice issued by the Punjab Government.

CBDT has extended the due date for filing income tax returns for assessment yeas 2010-11 has been extended till 4th August 2010. All paper and efilled returns will be considered as filed within due date if filed on or before 4th August 2010.

The Efiling of ITR 4 has been made compulsory by the Income Tax Department for the Assessment year 2010-11 for those individuals and HUFs who are required to get their accounts audited u/s 44AB of Income Tax Act by a notofication No.49/2010[F.No.142/15/2010-TPL], dated 9-7-2010.Earlier it was only Firms  who were liable to get their accounts audited u/s 44AB and the companies were compulsorly required to file their ITR online.

Jammu and Kashmir government said on 10th June, 2010 that Rs 2,000 would be charged as entry fee per vehicle carrying pilgrims to the cave shrines of Mata Vaishnodevi and Amarnath for a period of 3 days.

According to a notification issued by the government under Jammu and Kashnir Motor Vehicle Taxtion Act, 1957, the vehicles carrying passengers to Mata Vaishnodevi Yatra would be charged Rs 2,000 at entry point for a period of 3 days and after that Rs 2,000 will be charged per day.

It is generally seen that there is confusion among taxpayers about maintenance of books of accounts under Income Tax Act like who is required compulsorly to maintain the books of accounts and for how many years one has to keep his books of accounts.  Some views are expressed on this topic as follows:

Maintainence of books of accounts by Professionals: Section 44AA of Income Tax Act and rule 6F of Income Tax rules deal with the provisions regarding maitenance of books of accounts under Income tax Act. As per section 44AA(1) read with rule 6F the persons carrying on any of the profession as mentioned below are required to maintain books of accounts and other documents as may enable the assessing officer to compute his total income, if yearly gross receipts of the profession exceeded  Rs 150000

A person is required to get his accounts audited u/s 44AB if
1)The turnover of  business exceeds Rs 60 Lakhs, or
2)The Gross Receipts of Profession exceed Rs 15 Lakhs.

In case of business what should be the meaning of turnover/sales? Should it be Gross sales or net sales? Should it include VAT, Sales tax or excise duty? The meaning of turnover/sales for the purpose of tax audit is dissussed as follows:

Assessment under the Punjab VAT Act 2005 are made u/s 29. The assessment under Punjab VAT Act is made after the filing of the VAT 20 i.e annual return except in the case of Provisional Assessment. The assessment of Tax under section 29 of Punjab VAT Act 2005 can be done by two ways which can be discussed as follows:

Rule 36 of Punjab VAT rules which deals with the filing of VAT returns has been ammended w.e.f 18/05/2010 vide notification No . G.S.R.   /P.A.8/2005/S.70/Amd.(  )/2010. s.The second and third Proviso to Rule 36 (1) have been ammended to provide that the monthly VAT returns are now required to be filed by only those dealers whose annual tax liability was Rs 2 Lakh or more in the previous Year and once the dealer's annual tax liability exceeds Rs  2 lakhs he will continue to file his monthly VAT returns in Form VAT 16 for all the subsequent years irrespective of the fact that his annual tax liability becomes less than Rs 2 lakhs in the subsequent years. 

Relatives from whom Gift is permissible under Income Tax Act
List of Male Donors                                           List of Female Donors
Father (Papa or Pitaji)                                         Mother (Maa or Mummy)
Brother (Bhai)                                                     Sister (Bahin)
Son (Beta or Putra)                                             Daughter (Beti or Putri)
Grand Son (Pota or Potra)                                  Grand Daughter (Poti or Potri)

I have written an article earlier explaining the provisions of section 15(3) of Punjab VAT Act 2005. Section 15 of Punjab VAT Act deals with the Net Tax Payable by a taxable person. According to section 15(3) excess ITC after adjustment u/s 15(2) shall be adjusted against any outstanding tax, penalty or interest under this Act or under the Central Sales Tax Act, 1956, as the case may be.

Thus not only penalties but also any outstanding Tax or interest can be adjusted from the Excess ITC. Now the Punjab VAT Tribunal has confirmed in Ganesh Iron and General Store, Killinwari (muktsar) Vs. State of Punjab decided on 18-05-2009 [(2010) 14 STM 486 (PVAT-Tri.)] that excess ITC can also be utilised for payment of additional demand which is pre condition for hearing appeal.

The most awaited SARAL II form i.e ITR-1 has been notified by the CBDT for the A.Y 2010-11 vide notification  dated 23/04/2010. The new SARAL II Form is different from the earlier ITR-1 form in many respects.

The new SARAL II (ITR-1) form is of two pages only. The earlier ITR-1 form was also of two pages but the earlier ITR form could be filed by only those assessee who had income from the salaries/Pension and Income from Interest if any. But the new form can be filed by the asseessees having salary/pension Income, Income from one house property (excluding loss brought forward from previous years),Income from Other Sources (Excluding Winning from Lottery and Income from Race Horses).

FIR means First Information Report i.e report about the happening of a crime. Whenever anyone meet with a crime or see the crime happening and he informs the police, it should constitute an FIR and police should not refuse to register it.

But the reality is that the whenever a common man goes for registering a FIR its never easy for him. It is generaly seen that the Police always first start enquiring about the crime whether it has happened or not instead of registering FIR. But actualy what should happen is that after registering the FIR the enquiry should be started because the basis of Police enquiry should be FIR.

Finance is the important part and need of every business. The own capital of a person may not be always sufficient to meet the needs of finance of the business. Therefore the Loans and deposits become necessary and important to meet the financial needs of the business. But while taking loans and accepting deposits one also has to keep in mind the restrictions imposed under the Income Tax Act on the mode of taking such loans and deposits.

Such provisions regulating the mode of accepting or taking loans or deposits and mode of repayment of certain loans and deposits are contained under section 269SS and 269T of the Income Tax Act 1961.

The Punjab VAT Rules have been ammended to provide for that the input tax credit on purchase of goods from manufacturer or importer will be available to a dealer only upto the fourth stage of its purchase. The dealers will also have to mention on the bills that on which stage he is selling the goods. VAT form 23 and 24 has also been ammended to this effect.



The relevent notification is reproduced herebelow for ready reference:

The VAT forms i.e VAT 15 form has been updated in view of the change in the rate in the PVAT Act on schedule B goods from 4% to 5% and additional surcharge levied @ 10%. The next quatorly VAT Return under the PVAT Act 2005 is due to be filed in the next month of april.

All the software companies dealing in VAT E filling softwares and the dealers, C.As and Lawyers practising PVAT Act and accountants have been waiting for the changes in the VAT return forms in view of the increase in VAT rate from 4% to 5% on schedule B goods and the surcharge levied @ 10% under the PVAT Act 2005. The relevent important changes made in the worksheet of VAT form 15 regarding the changed rate and surcharge is as follows:

Section 62(5) of the PVAT Act 2005 provides for the precondition of deposit of 25% of total amount of tax, penalty and interest , if any before entertaining any appeal. Such condition was also imposed evan on those appealent whose entire goods are detained by the department u/s 51 evan if the value of such detained goods exceed the total amount of tax, penality, interest. In such cases it results in burdening the assessee with another liability.

The Budget for the year 2010-11 has been presented on 26/02/2010. The proposed important changes in Income Tax Act 1961 and rates in the finance bill 2010 are provided here below:

MALE RESIDENT INDIVIDUAL AND HINDU UNDIVIDED FAMILY (HUF)
SLAB INCOME TAX RATE
Upto Rs. 1,60,000 Nil.

Section 15 of PVAT Act 2005 deals with the Net Tax Payable by a taxable person. Sub section 1 of Section 15 provides that the output tax under PVAT Act shall be adjusted from the Input Tax Credit for determining Net Tax Payable by a taxable Person. If any excess ITC is still left then it is to be adjusted from the CST liability under CST Act 1956 at the option of the taxable person as per section 15(2) of PVAT Act.

Section 15(3) of PVAT Act provides that the Excess ITC if any left after adjustment of output tax or CST liability u/s 15(1) and 15(2) then such ITC shall be adjusted against any outstanding tax, Penality or Interest under PVAT Act 2005 or CST Act 1956 as the case may be.

t is well esteblished principle that the power to levy penality under taxation laws is incidental and ancillary to the power of collection of tax and is provided to make sure the compliance of tax deposits by the assessees. Taxation laws are welfare laws i.e they are for the welfare of the general public at large.

Under section 8(1) of the Central Sales Tax Act 1956 an Interstate sale to a registered dealer can be made at the concessional rate of Central sales tax i.e @2% existing at this time. But for claiming concessional rate of CST the seller needs to produce a declaration in the prescribed form duly filed and signed by the registered dealer in a prescribed form obtained from a prescibed authority.

Any Income derived from a Capital asset movable or immovable is taxable under the head Capital Gains under Income Tax Act 1961. The Capital Gains have been divided in two parts under Income Tax Act 1961. One is short term capital gain and other is long term capital gain.

1.Short Term Capital Gains : If any taxpayer has sold a Capital asset within 36 months and Shares or securities within 12 months of its purchase then the gain arising out of its sales after deducting therefrom the expenses of sale(Commission etc) and the cost of acquistion and improvement is treated as short term capital gain and is included in the income of the taxpayer.

Declared goods are the goods of special importance on which there are certain restrictions placed under CST Act 1956 on imposition of sales tax or VAT by the states. Article286(3)(a) of the Constitution of india authorises parliament to declare some goods as of special importance and to impose restrictions and conditions in regard to power of the states in regard to levy, rates and other incidence of tax on such goods. Exercising this power the Parliament vide section 14 of the Central Sales Tax Act 1956 has declared some goods as of special importance and has placed restrictions u/s 15 of CST Act on the imposition of sales tax or VAT on such goods by the state Governments.

The Government of Punjab,Department of Excise & Taxation has levied Entry tax on 12 new items Punjab Tax on Entry of Goods into Local Areas Act, 2000 (Punjab Act No.9 of 2000) with effect from 05-02-2010 vide notifications dated 01-02-2010. The new goods on which entry tax has been imposed along with the tax rate applicable are summarized hereinafter

Name of Goods Rate Applicable

The Government of Punjab has levied Surcharge/Additional Tax @10% on all the goods under Punjab VAT Act 2005 other than those seecified as declared goods under section 14 of Central sales Tax Act 1956 with effect from 05-02-2010. However this surcharge or additional tax will be levied on Liquor with effect from 01-04-2010.

The VAT rate on goods as mentioned in schedule B has been changed from 4% to 5% with effect from 29-01-2010. As per a Notification issued by the EXCISE AND TAXATION DEPARTMENT, PUNJAB NoS.O. /P.A.8/2005/S.8/2010. dated 29-01-2010 the VAT rate on schedule B goods other than declared goods under PVAT Act 2005 has been enhanced from 4% to 5%. The above notification can be found at the following link of the official website of the Excise and Taxation Department, Punjab

Rules of natural justice are important part of fundamental rights as enshirined in our constitution. Rules of natural justice means fair play in action i.e. to save the citizens from arbitrariness in administrative or quasi judicial action. Rules of natural justice are part of Rule of law as ensured under article 14 of our constitution. Violation of rules of natural justice result in arbitrariness and violation of fundamental rights as provided by our constitution to the citizens of India. The rules of natural justice ensures that any person is not subjected to arbitrariness and justice not only appear to have been done with him but manifestly have been done.