Bulletin No.A138 dated 11 May 2022

BULLETIN(Issue No.138)DT.11-05-2022

Compiled by Vinod Kumar Goel, Advocate

CIRCULARS

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

New Delhi, 30th March, 2022

PRESS RELEASE

Amendment to the provisions of Income-tax Rules, 1962 for prescribing fees under section 234H of the Income-tax Act, 1961

Under the provisions of the Income-tax Act, 1961 (“the Act”), every person who has been allotted a PAN as on 1st July, 2017 and is eligible to obtain Aadhaar Number, is required to intimate his Aadhaar to the prescribed authority on or before 31st March, 2022. On failure to do so, his PAN shall become inoperative and all procedures in which PAN is required shall be halted. The PAN can be made operative again upon intimation of Aadhaar to the prescribed authority after payment of a prescribed fee.

In order to mitigate the inconvenience to the taxpayers, as per Notification No.17/2022 dated 29th March, 2022, a window of opportunity has been provided to the taxpayers upto 31st of March, 2023 to intimate their Aadhaar to the prescribed authority for Aadhaar-PAN linking without facing repercussions. As a result, taxpayers will be required to pay a fee of Rs. 500 up to three months from 1st April, 2022 and a fee of Rs.1000 after that, while intimating their Aadhaar.

However, till 31st March, 2023 the PAN of the assessees who have not intimated their Aadhaar, will continue to be functional for the procedures under the Act, like furnishing of return of income, processing of refunds etc. A detailed Circular No.7/2022 dated 30.03.2022 has also been issued in this regard. After 31st March, 2023, the PAN of taxpayers who fail to intimate their Aadhaar, as required, shall become inoperative and all the consequences under the Act for not furnishing, intimating or quoting the PAN shall apply to such taxpayers.

(Surabhi Ahluwalia)

Commissioner of Income Tax

(Media & Technical Policy)

Official Spokesperson, CBDT

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INCOME-TAX (ELEVENTH AMENDMENT) RULES, 2022 - INSERTION OF RULE 12AC AND FORM ITR-U

NOTIFICATION G.S.R. 325 (E) [NO. 48/2022/F. NO. 370142/18/2022-TPL (PART-1)], DATED 29-4-2022

In exercise of the powers conferred by sub-section (8A) of section 139, read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend Income-tax Rules, 1962, namely:—

Short title and commencement.

1. (1) These rules may be called the Income-tax (Eleventh Amendment) Rules, 2022.

(2) They shall come into force from the date of their publication in the Official Gazette.

2. In the Income-tax Rules, 1962 (hereinafter referred to as the principal rules), after rule 12AB, the following rule shall be inserted, namely,––

'12AC. Updated return of income.— (1) The return of income to be furnished by any person, eligible to file such return under the sub-section (8A) of section 139, relating to the assessment year commencing on the 1st day of April, 2020 and subsequent assessment years, shall be in the Form ITR-U and be verified in the manner indicated therein.

(2) The return of income referred to in sub-rule (1) shall be furnished by a person, mentioned in column (2) of the Table below in the manner specified in column (3) thereof:––

TABLE

Explanation.–– For the purposes of this sub-rule, ―electronic verification code‖ means a code generated for the purpose of electronic verification of the person furnishing the return of income as per the data structure and standards specified by Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems).

(3) The Principal Director-General of Income-tax (Systems) or Director-General of Income-tax (Systems) shall specify the procedures, formats and standards for ensuring secure capture and transmission of data and shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to furnishing the return in the manners specified in column (3) of the Table.'.

3. In the principal rules, in Appendix-II, after the ITR-Ack, the following Form ITR-U (ITR for updated return) shall be inserted, namely:—

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REVISED INSTRUCTION FOR CONSTITUTION AND FUNCTIONING OF ‘LOCAL COMMITTEES TO DEAL WITH TAXPAYERS’ GRIEVANCES FROM HIGH-PITCHED SCRUTINY ASSESSMENT

INSTRUCTION F. NO. 225/101/2021-ITA-II, DATED 23-4-2022

The Central Board of Direct Taxes (the 'CBDT'), by its Instruction No. 17/2015, dated 9-11-2015 (copy enclosed) provided for constitution of 'Local Committees to deal with Taxpayers' Grievances from High-Pitched Scrutiny Assessment' in each Pr.CCIT region. The Local Committees were constituted to expeditiously deal with Taxpayers' grievances arising from High-Pitched Scrutiny Assessment.

2. Taking into consideration the changes in organizational set-up subsequent to launch of Faceless Assessment regime, the CBDT, in exercise of its powers under section 119 of the Income-tax Act, 1961 ('the Act') and in supersession of its earlier Instruction No. 17/2015, dated 9-11-2015, hereby issues the following instructions regarding constitution and functioning of 'Local Committees to deal with Taxpayers' Grievances from High-Pitched Scrutiny Assessment':

A. Constitution of Local Committees:

B. Jurisdiction of Local Committees:

The Local Committees constituted as above shall deal with the grievance petitions of the assessees under the jurisdiction of respective Pr.CCIT regarding High-Pitched Scrutiny Assessments completed under both Faceless and non-Faceless Assessment regimes. These Committees constituted in Pr. CCIT Region will also handle the grievances pertaining to Central Charges located under the territorial jurisdiction of the Pr. CCIT concerned.

C. Receipt of Grievances:

D. Action to be taken by the Local Committees on grievance petitions:

E. Follow up action by Pr.CCIT:

F. Monitoring the functioning of Local Committee:

3. The purpose of constitution of Local Committees is to effectively and efficiently deal with the genuine grievances of taxpayers and help in supporting an environment where assessment orders are passed in a fair and reasonable manner. It is to be noted that Local Committees cannot be treated as an alternative forum to dispute resolution/appellate proceedings.

4. It is emphasized that the task of constitution of Local Committees as per this Instruction be finalized within 15 days of issue of this Instruction or 30-4-2022, whichever is later, and compliance report may be sent by the Jurisdictional Pr. CCsIT/Pr. CCIT (Intl.Tax.)/ Pr.CCIT(Exemptions) to their respective Zonal Members with a copy to Member (IT&R), CBDT.

5. This issues with the approval of Chairman, CBDT.

Annexure:

Quarterly Report on functioning of Local Committees to deal with taxpayers' grievances from High-Pitched Scrutiny Assessments

(Note: The above information is to be submitted by 15th of the month following the quarter ended)

(Ravinder Maini)

(Director) (ITA-II), CBDT.

Union of India & Ors Vs. Ashish Agarwal vide Civil Appeal No. 3005/2022 (SC)

In view of the above and for the reasons stated above, the present Appeals are ALLOWED IN PART. The impugned common judgments and orders passed by the High Court of Judicature at Allahabad in W.T. No. 524/2021 and other allied tax appeals/petitions, is/are hereby modified and substituted as under: ­

(i) The impugned section 148 notices issued to the respective assessees which were issued under unamended section 148 of the IT Act, which were the subject matter of writ petitions before the various respective High Courts shall be deemed to have been issued under section 148A of the IT Act as substituted by the Finance Act, 2021 and construed or treated to be show­cause notices in terms of section 148A(b). The assessing officer shall, within

thirty days from today provide to the respective assessees information and material relied upon by the Revenue, so that the assesees can reply to the show­cause notices within two weeks thereafter;

(ii) The requirement of conducting any enquiry, if required, with the prior approval of specified authority under section 148A(a) is hereby dispensed with as a one­time measure vis­à­vis those notices which have been issued under section 148 of the unamended Act from 01.04.2021 till date, including those which have been quashed by the High Courts.

Even otherwise as observed hereinabove holding any enquiry with the prior approval of specified authority is not mandatory but it is for the concerned Assessing Officers to hold any enquiry, if required;

(iii) The assessing officers shall thereafter pass orders in terms of section 148A(d) in respect of each of the concerned assessees; Thereafter after following the procedure as required under section 148A may issue notice under section 148 (as substituted);

(iv) All defences which may be available to the assesses including those available under section 149 of the IT Act and all rights and contentions which may be available to the concerned assessees and Revenue under the Finance Act, 2021 and in law shall continue to be available.

The present order shall be applicable PAN INDIA and all judgments and orders passed by different High Courts on the issue and under which similar notices which were issued after 01.04.2021 issued under section 148 of the Act are set aside and shall be governed by the present order and shall stand modified to the aforesaid extent. The present order is passed in exercise of powers under Article 142 of the Constitution of India so as to avoid any further appeals by the Revenue on the very issue by challenging similar judgments and orders, with a view not to burden this Court with approximately 9000 appeals. We also observe that present order shall also govern the pending writ petitions, pending before various High Courts in which similar notices under Section 148 of the Act issued after 01.04.2021 are under challenge.

The impugned common judgments and orders passed by the High Court of Allahabad and the similar judgments and orders passed by various High Courts, more particularly, the respective judgments and orders passed by the various High Courts particulars of which are mentioned hereinabove, shall stand modified/substituted to the aforesaid extent only.

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​CASE LAWS

Anup Service Station Vs. DCIT, CPC, Bengaluru ITA No. 74 & 75/Del/2022

We find that the co-ordinate Benches of Tribunal, following the above decisions and various other decisions, are holding that if the assessee has deposited the employees’ share of contribution to PF & ESI before the due date of filing of return u/s. 139(1) of the Act, then no disallowance u/s. 36(1)(va) can be made. It has further been held that the amendment to the provisions of section 43B and 36(1)(va) of the Act by the Finance Act, 2021 has to be construed as prospective and applicable for the period after 01.04.2021. It is held that this provision imposes a liability on the assessee and therefore, cannot be construed as applicable with retrospective effect since the legislature has not specifically said so. 6 Since the assessee in the instant case has admittedly deposited the employee’s contribution to PF & ESI before the due date of filing of return of income, therefore, we are of the considered opinion that the ld. CIT(A) is not justified in sustaining the disallowance made by the CPC. We, therefore, direct the Assessing Officer to delete the disallowances in the hands of the assessee.

Praful M. Shah Vs. National Faceless Assessment Centre, [2022] 136 taxmann.com 296 (SC)

Section 144B of the Income-tax Act, 1961 - Faceless Assessment (Opportunity of hearing) - Assessee filed writ petition challenging faceless assessment order on ground that opportunity of personal hearing was not granted - High Court by impugned order set aside assessment for de novo consideration, with a direction to concerned authority to pass assessment order and strictly comply with mandatory provisions prescribed under section 144B, considering all submissions made by assessee and also granting a personal hearing - Whether notice was to be issued in SLP filed by assessee - Held, yes [Para 2] [In favour of assessee]

Deputy Commissioner of Income Tax Vs. Kunnam Granite Works [2022] 136 taxmann.com 415 (Chennai)

Section 43(5) of the Income-tax Act, 1961 - Speculative transactions (Trading in derivatives) - Assessment year 2009-10 - Whether where assessee being an exporter of goods having huge receivables from customers entered into a hedging contract with its bankers to minimize possible fluctuation in foreign currency, which resulted in loss, same had rightly been treated as revenue expenditure or business loss and could not be considered as speculative loss within meaning of section 43(5) - Held, yes [Para 9] [In favour of assessee]

Sh. Balwan Singh Vs. ACIT, Range-21(1), New Delhi vide ITA No. 2383/Del/2019

We have carefully considered the rival submissions. Before we proceed to adjudicate the issue, certain facts are reiterated for convenience. The assessee is engaged as a transporter and has not maintained any regular books of account. The assessment has been made on estimations, keeping in mind the transportation receipts earned by the assessee which also includes some of impugned entries towards cash receipts by way of loan. The assessee in the course of survey itself, on being questioned, responded that the cash has been received by way of temporary loan from family members to meet the business exigency having regard to the nature of business he is involved in. The fact of business exigency has not been denied by the Revenue. The CIT(A) has disregarded the defense of the assessee mainly on account of the fact that the assessee has failed to come out with complete facts and documents regarding the transactions. We find that the turnover receipts declared by the assessee at Rs.39,61,195/- was enhanced to Rs.1,33,67,162/- for the purposes of estimation of income based on such impounded records. Therefore, imposition of penalty separately towards such receipts by way loan is not justified. The impromptu response of the purportedly uneducated assessee at the time of survey, in our view, requires to be seen in its natural perspective and requires to be given credence. The assessee has declared that the money was received from family members to meet the business exigencies. Having regard to the nature of business of the assessee and ground realities, such explanation appears plausible. Some of the case law of the Hon’ble High Courts and Co-ordinate Benches of Tribunal viz; DCIT vs. Rupen Dass, (2011) 7 ITR 55 (Kol) (Trib); CIT vs. Balaji Traders, (2008) 167 Taxman 27 (Mad); CIT vs. Laxmi Trust Co., (2008) 303 ITR 99 (Mad); DCIT vs. Vignesh Flat Housing, (2007) 105 ITD 359 (Chennai) Dillu Cine Enterprises vs. CIT, (2002) 80 ITD 484 (Hyd); Hindustan Steel Limited vs. State of Orissa, (1972) 83 ITR 26 (SC) Says in corus that the breach of Sections 269SS and 269T for receipt/repayment of cash attributable to business exigencies is mere technical or venial breach. The assessee has shown existence of reasonable cause in accepting/repayment of cash to meet the immediate business requirements. In our view, mitigating circumstances exists to exonerate the assessee from the recourse of penalty under Sections 271D and 271E of the Act. We accordingly set aside the order of the CIT(A) and cancel the penalty imposed under Sections 271D and 271E of the Act by the competent authority.

Narendra Agarwal Vs. Pr. CIT – 7, Delhi vide ITA No. 456/Del/2021

We have heard the rival submissions and perused the materials available on record. The issue in the present case is about the invoking of provisions of Section 263 by Ld. PCIT. Section 263(1) of the Act, the powers under which Learned PCIT has assumed power for revision reads as under : “(1) The Principal Chief Commissioner or Chief Commissioner or the Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.” 20. The reading of the above provision makes it very clear that the power of suo motu revision u/s 263(1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision u/s 263, namely (i) the order is erroneous (ii) by virtue of being erroneous, prejudice has been caused to the interests of the Revenue. 21. Hon’ble Apex Court in the case of Malabar Industrial Co., Ltd., Vs CIT reported in (2000) 243 ITR 83 (SC) has held that PCIT has to be satisfied of twin conditions, namely, (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent - if the 13 order of the ITO is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue - recourse cannot be had to Sec. 263(1). It was further held that the provision cannot be invoked to correct each and every type of mistake or error committed by the AO; when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the ITO is unsustainable in law. 22. In the present case it is an undisputed fact that the return of income for the year under consideration was selected for limited scrutiny under CASS for making inquiries on four issues including the Short Term Capital Gain u/s 111 of the Act. We find that to examine the issues for which the case of the assessee was selected for limited scrutiny, notice u/s 143(2) and 142(1) of the Act was issued by AO along with questionnaire and the assessee was also asked to submit the various details contained therein. The paper book filed by the assessee reveals that in response to the notice issued by AO, assessee had made submissions on various dates namely on 1.9.2017, 5.12.2017, 13.12.2017, 18.12.2017 and on 21.12.2017. On the aforesaid dates, assessee had inter alia filed the computation of capital gains, details from whom the shares were purchased, their PAN numbers, copies of purchase bills, copies of bank account evidencing payment to sellers, contract note for sale of shares, 14 PAN number and SEBI registration number of the broker, copy of the DMAT account, copy of notice for listing of shares by BSE ledger account in the books of sellers, bank account evidencing payment to sellers, contract note for sale of shares. It is also a fact that the purchasing of shares being off market was also informed to the AO and the complete details from whom they were purchased by the Assessee was also furnished to the AO. The AO after examining the aforesaid details and on being satisfied with the queries raised, had accepted the contentions of the assessee and had made no addition on that count. In view of the aforesaid facts, we are of the view that AO had applied his mind to the information and details furnished by the assessee and after considering the information, he was of the view that the short term capital gains has been correctly computed by the assessee and accordingly accepted the claim, and, which according to us is a possible view. Before us, no material has been placed by the Revenue to demonstrate that the view taken by the AO was wholly unsustainable in law. Further, it is a settled law that the order of the AO cannot be branded as erroneous if the Commissioner is not satisfied with the conclusion arrived by the Assessing Officer. The order can be brought within the purview of an erroneous order only if it involves an error by deviating from law or upon erroneous application of the legal principle. We also find that PCIT has observed that the present case was a case where it was a clear case of lack of inquiry. It is a settled law that the power of revision can be exercised only where no inquiry as required under the law is done. It is not open to 15 enquire in cases of inadequate inquiry. In the present case, as noted above, the AO had raised various queries and the same were also replied by the Assessee. In such a situation it cannot be said that there was lack of inquiry from the end of AO. We further find that PCIT at the end of para 8 of the order has also not given any conclusive finding about the shares of K. D. Trendwear Ltd. that it is a penny stock as his observation is “apparently K. D. Trendwear Ltd. is a penny stock” which shows that he is not sure about the shares of K. D. Trendwear Ltd. being a penny stock. 23. On the submission of the Ld AR that the first notice dtd 24.2.2021 was general in nature, we find force in the argument of Ld AR. On the perusal of the aforesaid notice (the copy of which is placed at page 111 of the paper book), we find that vide the notice the assessee was asked to produce supporting documents/information in support of the issues involved but there was no details about the issue for which the assessee was required to file the details. Sec. 263 of the Act confers powers on the CIT/PCIT to revise the assessment order after giving the assessee an opportunity of being heard, and after making and causing such enquiry to be made, as may be deemed necessary. The Hon’ble MP High Court in the case of CIT v. Sattandas Mohandas Sidhi [1998] 230 ITR 591 (MP) has observed that the issuance of a valid notice is not a mere procedural requirement and that the notice should state reason for exercising revisional jurisdiction. 16 24. On the issue of the order of AO being cryptic and therefore the order being passed by non application of mind resulting into justification of the invocation of powers u/s 263 being justified, we are of the view that if a query is raised during the assessment proceedings and responded to by the assessee, the mere fact that it is not dealt with in the assessment order would not lead to a conclusion that no mind had been applied to it. Here it would be relevant to refer to the decision of Hon’ble Allahabad High Court in the case of CIT vs. Goyal Private Family Specific Trust (1988) 171 ITR 698 (All) where the Hon’ble High Court has observed as under: “The orders of the Income Tax Officer may be brief and cryptic, but that by itself is not sufficient reason to brand the assessment orders as erroneous and prejudicial to the interest of the Revenue. Writing an order in detail may be a legal requirement, but the order not fulfiling this requirement cannot be said to be erroneous and prejudicial to the interest of the Revenue. It was for the Commissioner to point out as to what error was committed by the Income-tax Officer.” 25. As far as the invocation of Explanation 2 to Section 263 by PCIT in the present case is concerned, we are of the view that only in a very gross case of inadequacy in inquiry or where inquiry is per se mandated on the basis of record available before the AO and such inquiry was not conducted, the revisional power so conferred can be exercised to invalidate the action of AO. 26. In view of the aforesaid facts, and relying on the decisions cited hereinabove, we are of the view that in the present case, Learned PCIT was not justified in invoking the provisions of 17 Section 263 of the Act to set aside the assessment order passed by AO u/s 143(3) of the Act. We therefore set aside the order of PCIT. Thus the grounds of the assessee are allowed.

Suman Jyoti Khaitan Vs. ACIT, Circle – 67(1), New Delhi in ITA No. 884/Del/2018

We have considered the rival submissions. We are of the view that adhoc disallowance out of expenses claimed by the assessee without bringing on record any adverse material deserves to be deleted being purely on conjecture and surmises alone. In the case of Thakur Vaidyanath Aiyar & Co. (supra) similar disallowances were held to be unjust and improper. We quote para 10 of the decision (supra) :- “10. We have heard the Ld. DR and perused all the relevant material available on record. It is pertinent to note that the Assessing Officer has simply rejected all these expenses stating in the Assessment order that the assessee could not produce proper vouchers. But from the perusal of the records which was before the Assessing Officer, it can be seen that the assessee has given all the vouchers and the relevant details of these expenses which was not at all taken into consideration by the Assessing Officer. Thus, merely on assumption basis the Assessing Officer disallowed 1/10th of these expenses which are not just and proper. Therefore, Ground No. 8 is allowed.” 7.2 Respectfully following the decision of the Coordinate Bench of Tribunal (supra) and holding the same view, we delete the impugned disallowance and direct the Ld. AO to modify the assessment order accordingly.

Bajaj Allianz General Insurance Company Ltd. Vs. M.A.C.T., KATHUA [2022] 136 taxmann.com 233 (Jammu & Kashmir Ladakh)

Section 194A of the Income-tax Act, 1961 - Deduction of tax at source - Interest other than interest on securities (Interest earned on awarded amount) - Whether as per section 194A, Insurance Company is duty bound to deduct tax at source on interest component of compensation awarded by Motor Accident Claims Tribunal(MACT), where amount of such interest paid in a financial year exceeds Rs. 50 thousand - Held, yes - Whether therefore, where interest component exceeded Rs. 50 thousand and, Insurance Company deducted TDS and deposited same with Central Government, it had carried out mandate of clause (ix) of section 194A and had not committed any illegality, thus, MACT could not have directed Insurance Company to pay said amount yet again for its payment to claimants - Held, yes [Paras 7, 8 and 10][In favour of assessee]

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