Mazars Tax Update | Edition 25.20

Direct Tax News

All communication with taxpayers to be from National e-Assessment Centre (NeAC), under faceless assessment 

The Income Tax department issued guidelines for the demarcation of roles of officers for the implementation of faceless assessment as per which NeAC has been tasked with management of Faceless Assessment proceedings u/s 143, 144, 148 read with 143(2) or 142(1) of the I-T Act as well as to communicate with the tax payer.

Ministry of Finance brushed aside rumours of modifications in I-T Return format

The I-T department currently receives information directly from third parties, like cash deposit/withdrawal from saving bank accounts, sale/purchase of immovable property, credit card payments, purchase of shares, debentures, foreign currency, mutual funds, among others through statement of financial transactions. Recently, the government revised the format of Form 26AS, stating that all such information from different SFTs would be shown in the new Form 26AS.
 
However, Source says there is no proposal to modify regular income tax returns forms and the taxpayer would not need to separately mention their high value transactions in I-T return.

CBDT added new conditions and guidelines for pension funds for claiming exemption u/s 10(23FE)

CBDT Notification no. 67/2020 dated 17^th August 2020

The Central Board of Direct Tax (CBDT), made following two new rules for pension funds for claiming exemption u/s 10(23FE)

1. Rule 2DB specifying other conditions to be satisfied by the pension fund.
2. Rule 2DC specifying guidelines for notification under clause (23FE) of Section 10.

Parents living in a shabby house cannot believe their son is director of two Chinese firms

Last week an I-T search operation were carried out at various premises in Delhi NCR wherein money laundering and hawala transactions carried out by various Chinese firms and their Indian counterpart were unearthed.

The search revealed that a boy named Rahul is a director of two Chinese firms and shareholder in two other firms. Parents of Rahul who live in a single room house in Peepal village in Khair area of Aligarh, could not believe that their son is a director of two Chinese firms and a shareholder in two other firms. It is suspected that his Aadhaar and PAN card, provided at the time of joining a new job in Noida, may have been used without his consent. The parents pleaded that government agencies should help him clear his name.

Judicial Pronouncements

The Delhi High Court held that refund cannot be withheld by I-T department where scrutiny notice was issued without justifiable reasons

Cooner Institute of Health Care & Research Centre (P.) Ltd. V/s ITO (W.P. (C) NO. 430 OF 2020)

The brief facts of the case are that petitioner filed its return of income for the A.Y. 2018-19 claiming refund of Rs. 1.43 crores on account of excess TDS. The case was selected for scrutiny under section 143(2) of the I-T Act. The CPC processed the ITR by allowing refund of Rs. 1,57,83,688/- which was never received even after various representations and it was informed that refund is withheld under section 241A of the Act without providing copy of the order or the reasons for withholding.
 
The only reason for withholding the refund was that assessee’s case was selected for limited scrutiny u/s 143(2) of the Act and the assessment was pending. Delhi High Court held that without recording any justifiable reason and without seeking approval of PCIT, the department cannot withhold refund u/s 241A of the Act, merely on behest of to notice issued u/s 143(2) of the Act.

Bombay Tribunal held that disallowing capital gains based on the third-party statement and without any cogent material is not tenable. 

Dipesh Ramesh Vardhan vs. DCIT (I.T.A. No.7648/Mum/2019)

The brief facts of the case are that the taxpayer-assessee sold shares of M/s Santoshima Tradelink Ltd and claimed exemption u/s 10(38) of the Act. The IT department conducted search operation on the taxpayer-assessee and investee company, wherein statement of one Mr. Vipul Bhat was separately recorded.

 
Mr. Vipul Bhat accepted his involvement in providing accommodation entries against commission and manipulation of the share prices of investee company. The assessee discharged his onus by furnishing contract notes, demat statements, bank statements, financials of M/s SAL and trading details of share.
 
Bombay tribunal held that once assessee has discharged its primary onus the onus shifted on the revenue to prove that such transactions are sham transactions and addition cannot be based on oral statement of unrelated person which does not corroborated by any cogent evidence.