Mazars Tax Update | Edition 26.20

Direct Tax News

Faceless assessment scheme also applies to Penalties proceedings under I-T Act

Under the Faceless e-assessment Scheme, penalties will be imposed by the National E-Assessment Centre (NeAC) instead of jurisdictional officers, and the option to approach the dispute resolution panel will remain open to taxpayers.

The Income Tax Department will map the digital behaviour of taxpayers

A senior official said that since all interactions of a taxpayer with the tax authority will be logged under faceless scrutiny assessment in electronic mode, the I-T department will map the digital behaviour of taxpayers to create their profiles. The NeAC will also issue a SOP for identifying cases that will need in-person discussion with the jurisdiction officer or via video conferencing.

IT Raid in Bhopal unearths benami transactions worth Rs. 105 Crores

The Income Tax Department carried out search and seizure operation at various locations in Bhopal and unearthed a network of over 100 benami properties, some linked to retired government officers, who are suspected to infuse huge amount of cash to buy such properties in the name of persons/ acquittances who has no means to buy such properties, indicating that these are benami properties. Documents pertaining to plots, flats and agriculture land having estimated market value of Rs. 105 Crores have been found.

Google Tax contributes only 1% of the total direct tax collection in major cities

Finance Bill 2020 expanded the scope of Google Tax @ 2 % equalisation levy with  effect on April 1, 2020, on trade and services by non-resident e-commerce firms with a turnover of over Rs 2 crore. Till 20/08/2020, the government has collected a total of Rs 396 crores from Google Tax as against 407 crores  collected in the same period last year.

The IT hubs, Bengaluru and Hyderabad together contributed about 75% whereas  Delhi and Mumbai together contributed approximately 22% of total collection.

Income Tax Department issued refunds worth Rs. 88,652 crores during corona outbreak

The Income Tax Department has issued I-T refunds to over 24 lakh personal and corporate taxpayers from 01 April 2020 onwards worth Rs. 88,652 crores. This refund was issued after Finance Minister’s announcement of relief package to aid the taxpayers during the Covid-19 pandemic period.

This refund includes corporate tax refund worth Rs. 60,472 crores  in 1,58,280 cases and Rs. 28,180 crores  in 23,05,726 non-corporate cases.

Judicial Pronouncements

Hon’ble Supreme Court held that capital gain arising out of acquisition u/s 16 of the Land Acquisition Act’1894 shall be taxable in the year of reward of compensation

Raj Pal Singh v/s CIT, Civil Appeal No. 2416 of 2010, dated 25 August 2020

Brief facts of the case are that the tax payer assessee owned a parcel of land in Ambala district which was acquired by the Government through notification dated 15.05.1968 whereas the compensation for the same was awarded on 29.09.1970. Vide another notification dated 26.06.1971, the Government acquired another parcel of land of the taxpayer assessee and issued directions to the collector to take possession of the said land after the expiry of 15 days as mentioned in Section 17 of the Land Acquisition Act, 1894. Consequently, the possession was taken on 04.09.1972 whereas the compensation was awarded on 27.06.1974.
Hon’ble Supreme Court held that the land acquired through notification dated 15.05.1968 was acquired u/s 16 of the Land Acquisition Act, 1894 and capital gain should arise for the A.Y. in which the compensation was awarded.

Mumbai Tribunal held that issuing second notice under section 148 of I-T Act without completing pending assessment proceedings is illegal. 

Johnson & Johnson Ltd v/s Addl. CIT, ITA NO. 4912/MUM/2013 (A.Y.2004-05) dated 10 Aug 2010

Brief facts of the case are that the assessee filed ITR for A.Y. 2004-05.  The assessment u/s. 143(3) was completed on 28/11/2006. The notice under section 148 of the Act was issued to the assessee on 02/07/2008. The assessee filed reply to the said notice on 23/07/2008 and filed return on 30/07/2008. No action was taken by the Assessing Officer on the reply and the return filed in response to the notice.
 
The assessing officer again issued notice u/s 148 of the I-T Act on 29/03/2011. The Mumbai Tribunal held that the reassessment proceedings were initiated beyond period of four years and nowhere in the reasons it has been brought out that the assessee has failed to disclose fully and truly all material facts necessary for the assessment. The CIT without commenting on the observations made by the Assessing Officer, approved permission for reopening the assessment in a mechanical manner without application of mind
Therefore, issuance of second notice issue is invalid and deserve to be quashed.

Bombay High Court held that penalty cannot be imposed when full particulars are furnished at initial stage of assessment proceedings.

Bombay High Court in Shri Omprakash T. Mehta vs ITO, ITA NO.1742 OF 2011 dated 17 Aug 2020

The brief facts of the case are that the assessee along with 4 others executed an agreement for sale in respect of a plot of land during A.Y. 2005-06. Conveyance was to be executed only upon receipt of the entire consideration.

The assessee received his share in instalments during A.Y. 2005-06 to 2007-08 and capital gains arising from the sale agreement with respect to the said plot was offered to tax by the appellant on receipt basis in the respective years. Later, A.O. issued notice dated 21.04.2008 under the provisions of Section 148 of the Act seeking to reopen the assessment for the Assessment Year 2005- 06 under Section 147 of the Act. AO completed the reassessment for the Assessment Year 2005-06 on 26.11.2008 and taxed the assessee’s share of capital gains for the said A.Y. 2005-06 and also initiated penalty proceedings u/s 271(1)(c). By order dated 28.05.2009 A.O. levied penalty for furnishing inaccurate particulars of income.
The Bombay High Court held that when the assessee declared the full facts, furnished the sale agreement at the first instance and never suppressed any fact, penalty u/s 271(1)(c) of the Act cannot be levied.

Penalty order cannot be confirmed mere on ground that submissions filed did not bear assessee’s signature

IT(SS)A NO. 124/RJT/2017- Keshavlal Devkaranbhai Patel vs ACIT

The Rajkot tribunal held that the CIT-(A) ought to have adjourned the matter and pass a further direction upon the assessee to file written notes of submission, duly signed, afresh. It is the basic principle that justice is not only be done but it must also be seen to be done. In the absence of that, we find that the order impugned is not in consonance with the spirit and object of sub section 6 of section 250 of the act.