Dos and Donts during the Assessment Proceedings PRESENTED BY CA Atul C. Bheda FCA, LLB(GEN), DISA(ICA).
Appearing Before AO Receiving Notice Check validity of notice with regard to (i) Section, (ii) Time & (iii) Jurisdiction. Read the contents of the notice Raise your objections for any defect in the notice.
Appearing Before AO Ask for the Questionnaire Dress Code Respect the Chair Tips for Personal Hearing
Give the details parawise and point wise as per the Questionnaire First para should contain the preamble
Before submitting any details/information to the Assessing Officer, pause and think, as to why he is asking for these details/information or what could be his intention behind asking for these details.
Observe accuracy while filing necessary details/information in respect of headings of the details i.e. statement of Sales/purchases exceeding Rs. 10,000 and not just Statement of Sales/Purchases
If on the date of hearing the Assessing Officer is not present, kindly ensure that your presence is noted in the Order Sheet or write a letter next day informing the Assessing Officer that you had come yesterday but he was not present
Before signing the order Sheet, ensure that whatever discussed with the Assessing officer has only been incorporated in the Order Sheet.
Maintain a similar Order Sheet or Proceeding sheet at your office, mentioning all the details day wise.
If due to any reason you are not able attend on the date of hearing or submit the necessary details on the date of hearing, kindly write a letter to the Assessing officer for leave of absence or reason for non submission of details.
Ensure to file all the details asked for, other wise negative inference can be drawn at a later state. At the same time don t file unnecessary details which can be used against you at a later stage.
File all the relevant details or evidence to sustain your claim, which can be used as evidence even at a later state.
Covering letter should very specifically list down all the documents that are filed along with and obtain the acknowledgement of the Assessing officer.
Whenever any details are filed, the same should be filed along with a Covering letter. Always give reference of your previous letter in the next letter to establish continuity or link between the letters.
Always write at the end of the Covering letter We will be glad to provide any further information/explanation which you may require so that on a later date the assessing officer can not say that information was not made available fully.
It is important to know the Law, but it is more important to know how to use the Law
You should know, which arguments will be effective at what lever. Certain arguments should be made only at the appellate level and not at the assessment level.
Try to put the ball in the court of Department. Shift the proof of burden on the Department. For example, in case of Loan confirmation, if you are not able to produce the party, ask the Assessing Officer to issue the summons to the party.
Insist on Cross Examination to save the case.
Never give up. Try to meet the challenges offered by the assessing officer. Apply the rule of Yes sir, but
Always remember the golden rule of there can be no sales without corresponding purchases. So if the Assessing officer wants disallow your purchases on any ground, ask him to disallow credit if Sales as well
No addition can be made on account of Carried forward Balances as unexplained cash.
Ensure payment of tax and interest on the addition of income, which is acceptable to you, at any early date.
DON T S Never accept notices on behalf of the Assessee Never Sign on blank order sheet, blank Acknowledgements. Do not leave the books of A/c s & record with A.O. until specific impounding Order.
No statement of Oath should be signed without issuance of summons. Avoid submission of document / signatures after the time limit for completion of Assessment. Avoid unnecessary delays especially when AO favourable.
Circular No.3 dt. 16/1/42- assessments should not be influenced by the Budget estimated. Circular no.230 dt. 27/10/77 states that ITO should give each assessee a different timing for hearing. CBDT Letter no.241/23/70 dated 23/10/70 states that orders should be passed within 14 working days after the date of hearing Instruction no.1395 dt. 15/5/81 if ITO cannot adhere to the schedule of hearing the assessee should be informed by letter, telephone whereever possible. Circular No.3 of 16/1/42 states that unless ITO feels if advisable books of a/cs & voucher etc. should not be called for in case of companies where accounts have been audited.
Legrand (India) Private Ltd. vs Union Of India (Uoi) And Ors. on 21 June, 2007 2008 (2) BomCR 387, 2007 (6) MhLj 146 The law declared by the highest Court in the State is binding on authorities, or tribunals under its superintendence
(a) It is immaterial that in a previous litigation the particular petitioner before the Court was or was not a party, but if a law on a particular point has been laid down by the High Court, it must be followed by all authorities and tribunals in the State ; (b) The law laid down by the High Court must be followed by all authorities and subordinate tribunals when it has been declared by the highest Court in the State and they cannot ignore it either in initiating proceedings or deciding on the rights involved in such a proceeding; (c) If in spite of the earlier exposition of law by the High Court having been pointed out and attention being pointedly drawn to that legal position, in utter disregard of that position, proceedings are initiated, it must be held to be a wilful disregard of the law laid down by the High Court and would amount to civil contempt as defined in Section 2(b) of the Contempt of Courts Act, 1971.
295 ITR 42 (BOM.) / 209 CTR 110 Mahindra & Mahindra Ltd. v. Assessing Officer The law as to how the income-tax Department should follow the parameters while passing orders on stay applications filed in pending appeals to the first appellate authority, laid down by this court in KEC International Ltd. v. B.R Balakrishnan [2001] 251 ITR 158 has also not been followed which warrants an action under the provisions of the Contempt of Courts Act considering our past experience that the consistent approach of the Revenue is not to follow the law laid down by this court.
[2014] 47 taxmann.com 371 / 33 ITR(T) 1 /150 ITD 633 (Mumbai Trib). ITO v.growel Energy Co. Ltd. ITAT issues strictures against AO & CIT & fines them for filing a frivolous appeal. a token cost of Rs. 5,000 upon the CIT who has given the authorisation and cost of Rs. 10,000 upon the AO who has filed this appeal
CBDT OFFICE MEMORANDUM dated 7 th November, 2014 for consolidation of earlier instructions F. No. 279/Misc./52/2014-(ITJ) iii Despite less than one percent cases being selected for scrutiny assessment, this area of work continues to remain in focus where the tax administration is questioned as adversarial. The selection of cases under Computer Assisted Scrutiny Selection has resolved the issue of subjectivity in selection of cases for scrutiny. However, the process of scrutiny involving long and non-specific questionnaires, the nature of additions made and the high-pitched assessments without proper basis continue to attract adverse attention. Instruction No. 6/2009 entrusted a responsibility on each Range Head to ensure improvement in quality of assessments by issuing directions under section 144A of the Act. There is a need to follow the said Instruction in letter and spirit and accordingly, the Range Heads are required to ensure that frivolous additions or high-pitched assessments without proper basis are not made. The Principal Commissioners of Income-tax/ Commissioners of Income-tax are required to supervise the work of their subordinates to ensure due discharge of these functions.
CBDT OFFICE MEMORANDUM dated 7 th November, 2014 for consolidation of earlier instructions F. No. 279/Misc./52/2014-(ITJ) v Instruction No. 7 of 2014 dated 26.09.2014 clarifies that ordinarily in scrutiny cases selected on the basis of AIR/CIB/26AS information, the scrutiny shall be limited to that information. Wider scrutiny would be possible only with the sanction of Principal Commissioner of Incometax/ Commissioner of Income-tax in specified cases and under the monitoring of the Range Head. (Such cases form 25-30% of the total scrutiny basket, thus limiting the cases of full scrutiny).
CBDT OFFICE MEMORANDUM dated 7 th November, 2014 for consolidation of earlier instructions F. No. 279/Misc./52/2014-(ITJ) Cleanliness and punctuality Appointment given to the public must be honoured Withholding of refunds Stay of demand and grant of installments Remand report only on a specific matter. Threshold limits for appeals to ITAT 4, High Courts 10 and Supreme Court 25 Grievances are disposed off within the specified time period Summons are issued only in deserving cases Officers and staff at all levels are advised to follow the Instructions religiously. Non adherence to these instructions will be viewed very seriously and disciplinary action initiated
Know when to stop
Evidences which can help an assessee to discharge his onus Direct evidence - Producing the books of accounts, bills, stock register, payment etc. - Filing confirmation and producing parties. Indirect evidence - Delivery challans - Lorry receipts
- Octroi payment - Confirmation from broker - Quantity tally - Sales details - Excise register, payment - Confirmation from transport operator - Godown rent and records maintained by godown keeper - Bank accounts cheque clearance certificate - Comparison of GP/NP - Rate comparison - Consumption details - Amounts credited to respective Accounts - Third party assessment orders - Expert valuation etc.
Following Check lists may help for better representation 1. Request the AO to give the copies of documents which he intends to use against the assessee. 2. Make an application for copies of statement of parties and assessee if the statement was taken in the course of survey etc. 3. If the notice is received U/s 148- - File return under protest Ask for recorded reasons - Objections to reassessment - After receipt of the order rejecting the objection, consult the lawyer whether it is worth approaching High Court by way of writ or contests by filing an appeal etc. 4. File quantity details 5. Comparison of GP assessees own case or similar trader or manufacturer
6. Ask cross examination of the alleged hawala dealer 7. Get the confirmation or affidavit from the broker 8. File detailed reply on facts 9. If statement was given on wrong presumption of law or facts File retraction within reasonable time. 10. Before filing reply, see the implications under general law and other laws. 11. Make application under RTI to get the information of the alleged hawala supplier and details of his assessment under Sales Tax 12. File certificate from banks 13. Try to substantiate the claim before the lower authorities by facts and law 14. Try to produce all evidences before the AO/CIT (A) or Tribunal. Tribunal is the final fact finding authority. Only question of law can be challenged in the High Court. Hence, proper representation before ITAT is very important.
Precautions an assessee should take while dealing with new suppliers to avoid disallowance of claim for purchases. It depends upon the nature of business and facts. One may consider the followings - Deal with the parties who are genuine. - Verify from website whether their names are registered or in the defaulters list - Pay by account payee cheques - Maintain the records as required by law - Year end outstanding balance is payable try to get the confirmation. If it is Pvt. Ltd. company make search in registrar of Companies - If it is Firm register of firm to find out whether registered - Get the confirmation from the broker - One can have agreement with broker - Know your customer - Use of technology-entire purchase delivery and production is recorded -