The I-T can now use address of the assessee as available with the banks, post office, insurer or that available in government/local authority records
The central board of Direct Taxes has amended the rules relating to service of notice, summons, requisition or order.
The step widens the scope of addresses that the I-T department can use for delivering any form of communication with the taxpayers.
The I-T can now use address of the assessee as available with the banks, post office, insurer or that available in government/local authority records.
It can also include communication address provided under PAN database, which is meant for filing statement of financial transaction.
The extant rule provides that the I-T could use the address from either the PAN database or a taxpayer’s registered office address.
Experts said the change in rule was to ensure tax authorities can track those asseesses who aren’t reachable at the addresses available with the department.
I-T department is set to issue notices to 4 to 5 lakh high networth individuals across the country who were trading in bitcoins on exchanges. Last week, the department had conducted surveys across major cities
Widening its probe into bitcoin investments and trade, the Income Tax (I-T) department is set to issue notices to 4 to 5 lakh high networth individuals (HNI) across the country who were trading on the exchanges of this unregulated virtual currency.
The taxman had conducted surveys at nine such exchanges last week to check instances of tax evasion.
The department, official sources said, found that out of the estimated 20 lakh entities registered on these exchanges, about 4 to 5 lakh were “operational” and indulging in transactions and investments.
Sources told PTI that the Bengaluru investigation wing of the tax department, which supervised last week’s operations, has now dispatched the information of the individuals and entities found on these databases to eight other such wings across the country for a detailed probe.
“Those individuals and entities whose records were recovered by the department are now being probed under tax evasion charges. Notices are being issued and they will have to pay capital gains tax on the bitcoin investments and trade,” a senior official privy to the operation said.
About 4-5 lakh HNIs and their businesses are being issued notices which will first seek their relevant financial details and subsequently establish the tax demand, if any, he said.
As the bitcoins or the virtual currencies (VCs) are illegal and unregulated in the country as of now, the IT department has taken action as per the existing provisions, they said.
The survey operations conducted last week, under section 133 A of the Income Tax Act, were undertaken for “gathering evidence for establishing the identity of investors and traders, the transaction undertaken by them, identity of counter-parties, related bank accounts used, among others,” they said.
A survey action under the IT law pertains to the tax officials making a surprise visit to the business premises of the party under action but not their residential ones. The trigger for the action is understood to be the huge spike being registered in the value of bitcoins and other virtual currencies in the recent past.
Suspected black money being converted into white, post demonetisation, through the use of bitcoins was also under the department’s scanner, officials said. Earlier this month, there was a spurt in the value of a bitcoin. It rose from under $10,000 at the start of the year to close to $20,000, before a sharp 20 per cent plunge within hours.
Bitcoin, a virtual currency, is not regulated in the country and its circulation has been a cause for concern among central bankers the world over for quite a while now.
The Reserve Bank of India (RBI) has also cautioned users, holders and traders of virtual currencies. The government has also said that it does not recognise ‘crypto-currency’ as legal tender in India. In March, the Union finance ministry constituted an Inter-Disciplinary Committee to take stock of the present status of virtual currencies both in India and globally and suggest measures for dealing with them.
The committee has submitted its report which is being examined.
The RBI has cleared its stand on cryptocurrencies since long. “There is no underlying or backing of any asset for VCs. As such, their value seems to be a matter of speculation. Huge volatility in the value of VCs has been noticed in the recent past. Thus, the users are exposed to potential losses on account of such volatility in value,” the central bank had said in a December 24, 2013 note.
The move comes at a time when the tax department’s field formations have apparently been on an overdrive after the demonetisation move brought large chunks of supposedly tax-evaded cash into the banking system.
The Central Board of Direct Taxes (CBDT) has sent a missive to all assessing officers (AOs) to stick to protocol while pursuing cases of “limited scrutiny” and not resort to “fishing and roving inquiries” in such cases.
The Central Board of Direct Taxes (CBDT) has sent a missive to all assessing officers (AOs) to stick to protocol while pursuing cases of “limited scrutiny” and not resort to “fishing and roving inquiries” in such cases. The move comes at a time when the tax department’s field formations have apparently been on an overdrive after the demonetisation move brought large chunks of supposedly tax-evaded cash into the banking system. The department selects cases of “limited scrutiny” — which restricts probe into a single aspect rather than a complete appraisal of tax liability — through Computer Aided Scrutiny Selection (CASS). The data mined include annual information reports and 26AS, which includes tax payment/TDS history. In its latest direction to the assessing officers (AOs), the board said it has come across instances where AOs have ventured beyond their jurisdiction while making assessments in ‘limited scrutiny’ cases by initiating inquiries on new issues without following the due procedure.
“These instances have been viewed very seriously by the CBDT and in one case, the Central Inspection Team of CBDT was tasked with examination of assessment records on receipt of allegations of several irregularities,” the letter said. The CBDT in fact suspended the officer concerned after it was found that there was no reason recorded for expanding the scope of limited scrutiny. Violating standard operating procedure, the officer had not sought approval from principal commissioner for converting limited scrutiny cases into a complete scrutiny case. Moreover, the AO hadn’t maintained the order sheet properly, which gave rise to strong suspicion of mala fide intentions. The purpose of introducing ‘limited scrutiny’ was to curb overarching powers of AOs and improve ease of paying taxes. The CBDT has previously issued instruction to AOs to confine the questionnaire to the specific issues and complete the case expeditiously in a limited number of hearings.
The CBDT reiterated that AOs must maintain “order-sheet” properly by ensuring that the minutes of the hearing in a case are entered along with relevant date. Further, it said that the order-sheet must have entries for each posting, hearing and seeking and granting of adjournments. Order-sheet is meant to chronicle the progress of an assessment case by the concerned official. “Suspension of undisciplined officers clearly conveys the message that the government aims to make India’s taxation regime transparent, non-adversarial and taxpayer friendly. But the established fact is that real picture is drawn from the enforcement and not policy formulation. Hoping that the tax authorities follow the instructions diligently going forward and end the era a tax terrorism,” Rakesh Nangia, managing partner at Nangia & Co said.
The seven APAs signed over the last month pertain to sectors like FMCG, semi-conductor, information technology, travel and leisure, office furniture and engineering.
The Central Board of Direct Taxes (CBDT) has signed seven more advance pricing agreements (APAs) with Indian taxpayers as it looks to reduce litigation by providing certainty in transfer pricing.
The seven APAs signed over the last month pertain to sectors like FMCG, semi-conductor, information technology, travel and leisure, office furniture and engineering.
“The Central Board of Direct Taxes (CBDT) has entered into seven more Advance Pricing Agreements (APAs) during October 2017. All these agreements are unilateral,” the CBDT said in a statement.
With the signing of these agreements, the total number of APAs entered into by the CBDT has gone up to 184, which includes 171 unilateral and 13 bilateral APAs.
In 2017-18, a total of 32 APAs (2 bilateral and 30 unilateral) have been signed till date.
The APA scheme was introduced in the Income-Tax Act in 2012 and the ‘Rollback’ provision in 2014.
The scheme aims to provide certainty to taxpayers in the domain of transfer pricing by specifying methods of pricing and setting the prices of international transactions in advance.
According to the statement, the progress of the APA scheme strengthens the government’s resolve of fostering a non-adversarial tax regime. The Indian APA programme has been appreciated nationally and internationally for being able to address complex transfer pricing issues in a fair and transparent manner.
Rates have dipped to a third to 6 per cent from 9-18 per cent about 6-9 months ago.
Interest rates that money lenders charged borrowers hardly budged for decades irrespective of policy decisions. But even that is collapsing faster than what it is in the formal banking system, thanks to the implementation of Goods and Services Tax.
Borrowing in the informal market is no more lucrative.
Lenders who fund small traders and merchants have lowered their rates to just a third of what they were charging, but still the demand is not showing up.
Rates have dipped to a third to 6 per cent from 9-18 per cent about 6-9 months ago, said two dealers aware of the market dynamics.
“Those businessmen have now limited options to run operations in cash especially after GST implementation and demonetisation,” said a textile business owner, who did not want to be identified.
“From a local politician to an industrialist or local trader whoever has additional unaccounted cash are normally the lenders in this informal loan market.”
A huge army of businessmen borrowed in an informal market from money lenders to avoid getting trapped by the banking system and the tax department. This was known as ‘Kachha Credit’ among practitioners.
With the implementation of GST which produces a chain of transactions till it reaches the ultimate consumer, merchants have little scope to escape accounting for their trades.
So, instead of funding their purchases through informal credit at high rates which was beneficial since it allowed escaping the tax net, they are choosing to fund businesses through formal credit. To keep businesses running, money lenders have lowered rates.
Since the tax department is keeping close watch on businesses, all traders preferred anonymity. This market is known as a plat form for lending and borrowing unaccounted or untaxed money without any collateral. Traders now shy away from availing such credit amid cash squeeze triggered by reform measures like GST and demonetisation. Sometimes, people take highly leveraged positions borrowing such money, which a bank would have declined.
A garment trader who may be eligible to borrow say, Rs 10 lakh in the absence of creditworthy balance sheet, can take a loan up to Rs 50 lakh due to personal knowledge of businesses, dealers said. The practice is prevalent in the garment industry.
Mumbai’s Bhiwandi, a business centre, used to be the hotbed of it. It has died down after the Central Value Added Tax, a central government tax levy introduced by Vajpayee led NDA, was introduced.
The identities of the taxpayer and his assessing officer will be hidden in a bid to check corruption and harassment assessees face at the hands of over-zealous officers.
To check corruption and harassment, the tax department will soon launch a pilot of “jurisdiction-free assessment” where a tax officer will not get to know identity of the assessee as allotment of cases will be done randomly by computers rather than on the basis of area.
The success of the pilot, to be first carried out in New Delhi and Mumbai, will determine if the plan has to be expanded all over the country, a senior revenue department official said.
The country is divided into 18 tax zones. Taxpayers are assessed by the officers of the region they are based in.
Under the new system, the assessment zones will be demolished and a special computer software will allocate a taxpayer to any officer anywhere in the country, he said.
The identities of the taxpayer and his assessing officer will be hidden in a bid to check corruption and harassment assessees face at the hands of over-zealous officers.
The tax department is working on a major reform initiative to make compliance taxpayer friendly and a 13- member committee of tax officers has been formed to look into implementation issues, the official said.
But before the country-wide launch, the pilot is being run to spot implementation issues.
“After you initiate jurisdiction-free assessment, a taxpayer might say he wants to meet the tax officer face to face and explain his case. What do we do in that case? Can we deny the taxpayer an option to meet his assessment officer (AO)? Say, we allow them to have video conferencing, then we will have to set up the facility in tax offices. These are issues we need to address,” he explained.
Among draft recommendations of a technical committee submitted to the CBDT, the apex policy-making body on income tax matters, the tax department wants to move to the jurisdiction-free I-T assessment where the taxpayer will not have to meet his assessing officer face to face.
The official also said the proposals were broadly reflected in the Prime Minister’s speech in Rajaswa Gyan Sangam earlier this month when he had said the relation between the tax department and an assessee should be that of an examiner and an examinee where either party does not know each other.
Modi, the official said, had also called for redrafting of the archaic income tax laws so that these become simpler. The humongous Income Tax Act has been in place since 1961 and the UPA government had proposed a Direct Tax Code to replace the Act.
However, since the government changed in 2014, the DTC could not be taken up.
It’s well within the law and powers of the tax office to review an old tax assessment if there is suspicion of tax fraud.
The tax office is reopening old records of many companies that have wound up and no longer exist in the books of the government — something the revenue department has rarely done in the past.
Former directors of such closely-held private companies, which have received tax notices along with the official liquidators, fear they could be suddenly saddled with unforeseen liabilities. While opening new private companies and shutting down old ones have often been a ploy to move unaccounted money, some of the companies set up to carry out bona fide businesses which subsequently failed have also come under the glare of the income tax department.
Till now, the department has typically stayed away from companies to which it had issued non-objection certificate prior to the winding process. But, it’s well within the law and powers of the tax office to review an old tax assessment if there is suspicion of tax fraud.”In case of private limited companies, the liability of directors continues even after liquidation. Here, these ex directors have to prove that any non-recovery of tax is not due to any gross neglect, malfeasance, or breach of duty on their part in relation to the affairs of the company,” said senior chartered accountant Dilip Lakhani.
“But such reopening in case of companies which have been liquidated or struck off from the RoC (Registrar of Companies) records should be done very selectively — may be only in situations of tax fraud and not situations of plain vanilla income having escaped assessment,” said Mitil Chokshi, senior partner at Chokshi & Chokshi LLP.
The liquidator of a company going for ‘voluntary liquidation’ can approach the tax office to ascertain the outstanding tax liability, and set aside the amount before distributing the proceeds from asset sale to creditors and shareholders.
But even in such cases the department can (though rarely done) reopen old assessments if it later suspects fraud or fund diversion. The no-objection certificate, according to a senior tax official, is simply based on the outstanding tax claim on that date. According to him, if the department has to look into serious irregularities, then no NoC can be issued. “The provisions do provide powers to assessing officers to re-open and issue such notices,” said Chokshi.
“But is it really fair to re-assess based on some possible income having escaped assessment, especially when the companies are no longer in existence?” One of the closed companies to have received notice for reopening assessment was an outsourcing arm of a US bank. Some of the liquidated entities were engaged in marketing, realty and infrastructure development.
Significantly, even if the tax amount (approved by the I-T department) is set aside in the course of liquidation, former directors can be questioned if the company is ‘private limited’ in character. The companies have received reopening notices for assessment years 2011-12 and 2012-13.
The taxman can go back up to six years in reopening of old assessments. However, in covering undisclosed foreign assets — overseas bank accounts, properties etc — the I-T department can rake up 16-year old transactions in probing tax evasion. In the US, no-objection certificate from the Internal Revenue Service (the national tax collection agency) is required before final liquidation.
There are no provisions for reopening unless a tax fraud has been identified. According to another tax practitioner, while such a notice may be stayed by moving the high courts, the question is who will do it?”Liquidators were appointed for a limited period; erstwhile Indian directors may not have the authority, while foreign promoters and directors are least interested,” said the person.
