CBDT clarifies that officer below the rank of JCIT can’t initiate penalty proceedings u/s 271D or 271E

SECTION 271D, READ WITH SECTION 271E, OF THE INCOME-TAX ACT, 1961 - FAILURE TO COMPLY WITH PROVISIONS OF SECTION 269SS - PENALTY FOR - COMMENCEMENT OF LIMITATION FOR PENALTY PROCEEDINGS UNDER SECTIONS 271D AND 271E

CIRCULAR NO.9/DV/2016 [F.NO.279/MISC./M-116/2012-ITJ], DATED 26-4-2016

It has been brought to the notice of the Central Board of Direct Taxes (hereinafter referred to as the Board) that there are conflicting interpretations of various High Courts on the issue whether the limitation for imposition of penalty under sections 271D and 271E of the Income tax Act, 1961 (hereafter referred to as the Act) commences at the level of the Assessing Officer (below the rank of Joint Commissioner of Income Tax.) or at level of the Range authority i.e. the Joint Commissioner of Income Tax./Addl. Commissioner of Income Tax.

Some High Courts have held that the limitation commences at the level of the authority competent to impose the penalty i.e. Range Head while others have held that even though the Assessing Officer is not competent to impose the penalty, the limitation commences at the level of the Assessing Officer where the Assessing Officer has issued show cause notice or referred to the initiation of proceedings in assessment order.

2. On careful examination of the matter, the Board is of the view that for the sake of clarity and uniformity, the conflict needs to be resolved by way of a "DepartmentalView".

Tips collected by hotel from customers and paid to employees couldn’t be taxable as salary: SC

Issue

“Whether tips collected by a hotel from customers and paid to employees could be chargeable as salary in hands of employees?”

Bank has no lien on security deposited with DRAT by borrower for consideration of his appeal on merits

Bank has no lien in terms of Section 171 of The Indian Contract Act, 1872 on the pre-deposit made by the borrower under Section 18 of the SARFAESI Act as pre-condition for hearing his appeal on merits

Facts:

a) The respondent-borrower filed Securitisation Application before the DRT against the steps taken by the secured creditor, a bank, for enforcing his security. However, DRT rejected the same.

b) The respondent-borrower moved to DRAT u/s 18 of the SARFAESI Act and deposited sum of Rs.50 lakhs before the Appellate Tribunal in terms of the proviso to section 18 of the said Act.

c) Realising that the appeal would not survive thereafter, the respondent sought permission from DRAT to withdraw the same and also for refund of the deposited amount. DRAT granted permission to withdraw deposits subject to the disposal of the appeal.

d) As the appeal itself was being withdrawn, the respondent filed writ before High Court.

e) The High Court set aside the said condition and permitted the respondent to withdraw the amount unconditionally.Aggrieved by the order, the appellant-Bank filed an intra-Court appeal which was dismissed by Division bench

On further appeal, the Supreme Court held as under:

Facebook friends may be treated as connected persons for the purposes of Insider Trading: SEBI

This article gives an analysis of the latest SEBI's order on Insider Trading especially it is a case concerning Promoters of a listed company and persons connected with them who have allegedly engaged in insider trading. SEBI has chosen the social media 'Facebook' to determine and to establish connection between the parties who have committed Insider Trading.

1. Introduction

Securities Exchange Board of India (SEBI) had originally framed SEBI (Prohibition of Insider Trading) Regulations, 1992 in order to deter the practice of insider trading in the securities of listed companies. Afterwards several amendments to the said Regulations and also judicial paradigm through various case laws had also evolved to prohibit insider trading. But major overhaul of the Regulations have not been done. But SEBI on 15^th January, 2015 had notified SEBI (Prohibition of Insider Trading) Regulations, 2015 [Regulations 2015] and has been done in order to strengthen the legal and enforcement framework, toughen the insider trading rules, align Indian regime with International practices and to provide clarity to certain definitions and concepts.

Surveying authority can’t allege excess stock without demanding standard weighment facility from assessee

Facts

a)  Surveying authority conducted survey at premises of assessee and alleged excess stock by weighing stock on basis of cartons. Consequently, the Assessing Officer (AO) made addition on account of excess stock.

b)  Assessee challenged that no addition could made on account of excess stock as weighment was not done by the surveying authority in accordance with the provisions of the Standards and Weights and Measures Act, 1976.

c)  CIT(A) upheld the addition made by the AO by observing that there was no evidence that the assessee provided to the survey team the necessary facility of weighment by a standardized scale.

d)  Aggrieved by the order of the CIT(A), assessee filed the instant appeal before the tribunal.

Mistake by return filing portal, TaxSpanner.com doesn't call for concealment penalty on taxpayer

Where assessee's salary was understated in her return due to mistake of online tax return filing portal (TaxSpanner.com) and she could not verify contents of return due to her pregnancy and immense pressure in office, concealment penalty was not justified

FACTS: 

a)     Assessee was a salaried employee who provided her Form No. 16 to an online tax return filing website (TaxSpanner.com) for filing of her return of income. Due to a mistake committed by website, her income was understated in return of income.

b)    Assessee received ITR-V from website and as she was having pregnancy of five months and due to immense work pressure in the office, she could not devote time to see the content of ITR filed, signed it straightaway and sent it to Income-tax Department.

c)     The Assessing Officer (AO) levied concealment penalty on her for understating the income.

d)    CIT(A) confirmed the order of the AO. Aggrieved by the order of the CIT(A), assessee filed the instant appeal before the tribunal.

Facebook friends may be treated as connected persons for the purposes of Insider Trading: SEBI

Probably, it is for the first time that SEBI has treated ‘Facebook’ as a relevant factor to determine connections between persons or to establish connection. In instant case, SEBI observed that having "mutual friends" on Facebook will form the basis of determination of connection for the purpose of Insider Trading. Insider means any person who is (i) A connected person; or (ii) in possession of or having access to unpublished price sensitive information.

SEBI's order No: WTM/PS/152/IVD/Feb/2016 dated 4th February, 2016 held guilty Chairman and Managing Director (CMD) and Chief Executive O􀁹icer (CEO) of Paired Technologies Ltd (PTL), a micro-cap which runs LatestOne.com, an online mobile accessories store. The PTL had run into financial di􀁹iculties and therea􀁺er it decided to sell its business on a slump sale basis to another entity. The company decided to declare special dividend and also carry out a buyback of shares. Because of this, the shareholders received an amount far higher than the then ruling market price of the shares. Subsequently, the price of the shares also started rising substantially.

It was later on revealed through investigation that the CMD, CEO were part of a cartel of 15 people termed as 'insiders' and were in possession of unpublished price sensitive information (UPSI) on the basis of which they traded in the scrip of PTL. These persons allegedly connected had purchased the shares of PTL at the earlier low ruling price.

How the parties were found connected?

In the aforesaid case, connections with the other parties were found on various grounds. Mr.PS, the Chairman and MD of PTL was a connected person under the Regulations and the

Upfront premium received for grant of perpetual tenancy rights in a property is taxable as capital gain

Facts

a) Assessee-HUF received one time premium for grant of tenancy rights in a property. It offered the amount so received as capital gain and claimed exemption under section 54EC in respect of investment made in Rural Electrification Corporation Bond.

b) Assessing Officer (AO) allowed exemption to assessee. However, Commissioner by invoking section 263 held that said amount was chargeable as income from house property and, thus, passed revisional order directing the AO to disallow exemption under section 54EC.

c) Aggrieved assessee filed the instant appeal before the tribunal.

The tribunal held in favour of assessee as under:

CARO 2016 in a new Avatar

It’s an attempt to provide a brief synopsis of the rationale for issuing the revised version of the CARO, its revised applicability and clause by clause comparison between CARO 2015 and CARO 2016. 

There were various reasons for modifying the already issued CARO 2015, which may be categorized as follows:

2. Brief Summary

2.1 The need: There were various reasons for modifying the already issued CARO 2015, which may be categorized as follows:

2.1.1 Compatibility with the Companies Act, 2013  (the Act 2013): The Companies Act, 1956 had largely ceased to be in force effective from 1 April, 2014 (barring those sections which are still applicable) and, consequently, CARO 2003 (as amended), issued under section 227(4A) of the said Act also lost its validity from the said date. With the introduction of the Act 2013, CARO 2015 was issued; however, a need was felt to further revise the same in such a short span of time for making it more compatible with the Act 2013.  Consequently, following changes have been done to CARO 2015:

§  Reporting on Internal Control Systems deleted, due to a separate reporting on Internal Financial Controls, as mandated by the Act 2013.

§  Reporting with respect to loans, investments, guarantees and security under sections 185 and 186 of the Act 2013 added.

§  Reporting of the fraud by the company and on the company by its officers or employees is mandated now, as against all the frauds on or by the company earlier.

§  Reporting on managerial remuneration added as per the Act 2013.

§  Reporting on compliance with section 177 (Audit Committee) and section188 (Related Party Transactions) of the Act 2013 added.

§  Reporting on non-cash transactions with directors, etc., as per the provisions of section 192 of the Act 2013 added.

2.1.2 Further improvements

§  Increasing of the applicability limits for private companies for scoping out small sized companies

§  Adding new provisions for more transparency or complete reporting, e.g.,

o    Reporting on holding the title deeds of immovable properties in the name of the company.

o    Reporting of loan, etc., given to Limited Liability Partnerships.

o    Reporting on schedule of repayment of loans.

o    Reporting on lender-wise details to be made with respect to defaults on dues.

o    Reporting on moneys raised by way of IPO or further public offer.

2.1.3 Applicability: Every statutory audit report issued by an auditor under section 143 of the Act 2013 on the financial statements of a company, having CARO 2016 applicable for the FY commencing on or after 1 April 2015, shall report matters specified under CARO 2016.

Order 2016 shall not apply to the auditor’s report on consolidated financial statements.

CARO 2016 is applicable to every company including a foreign company, barring following companies:

§  a banking company;

§  an insurance company;

§  a company licensed to operate under section 8 of the Act 2013;

§  an OPC and a Small Company as defined under the Act 2013; and

§  a private limited company (not being a subsidiary or holding company of a public company) with:

o    a paid-up capital and reserves and surplus not more than Rs. 1 crore as on the balance sheet date;

o    which does not have total borrowings exceeding ` 1 crore from any bank or financial institution at any point of time during the financial year; and

o    Which does not have a total revenue as disclosed in Scheduled III to the Act 2013 (including revenue from discontinuing operations) exceeding RS. 10 crore during the financial year as per the financial statements.

2.1.4 Reporting on adverse comments by the auditors: In case the answer to any of the clauses under CARO 2016 is unfavorable or qualified, the auditor shall also provide the basis for such unfavorable or qualified responses. However, in those instances where the auditor is unable to express any opinion on a specified matter, he shall indicate this fact along with the reasons for the same.

For more, please refer Taxmann’s Corporate Professionals Today nVolume 35 nIssue 7 nApril 1 to 15, 2016

AO’s order under Sec. 195(2) determining amount of TDS to be deducted isn’t appealable

Facts

a)    Assessee (Bangalore International Airport Limited) was required to make payment to non-resident for the preparation of the bid papers and project proposal with regard to an Airport Project undertaken by it.

b)    It approached the Assessing Officer (AO) under Section 195(2) by filing the application for seeking permission to make the said payment without deduction of tax at source.

c)    AO passed the respective order by holding that the payment in question was in the nature of Fees for Technical Services ('FTS'). Therefore, the assessee was liable to deduct the tax before making such payment.

d)    Assessee challenged the order of the AO before the CIT (Appeals). CIT (Appeals) confirmed the order of the AO.