Friday, December 16, 2016

Service receiver has no locus standi to challenge service-tax circular; SLP dismissed

Service-Tax: If the person to whom the burden of service tax is ultimately passed on is
entitled to challenge levy of service-tax, it would lead to disastrous consequence. Millions of
consumers would come and challenge such levy of taxes. Thus, service receiver has no locus
standi to challenge service-tax circular on Joint Development Agreement.

Click here to read Supreme Court Judgement

No revised return to show black money as income of past years; Tax dept. cautions taxpayers

Under the existing provisions of section 139(5), revised return can be filed only if original return contains any omission or any wrong statement. Post demonetization of the currency, some taxpayers may misuse this provision to revise the return-of-income of earlier Assessment Years, for manipulating the figures of income, cash-inhand, profits, etc. with an intention to show the current year’s undisclosed income in the earlier return.

Thus, the CBDT has clarified that the provision to file a revised return of income has not been stipulated for making changes in the income initially declared so as to drastically alter the form, substance and quantum of the earlier disclosed income. Any instance coming to the notice of Income-tax Department which reflects manipulation in the amount of income, cash-in-hand, profits, etc. may necessitate scrutiny of such cases so as
to ascertain the correct income. It may also attract penalty or prosecution in appropriate cases.

‘No Reassessment circulars’ aren’t Amnesty Scheme for past sins

Demonetization has encouraged people to shift towards digital mode of payment while making financial transactions. By adopting digital mode of payment, no financial transactions would remain undisclosed and consequently an enhanced turnover of business might get reflected in the books of accounts.

Under the circumstances, an apprehension has been raised that increased turnover in the current year may lead to reopening of earlier years' cases causing undue harassment to tax payers. Thus, CBDT and CBEC (vide Circular No. 40/2016 and Circular No. 137/155/2012-Service tax) have advised tax officials not to re-open past assessments in income-tax and indirect tax cases only because increased turnover is reflected in books of accounts of business on account of increased use of digital means of payment.

It would be incorrect to construe the above Circulars as giving any amnesty to taxevaders. Nor do the above circulars say that any spurt in turnover reported in books of account of businesses of current financial year (and consequently in their ITRs or indirect taxes returns) would not need to be explained.

The Circulars do not give businessmen a license to show their accumulated black money in the form of demonetized notes as current year’s turnover and get away scot-free without any interest or penalty and by paying normal tax for current year. If such a license is given by the circulars, the proposed PMGKY Scheme and proposed amendments to section115BBE of Income-Tax Act and proposed new section 271AAC of that Act would be redundant. The Circulars are innocuous and merely caution tax o􀁹icials to adopt systematic approach under the law to enquire into sudden jumps and reopen past assessment only if enquiry
throws up reason to believe that past turnovers/incomes escaped assessment.