27 August 2022 Updates

Income Tax Window is now open to file Income Tax return for FY 2019-20 and FY 2020-21 if one has missed filing it and for filing updated return if one has under reported income in the tax return filed for these years. With additional tax liability of 50% for FY 2019-20 and 25% for FY 2020-21 for filing the updated return the taxpayers can avoid penalty as well as prosecution. 

GST payable on interest component of EMI of Credit Card loan: HIGH COURT OF CALCUTTA: Ramesh Kumar Patodia v. Citi Bank [WPO NO. 547 OF 2019 JUNE 24, 2022 ]

The Ministry of Finance has issued a Circular No. 179/11/2022-GST dated August 3, 2022  for Clarification regarding GST rates & classification (goods) based on the recommendations of the GST Council in its 47th meeting held on 28th – 29th June, 2022 at Chandigarh.

Based on the recommendations of the GST Council in its 47th meeting held on 28th - 29th June at Chandigarh, clarifications, with reference to GST levy, related to the following are being issued through this circular:

Electric vehicles, whether or not fitted with a battery pack, attract GST rate of 5%: 

Treated sewage water attracts Nil rate of GST:

CAG’s Performance Audit on Exemption of Charitable Entities reveals lack of effective monitoring; Recommends stronger IT system for cross-verification.

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✅Window is now open to file Income Tax return for FY 2019-20 and FY 2020-21 if one has missed filing it and for filing updated return if one has under reported income in the tax return filed for these years. With additional tax liability of 50% for FY 2019-20 and 25% for FY 2020-21 for filing the updated return the taxpayers can avoid penalty as well as prosecution.

✅ GST Council to decide taxation of online gaming, betting in September meet

✅It is advisable to complete DINKYC before 15 August, 2022 as portal will be closed from 15 August 2022.

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CBDT has issued a detailed standard operating procedures (SOP) for officials for dealing with the faceless scheme, in a move aimed at reducing litigation and confusion about the scheme. The board has mandated the officials to grant personal hearing to the assessee within 2-3 days if receiving such a request.

A ruling by the Mumbai Income Tax Appellate Tribunal this week has held that the provisions of the Minimum Alternate Tax, or MAT, do not apply to foreign companies, including foreign portfolio investors (FPIs). 

Deduction of tax at source under section 194C is required to be made on any sum paid by assessee engaged in business of generation and distribution of power to clearing and forwarding agents and it includes reimbursement of expenditure. [Surendra Commercial & Exim (P) Ltd. v. ITO (2022) 141 taxmann.com 23 (Cal.)]

Income-tax payers will not be allowed to enroll in the government’s pension security scheme Atal Pension Yojana (APY) from October1. “From October 1, any citizen who is or has been an income tax payer, shall not be eligible to join APY,” the finance ministry said in the notification issued. 

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✅Government modifies Companies (Accounts) Rules, 2014; mandates companies to keep the back-up of books of account on daily basis* rather than periodic.

✅ “Updated Return” u/s 139(8A) of Income Tax Act. - As you know that Finance Bill 2022 has introduced a new section 139(8A) of income Tax Act. Under this section, Taxpayers can file “Updated Return” within 2 years from the end of the relevant Assessment Year. Effective from 01/04/2022. Now the Taxpayer can file the Updated Return from Assessment Year 2020-21 & 2021-22 (F/A 2019-20 & 2020-21).

✅For Taxpayer with Annual Turnover More than Rs 5 crore   & For Taxpayer who is not opting for QRMP Scheme having Turnover up to 5 crores. Return for the Month of JULY 2022 : 

Due date 20-AUG

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Finance ministry is proposing to soon review the exemption-free new tax regime with a view to making it more attractive for individual income taxpayers. Government aims to establish a system where there are no exemptions and the complex old tax regime with exemptions and deductions is terminated. The Union Budget 2020-21 introduced a new tax regime.

High Court of Punjab & Haryana decided that No TDS on interest on compensation awarded by Motor Accident Claims Tribunal (MACT) prior to FA 2015 amendment; Cannot burden claimants with refund process. New India Assurance Company Ltd. v. Ravinder Kumar @ Vickey and others. 

Allahabad High Court has  quashed order u/s 147, Notice u/s 148 and consequential reassessment proceedings for AY 2017-18 for violation of principle of natural justice by imposing cost Rs. 50,00,000/- on erreing Revenue Officers and by giving certain directions to CBDT to put the faceless assessment mechanism in place in such a manner that no harassment is faced by general public and assesses and accountability is fixed on erring officers. 

Payment of interest on late deposit of TDS is not allowable as deduction: Delhi ITAT

Govt modifies Companies (Accounts) Rules, 2014; mandates companies to keep the back-up of books of account on daily basis. 

The Ministry of Corporate Affairs is going live with the MCA21 V3 system with 09 Company e-forms on 31 August 2022 at 12:00 AM. In view of the same, filings for the said 09 e-forms will be stopped on the current MCA21 V2 system from 15 August 2022, at 12:00 AM and the same will resume on MCA21 V3 system from 31 August 2022 at 12:00 AM. 

As part of the revised process, for undertaking any e-filing service or DSC registration/ association service, it is a prerequisite that the user is registered as a “Business User” on the MCA21 portal.

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Finance Act 2022 had inserted a new Explanation 3 to the third proviso of Section 10(23C) to provide for accumulation-related conditions similar to Section 11. To incorporate such change, the CBDT has amended Rule 17 which provides for furnishing of Forms for the accumulation of income.

Income Tax Deduction u/s 80IA is allowed unit wise. Case Name : DCIT Vs Gujarat JHM Hotels Ltd. (ITAT Surat)

Gujarat High Court directed the department to grant refund of IGST already paid by the assessee on the amount of ocean freight charges. 

Credit and Finance for MSMEs: Even as SMEs listed on the two SME exchanges in the country, BSE SME and NSE Emerge, have better profitability ratios, higher return on assets and asset utilisation ratios and also debt-equity ratio in comparison to the smallest 25 percent of firms listed on main boards. 

Delhi High Court questioned why restaurants should recover service charges from consumers as an "additional" and "separate levy." Court remarked that a common man perceives service charge as a government levy and restaurants can increase their food prices to absorb this charge instead of recovering it in the form of an additional charge over and above the total bill.

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The importance of GOOD PEOPLE in our life is Just like the importance of HEARTBEATS. It's INVISIBLE but it silently SUPPORTS our life.



CBDT amends Rule 17 & Form 10 providing accumulation of income by entity approved u/s 10(23C) Notification No. 96/2022, dated 17-08-2022. Under the provisions of the Income-tax Act, trust or institution is required to apply 85% of its income during any previous year. If it is not able to apply 85% of its income during the previous year, it can accumulate such income for a period not exceeding 5 years.

Income tax department has worked out fresh checks and balances in its faceless assessment scheme to make it more robust. Tax officers said that some of the changes were implemented at the start of the financial year itself, when 20 committees were set up to address concerns over high-pitched assessment that some of the taxpayers had raised.

CBIC vide Instruction No. 03/2022-23(GST-Investigation) dated August 17, 2022 has issued guidelines on the issuance of Summons under section 70 of the Central Goods & Services Tax Act, 2017 (“the CGST Act”).

The Central Board of Indirect Taxes and Customs increased the threshold monetary limit for prosecution and arrest for customs violations. In baggage and outright smuggling cases, the threshold market value of goods or foreign currency has been increased from over Rs 20 lakh to over Rs 50 lakh for legal action.

Rejection of request for conversion of free shipping bills to advance authorization scheme shipping bills not justified: Case Name : Carboline India Pvt. Ltd. Vs Commissioner of Customs (CESTAT Chennai)

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Rule 25B to be read after 25A 

25B. PHYSICAL VERIFICATION OF THE REGISTERED OFFICE OF THE COMPANY - BY ROC

-ROC has to prepare Physical Verification Report of the Registered Office of the company in the given format.

 -Report to be filed by ROC-

*Need to attach Photograph of the Registered Office of the company to his report

*Copy of Agreement/ownership/rent agreement/NOC of the Registered Office of the company from owner/tenant/lessor-Self attested ID-card of the person available, if any

-Independent two witness of the locality

-Registered Office if not found capable than ROC issue notice  to  Company and Directors.

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CBDT extended the time-limit for furnishing Form 67 for claiming Foreign Tax Credit (FTC), effective from 01.04.2022 [Notification No. 100 of 2022 dated 18.08.2022]. 

CBDT, vide Notification No. 98/2022 dated 17.08.2022, notifies Rule 40G and Form No. 29D for claiming refund under Section 239A; The application in Form No. 29D shall be accompanied by a copy of an agreement or other arrangement referred to in Section 239A and can be presented by the claimant himself or through a duly authorised agent.

CBDT has set up a monitoring cell to track the handling of high pitch cases by the tax official and to investigate complaints by taxpayers under the faceless scheme. 

The move comes following an instruction from Allahabad High Court that in its order dated May 19 directed the Department of Revenue to investigate handling of complaints of taxpayers. In the order, the court asked the department to ensure establishing a monitoring cell to ensure regular monitoring of local committees under Principal Chief Commissioners. 

CBIC vide Circular No. 14/2022- Customs dated 18.08.2022 has clarified the applicability of customs duty on display assembly of a cellular mobile phone.

If the display assembly is imported along with mere back support of metal or plastic then the entire display assembly is subjected to the concessional rate of BCD at 10%. These back support of metal or plastic has no essential function and only provides strength, protection and structural stability to the display assembly.

However, if the display assembly is imported with any other additional parts such as mechanics or any other items (sim tray, antenna pin, speaker net, power key, fingerprint etc.) then, the entire display assembly will be subjected to BCD at the rate of 15%.

MCA notifies Companies (Incorporation) Third Amendment Rules,2022. 25B. PHYSICAL VERIFICATION OF THE REGISTERED OFFICE OF THE COMPANY - BY ROC. ROC has to prepare a Physical Verification Report of the Registered Office of the company in the given format.

Need to attach a Photograph of the Registered Office of the company to his report. Copy of Agreement/ownership/rent agreement/NOC of the Registered Office of the company from owner/tenant/lessor-Self attested ID-card of the person available, if any. 2 independent witnesses of the locality. Assistance of the local police for such verification. 

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Form 3CD- Clause 44: Templates

Clause 3 of Form 3CA or Clause 5 of Form 3CB

Qualification Type – Others

 

Situation- 1: Not providing information in Clause 44:

As informed by the assessee, the information required under clause 44 of Form 3CD has not been maintained in absence of any disclosure requirement thereof under the goods and service tax statute. 

Further the standard accounting software used by Assessee is not configured to generate reports as required under this clause in absence of any prevailing statutory requirement. Therefore, it is not possible to determine the break-up of total expenditure of entities registered or not registered under the GST. In view of the above we are unable to verify and report the desired information in this clause.

 

Situation 2: Assesse not registered under GST and Not providing information:

The assessee is not registered under GST and as informed by the assessee, the information required 

under clause 44 of Form 3CD has not been maintained in absence of any disclosure requirement thereof. 

Further the standard accounting software used by Assessee is not configured to generate reports as required under this clause in absence of any prevailing statutory requirement. Therefore, it is not possible to determine the break-up of total expenditure of entities registered or not registered under the GST. In view of above we are unable to verify and report the desired information in this clause.

 

Situation 3: Providing information – however limitation on obtaining some information

As informed by the assessee, the information reported under clause 44 of Form 3CD is based on the 

 information extracted from accounting software/ relevant GST report. However this may not be accurate as the accounting software used by Assessee is not configured to generate report as required under this 

clause in absence of any prevailing statutory requirement. In addition, the software/system does not 

capture information relating to the entities falling under composition scheme or supply with ineligible 

credit. Therefore, it is not possible for us to verify the break-up of total expenditure of entities registered 

or not registered under the GST and unable to comment on accuracy of information provided therein. 

Total expenditure reported under the clause includes capital expenditure however does not include depreciation, bad debt and expenditure which is not a supply as per GST.

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Direct Tax Committee of  ICAI Hosted Guidance Note on Tax Audit and link is   https://resource.cdn.icai.org/71267dtc200822-gn44ab.pdf.

Income tax department has exempted non-resident corporate entities and firms not having a permanent establishment or a fixed place of business in India from 5 per cent TCS on foreign remittances and tour packages.

ITAT allows depreciation in respect of closed units or non-functional undertakings. Case Name : Beeyu Overseas Ltd. Vs DCIT (ITAT Kolkata) Appeal Number : ITA No. 409/Kol/2020 Date of Judgement/Order : 01/08/2022.

CBIC told officials administering the GST not to issue summonses to the top management of companies at the first instance and said arrests can only be made after written permission from senior officials. CBIC issues detailed instructions to address concerns raised by businesses over the excessive use of summonses and arrest provisions in the law. Officials should initially call for evidence or documents.

Government has amended rules to ensure a transparent process for the physical verification of companies' registered addresses, including by way of having the presence of independent witnesses and clicking a photograph of the registered office at the time of the verification.

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As per guidance note on Tax audit issued by icai the members are suggested to mention the Assessee's and Tax Auditor's responsibilities under clause (3) of form no. 3CA or clause (5) of form number 3CB.

Hyderabad ITAT holds that limitation period of four year for rectification under 154(7) is applicable even to an intimation under Section 143(1); [Zintec Software (P) Ltd. v. DCIT – Date of Judgement : 17.08.2022 (ITAT Hyderabad)]

CBIC issued a notification to ensure that there are fewer errors and to enforce better compliance for the firms in India. Starting from October 1, 2022, businesses with a turnover exceeding Rs 10 crore will be required to generate e-invoices. Currently, e-invoicing is mandatory for firms with a turnover of more than Rs 20 crore.

Central Board of Indirect Taxes and Customs has issued a Notification No. 67/2022 Customs (N.T.) dated August 8, 2022 regarding Passenger Name Record Information Regulations, 2022. Every aircraft operator shall register with the proper officer in the specified FORM.

Blending, bottling & packing not taxable under ‘Business Auxiliary Service. Case Name : Commissioner of Central Excise & Service Tax Vs Hi-Tech Bottling Private Limited (CESTAT Kolkata)

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✅The Supreme Court on Tuesday (23rd August) struck down various provisions of the Benami Transactions (Prohibition) Act of 1988 and the 2016 amendments to the Act as unconstitutional.

✅ Empanelment of Members to act as Observers at The Examination Centres for The Chartered Accountants Examinations - November 2022 

https://resource.cdn.icai.org/71268exam57307.pdf

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✅ Guidance on Clause 44 of Tax Audit

1. Break up of expenditure in aggregate is to be given and not head wise. 

2. Depreciation, Bad debts etc. which are not expenses are not to be reported. 

3. Transactions covered under Schedule III of CGST Act not to be reported in any column viz. Salary expenditure etc. 

4. Expenditure on _Alcohol, petroleum crude, high speed diesel oil, motor spirit, natural gas and aviation turbine fuel_ are covered under meaning of exempt supplies.

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CBDT is reviewing the operation of its faceless tax assessment procedures to ensure field officers do not make aggressive tax demands and allow natural justice to take its course. The review follows an 11 August order by the Allahabad High Court giving instructions about instituting safeguards amid complaints over the system's alleged over-reliance on data rather than human interaction.

Rs. 50 lakhs cost  imposed on the department in case of arbitrary demand and proceedings initiated on the pretext of Faceless Assessment under Income Tax. Allahabad  HC rejects affidavit of Sri Shishir Kuamr Jha, Principal Chief Commissioner of Income Tax, U.P. (West) and Uttarakhand Region at Kanpur. 

3. Revenue could not proceed to file an appeal against the order of ITAT if National Company Law Tribunal (NCLT) passed an order imposing a moratorium under Insolvency & Bankruptcy Code, 2016. PCIT v. Shubh Labh Steels (P) Ltd. [2022] 141 taxmann.com 190 (Cal.)]

The Supreme Court holds that amendments made to the Benami Act in the year 2016 apply prospectively, thus, upholds Calcutta HC ruling in Ganpati Dealcom. In view of this judgement, all the cases where Benami proceedings have been initiated in respect of transaction before 1st November,2016 shall be null and void.

A big relief to all such persons who were facing Benami Proceedings pertaining to the period prior to this date. It may however be noted that this will not give any relief to those persons who are facing Benami Proceedings in respect of demonetisation ( नोट बन्दी ) as demonetisation transactions are on or after 1st November,2016.

MCA has vide notification dt. 05.08.2022 made amendment in relation to maintaining books of accounts of the company. Relevant extracts of the notification are issued.

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🧑🏻‍🎓CBDT issued Notification No. 99/2022/F. No. 370142/9/2022-TPL dated 17-08-2022, superseding its earlier notification in this matter.

👨🏻‍🎓 Notification relates to Section 206C(1G) of the Income-tax Act, 1961. As per the said Section, he tour operator shall be required to collect tax (TCS) at the rate of 5% in respect of overseas tour programme package. 

🧑🏻‍🎓 In this regard various representations were received by the Govt., that NR visiting India may not have a PAN, and therefore tax is required to be collected at higher rates. Further, such non-residents may find it difficult to furnish their tax returns and claim refunds. 

👨🏻‍🎓 Based on the representations received, on 31-3-2022 CBDT specified that the provisions of the said section shall not apply to a non-resident individual buyer visiting India.  

🧑🏻‍🎓 However, now in Aug 2022, CBDT have released the notification saying that, Section 206C(1G) of the Act shall not apply to a non-resident buyer who does not have a Permanent Establishment (PE) in India. Thus, now twin conditions need to be satisfied for the exemption to apply: a) The taxpayer (i.e., buyer) should be a non-resident; b) Such taxpayers shouldn't have a PE in India.

👨🏻‍🎓 Therefore, now more NR will be able to take benefit of the relaxation available under this Section. *Curious CA advice all readers that while suggesting/granting the exemption, the collector should collate documentary evidence to satisfy that the buyer is a non-resident and does not have a PE in India.*

🧑🏻‍🎓 If you find the update easy to understand and useful, do join our WhatsApp broadcast : https://bit.ly/2oG7TAR

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CBDT has directed field formation to verify all the information provided by the I-T portal before drawing any adverse inference and initiating proceedings against the taxpayers. The directive comes following a ruling by the Allahabad High Court that passed severe strictures and proposed to levy an exemplary cost of ₹50 lakh on revenue offices in a writ challenging reopening of assessment on wrong facts.

The Assessing Officer cant withdraw interest under section 244A(2) in rectification under section 154 when PCCIT/CCIT/PCIT/CIT has not decided the exclusion of period for interest. Otis Elevator Company (India) Ltd. v. DCIT (2022) 141 taxmann.com 391 (ITAT Mumbai)]. 

RBI had issued draft rules/ regulations regarding Overseas Direct Investment (‘ODI’)/ Overseas Portfolio Investment and had sought feedback on the same (‘Draft ODI Rules’). Pursuant to the Draft ODI Rules and the feedback received, the Central Government and the Reserve Bank of India, on 22 August 2022, released the new rules/ regulations/ directions on ODI. 

Supreme Court ruled the amended Benami Act, which came into effect on November 1, 2016, applied only prospectively, besides declaring "unconstitutional" one of the provisions of the law dealing with a three-year jail term and a penalty.

SEBI has amended rules governing portfolio managers, under which they will not be allowed to invest clients' funds in unrated securities of their related parties or associates.

6. Empanelment Of Members to Act as Observers at The Examination Centres for The November -2022 Chartered Accountants Examinations.)

https://resource.cdn.icai.org/71268exam57307.pdf

7. Concurrent Audit of Various Zones in Bank of Baroda. Last Date:- Sep 09, 2022. Zones:- Ahmedabad 1 & 2, Baroda 1 & 2, Bengaluru, Bhopal 1 & 2, Chennai, Jaipur 1 & 2, Kolkata, Lucknow, Mangalore , Meerut, Mumbai 1 & 2, Delhi 1 & 2, Patna, Pune 1 & 2, Rajkot

https://www.bankofbaroda.in/-/media/Project/BOB/CountryWebsites/India/tenders/rfp-ciad-114-3-dated-20-08-2022-20-01.pdf

8. ​Supreme Court has said all details of the bidder winning a government contract need to be shared with the Goods and Services Tax (GST) jurisdictional officers concerned to enable them to correctly assess tax liability. The Supreme Court also held that it is the responsibility of the bidder to quote the correct Harmonised System of Nomenclature (HSN) code and the corresponding SGT rate.

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CBIC has notified that w.e.f. 1st October, 2022, the provisions of E-Invoicing shall be applicable on all the taxpayers having aggregate turnover of 10 Crores or more. This has been reduced from the prevailing limit of 20 Cr.

The Supreme Court has said all details of the bidder winning a government contract need to be shared with the Goods and Services Tax (GST) jurisdictional officers concerned to enable them to correctly assess tax liability. The Supreme Court also held that it is the responsibility of the bidder to quote the correct Harmonised System of Nomenclature (HSN) code and the corresponding SGT rate. 

Recovery for financial creditors from the resolution of toxic assets under the Insolvency and Bankruptcy Code (IBC) stood at just 10.7% of their admitted claims in the June quarter. It barely improved from a record low of 10.2% between January and March, and registered the second worst quarterly performance since the IBC came into being in 2016.

RBI had issued draft rules/ regulations regarding Overseas Direct Investment (‘ODI’)/ Overseas Portfolio Investment and had sought feedback on the same (‘Draft ODI Rules’). Pursuant to the Draft ODI Rules and the feedback received, the Central Government and the Reserve Bank of India, on 22 August 2022, released the new rules/ regulations/ directions on ODI. 

Online link to apply for EMPANELMENT OF MEMBERS TO ACT AS OBSERVERS AT THE EXAMINATION CENTRES FOR THE CHARTERED ACCOUNTANTS EXAMINATIONS NOVEMBER 2022: http://observers.icaiexam.icai.org

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The Income-tax department has collected around Rs 28 crore in taxes after about 1 lakh returns were filed by taxpayers under the newly introduced return filing form called ITR-U, that was notified this year as part of the Budget 2022-23.



CBDT said that online gaming players associated with just one gaming portal have been found to have netted as much as Rs 58,000 crore in the three years through FY22 as the gross winning amount. IT Deptt Having identified huge tax evasion in the thriving online gaming industry, the tax department wants the winners in such games to use the updated income tax returns (ITR-U) scheme to disclose their incomes and pay the right amounts of taxes with applicable interest.

The Supreme Court agreed to consider a plea seeking a review of its earlier judgment upholding the constitutional validity of anti-money laundering provisions, including the powers of arrest and seizure. The court said it would re-examine two provisions of the Prevention of Money Laundering Act (PMLA), one with respect to providing a copy of the Enforcement Case Information Report (ECIR) to the accused and another related to the burden of proof on the accused regarding innocence.

Direct tax collections (post-refunds) grew by a robust 33% in the year till August 24 of the current financial year, with both personal income tax (PIT) and corporate income tax (CIT) performing much better than anticipated. 

Authority for Advance Ruling (AAR) judgement saying tax credit should be allowed on goods and services tax (GST) paid on upfront lease premium could give a breather to companies and even corporate individuals. Tax authorities have been disallowing the tax credit up until now.

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12 August 2022 Updates

👉🏻Over 40,000 GST returns for 2018-19 under scrutiny

(To curb fraudulent availment of ITC & tax evasion, the CBIC will soon identify about 40,000 GST returns for 2018-19, based on the risk parameters, for scrutiny)

👇🏻 👇🏻 👇🏻

https://bit.ly/3B8qvMV

👉🏻IBBI Suspends Registration of IP for outsourcing his responsibilities

(IBBI Suspends Registration of IP for outsourcing his responsibilities - IBBI (DC) Order No. IBBI/DC/115/2022, Dated 20th July, 2022)

👇🏻 👇🏻 👇🏻

https://bit.ly/3aVPatx

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Tran-1 directions issued by SC right now

1. Gstn portal to open common portal for all assesses to claim transitional credit for 60 days from 01.09.2022 till 30.10.2022 

2. All assesses can claim benefit whether they have filed Writ or not

3. GSTN to make sure no technical glitch during this time

4. 90 days given to officers therafter to verify the claim of credit on merits and pass appropriate order. Opportunity of hearing to be granted . 

6. Thereafter credit to reflect in Electronic Credit Ledger

7. CbIc can issue directions to field officers

Many dealers have missed/ failed to avail transitional credit of GST in 2017. Many dealers have filed writ petition in the court of law. Now directions has been given by the GST department. Kindly make use of this opportunity and benefit. 

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High Court grants stay on 10% deposit of tax in view of fact that Co. to pay 1-1.5% interest every month on outstanding demand. [In favour of assessee] - [Yeswath Kavitha v. ITO (2022) 140 taxmann.com 200 (Madras)]

Order passed U/s 148 A(d) set aside on the basis there being "change of opinion". Hon'ble Delhi High Court has taken cognizance that as the issue sought to be reopened is discussed, deliberated and verified by AO in original proceedings, it requires fresh consideration u/s 148A(d) again. The logical sequitur is that the previous jurisprudence of reassessment proceedings still exists and holds good.

Kerala High Court, as a part of the first phase in the implementation of paperless courts, has decided to introduce paperless courts in Bail Jurisdiction and Tax matters from 1st August.

Wef 1 Aug, Taxpayers with AATO of more than 5 cr to report 6 digit HSN in table 12 of GSTR-1. Warning in case of incorrect HSN but GSTR-1 can be filed.

GST Registration cannot be denied by violation of principles of natural justice. Case Name : B.C. Mohankumar Vs Superintendent of Central Goods & Service Tax (Madras High Court) Appeal Number : W.P. No. 13272 of 2022 and WMP. Nos.12569 & 12571 of 2022 Date of Judgement/Order : 16/06/2022

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Calcutta High Court dismisses Revenue’s appeal, upholds ITAT order deleting addition made under Section 68 with respect to unsecured loan obtained by the Assessee and interest thereon; Opines that Assessee had discharged the initial burden placed upon him and Revenue failed to further enquire into the matter, also expresses that the Revenue should have desisted using the term ‘money laundering’ and holds it to be uncalled – [In favour of assessee] (Related Assessment Year : 2015- 16) – [PCIT v. Sreeleathers – Date of Judgement : 14.07.2022 (Cal.)]

Delhi High Court dismisses Revenue’s appeal, holds amendment to Section 14A by Finance Act, 2022 on disallowance of expenditure in absence of exempt income to be applicable prospective, despite being inserted for removal of doubts; Opines that “the amendment of Section 14A, which is “for removal of doubts” cannot be presumed to be retrospective even where such language is used, if it alters or changes the law as it earlier stood.``; - [PCIT v. ERA Infrastructure (India) Ltd. – Date of Judgement : 20.07.2022 (Del.)]

The Supreme Court of India has directed the GSTN to open the common portal for two months for all the taxpayers for filing of GST TRAN-1 and TRAN-2. Preferably, the common portal will be open from 01.09.2022 to 31.10.2022.

Irrespective of whether the taxpayer has filed the writ petition or not or their case has been decided by the grievance redressal committee, a common portal will be open for all the registered person to claim the transitional credit or to revise the already filed form.

The Hon'ble Court has also directed the GSTN to ensure that there are no technical glitches during this period. The Department will thereafter have 90 days to verify the correctness of the claim and pass the speaking order on merits.

Although, this comes from the Hon'ble Apex of India, taxpayers always expect such relief from the Government of India so that the resources of both the taxpayers and the Government are not wasted over unnecessary litigations.

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Section 12AA registration cannot be cancelled just because it received a donation from an entity providing accommodation entry. – [CIT (Exemption) v. Sanskriti Sagar (2022) 140 taxmann.com 233 (Cal.)]

No exemptions of RCM on GTA where freight is ₹1500 or ₹750. Now Reverse Charge on GTA services will be applicable from ₹1. GST Rate Change Notification issued on 13-07-2022 to give effect to recommendations made at the 47th GST Council Meeting.

Central Board of Indirect Taxes and Customs has issued an order regarding Authorisation under clause (c) of sub-rule (4) of rule 96 of the Central Goods and Services Tax Rules, 2017 dated July 21, 2022.

Central Board of Indirect Taxes and Customs has issued a document regarding FAQs on GST applicability on ‘pre-packaged and labelled’ goods- reg. The changes relating to GST rate, in pursuance of recommendations made by the GST Council in its 47th meeting, are coming into effect from the 18th of July, 2022.1. The due date for filing income tax returns is 31.07.2022. You are advised to ensure timely compliance and avoid applicable penalties and interest.2. Section 12AA registration cannot be cancelled just because it received a donation from an entity providing accommodation entry. – [CIT (Exemption) v. Sanskriti Sagar (2022) 140 taxmann.com 233 (Cal.)]3. No exemptions of RCM on GTA where freight is ₹1500 or ₹750. Now Reverse Charge on GTA services will be applicable from ₹1. GST Rate Change Notification issued on 13-07-2022 to give effect to recommendations made at the 47th GST Council Meeting.4. Central Board of Indirect Taxes and Customs has issued an order regarding Authorisation under clause (c) of sub-rule (4) of rule 96 of the Central Goods and Services Tax Rules, 2017 dated July 21, 2022.

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The Income Tax department complimented the department for achieving the highest ever revenue collection of over ₹14 lakh crore in the last fiscal year and for having successfully implemented the government’s policy reforms.

Rajasthan High Court directs Revenue to adjudge Petitioner’s claim under Benami Transactions Informants Reward Scheme, 2018 within 6 months from receipt of information in specified format, which was denied citing Petitioner’s failure to furnish information in the said format; - [Sharad Pandya v. CBDT and Others – Date of Judgement : 13.07.2022 [TS-584-HC-2022 (Raj.)]

The Delhi High Court has held that the tax payment software has to be tailor-made according to the needs, aspirations, and legal rights of the taxpayers and not that the taxpayers' legal rights have to be tailor-made in accordance with the software being used by the Tax Department.

Court has held that as the petitioners have paid the taxes, they should be given credit for the challans paid on Form 3 under the Direct Tax Vivad se Vishwas Act (DVCV Act). The order/ communication rejecting credit of taxes deposited under the VSV on the hyper-technical ground that challans have been deposited under the minor head '200' instead of '400' is unfair, illegal, and contrary to the objective of enacting the DTVSV Act.

Bombay High Court allows Pro-Rata section 80IB(10) Deduction on eligible residential units under Income Tax. Case Name : PCIT Vs Kumar Builders Consortium (Bombay High Court)

VAT at higher Rate cannot be levied if no star categorisation by Ministry of Tourism: Rajasthan High Court. Case Name : Deputy Commissioner Anti Evasion Vs Geethpriya Hotels And Resorts Pvt. Ltd. (Rajasthan High Court). 

Experts Advisory Committee of ICAI has been issuing opinions on Accounting, Auditing and allied matters. all the EAC Opinions are available online, in searchable mode on the ICAI's website at   http://115.248.235.50/eacicai/

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Adjustment of excise duty payable with available input tantamount to actual payment; No disallowance under section 43B. Beekay Steel Industries Ltd. v. PCIT (2022) 140 taxmann.com 311 (Calcutta).

Government said it has raised a tax demand of Rs 14,820 crore after completing assessment in 368 cases under the black money law dealing with undisclosed foreign income. 

Income Tax Appellate Tribunal (ITAT), Mumbai has held that Interim Resolution Professionals (IRP) is the authorized person to file an appeal against the assessment order once a moratorium is declared. The appellant, M/s. Krishna Knitwear Technology Ltd.

GST Council promised to issue clarifications relating to various Input Tax Credit (ITC) issues under GST. Keeping its promise, the CBIC has issued a circular clarifying various ITC-related issues in respect of perquisites provided by employers to its employees and leasing of assets.

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CBDT, vide Notification No.4 of 2022 dated 26.07.2022, notifies procedure for application and allotment of PAN through simplified proforma for newly incorporated LLPs electronically; In continuation with Ministry of Corporate Affairs’ notification dated 04.03.2022, notifying  Common Application Form in the form of simplified proforma for incorporating LLPs.

Trust cannot claim section 11 exemption without obtaining registration under section 12AA. [Gurukul v. ITO (Exemption) [2022] 140 taxmann.com 309 (ITAT Patna)]

The Supreme Court upheld ED powers of inquiry, arrest, and attachment of property. The bench upholds the validity of various provisions of the PMLA and says that stringent conditions for bail under the Act are legal and not arbitrary.

ED, SFIO, DRI officials not "police" statements recorded during the inquiry are valid evidence, the bench says. However, the apex court held that the question of enactment of amendments in 2019 to the PMLA Act as money bill has to be decided by a larger bench of seven judges before whom the same question is already pending.

The Supreme Court also says that it is not mandatory for ED officers to disclose the grounds of arrest at the time of detaining an accused in a money laundering case.

The top court upholds strict bail provisions under the PMLA. The bench says it is not necessary to give an ECIR copy to the accused.

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Write cannot be entertained against reassessment proceeding which is yet to be concluded by the Assessing Officer, there was no reason to warrant interference in the same by exercise of jurisdiction under article 226 of Constitution of India, Supreme Court dismissed SLP. [Gian Castings (P) Ltd. v. Central Board of Direct Taxes (2022) 140 taxmann.com 319 (SC)]

Income Tax Section 263 order quashed since it did not mention DIN. Supreme Court and the jurisdictional High Court of Calcutta, we are inclined to adjudicate on the additional ground in favour of the assessee by holding that the order passed by the Ld. CIT(E) is invalid and deemed to have never been issued as it fails to mention DIN in its body by adhering to the CBDT circular no. 19 of 2019.

Interest earned by an assessee, a co-operative society, from a co-operative bank does not come under consideration of income from other sources and is eligible for deduction under section 80P(2). [ITO v. Irula Snake Catchers Industrial Co-operative Society Ltd. (2022) 140 taxmann.com 494 (ITAT Chennai)]

Karnataka High Court in the case of CIT vs. N.S. Narendra [2021] 129 taxmann.com 335 (Kar) after considering various decisions cited therein has held that gratuitous loan or advance given by a company to the classes of shareholders specified therein would come within the purview of section 2(22) but not to the cases where the loan or advance is given in return to an advantage conferred upon the company by such shareholder.

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The Assessing Officer cannot initiate prosecution against the director without issuing notice to treat him as principal officer of the Company. [Income-tax Department, Bangalore v. Jenious Clothing (P) Ltd. (2022) 140 taxmann.com 351 (Karn.)]

RBI released guidelines to ease the transition to new norms on card-on-file (CoF) tokenization and licensing of payment aggregators (PAs) in two separate notifications. While reiterating that with effect from October 1, no entity in the card transaction chain, other than card issuers and card networks, shall store CoF data. 

The manufacturing sector attracted foreign direct investments worth USD 21.34 billion in 2021-22, an increase of 76 per cent year-on-year, the commerce ministry said. 

Sebi wants schemes of private equity (PE) and venture capital (VC) funds to be ring-fenced from each other so that any stress and liabilities in one pool of money do not spill over into another. 

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New IT Rules for verification of ITRs

If ITR for AY 2022-23  filed today or in months to come  upto 31.12.2022 and not verified within 30 days

1. Date of verification will be taken as date of filing. So interest and late fees will be levied accordingly 

2. Where these 30 days expire at any time in 2023 then ITR will be treated as never filed because post 31.12.2022 ITR cannot be filed.

However, for returns filed upto 31.7.2022 time limit of 120 days shall be available

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✅ E-invoice limit reduced from Rs. 20 Crores to Rs. 10 Crores wef 01/10/2022  i.e for any registered person with aggregate turnover exceeding Rs. 10 Crores in any FY 2017-18 onwards has to issue E-invoice w.e.f 1st October 2022.

✅CBDT Reduces time limit for e- verification of ITR from 120 days to 30 days of filing the return. However, for ITR Filed upto 31 July 22 time limit of 120 days would continue to apply.

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E-invoice limit reduced from Rs. 20 Crores to Rs. 10 Crores wef 01/10/2022  i.e for any registered person with aggregate turnover exceeding Rs. 10 Crores in any FY 2017-18 onwards has to issue E-invoice w.e.f 1st October 2022.

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Date of e-verification or manual verification is the date of filing the returns in case of returns e verified or manually submitted after 30 days, and late fee and interest will be charged accordingly. 

E-invoice limit reduced from Rs. 20 Crores to Rs. 10 Crores wef 01/10/2022 i.e for any registered person with aggregate turnover exceeding Rs. 10 Crores in any FY 2017-18 onwards has to issue E-invoice w.e.f 1st October 2022.

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DTVSV - Declined credit of challans paid on the ground that taxes had been deposited under the minor head “200 instead of 400.  CELERITY INFRASTRUCTURE PVT. LTD.  Vs. DCIT, 19/07/2022, (Delhi High Court) (Favour of Assessee)



Centre has made E-invoicing mandatory for businesses with aggregate turnover exceeding Rs 10 crore from October 1, a move which will further plug in revenue leakage and will ensure better tax compliance from businesses. Presently, e-invoice is compulsory for businesses with an annual turnover of over Rs 20 crore.

The Union Cabinet has cleared the Competition (Amendment) Bill, 2022, and is set to table it in the ongoing Monsoon session of Parliament. The Bill aims to bring in more flexibility, agency, and accountability to the Competition Commission of India (CCI).

The Supreme Court held that non-executive directors of a company would not be liable under a cheque bounce case and no criminal proceedings can be initiated against them, as they are not involved in the day-to-day affairs of the company or in the running of its business.

The Central Board of Trustees (CBT) of the Employees' Provident Fund Organisation (EPFO) deferred a decision on increasing the equity investment limit from 15% to 20% at a meeting on Saturday, citing the volatile market situation. The board agreed in principle to the idea of higher equity allocation to improve returns, but will discuss the issue further after September.

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✅ CBIC issued clarification regarding GST rates & classification (goods) based on the recommendations of 47th GST Council

✅ E-invoice limit reduced from Rs. 20 Crores to Rs. 10 Crores wef 01/10/2022  i.e for any registered person with aggregate turnover exceeding Rs. 10 Crores in any FY 2017-18 onwards has to issue E-invoice w.e.f 1st October 2022.

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The Supreme Court ruled that no service tax will be levied on composite work contracts that were executed before 2007. Setting aside various judgements, given by high courts and tax tribunals across the country, that ruled to the contrary. 

ITAT launches a pilot project at Delhi, Ahmedabad, Lucknow and Kolkata benches for sending emails to the appellants on acknowledgement for filing of appeal, memorandum of defects and also send hearing and adjournment notices to the appellants, respondents and the departmental representatives, apart from physical post.

The Supreme Court passed a final order in a PILL with directions to the GST Council to issue advisories to all the states for implementation of Document Identification No (DIN) on the all notices sent by State GST Officers, court also directed all the states to implement earliest possible.

GST Circular No 178 issued by Ministry of Finance reg GST applicability on various issues: As per said circular,

No GST applicable on Liquidated damages

No GST applicable on penalties imposed for violation of law.

No GST applicable on forfeiture of salary or payment of bond amount by employee in case of leaving the company. 

No GST applicable on cheque dishonoured fine/penalty.

No GST applicable on fixed power charges.

GST on surcharge/ Late fee for making payment of electricity bill/ Water bill/ Telephone bill etc will be charged as applicable on main bill. 

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Developer not liable for TDS on subvention charges/pre-EMI interest paid to financier on buyer’s behalf. [Ozone Urbana Infra Developers (P) Ltd. v. ACIT – Date of Judgement : 12.07.2022 (ITAT Bangalore)]

Indirect tax body through multiple circulars addressed key issues around liquidated damages, penalty on cheque bouncing, delayed payment charges, recovery from employees towards bond payment/forfeiture of salary, etc.

The Supreme Court has directed the GST Council to issue an advisory to states for implementation of the system of electronic generation of Document Identification Number (DIN) in indirect tax administration, saying it will bring in transparency and accountability vital to efficient governance.

The GST Council in July agreed on a 5 percent tax on single packages of food items like cereals, pulses, flour and paneer weighing up to 25 kg. "Over the last few years, the regulation under which branded players had to pay 5 percent GST while unbranded players were exempt created a lot of confusion.

The Supreme Court held that non-executive directors of a company would not be liable under a cheque bounce case and no criminal proceedings can be initiated against them, as they are not involved in the day-to-day affairs of the company or in the running of its business. [Sunita Palita and others (2022) 141 taxmann.com 31 - Date of Judgement : 01-08-2022 (SC)]

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CBDT has issued notifications on 5th August, 2022 prescribing conditions for claiming exemption in respect of a perquisite by way of reimbursement by the employer in respect of any expenditure for treatment of any illness relating to Covid-19.

CBDT also has issued notification prescribing conditions for exemption from tax under section 56(2)(x) in respect of amount received from unrelated person for treatment of illness relating to Covid and also in respect of amount received from employer or any other person by the family of deceased who died due to Covid -19 illness.

It may be interesting to note that a Press Release was issued on 25th June,2021 announcing these tax exemptions but it was stated that necessary legislative amendments for these decisions shall be proposed in due course of time. Thereafter, Finance Act, 2022 has inserted the amendments in the Income Tax Act with a rider that these exemptions though available from AY 2020-21 ( FY 2019-20) but shall be allowed subject to fulfilment of conditions to be prescribed. And now on 5th August, 2022, these Notifications have been issued prescribing the conditions subject to which these exemptions will be allowed to the taxpayers. Income Tax Returns for these assessment years Ay 2020-21, AY 2021-21 and AY 2022-23 have already been filed and time to file revised returns for AY 2020-21 and AY 2021-22 has already expired. One wonders if a taxpayer has not claimed these exemption in these assessment years but fulfils the prescribed conditions of these Notifications, how such taxpayers will claim the exemption. As against this, if any taxpayer has claimed such exemption but now finds that he doesn’t fulfill the conditions prescribed by these Notifications, how he is going to surrender the claim. 

It will be ideal that considering this anamoly, the CBDT also issues a circular under section 119 permitting revision of tax returns already filed limited on this account. 

Another anomaly on cursory glance of notification issued under section 17(2) when read with clause (ii)(c) of proviso to section 17(2)(viii) is that the employee is required to submit the documents stated in the Notification to its employer in order to be eligible for exemption under section 17 for reimbursement towards covid related medical expenditure. It’s not understood as to how this may be relevant for past years for which return has been filed, exemption may or may not have been claimed and TDS may/may not have been deducted. Whether giving these documents now is important is also not clear. 

Further, for medical reimbursements received from person other than employer, it may be relevant to point out that statement in Form 1 (prescribed under the notification) is required to be filed before the AO within 9 months from the end of the financial year in which amount is received or by 31.12.2022, whichever is later. 

Similarly, for payments received by legal heir pursuant to death, statement is required to be filed before the AO in Form A (prescribed under the notification) within 9 months from the end of the financial year in which amount is received or by 31.12.2022, whichever is later. 

This extended time being allowed under these Notifications for filing prescribed forms will not address the issue of those taxpayers who have not made a claim in the return in the absence of any statutory amendment in the law allowing such exemption on that date and also who have made the claim assuming to be eligible on the basis of press release but are now finding not eligible as conditions prescribed are not being fulfilled. 

It may also be interesting to note that all these notifications state that no person is being adversely affected by granting retrospective effect to this notification; but one may wonder is it really the case ? 

Regards 

Ved Jain

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The National Faceless Assessment Centre issued a set of standard operating procedures (SOPs) to address several anomalies in the regime. The faceless centre, constituted by the Central Board of Direct Taxes, is the nodal authority and works as an interface for the faceless regime.

Foreign portfolio investors (FPIs) are required to maintain Form 10F and provide the same along with other documents when asked by the income tax officer to claim tax treaty benefits. This year, CBDT issued a notification in mid-July, making it mandatory to file Form 10F electronically for taxpayers claiming tax treaty benefits.

GSTR-9 & GSTR-9C for the FY 2021-22 are available on the GST Portal for filing. GSTR-9 & GSTR-9C Applicability for F.Y.2021-22 given below. Due Date to File GSTR-9 & GSTR-9C is 31/12/2022.

The Union Finance Ministry said 'sarais' run by religious or charitable trusts are exempt from the Goods and Services Tax (GST) irrespective of rent.

Soon, banks are likely to get relief from a new tax rule that effectively mandates them to deduct a 10% tax at source on the amount of debt waived by them through one-time-settlement (OTS) or some other schemes, especially involving large accounts.

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✅ E-Invoice New Turnover Limit

E-invoice limit reduced from Rs. 20 Crores to Rs. 10 Crores wef 01/10/2022 vide (Notification No. 17/2022-Central Tax) i.e for any registered person with aggregate turnover exceeding Rs. 10 Crores in any FY 2017-18 to 2021-22 has to issue E-invoice w.e.f 1st October 2022.

E-invoicing is not Applicable for:

Insurance

Banking company

Financial institutions

Goods transport agency

Passenger transport agency

Services by way of admission to exhibition of cinematographic films in multiplex screens.

E-invoicing is Applicable for:* E- invoicing is required for B2B transaction and exports for following documents:

Invoice

Debit Notes

Credit Notes

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Allahabad high court quashed order under 148A(d) of the Income Tax Act passed without considering  the reply  of assessee. Cost of Rs. 50,000 imposed  on the Department.

Vide Notification No. 90/2022, the Central Government notifies conditions under clause (ii)(c) to the first provision to Section 17(2) to exempt any sum paid by an employer for any expenditure incurred by the employee on his or his family member’s treatment. 

Income Tax Department conducts search and seizure operation on  several groups engaged in the healthcare services by running hospitals, covering more than 44 premises spread over Delhi-NCR Unearths unaccounted income of Rs. 150 Cr.; Further investigations are in progress.

GSTN has issued a news update dated July 22, 2022 regarding advisory on Upcoming Changes in GSTR-3B. Recently the Government has notified many changes to Form GSTR-3B requiring taxpayers to report information on ITC correctly availed, reversal thereof, and declaring ineligible ITC in a new manner.

This new notification is legally applicable from July 5, 2022. However, notified changes in Table 4 of GSTR-3B are not available as of now. Thereby, GSTN has stated that “Until these changes are implemented on the GST Portal, taxpayers are advised to continue to report their ITC availment, reversal of ITC and ineligible ITC as per the current practice.”

RBI allowed relaxations for standalone primary dealers (SPDs) to operate in the foreign exchange market alongside banks with an aim to enable their customers to hedge currency risks and broaden the availability of market makers.

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CBDT notified new conditions and a form for claiming exemption against expenses on Covid-19 treatment. As per the notification dated 5 August 2022, you will have to submit certain documents to your employer and a form to the income tax department to claim tax exemption on money received from an employer or relatives for Covid-19 treatment.

ITRs of AY 2022-23 due on 31.7.2022 are poured in, the Compliance Management Team of Income Tax Department has started mailing alert messages to such assessees before processing the return u/s 143(1)(a) with regards to different type of claims and credits made in the return or who have made such claims in revised return furnished u/s 139(5) of the Act and allowing 15 days time for for e-response. The alert is advisory also to finish revised returns if required.

TRO can not sell attached property if recovery of tax demand was not made within 3 years from date of attachment. [S. Sebastine v. CIT (2022) 140 taxmann.com 604 (Mad.)]

The Supreme Court decided to set up a committee yesterday to form an All India Organization of taxpayers, which will be the biggest organization in the world. No matter which Government is ruling, without the approval of this Organisation, no free electricity, free water, free distribution, or loan waivers can be announced by any government implementing them.

CBIC in accordance with the recommendations made by the GST Council at the 47th Council Meeting has issued various Circulars on 3 August, 2022 clarifying issues relating to GST rates/exemptions on both goods and services and GST applicability on liquidated damages, compensation and penalty arising out of breach/break of a contract.

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👉🏻CAG asks CBIC to complete verification of GST transitional credit claims 

(As part of transition to GST wef July 1, 2017, taxpayers were allowed to file Form TRAN-1 and avail tax credit on the basis of closing balance of the credit declared in the last return under the pre-GST regime)

👇🏻 👇🏻 👇🏻

https://bit.ly/3QtvR9V

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Section 131 of the Income Tax Act, 1961 vests powers of a civil court in an assessing officer, the Dharwad bench of the high court has observed, while upholding the decision of the Income Tax Appellate Tribunal (ITAT), Bengaluru, in relation to a Ballari-based company. M/s Ennoble Construction, Ballari. 

Banks have approached the CBDT for clarity on the scope of Section 194R of the Income Tax Act, as they fear the newly introduced provision will force them to deduct a 10% tax at source on incentives extended to large business customers through credit cards. 

Central government hereby permits the manufacturers or packers, or importers of pre-packaged commodities to declare the revised retail sale price (MRP) on the unsold stock manufactured packed/imported, after inclusion of the applicable taxes upto January 31, 2023 or till such date as the stock lasts.

CAG recommended that the indirect tax department should complete the verification of transitional credit allowed under the GST mechanism. As part of transition to GST with effect from July 1, 2017, taxpayers were allowed to file Form TRAN-1 and avail tax credit on the basis of closing balance of the credit declared in the last return under the pre-GST regime. 

GSTN has issued an update regarding introduction of Single Click Nil Filling of GSTR-1. Single Click Nil Filling of GSTR-1 has been introduced on the GSTN portal to improve the user experience and performance of GSTR-1/IFF Filling. Taxpayers can now file NIL GSTR-1 returns by simply ticking the checkbox file NIL GSTR-1 available at the GSTR-1 dashboard. Detailed advisory has been issued.

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Request to address the concerns arising from automatic processing under section 143(1) of the Act by the CPC considering solely information provided in clause 16 of Form 3CD while ignoring income computation which is causing double addition of same income

The ICAI, being a partner in Nation Building, plays a pivotal role in strengthening the relationship between the taxpayers and the Department, by bringing to the notice of the Department, genuine hardships being faced by the assessees under the Income-tax law and to ensure timely redressal of the same. Continuing in this direction, we bring before your kind notice issues being faced by tax payers due to processing of return done by CPC u/s 143(1) of the Income-tax Act, 1961 adding income twice as reported in clause 16 of Form 3CD. This is being witnessed in thousands of intimations. 

Background

Section 143(1)(a)(iv) provides for automatic processing of return of income by the CPC. Certain assessees, who are required to get their accounts audited, also furnish particulars in Form 3CD.   Adjustments towards disallowance of expenditure or increase in income etc. indicated in the said Form No. 3CD but not taken into account in computing the total income in the return.  

Clause 16 of Form 3CD provides for reporting by the tax auditor eg Amounts not credited to the profit and loss account, being, (a) the items falling within the scope of section 28, (d) any other item of income. Addition of the amount reported against this clause is added to the income reported in ITR.  

Issues & Concerns of taxpayers due to erroneous automatic adjustments made by the CPC u/s 143(1) on the basis of information furnished in clause 16(a) and 16(d) of Form 3CD 

However, assessee as well as our members have reported that tax payers are receiving intimations under section 143(1)(a) from CPC adding income as reported in clause 16(a) and 16(d) of Form No. 3CD. This adjustment is carried out without considering the fact that such income being already offered to tax in the ITR Form furnished by the assessee either under some other head of income or at some other particulars of business income head.  

The online responses whose asked are submitted by the assessee against such proposed addition in income u/s 143(1)(a) are also not being considered. The online responses by the assessee are completely disregarded despite clearly explaining the fact that the incomes as reported in clause 16(a) and 16(d) of Form 3CD are taxed/reported in the ITR Form at relevant places meant for reporting such incomes. 

Where amount of income is included in Form No. 3CD at clause no 16(a) and 16(d), assessees have by and large, included such amount in income computation and as such included in ITR. For example, in case of a sole proprietary enterprise, savings bank interest or house property rent  

received (not being income from business) is credited to profit and loss account and is credited to capital account of the proprietor. While doing computation of income, it is included in taxable income and retorted in ITR furnished by him.  

After receipt of intimation under section 143(1), in order to rectify any apparent mistake, application can be made under the provisions of section 154 of the Act. However, no rectification request is being permitted against such addition of incomes.  

Therefore, then only solution left to challenge such additions of income from tax payer point of view is to go for appeals involves incurring of considerable cost, precious resources resulting into unnecessary hardships. This is against the policy of ease of doing business. There is error in programming employed by CPC in this regard and such automatic adjustments solely based on reporting under clause 16(a) and 16(d) of Form 3CD, without considering ITR while issuing intimations under section 143(1)(a) should be instantaneously stopped.  

Once again to explain the above issue, consider a situation where an assessee say, Mr. A has income of Rs 500 from partnership firm (i.e. remuneration, interest etc) and Rs 400 from proprietorship firm. Both the firms are liable for tax audit under the Act. The income from partnership firm is not included in the profit and loss account of the proprietorship firm but is directly taken in the computation of income for the purposes of furnishing ITR Form. The tax auditor while reporting in Form 3CD (of proprietorship firm) in clause 16(a) - Amounts not credited to the profit and loss account, being the items falling within the scope of section 28 - has reported Rs 500, which is the income from the partnership firm not credited to the profit and loss account. Now, in ITR Form 3 of Mr. A, he has included the income from partnership firm i.e. Rs 500 in Schedule BP Clause 24 - Any other income not included in profit and loss account/any other expense not allowable (including income from salary, commission, bonus and interest from firms in which individual/HUF/prop. concern is a partner). However, CPC on the basis of tax audit report is making adjustments u/s 143(1)(a) and again added Rs 500 in Schedule BP clause 23 (Any other item of addition under section 28 to 44DA).  

Similar, is the case with various other assessees wherein income as reported in clause 16(a) and 16(d) of Form 3CD are being added under section 143(1)(a). In other cases, any item in the nature of income eg Interest income, rental income, agricultural income etc which is credited to the capital account (since non-business income) is reported under clause 16(d) of Form 3CD of the assessee. While filing ITR, these items of income are offered for taxation under the respective heads of income. While processing such ITRs by the CPC, entire such income(s) though offered for taxation is added back & demand being raised. The same is being done without considering the response submitted against the intimation of the proposed adjustment under section 143(1)(a). 

This error in programming for processing ITR is resulting into:  

(a) raising unwarranted demands 

(b) costing time, efforts, money to tax payers, besides mental agony, 

(c) costing time, efforts and cost to the Government, 

(d) contrary to policy of Hon’ble Prime Minister of Ease of Doing Business, 

(e) receding status of the country in ease of doing business ranking. 

Request for Consideration

As is clear from above, automatic additions of income under section 143(1)(a) incomes reported in clause 16(a) and 16(d) of Form 3CD without considering income based on incorrect computation. The online responses submitted against such proposed additions should be considered before raising demand and even rectification application also must be permitted in such cases. 

Suggestions:

It is suggested that:  

(1) The CBDT may look into the matter of automatic additions to income based on reporting under clause 16(a) and 16(d) of Form 3CD without considering the fact that such incomes may have been offered by taxpayers in their ITR Form.  

(2) The online responses against such intimations should necessarily be considered.  

(3) Application for rectification should be allowed in program and be considered on merit. 

(4) Where response or application for rectification has been rejected, all such cases be revisited for doing justice.   

We are confident for a positive consideration of our suggestion, above. We shall be happy to elucidate, if need be. 

Thanking You, 

With Warm Regards, 

CA. Chandrashekhar V. Chitale

Chairman, Direct Taxes Committee 

The Institute of Chartered Accountants of India

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CBDT has notified new Rule 17AA prescribing books and other documents to be kept and maintained by entities under clause 10(23C) or section 12A (Charitable Institutions).  The books of accounts and other documents may be kept in written form or in electronic form or in digital form. They shall be kept and maintained for a period of 10 years from the end of relevant year.

 The GST policy wing of the CBIC is conducting an in-depth analysis to widen the coverage of tax on the crypto ecosystem. It is looking to bring in more activities such as mining platforms for cryptocurrency assets and the use of virtual digital assets (VDAs) as a medium of exchange in purchases under the tax net.

NCLT has clarified that it has not issued any circular stating that tribunals will hold only urgent hearings due to a shortage of members, stated a circular posted on its website. NCLT stated that a note has been circulating on the Whatsapp group saying that with effect from August 10, the tribunal will hear urgent matters until further notice. 

Union Cooperation Minister said more than 300 cooperatives including 45 multi-state cooperative societies have been onboarded on the government's public procurement portal Government e-Marketplace (GeM) as buyers to procure goods from lakhs of MSMEs and other businesses.

Credit and Finance for MSMEs: Uttar Pradesh's investment promotion and facilitation agency Invest UP has directed state departments to clear pending dues of micro, small and medium enterprises (MSMEs).

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