DTRTI NEWSLETTER Issue No.51/Chennai May 24, 2019

TRAINING NETWORK RELATED NEWS

Shri V. Palanivel Rajan, IRS, CIT(A), Chennai, Shri Sambit Mishra, IRS, Addl. DIT(Inv), Mumbai &

Shri Amrit Raj Singh, IRS, DDIT, CPC, Bengaluru in a Panel discussion during the Course on Real

Estate Business and Civil Contractors

Shri Jasdeep Singh, IRS, CIT(A), Chennai

inaugurated the Course on Real Estate

Business & Civil Contractors

Shri Syamal Datta, IRS, Director (Inv), CBDT,

New Delhi handled a session on data mining &

assessments in real estate cases

CONTENTS Training network related news

Topic for the week – Quality Assessments

Connections – Solution for puzzle of Issue no.50

Solutions to the last week’s crossword puzzle

2

TOPIC FOR THE WEEK Quality Assessments-Compiled & provided by Shri S. Ramakrishnan, IRS, ADG, DTRTI

Improving quality of assessments is one of

the important functions of not only the

Assessing Officers but also the supervising

hierarchy. Every year large chunk of

officers both newly recruited ACsIT and

newly promoted ITOs join the bandwagon

of “Assessing Officers”, it is imperative that

the concept of “quality assessment” as

mantra for the departmental officers need

to be ingrained into the minds of the

Assessing Officers repeatedly by the

supervising authorities just as the concept

of “quality circle” is being ingrained in the

minds of industrial personnel on a regular

basis. In this connection, it is worth

reiterating the Board’s specific input in

this direction as documented in Action

Plan for Financial Year 2016-17.

“Framing of Quality Assessments is an

essential part of any risk management

strategy. Quality of assessments is being

used as one of the most important

indicator to judge the performance of

tax department. Therefore, it is

imperative that various authorities in

the hierarchy of Income-tax Department

discharge their respective roles in the

process of assessment work with

sincerity and utmost devotion. In order

to ensure the quality in assessment work

a strategy needs to be devised at

different level in the department

keeping in mind some suggestions given

hereunder in this chapter.”

As the departmental officers are at the

threshold of Financial Year 2019-20,

the suggessions enumerated by CBDT

in the said document is worth

recollecting.

“Initiatives taken by the Board to

improve upon quality of assessments:

With the objective of bringing

improvement in quality of assessments

being framed, in recent years, Board has

taken a number of initiatives. These are

summarized as under:

i. Selection of revenue potential cases

for scrutiny has brought overall

improvement in assessments as

unimportant cases are filtered out in

the selection process. Over the years,

Board has devised system based

methods for selecting cases for

scrutiny which has substantially

reduced the manual intervention in

this process. As of now, bulk of the

cases are selected through Computer

Aided Scrutiny Selection (‘CASS’) after

applying broad based selection filters

and 360 degree data profiling while

only a small numbers of cases are

selected under the criteria – ‘Manual-

Compulsory’ on the basis of

predetermined parameters. Board has

eliminated ‘Manual-discretionary’

method of scrutiny selection also,

which had in the past led to

complaints of harassment of tax-

payers.

ii. Board has laid emphasis on improving

the quality of assessments by

incorporating the strategy for

ensuring quality in scrutiny

assessment cases in the Central Action

Plan document. Post-assessment,

practice of review and inspection has

been standardized. Each CCIT/ DGIT

..

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is required to forward to the

concerned Zonal Member analysis of

50 quality assessments of his charge

along with suggestions for

improvement. Further, quality cases

are being compiled and published

annually which provides valuable

guidance to the Assessing Officers.

iii. To discourage AOs from making high-

pitched assessments, Member (IT)

issued a communiqué in November,

2012 to all Cadre Controlling

Authorities wherein supervisory

officers were advised to deal with

such instances in an effective

manner. Besides this, the Board has

issued Instruction No.17/2015 dated

9/11/2015 directing Pr.CCsIT to

constitute a committee at their

Headquarter consisting of PrCsIT and

CsIT to deal with grievances related

to the high-pitched assessments.

iv. CBDT has vide Instruction No.

6/2009 directed that Range heads

are required to effectively monitor

cases during the progress of scrutiny

assessment and in appropriate cases,

may invoke provisions of section

144A of the I.T. Act to issue suitable

directions to the Assessing Officer to

enable him to frame a judicious

order. Board vide Instruction dated

07.11.2014 in F. No. 279/Misc./

52/2014- (ITJ) has reemphasized the

fact that Range Heads are required to

follow the said Instruction in letter

and spirit and are also required to

ensure that frivolous additions or

high-pitched assessments are not

made. Further, Pr.CsIT/ CsIT are also

required to supervise the work of

their subordinates in this regard.

v. System of Review (Instruction No. 15

of 2008) and Inspection (Instruction

No. 16 of 2008) by the supervisory

officers, post-assessment, is also used

as an effective tool to monitor the

quality of scrutiny-assessments being

framed. Vide Instruction of the Board

dated 07.11.2014, supervisory

officers have been directed to ensure

due follow up of these Instructions

which have a vital bearing on capacity

building of tax-administrators and

improving quality of work.

vi. Keeping in view the intent of the

Government to usher in a non-

intrusive system of tax

administration, Board vide

Instruction No. 7/2014 dated

26.09.2014 had directed that in cases

selected for scrutiny assessment

during the F.Y. 2015-16 under CASS

on basis of AIR/CIB data/26AS

mismatch, only specific aspects would

be examined during scrutiny and

wider scrutiny would be possible in

such cases in exceptional

circumstances only. This initiative

reduced the instances of issuing non-

specific queries in course of scrutiny

proceedings and making frivolous

additions. This initiative has been

continued in the current year also.

vii. It has been decided that for the

financial year 2016-17, the quarterly

targets for the disposal of scrutiny

assessments are to be fixed by the Pr.

CCsIT/ CCsIT/ Pr.DGsIT/ DGsIT

concerned keeping in view the need

to dispose of the cases in a staggered

manner and ensuring quality in

assessments as well as timely

collection of regular assessment tax.

4

..

The Pr.CCsIT/CCsIT are required to

redistribute the workload wherever

necessary.

viii. In order to ensure greater

accountability of Assessing Officers in

assessment work Board has revised

the format of Annual Performance

Appraisal Report (APAR) in which

substantial weightage has been given

to the handling of various aspects of

assessment work by an Assessing

Officer. These are required to be

carefully and objectively filled by the

supervisory authorities.

Procedural mistakes have proved costly in

quite a few cases where the officers of the

department have successfully identified

areas of concealment which ultimately

nullified hard work of the departmental

officers and hence Board also highlighted

various instructions issued so far in Action

Plan document which are reproduced as

they are valuable guide.

“In addition to the above orders and

directions of the Board, it is suggested

that during the F.Y. 2016-17, adequate

attention should be given to the

following procedural aspects of

assessment related work:

• All statutory notices and questionnaires

should be served on the assessee in a

timely manner in accordance with the

prescribed procedures. Evidence of issue

and service of all important notices must

be placed on the assessment record. It is

imperative that detail of notices issued

earlier should be mentioned in the

subsequent notices and assessment order.

• The first detailed questionnaire under

section 142(1) of the Income Tax Act,1961

(Act) comprising relevant and case

specific issues in scrutiny cases must be

issued preferably by 30.06.2016 (in time-

barring cases) and by 31.07.2016 (in non

time-barring cases). It must be ensured

that only relevant queries are made in the

questionnaire. In the cases selected for

limited scrutiny the AOs must follow the

Board guidelines scrupulously. Further,

the assessment proceedings should be

conducted in a non-adversarial manner in

accordance with guidelines issued by the

Board vide its instruction dated 7.11.2014

in F. No. 279/Misc./52/2014-15-(ITJ).

During the course of scrutiny assessment

proceedings, information regarding

immovable and movable assets (including

all types of Bank Accounts, deposits as

well as Credit Cards) of the assesssee

concerned should be taken on record in

accordance with Instruction No. 1937

dated 25.03.1996 of the Board. The

supervisory authorities are required to

ensure that the aforesaid Instruction is

strictly implemented.

• Adjournment of hearing should be

granted only for bona-fide reasons and in

cases where there is deliberate non-

compliance on the part of the assessee

with the statutory requirements of

assessment proceedings, appropriate

action as per provisions of the Act must be

taken.

• In order to reduce the time gap between

the conduct of search and seizure

operation and conclusion of assessments,

the proceedings related to the search

assessments must be initiated within one

month from the date of receipt of the

seized material/appraisal report by the

Assessing Officer.

5

..

Monthly review of the search assessment

cases by the supervisory authorities may

be made to expedite the completion of

assessments in these cases. Further, as a

general practice, efforts should be made to

stagger passing of search assessment

orders. The orders pertaining to the

earlier six years should be completed in a

phased manner while the assessment

pertaining to the financial year in which

search was conducted may be finalized

subsequently.

• The cases for survey should be selected

after due-diligence and the surveys must

be conducted professionally in a

transparent manner. It is imperative that

survey reports are submitted in a timely

manner and should clearly identify the

issues requiring further examination in

assessment proceedings. It is suggested

that regular feedback between assessment

charges and TDS charges will be helpful in

identifying the potential cases.

• In the cases of revenue audit objections

the Circular No. 8/2016 dated

17/03/2016 modifying Instruction

No.9/2006 should be strictly followed and

wherever required remedial actions

should be taken strictly as per the

timelines given therein and all efforts

should be made for early completion of

these cases and recovery of taxes within

the Financial Year itself. In the cases of

internal audit objections, the existing

guidelines should be scrupulously

followed.

• While disposing of objections to notice

u/s 148 seeking to re-open an assessment,

the Assessing Officer should pass order

while keeping in mind various judicial

pronouncements in this regard and

indicating due consideration of the issues

involved including the objections with

reasons in support of his/her conclusions.

• References for special audit u/s.

142(2A), Valuation etc. should be made by

31.08.2016 in respect of time-barring

cases so as to ensure proper follow up in

such cases.”

In the context of quality assessments

following points are worth reiterating:

Be clear about the relevant assessment

year, the entity in whose hands and

the section under which addition of

income is proposed to be taxed. In case

of any doubt, do not hesitate to obtain

guidance from the range head. In case

of lack of clarity do not hesitate to

press the legal elbow room provided in

tax jurisprudence viz., substantive and

protective assessment.

In case of assessment of part of a

transaction in the hands of the

assessee (such as assessment of share

of capital gain of sale of property)

kindly ensure to pass on the results of

the investigation to the assessing

officers of connected entities as such

step would not only optimize revenue

collection, but also prevent diluting the

main case in higher appellate forum as

the assesses utilize contrary stand of

one assessing with that of others in

similar factual matrix to nullify the

good work of the department.

The conventional view of shell

companies in the perspective of our

departmental officers is that they are

either used to (a) launder money using

penny stock route or (b) deposit cash

consequent to demonetization of

6

..

specified currency to but they forget one

other important area where

unaccounted money get layered through

series of entities to launder into business

entity. For this purpose books of

accounts and income tax returns are

used effectively to obfuscate the

investigator. To illustrate, the AO

handling assessment u/s.143(2) is often

faced with the P & L account with

similar factual matrix.

TRADING AND PROFIT AND LOSS ACCOUNT

Rs. Rs.

EXP 1.50 lacs Income 2.00lacs

Profit 0.50 lacs

BALANCE SHEET

Rs. Rs.

Capital 2.50 lacs Assets 2.00 lacs

Bank 0.25 lacs

C. Liability 200.00 lacs Loans 200.25 lacs

In the above factual matrix, the assessing

officer handling assessment perceives that

the case is small as the income as per profit

and loss account is a paltry amount. The

said assessing officer misses the wood for

the tree as the saying goes. This because

huge amount of current liabilities of Rs. 200

lacs and loans and advances of Rs. 200.25

lacs goes without scrutiny. Now that this

entity is armed with a 143(3) order of

“returned income accepted” can thwart any

investigation into application of loans of Rs.

200.25 lacs in other entities books as this

assessee will not only produce confirmation

letter but boasts that the said transaction is

well disclosed to the department as

“certified” order u/s.143(3) which glossed

over investigation into sources of current

liabilities of Rs.200 lacs. Therefore, the AOs

who have returns for scrutiny having paltry

income should investigate major

transactions in the Balance Sheet

notwithstanding paltry income disclosed by

the assessee. In money layering cases, co-

ordinated investigation of the transactions

of all entities by various AOs would result in

detection of “unexplained credit” in the

primary entity in which the funds are

infused and attachment u/s.281B of the

entity where the said credit has finally

landed would result in effectively collecting

the demand raised in the primary entity.

Though we as the AOs deal with Income Tax

law on a regular basis, we find that RAP

succeeds in detecting mistakes in our

assessments though RAP personnel do not

have the length of experience in Income Tax

Law. It is because, they have frequent

interaction among themselves so that if one

RAP personnel detects any mistake, the

same is shared across the RAP team so that

they tend to look for similar mistakes. It is

time, that our departmental officers share

their quality assessment work experience

(without disclosing the identity of the

assessee) so that the same can be published

in our Newsletter to improve the

competencies of our AOs.

As highlighted in the Article titled

"Summary of Instructions.,......on Insight

Portal " in our Newsletter No. 45, CBDT

has virtually opened a floodgate of

information about taxpayers gathered

from various sources accessible to tax

authorities by click of the mouse. AOs

need to dig deep into their system to

unearth relevant material while

conducting scrutiny assessment which

will go a long way in improving the quality

of assessments.

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Clarification स्पष्टीकरण

Office Memorandum कायाालय ज्ञापन

Entries प्रविवष्टयााँ

Particulars वििरण

Guideline ददशावनदेश

–

Further clarification, if any, in this regard

may be obtained from the administration

section.

इस संबंध में अवधक स्पष्टीकरण, यदद कोई हो, तो

प्रशासन अनुभाग से प्राप्त दकया जा सकता ह ैl

In this context copy of Office

Memorandum enclosed herewith for your

kind information and necessary action.

इस संदभा में कायाालय ज्ञापन की प्रवत आपके

सूचनाथा एिं आिश्यक कारािाई के वलए सादर संलग्न

ह ैl

I declare that all entries made by me in

this application are true to the best of my

knowledge and belief.

मैं यह घोषणा करता हाँ दक इस आिेदन में मेरे द्वारा की

गई सभी प्रविवष्टयााँ मेरे सिोत्तम ज्ञान और विश्वास के

अनुसार सही हैं l

Certified that the particulars furnished

have been verified from the relevant

records and are correct.

प्रमावणत दकया जाता ह ैदक प्रस्तुत वििरण संबंवधत

अवभलेखों से सत्यावपत दकए गए हैं और सही हैं l

I am directed to request all the officers to

strictly comply with the guidelines issued

in this regard.

मुझे सभी अवधकाररयों को यह अनुरोध करन ेका वनदशे

हुआ ह ैदक इस संबंध में जारी ददशावनदेशों का सख्ती से

अनुपालन करें l

..

Smt. Premila Vasudevan, OS & Shri V. Hariharan, ITI handled sessions during the Course on

Spoken Tamil conducted by MSTU, Chennai

Answers to the connections puzzle published in Issue No.50

1. Hearing Notice

2. Attachment

3. Secured & Unsecured Investments

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SOLUTION TO THE LAST WEEK’S CROSSWORD CROSSWORD ON EQUALISATION LEVY

.S1 P E C2 I F I E D S E R V I C E3

O S4 F

E5 X E M P T I F

M F6 I X E D P7 L A C E

O R C

N8 D P9 E N A L T Y

O10 N L I N E T11 P I

T O12 T W A V O13

I14 N T I M A T I O N R S15 E N

C E E Y E E L E

E L S E V Y H

A E16 Q U A L O17 N E U

K A18 R N N

H M A19 D J U S T M E N T D

E H R

N20 O N C O G N I Z A B L E E

D O21 N E T H O U S A N D

..

Shri S. M. Surendranath, IRS, DCIT, Shri V.P. Parthasarathy, DD(Sys) &

Shri V. Govindarajan, DD(Sys) handled sessions on Grievance Redressal at MSTU, Trichy

Published by: Team DTRTI, Chennai