Government mending the net: It’s a new catch

The government has taken various measures to facilitate compliance by the taxpayers. In July 2020 alone, the government has taken following measures:-

1. Form 26AS to show Financial Transactions
2. More time has been provided to file belated/revised ITR for FY 18-19
3. E-campaign launched to encourage voluntary compliance of Income Tax (filing of belated/revised ITR) wef 20^th July 20.
4. New functionality introduced on the e-filing platform to facilitate checking of TDS rate of a cash withdrawing person u/s 194N to enable compliance to banks/post offices.
5. Instead of declaring ITRs filed for AYs 2015-16 to 2019-20 invalid due to lack of verification, the government has extended a time window up to 30-09-2020 by which the taxpayers can provide verification of the tax returns.

On the other hand, in July 2020 only, the CBDT has signed various MOU’s with various organizations like SEBI, CBIC and MSME Ministry for automatic and regular exchange of information to catch hold of any non-compliances or misreporting by the taxpayers. 

Important Statutory developments

1. Statement of Financial Transactions (SFTs) will now be shown as Part E of the new Form 26AS.
2. Due date for filing belated/revised ITR for FY 18-19 is further extended from 31^st July 20 to 30^th Sept 20 in view of COVID crisis. Self-Assessment tax paid by senior citizens not liable to pay advance tax to be treated as Advance tax for the purpose of computing interest u/s 234A.
3. A 11 day e-campaign to achieve voluntary compliance of Income Tax (filing of belated/revised ITR) launched by CBDT from 20^th July 20.
4. CBDT has introduced a functionality on the e-filing platform to enable the banking company or a co-op. bank or a post office to check whether person withdrawing cash is falling within the proviso to Section 194N or not.
5. CBDT signs Memorandum of Understanding for sharing ITR related information to Ministry of MSME.
6. CBDT has clarified that the exemption Notifications 68, 70 and 80 with respect to section 194N issued in 2019 shall be deemed to be issued under fourth proviso to section 194N as amended by the FA, 2020.
7. ITRs filed for AYs 2015-16 to 2019-20 pending verification can be now be validated by providing verification (physical/online) up to 30-09-2020.
8. A formal Memorandum of Understanding signed between CBDT and SEBI for exchange of data between two organizations on regular and automatic basis.
9. CBDT notifies ‘NPS Tier II- Tax Saver Scheme, 2020’ for Sec. 80C deduction. The lock in period under the scheme shall be three years from the date of credit of amount.
10. CBDT and CBIC have signed a new Memorandum of Understanding for data exchange for spontaneous exchange of data as requested.
11. CBDT relaxes timeline for processing of non-scrutiny ITRs filed up to AY 2017-18 with refund claim.

Important Judicial Precedents

1. The Ahmd ITAT in the case of Chhotabhai Jethabhai Patel & Co held that losses already set off against profit of other business not to be reduced notionally while computing profit u/s 80-IA.
2. The Chd ITAT in the case of Paramount Impex held that books of account couldn’t be rejected just because assessee didn’t maintain stock register.
3. The Mum ITAT in the case of Yogesh Mavjibhai Gala held that holding period for purpose of capital gains has to be reckoned from date of allotment of flat and not date of possession of flat
4. The Karnataka High Court in the case of International Society For Krishna Consciousness held that revision u/s 263 cannot be made if reassessment proceedings were dropped by AO after taking one of possible views.
5. ‘The Madras High Court in the case of K.P.R. Developers Ltd held that TComputerised Patta’ showing land as wet land to be deemed as agricultural land and merely because an agriculture activity could not be done on said land for various reasons including natural causes, it did not cease to be an agricultural land, thus, same could not be considered as capital asset as per section 2(14) and capital gain arising from same was exempt from tax.
6. The Mum ITAT in the case of Tata Education and Development Trust held that exemption u/s 11is allowable for sum spent on CBDT-approved foreign universities.
7. The Mum ITAT in the case of Abdul Kayum Ahmed Mohd. Tamboli held that ‘Development Right’ is business asset; no capital gain arises on sum received on its transfer:
8. The Madras High Court in the case of Smt. S. Mahalakshmi held that the process of converting raw urad into urad dal is a manufacturing activity and assessee would be entitled to deduction under section 80-IA.
9. The Bang. ITAT in the case of Flutura Business Solutions (P.) Ltd. held that to determine fair market value of share allotted in lieu of purchase consideration payable for an acquired asset, an assessee has two choices – he may adopt either NAV method or DCF method; Assessing Officer can determine fresh valuation but cannot change method of valuation opted by Assessee.
10. The Madras High Court in the case of Nagaraj & Co. (P.) Ltd. held that the assessee can’t file rectification application to claim deduction which is debatable in nature.
11. The Karnataka High Court in the case of C. Ramaiah Reddy held that where assessee, engaged in real estate business, received certain land as stock in trade in partition of joint family property, held as stock by joint family also, there was no conversion of capital asset into stock in trade, section 45(2) not applicable.