Filing of Form TRAN-I to avail Input Tax Credit

Transition to GST provided for trust based transition of input tax credit of the existing taxpayers. A tax payer could file Form TRAN-1 and avail input tax credit on the basis of closing balance of the input tax credit declared in the last return under the pre GST regime. The last date for filing of Form TRAN-1 is 27th December, 2017. In keeping with the philosophy of voluntary compliance, revision of Form TRAN-1 has also been provided. The last date for revision of TRAN-1 is also 27th December, 2017.

It has been noted that some taxpayers have availed extraordinarily high transitional credit of CGST which is neither commensurate with the trend of input tax credit of the industry nor as maintained by the taxpayer himself in the past. Some of these high transitional credits may have a bonafide explanation or may be a case of bonafide mistake. However, it has been noted that high transitional credit has been claimed in many cases for which perhaps no bonafide explanation exists. Analysis to identify such units is underway. Such behaviour leads to breach of trust between the taxpayer and the tax-administration, which is the bed-rock of self-assessment regime in GST.

Taxpayers who have claimed transitional credit erroneously are advised to avail of the opportunity to revise Form TRAN-1 by 27th December, 2017 and ensure that only correct and bonafide credit is availed in transition, failing which the tax administration would be constrained to initiate audit and enforcement action against the identified units.

Extension of deadline till 31.03.2018 for submission of Aadhaar number, and Permanent Account Number or Form 60 by client to the reporting entity

After considering various representations received and inputs received from Banks, it has been decided to notify 31st March, 2018 or six months from the date of commencement of account based relationship by the client, whichever is later, as the date of submission of the Aadhaar number, and Permanent Account Number or Form 60 by the clients to the reporting entity. Necessary notification in this regard has been issued.

It may be recalled that earlier Under the provisions of Prevention of Money-laundering (Maintenance of Records) Second Amendment Rules, 2017, published in the Extraordinary Gazette of India vide G.S.R. 538 (E) dated 01.06.2017, it was provided that

• In case the client, eligible to be enrolled for Aadhaar and obtain a Permanent Account Number does not submit the Aadhaar number or the Permanent Account Number at the time of commencement of an account based relationship with a reporting entity, the client shall submit the same within a period of six months from the date of the commencement of the account based relationship. Provided that the clients, eligible to be enrolled for Aadhaar and obtain the Permanent Account Number, already having an account based relationship with reporting entities prior to date of this notification, the client shall submit the Aadhaar number and Permanent Account Number by 31st December, 2017.
• In case the client fails to submit the Aadhaar number and Permanent Account Number within the aforesaid six months period, the said account shall cease to be operational till the time the Aadhaar number and Permanent Account Number is submitted by the client. Provided that in case client already having an account based relationship with reporting entities prior to date of this notification fails to submit the Aadhaar number and Permanent Account Number by 31st December, 2017, the said account shall cease to be operational till the time the Aadhaar number and Permanent Account Number is submitted by the client.

No section 14A disallowance if no exempt income earned; CBDT circular can’t override express provision

The issue before the High Court was as under:

Whether the disallowance of the expenditure will be made even where the investment had not resulted in any exempt income during the AY?

High Court held in favour of assessee as under:

• Section 14A does not clarify whether the disallowance of the expenditure would apply even where no exempt income is earned.
• The words "in relation to income which does not form part of the total income under the Act for such previous year" in the Rule 8D(1) indicate a correlation between the exempt income earned in the AY and the expenditure incurred to earn it. In other words, the expenditure as claimed by the Assessee had to be in relation to the income earned in 'such previous year'.
• This implies that if there was no exempt income earned in the relevant AY, the question of disallowance of the expenditure incurred to earn exempt income in terms of Section 14A, read with Rule 8D could not arise.
• CBDT's Circular No. 5/2014 dated 11-02-2014 does not refer to Rule 8D(1) at all but only refers to the word "includible" occurring in the title to Rule 8D as well as the title to Section 14A. The Circular concluded that it was not necessary that exempt income should necessarily be included in a particular year's income for the disallowance to be triggered.
• For all of the aforementioned reasons, the CBDT Circular (Supra) couldn’t override the express provisions of Section 14A, read with Rule 8D. Therefore, if no exempt income was earned, there could be no disallowance of expenditure in terms of section 14A, read with Rule 8D. [2017] 84 taxmann.com 186 (Delhi)

Search and seizure -- Search on holding company and assessee name not mentioned in warrant--Notice under section 153A issued to assessee

Dorf Ketal Chemicals LLC v. Dy. CIT

Search and seizure--Assessment under section 153A-- Search on holding company and assessee name not mentioned in warrant--Notice under section 153A issued to assessee

Facts:

Assessee-company was a 100 per cent subsidiary of Indian Company D and had its control and management in India. A search and seizure action under section 132(1) was carried out at the business premises of D and also on the residential premises of the directors of the said company. A notice under section 153A was issued to the assessee and thereafter the assessment was completed under section 143(3) read with section 153A. Assessee contended that there was no initiation of search under the provisions of section 132 as the name of the assessee was not mentioned in the warrant of authorization and, therefore, the issue of notice under section 153A and the consequent assessment framed were void ab initio.

Held:

For the purpose of assumption and exercise of powers under section 153A in case of a person, the initiation of search in terms of section 132 or 132A on the said persons was mandatory and, therefore, whether there was no initiation of search as contemplated under section 132, the fundamental conditions for issuance of notice under section 153A was not fulfilled. Thus, the person in respect of whom the search was initiated under section 132 was the same persons against whom the notice is to be issued under section 153A. In view of this legal position, since no search had been initiated under section 132 in the case of assessee, therefore, notice issued under section 153A was without jurisdiction and the consequent assessment so framed under section 143(3) read with section 153A was also void ab initio.

Direct Tax Collections for Financial Year 2017-18 show Growth of 14.4% upto November, 2017

The provisional figures of Direct Tax collections up to November, 2017 show that net collections are at Rs. 4.8 lakh crore which is 14.4% higher than the net collections for the corresponding period of last year. 

The Net Direct Tax collections represent 49% of the total Budget Estimates of Direct Taxes for the Financial Year. 2017-18 (Rs. 9.8 lakh crore). Gross collections (before adjusting for refunds) have increased by 10.7% to Rs.5.82 lakh crore during April-November, 2017. Refunds amounting to Rs. 1.02 lakh crore have been issued during April, 2017 to November, 2017.

CBDT extends date till 31.3.18 for linking of Aadhaar with PAN

Under the provisions of recently introduced section 139AA of the Income-tax Act, 1961 (the Act), with effect from 01.07.2017, all taxpayers having Aadhaar Number or Enrolment Number are required to link the same with Permanent Account Number (PAN). In view of the difficulties faced by some of the taxpayers in the process, the date for linking of Aadhaar with PAN was initially extended till 31st August, 2017 which was further extended upto 31st December, 2017.

It has come to notice that some of the taxpayers have not yet completed the linking of PAN with Aadhaar. Therefore, to facilitate the process of linking, it has been decided to further extend the time for linking of Aadhaar with PAN till 31.03.2018.

Income Tax Department suspends an officer for harassing the taxpayer

A complaint was received making serious allegations against Shri D. K. Meena, Deputy Commissioner of Income Tax, posted at Surendranagar in Gujarat Regioan for harassing a taxpayer in a scrutiny case with malafide intention. The officer was alleged to have demanded illegal gratification through the taxpayer’s Chartered Accountant for favourably completing the assessment. The audio recordings of conversations were also received which, inter alia, mention the bribe amount being demanded by the officers of the Department for settling the case.

In order to verify the veracity of the allegations, case records were requisitioned immediately by the Vigilance Directorate of CBDT. On examination of the case records, serious lapses and irregularities were found which led credence to the allegations made against the officer. The matter is under investigation.

The Department has zero tolerance to such malpractices and corruption. Pending investigation, the officer has since been placed under suspension.