The Hindu : Business : Amendments proposed in the Finance Bill, 2008

40,57,06000,0,4 The Hindu : Business : Amendments proposed in the Finance Bill, 2008

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Monday, Mar 17, 2008
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Amendments proposed in the Finance Bill, 2008

How does the Finance Bill, 2008, affect computation of business income?

Sec. 40A(3), which disallows any payments in excess of Rs. 20,000 in respect of any expenditure, which would include purchases, by means other than account payee cheque or account payee draft, is now proposed to be beefed up by making the ceiling applicable to the aggregate of the payments made on the same day so as to rule out avoidance of the provision by splitting up the payment. Such payments in cash at different times even on the same day, even if they are independent payments, were held permissible starting from CIT v Aloo Supply Co. (1980) 121 ITR 680 (Ori), but this and other decisions to the same effect now stand nullified.

A further amendment by way of a new sub-section (3A) would cover even what has been allowed on an accrual basis, if such liability is ultimately discharged by means other than account payee cheques or account payee drafts, so as to require withdrawal of deduction by way of disallowance in the year of such payment.

What are the changes in procedural law?

A number of changes have been made in procedural law.

Due date for filing voluntary returns for those who are now liable for filing returns up to October 31 is advanced to September 30 by an amendment to Sec. 139 (1). This requirement comes with effect from April 1, 2008, so that even the returns to be filed for assessment year 2008-09 would now be covered by the revised date.

There is an omission to make a consequential amendment to Sec. 44AB, which continues with October 31 as the date before which audit is required to be completed.

Monetary limit for filing appeals disregarded by the Commissioner could still be legitimate, if there are circumstances to justify admission in the light of new Sec. 268A.

Acquiescence presumed in the decision of the Supreme Court in Berger Paints India Ltd. v CIT (2004) 266 ITR 99 (SC), so as to bind the Department to adopt the accepted view in one case but in other cases, is sought to be superseded by a strange amendment giving freedom to revenue to adopt a different view, giving thereby licence to the Incometax Department to give unequal treatment between the taxpayers. This amendment by way of a new Sec. 268A is all the more regrettable, since it is proposed to be made retrospective from April 1, 1999.

A limitation has been placed on the powers of the Tribunal for stay of disputed demand beyond 365 days by an amendment to Sec. 254, even if non-disposal of the appeal is "not attributable to the assessee". There can be no justification for such an amendment, since assessee cannot be put to hardship in deserving cases of stay, where there is delay due to department asking for adjournment or making the records available or the Tribunal itself is unable to dispose of the same.

Another amendment by way of a new Sec. 292BB proposes that non-service or service beyond the time limit or improper service of notice in respect of any assessment or re-assessment proceedings would not be invalid, if the assessee has participated in the proceedings notwithstanding such non-service or improper service of notice. It legalises an illegal assumption of jurisdiction and nullifies the decision of the Delhi High Court in CIT v Hotline International P. Ltd. (2008) 296 ITR 333 (Del), where an argument that a subsequent participation would amount to waiver of such right to service of notice was rejected by the High Court.

The presumption as to ownership and the genuineness of the assets and documents found during search even for regular assessment and penalty proceedings under Sec. 292C is now proposed to be extended to requisition cases under Sec. 132A and survey cases under Sec. 133A by amendment to Sec. 292C. This is again a drastic provision with potential for abuse of powers of survey.

Delhi High Court decision required the satisfaction as a mandatory requirement provided in the section as to the existence of prima facie case for initiation of penalty proceedings to be in express terms.

These decisions are proposed to be nullified by a new sub-section (1B) in Sec. 271 with retrospective effect from April 1, 1989 giving a free hand to initiate penalty proceedings for every addition merely by recording a direction or an observation as to initiation of penalty proceedings.

A number of decisions of the Court both in respect of substantive law and procedural law are sought to be nullified, many of them even retrospectively.

The path of the taxpayer is made harder at every step. Tax assessment has become a game, where the tax collectors are permitted to call "Heads I win, tail you lose".

S. RAJARATNAM

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