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TAX FORUM: QUESTIONS & ANSWERS
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sought to be superseded by a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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