Best Judgement Assessment

Re-assessment

Provisional assessment

BJA

It usually takes place in the cases where there is a non cooperative attitude of the tax payer

It is a supplementary provision of tax assessment.

The books of accounts are rejected and their own opinion is inserted for calculation of taxable item.

The Constitutional Courts have laid down certain guidelines in case of BJA to check the misuse of powers in case of BJA. For ex the AO should base his opinion on the evidence available on record or other relevant material.

Re-assessment

It takes place when there is escapement of income by the taxpayer

There must be cogent reasons to believe

Notice, inquiry and orders are must.

Re-assessment cannot take place where the subject matter has already been settles in regular assessment or appeal thereof.

Provisional Assessment

Takes place before the completion of the taxable period

Tax liability does not becomes final.

The demand can be raised only after filing of final returns.

Department can provisionally assess only on specific grounds.

The assessee/taxpayer can also seek provisional assessment in doubtful case.

Different modes of tax collection are

Advance tax

TDS

Self assessment

Enforcement.

Advance tax is payable by the tax payer in the prescribed form if the tax payable exceeds certain specified limits.

Prescribed cases:- [registered taxpayer]

1. projected tax –

it is not the actual tax which would be payable by the assesse.

It is pure guess work based on past experiences.

2. exceeds taxable limit –

it excludes the small taxpayers.

The taxable limit is decided by the authority.

3. taxable period –

Taxable period differs as per the tax. In income tax it is one financial year while in VAT it is one quarter.

Non registered tax payer not expected to pay advance tax even if first instalment date has passed. His liability to pay advance tax may be imposed on certain specified taxpayer other than the taxpayer.

This slightly goes against the taxpayer.

TDS/TCS

Tax Deducted at Source is the tax which is deducted by the payer while paying or making payment which is in nature of taxable item to the payee.

The payee can claim this amount as an adjustment while making his actual payment of taxes.

Harsher Methods

These methods are adopted when any default is made by the taxpayer in payment of taxes in ordinary course.

1. Attachment and seizure of Bank Accounts

2. Garnishee order - A legal procedure by which a creditor can collect what a debtor owes by reaching the debtor's property when it is in the hands of someone other than the debtor.

3. Attachment and Sale of Property – the rule of Code of Civil Procedure apply for attachment and sale of property.

REFUND OF TAX –

The refund of tax arises on two accounts

On account of excess taxes paid. On account of acceptance of appeal.

The refund claim can be made on filing of an application or on filing of the return. Under some statutes separate form is prescribed for the claim of Refund (For ex. VAT), but under Income tax the assessee become entitled for refund as and when he files his return.

Interest – Usually interest is payable because of delay on account of process of refund vouchers. The delay has to be calculated after a prescribed time from the date of filing the refund application.

Set off for Outstanding Liabilities – If while processing the refund the assessing officer comes across any outstanding liability in case of the taxpayer then he can adjust such refund against that liability.

NATURE OF PENALTY AND PROSECUTION UNDER TAXATION STATUTES

1. Tax assessed in the assessment proceedings is revenue in nature. Interest levied on

delayed payment of such tax is compensatory in nature.

2. The penalty imposed in such proceedings is quasi-criminal in nature, and prosecution is

of criminal in nature.

3. The assessment proceedings (assessment/penalty/prosecution) are different in nature.

Scrutiny assessment is initiated after issuing a notice, and an order is passed after

conducting inquiry. Under penalty proceedings separate notice is mandatory to initiate

such proceedings, after which the inquiry takes place and order is passed. Prosecution

takes place before criminal courts and not before the tax authorities.

4. Initiation of proceedings – Assessment initiated by notice. Penalty proceedings by Show

Cause notice and proceedings are initiated by filing of complaint.

5. Concept of Mens Rea – no concept of mens rea in assessment proceedings as it is a civil

proceedings. In Penalty proceedings, ordinarily the burden should be on the tax

authorities, but by virtue of specific provisions in the tax statutes the onus or the burden

is shifted on the taxpayer. In prosecution proceedings strict rules of criminal law are

applicable. The accused is innocent until contrary is proved.

6. Link between the three – If the penalty and prosecution proceedings are based on the

assessment proceedings. The failure of such at any stage shall dismantle the ground of

the department in the penalty or prosecution proceedings. But where the act for which

penalty is proposed or the offence for which the prosecution is initiated is different from

the assessment proceedings then the outcome of the assessment proceedings has no effect

on the other two.

7. Appellate Authorities – In assessment and penalty the proceedings are under the IT Act.

In prosecution proceedings the hierarchy is of criminal courts.

8. Ignorance of law an excuse – Usually ignorance of law is no excuse in court of law. But

ignorance of law becomes an excuse in case of penalty proceedings.

APPEAL PROCEDURES AND APPELLATE AUTHORITIES UNDER THE TAXATION

LAWS

Designation of the Appellate Authorities

For Income tax

For VAT

Right to Appeal – it is a statutory right as held in CIT v. Ashoka Engineering Company. If no remedy is available under the statute then a writ petition is available to the State High Court.

There are no bars to the availability of writ petition rights.

Condonation of Delay - Sec 5 Limitation Act - Extension of prescribed period in certain cases – Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908 (5 of 1908 ), may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.

CIT(A) ITAT HC SC

DyC(A) ITAT HC SC

The High Court does not have the power to condone delay. i.e. the Limitation Act does not apply to cases under the special statues. This is true for first and second appellate authority also but the taxation statute have a specific provision for condonation of delay with regard to the first and second appellate authority but such provision was not there for the High Courts.

In the 2010 the Sc started taking a vies w that in absence of a specific provision for condonation of delay even the High Courts cannot condone delay, there was chaos and thousands of petitions were dismissed by various High Courts throughout India. Now, different legislatures have started inserting such provisions for condonation of delay for the High Courts.

For ex – Finance Act – Sec 206a (A)

Stay of Demand – Power to stay demand is available with both the Assessing Officer and the Appellate Authority. But there are several practical and real world difficulties.

There are two main channels.

AO Exercising of power by Appellate Authorities. If there is a refusal to exercise such power by any of the authority then a writ

petition can be filed for seeking appropriate direction by the Hon’ble High Court.

Admission Additional Evidence – The Appellate Authority ha s wide power to re-appreciate the evidence available on record. But as far as admission of additional evidence is concerned they have to be cautious and they can exercise such powers to admit additional evidence.

There is a procedure before admitting additional evidence, i.e. comments are asked from the other party regarding the admission of additional evidence.

BETWEEN IN DIARY

REVISION

Means calling of records by the higher authority to check the appropriateness of the proceedings or the orders either suo motto or on an application.

It can take place after passing of the order or during the process of assessment.

Refusal – A writ is maintainable with the Hon’ble High Court if CIT refuses to exercise power on the application made by the assessee.

A revision is not merely a tool in the hand of the department but it also helps the assessee several times.

Doctrine of Merger – CIT v. R.S. Banwari Lal – A separate issue can be raised in revsion.

Condonation of delay – it is allowable in cases of revision as in appeal. Karamchand Premchand (Pvt.) Ltd. v. CIT.

Order erroneous and prejudicial to the interest of revenue – the assessee is not allowed to interfere in such revision during the initiation/continuation of the proceedings.

RECTIFICATION UNDER TAXATION STATUTES –

1. Mistake apparent on record – Rectification can be done only in cases where mistake is apparent from record, for ex. calculation error or arithmetical error. No new claim/deduction/mixed question of fact and law/ question involving new facts can be raised in rectification proceedings. However, if there is a mistake of law that can be raised in such proceedings. Even if there is an interpretation given by a superior court subsequently, would amount to mistake of law. Parshuram Pottery Works v. D.R. Trivedi [100 ITR 651].

2. Payment of interest – The interest will be paid till the orders are rectified.

3. Dual Rectification and Limitation - Limitation period in case of dual rectification starts from the date of the original order.

4. Power to Rectify – Power to rectify is available with all the authorities. AO to SC.

5. Rectification Vis-a-Vis Revision –

Rectification is made by the same authority whereas revision is done by a higher authority.

In revision factual matter are also considered whereas in rectification anything which is available on record can only be considered and that to on the face of it.

6. Rectification Vis-a-Vis Appeal –

Rectification is made by the same authority whereas revision is done by a higher authority.

Appeal involves re-appreciation of all the records.

7. Rectification Vis-a-Vis Re-assessment –

Both these proceedings are undertaken by the same authoritybut the scope of enquiry is different. In rectification the scope of enquiry is restricted only to the order wwhich

has been passed whereas in re-assessment the authority considered which has been left out.

8. Every order can be rectified.