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Circulated By EmailVolume - VIII | September 2020
Vadodara Branch of Western India Regional Council ofThe Institute of Chartered Accountants of India
The Institute of Chartered Accountants of India(Setup by an Act of Parliament)
Editorial Team
CA. Krunal Brahmbhatt 78748 11551Chairman
CA. Vinod Pahilwani 98980 78176Vice-Chairman
CA. Manoj Sahu 90990 94500Secretary
CA. Rikin Patel 88667 09509Treasurer
CA. Vishal Doshi 98240 59901Ex-officio
CA. Hitesh Agrawal 99980 28737IP - Chairman
CA. Rahul Agrawal 97233 10418Committee Member
CA. Dhruvik Parikh 99795 39966Committee Member
CA. Krunal Brahmbhatt CA. Dhruvik Parikh
CA. Nayan Kothari CA. Rahul Parikh
CA. Hitesh Thakkar CA. Rachit Sheth
CA. Chinmay Naik CA. Janki Gohil
CA. Sakshi Somani CA. Neel Shah
CA. Sahil Rao
Managing Committee
Contents
Dear All
Obstacles don’t have to stop you. If you run into a wall, don’t turn around andgive up. Figure out how to climb it, go through it, or work around it that’s theway of life.
This is the month of September and all our professional brothers getinvolved in completion of auditing though not at a pace where we used tobecause of extension of due dates .
What I believe this year 2020 is abnormal for all business and profession butthis is new normal where we learn many ways to deal with unique situation.
We have scheduled workshop of Excel training by CA Amit Jain as 4 dayseries, requesting all members to take benefit of this session and along withthat we have plan session on professional opportunity for members onGujarat industrial policy and NSE on 12th September.
ICAI Updates:
1] Research Committee: It has launched the following initiatives for themembers and students at large to avail the benefits of such schemes:
1. I C A I D o c t o r a l S c h o l a r s h i p S c h e m e – F o r d e t a i l shttps://www.icai.org/new_post.html?post_id=16491
2. I C A I R e s e a r c h P r o j e c t S c h e m e - F o r d e t a i l shttps://resource.cdn.icai.org/59494research48411project.pdf
3. I C A I I n t e r n a t i o n a l R e s e a r c h A w a r d - F o r d e t a i l shttps://resource.cdn.icai.org/59392research48349awards.pdf
4. ICAI Awards for Excellence in Financial Reporting – For detailshttps://www.icai.org/new_post.html?post_id=16508
2] EMPANELMENT OF MEMBERS TO ACT AS OBSERVERS AT THEEXAMINATION CENTRES FOR THE CHARTERED ACCOUNTANTSEXAMINATIONS: A member who fulfills the above mentioned eligibilitycriteria, desirous of empanelling himself for the assignment, may do so,online at on or before 20.09.2020.http://observers.icaiexam.icai.org
3] The IASB publication of IFRS comprising IFRS Part B (IllustrativeExamples and Implementation Guidance) and IFRS Part C (Bases forConclusions) that accompany the IFRS Standards is also placed on theICAI website for guidance in application of the Ind AS. The above e-version of updated Ind AS and related guidance material are availableat: https://www.icai.org/new_post.html?post_id=15361
4] ICAI Cares - Medical Financial Assistance to the Members and theirdependents suffering from CORONA. The Detailed Notification can beaccessed on https://www.icai.org/post/covid19cabf.
Regards,
CA. Krunal Brahmbhatt
Chairman
Chairman Communication Forthcoming Events 2Pg 0
Judicial Decisions on Indirect Taxes Pg 02
Financial Instruments Part-5 Pg 03
SC Leaping to Facts than Law Pg 07
Direct Tax Updates Pg 08
Due Date Calendar Pg 10
Photo Gallery Pg 11
Vadodara Branch of WIRC of ICAI
Volume - VIII September 2020
02
Branch Events
Timing : 04:00 pm to 06:00 pm
Fees : Rs. 500/- + 18% GST
Webinar on Excel Training
Topic Faculty
Basic Excel Features : Basic Idea about excel, CA. Amit JainBasic common formula and functions used inexcel i.e. filter, countif, sumif, Dropdown list,min, max, LEN, rank, sorting and many more.
Advanced Excel Functions : Conditional CA. Amit JainFormatting, Print Options, Lookup function(vlookup, Hlookup), Logical Function (If),Advanced Vlookup (lookup with match), Trim
Pivot (Basic to Advanced Features), Slicer, CA. Amit JainChart, Dashboard, GSTR 2A Reconciliation inExcel in 5 minutes.
Auditing Tool in Excel, Basic and advanced CA. Amit Jainprotection in excel, Overview of Macro(Automation in Excel).
Day & Date : Friday, 28.08.2020
shall fall within the meaning of the term apparatus,
equipment and machinery and therefore, shall be
eligible for claim of ITC. Further. It was ruled that
ITC was eligible of GST on Steel & Civil Structure on
which the water slides are installed.
[Atriwal Amusement Park – AAR – Madhya
Pradesh]
1.2 The Appellate AAR ruled that when it has been
established that money, transported by the
Appellant in the cash -carry vans, can be
considered as goods, ITC in respect of the cash
carry vans used for the transportation of cash will
be available to the Appellant in accordance with
provisions of section 17 (5) (a)(ii) of the CGST Act,
2017.
[CMS Info Systems Ltd – Appellate AAR –
Maharashtra]
II. INTERMEDIARY
The Petitioner is an association comprising of
recycling industry engaged in manufacture of
metals and casting etc. The members of the
petitioner also facilitate sale of recycled scrap
goods for their foreign principals in India and other
countries.
Thus, the members of the petitioner association
not only deal with goods sold by foreign principals
to customers in India but also facilitate sale of
goods by foreign principals in non-taxable territory
to their customers, who are also located in non-
taxable territories. According to the petitioner,
member of the petitioner association receives only
the commission upon receipt of sale proceeds by
its foreign client in convertible foreign exchange.
Thus, according to the petitioner, the transaction
entered into by the members of the petitioner
association is one of export of service from India
and earning valuable convertible foreign exchange
for the same. According to the petitioner, IGST
cannot be levied on the members of the petitioner
association, who are engaged in the transaction of
export of service as stated above as the petitioner
members’ export of services is covered by the
Section 16(1) of the IGST Act, 2017 which provides
for “zero rated supply”.
The Petitioner had approached the Honourable
High Court to determine the issue as to whether the
provisions of Section 13(8)(b) rws 2(13) and 8(1) of
HrsCPE 8
(Subject to Confirmation)
Day & Date : Saturday, 29.08.2020
Day & Date : Friday, 04.09.2020
Day & Date : Saturday, 05.09.2020
Vadodara Branch of WIRC of ICAI
Announces Webinar on
Top 6 Opportunitiesof
NSE Platforms - for CA’s
Date
12 September, 2020th
Time
04.00 pm to 05.30 pm
Time
05.30 pm to 07.00 pm
Gujarat New IndustrialPolicy - 2020 & Professional
Opportunity for CA’s
CA. Ashish Goyal, VP NSE CA. G. B. Modi
CPE : 3 Hrs. Fees : Rs. 300 + GST
Contributed by : CA Anirudh Sonpal.can be reached at [email protected]
Judicial Decisionson Indirect Taxes
I. INPUTTAX CREDIT
1.1 With reference to water slides installed in an
amusement park, the AAR rules that Water Slides
Vadodara Branch of WIRC of ICAI
Volume - VIII September 2020
03
t h e I G S T A c t , 2 0 1 7 a re u l t ra v i re s a n d
unconstitutional or not?
The Honourable High Court observed that ‘the
basic logic or inception of Section 13(8)(b) of the
IGST Act considering the place of supply in case of
intermediary to be the location of supply of service
is in order to levy CGST and SGST and such
intermediary service therefore, would be out of the
purview of IGST. There is no distinction between the
intermediary services provided by a person in India
or outside India. Only because, the invoices are
raised on the person outside India with regard to the
commission and foreign exchange is received in
India, it would not qualify to be export of services,
more particularly when the legislature has thought
it fit to consider the place of supply of services as
place of person who provides such service in India.
There is no deeming provision as tried to be
canvassed by the petitioner, but there is stipulation
by the Act legislated by the parliament to consider
the location of the service provider of intermediary
to be place of supply. Similar situation was also
existing in service tax regime w.e.f. 1st October
2014 and as such same situation is continued in
GST regime also. Therefore, this being a consistent
stand of the respondents to tax the service provided
by intermediary in India, the same cannot be treated
as “export of services” under the IGST Act and
therefore, rightly included in Section 13(8)(b) of the
IGST Act to consider the location of supplier of
service as place of supply so as to attract CGST and
SGST.’
The Honourable High Court held that it cannot be
said that the provision of Section 13(8)(b) rws 2(13)
o f t h e I G S T A c t , 2 0 1 7 a re u l t ra v i re s o r
unconstitutional in any manner.
[Material Recycling Association of India vs UoI –
Gujarat HC]
III. REFUND – INVERTED DUTY STRUCTURE
The Honourable High Court allowed the claim of the
refund made by the petitioners considering the
unutilised input tax credit of “input services” as part
of the “net input tax credit”(Net ITC) for the purpose
of calculation of the refund of the claim as per Rule
89(5) of the CGST Rules,2017 for claiming refund
under Sub-section 3 of Section 54 CGST Act,2017.
The Honourable High Court opined that Explanation
(a) to Rule 89(5) which denies the refund of
Impairment of Financial Assets – Expected Credit Loss
(ECL) model
Introduction
The Impairment requirements of Ind AS 109 are based
on ECL model. This will result in earlier recognition of
impairment loss as compared to the incurred loss model
prescribed under Accounting Standards (“AS”).
Applicability
ECL model under Ind AS 109 applies to following
financial instruments:
• Financial assets that are debt instruments which
are measured at Amortised cost (e.g. loans, debt
securities, deposits and bank balance) or at
FVTOCI meeting both, business model test and
contractual cashflow test;
• Loan Commitments which are not measured at
FVTPL;
• Financial guarantee contracts issued which are not
measured at FVTPL;
• Lease receivables under Ind As 116; and
• Trade Receivables or any contractual right to
receive cash or other financial asset under Ind AS
115.
The impairment model does not apply to
• The equity insturments - measured at FVTPL or
Contributed by : CA Bijal Mehta.can be reached at
Financial InstrumentsPart-5
“unutilised input tax” paid on “input services” as part
of “input tax credit” accumulated on account of
inverted duty structure is ultra vires the provision of
Section 54(3) of the CGST Act, 2017 and read down
the Explanation (a) to the Rule 89(5) to the extent
that Explanation (a) which defines “Net Input Tax
Credit’ means “input tax credit” only and held the
said explanation to be contrary to the provisions of
Section 54(3) of the CGST Act; in fact the Net ITC
should mean “input tax credit” availed on “inputs”
and “input services” as defined under the Act.
[VKC Footsteps India Pvt Ltd vs UoI – Gujarat HC]
Vadodara Branch of WIRC of ICAI
Volume - VIII September 2020
04
FVTOCI; and
• Any financial instrument which is measured at
FVTPL.
Credit Loss Allowance
• For financial assets, a credit loss is the present
value of the difference (i.e. cash short falls)
between :
i. the contractual cash flows that are due to an
entity under the contract; and
ii. the cash flows that the entity expects to
receive, discounted at original effective interest
rate (or credit adjusted effective interest rate, as
applicable).
• An entity shall estimate cash flows by considering
all contractual terms of the financial instrument
through the expected life of the financial
instrument.
Measurement of ECL
• An entity shall measure ECL of a financial
instrument in a way that reflects :
(a) an unbiased and probability-weighted amount
that is determined by evaluating a range of
possible outcomes;
(b) the time value of money; and
(c) reasonable and suportable information that is
available without undue cost or effort at the
reporting date about past events, current
conditions and forecasts of future economic
conditions.
When measuring ECL, an entity need not
necessarily identify every possible scenario.
However, it shall consider the risk or probability that
a credit loss occurs by reflecting the possibility that
a credit loss occurs (even if the possibility of a
credit loss occurring is very low) and the possibility
that no credit loss occurs.
Decision Tree to determine Measurement Approach :
Measurement Approaches
Ind AS 109 prescribes two approaches to measure ECL.
We will briefly discuss them in this article:
a) The General Approach
The general approach requires an entity to recognise, at
each reporting date, an impairment loss allowance
using either 12- month ECL or lifetime ECL.
12-month ECL typically results in lower impairment
since it focuses only on probability of default (PoD)
within next 12 months period as against PoD over the life
of an instrument. The determination of ECL depends on
whether there has been a significant increase in credit
risk on the instrument since its initial recognition. A 12-
month ECL is the portion of Lifetime ECL.
The standard outlines a “three-stage model” (“general
model”) for impairment which is based on changes in
credit quality since initial recognition :
Changes in credit quality since initial recognition
b) Simplified Approach
The simplified approach does not require an entity to
track changes in credit risk. Each entity recognises
impairment loss allowance based on lifetime ECL at
each reporting date, right from its initial recognition.
This approach is to be applied only to:
a. trade receivables without a significant
financing component;
b. any contractual right to receive cash or another
financial asset that result from transactions
that are within the scope of Ind AS 115; and
c. lease receivables under Ind AS 116.
c) Purchased or originated credit impaired (POCI)
financial assets approach
Vadodara Branch of WIRC of ICAI
Volume - VIII September 2020
05
This approach is relevant only for purchased or
originated financial assets that are ”credit impaired” at
initial recognition generally measured at fair value
/purchase price and hence no allowance is recognised
at initial recognition.
Under POCI, impairment is always measured on basis of
lifetime expected loss and the changes in lifetime ECL is
recognised as loss allowance (Incremental/Reversal) in
statement of profit and loss.
Illustrations on ECL
a. 12-months ECL – probability of default approach
Entity A originates a single 10 year loan for INR 10
million. The loan’s coupon and EIR is 10%. Entity A
uses reasonable and supportable information that is
available without undue cost or effort taking into
consideration the expections for instruments with
similar credit risk, credit risk of the borrower, and the
economic outlook for the next 12 months.
Entity A estimates that the loan at initial recognition
has a probability of default (PoD) of 0.5% over next 12
months. It determines that changes in the 12-month
PoD are a reasonable approximation of the changes
in the lifetime PoD for determining whether there has
been significant increase in credir risk since initial
recognition. Entity determines that 25% of gross
carrying amount is likely to be lost if the loan defaults
(i.e Loss given default (LGD)) of the balance
outstanding .
Solution : At Reporting date, there is no change in 12-
month PoD and entity assesses that there is no
significant increase in credit risk since initial
recognition – therefore lifetime ECL is not required to
be recognised.
Particulars Details
Loan Amount Rs. 100,00,000 (A)
LGD 25% (B)
PoD – 12 months 0.5% ( C)
Loss Allowance Rs. 12,500
(For 12-months ECL) (A*B*C)
b. Lifetime ECL – provision matrix for trade
receivables
Entity B, a manufacturer has a portfolio of trade
receivables of INR 90 Million in 2019 and operates in
one geographical region only. The customer base of
the entity consists of large number of small clients
and trade receivables are categorised by common
risk characteristics that are reflection of customer’s
ability to pay all amounts due as per the contractual
terms. The trade receivables do not have a significant
financing component as prescribed under Ind AS 115.
In accordance with Para 5.5.15 of Ind AS 109, the loss
allowance for such trade receivables is always
measured at an amount equal to lifetime expected
credit losses.
The information for outstanding trade receivables
and default rates for making provision are as under :
Days past due Gross Carrying Amount Default Rate(A) (B) (C )
Current/not due 45,000,000 0.3%
1-30 days 22,500,000 1.6%
31-60 days 12,000,000 3.6%
61-90 days 7,500,000 6.6%
More than 90 days 3,000,000 10.6%
TOTAL 90,000,000
Solution :
At every reporting date the historical observed default
rates over the expected life of the trade receivables
are updated and is adjusted for forward-looking
estimates for provision matrix. In this case the
economic condition seems to deteriorate over the
next year.
Days past due Gross Carrying Lifetime ECL
Amount allowance (B X C)
Current/not due 45,000,000 135,000
1-30 days 22,500,000 360,000
31-60 days 12,000,000 432,000
61-90 days 7,500,000 495,000
More than 90 days 3,000,000 318,000
TOTAL 90,000,000 1,740,000
Assessment of significant increase in credit risk
In determining whether the credit risk on an instrument
has increased significantly, management should
compare the risk of default prevailing as at reporting
date with default existing as at initial recognition,
considering reasonable and supportable best
information available without undue cost or effort. This
information should include actual and expected
changes in external market indicators, internal factors
and borrower-specific information.
The standard requires both forward-looking and
historical information to be used in order to determine
Vadodara Branch of WIRC of ICAI
Volume - VIII September 2020
06
whether a significant increase in credit risk has
occurred.
Presentation
Statement of Profit and loss
ECL impairment loss allowance (including reversals of
impairment losses or impairment gains) recognised
during the period is disclosed as income/expense in
statement of profit and loss as a separate line item.
Balance Sheet
• Financial assets measured at amortised cost,
trade receivables, contractual revenue receivables
and lease receivables: The ECL is presented as an
allowance and reduces the Gross carrying amount
of assets in the Balance sheet. This is not the case
If the asset meets write-off criteria.
• Loan commitments and financial guarantee
contracts: An entity should recognise ECL in the
statement of financial position as a provision (i.e.
as liability) .
• ForDebt Instruments measured at FVTOCI:
financial assets that are mandatorily measured at
FVTOCI, the accumulated impairment amount is
not separately presented in the statement of
financial position. However, an entity should
disclose the loss allowance in the notes to the
financial statements.
Disclsoures
Detailed disclsoures are required to identify and explain
the amounts in the financial statements that arise from
ECL and effect of improvement and deterioration in
credit risk including the impact of COVID-19 on various
credit related aspects such as methods, assumptions
and information used in estimating ECL, policies and
procedures for valuing collaterals etc.
Key quantitative and qualitative disclosure requirements
includes :
Quantitative:
i. Reconciliation of opening to closing amounts of
loss allowance , gross carrying amounts showing
key drivers of change.
ii. Write offs, recoveries and modifications.
Qualitative:
i. Inputs, assumptions and estimation techniques to
determine significant increase in credit risk ,
impaired assets, etc.
ii. Inputs, assumptions and estimation techniques for
estimating ECL.
iii. Write-off policies, modification policies and details
of collaterals, etc.
Impact of Coronavirus on ECL
The widespread contraction in economic activity across
the globe due to the rapid spread of COVID-19 is likely to
have an impact on financial reporting and auditors
consideration. ICAI has developed and issued advisory
in this aspect including impact on the quantificaton of
ECL and classificaton of financial assets into 3 buckets
for recogniton and measurement of impairment losses
which have been summarised below:
The important/critical factors to be considered by the
preparers of the financial statements:
• Recognition of 12 months ECL versus Lifetme ECL
is based on segregation of credit exposures for
financial assets into 3 buckets where,
Stage 1- no significant increase in credit risk,
Stage 2 - significant increase in credit risk and
Stage 3- Credit impaired.
(The above segregation is not required for the
financial assets for which simplified approach is
permitted and the same is applied).
• Measurement of ECL- Adverse impact on the
business of borrowers or debtors may impact the
following credit risk parameters:
i. Risk of default (probability of default) i.e.
significant increase of default by borrower due
to reduced economic activity;
ii. Estimated amount of the loss itself in the event
of default (loss given default). Contraction in
economic act iv i ty and its impact on
consumers affect collaterals and business
cash flows adversely affecting the expected
amount of loss;
iii. borrowers may tend to fully utilise undrawn
limits and loan commitments, which in turn
would impact another credit risk parameter i.e.
exposure at default.
• the measurement of ECL is determined based on
current as well as forecasted macro-economic
conditions and more than one scenario need to be
Vadodara Branch of WIRC of ICAI
Volume - VIII September 2020
07
Contributed by : CA. Prashant Upadhyayacan be reached at
SC Leaping toFacts than Law
Section 56 of the Income Tax Act, 1961 is a section
covering residuary head of income wherein any income
not covered by any other Heads of Income are Taxed as
Income from Other Sources. Such income from other
sources is taxed at normal rate of tax applicable to the
Tax Payer who has earned such income. However, in
practice, if the Tax Payer has not offered a particular
income in his return or if a Tax Payer does not offer
proper explanation of a particular receipt, then such
receipt or credit are taxed under Section 68 of the
Income Tax Act by the Department. This practice is age
old primitive practice and has gathered more
incentivisation after increase in effective tax rate under
Section 115BBE of the Income Tax Act. Even in certain
cases where returns are filed showing Income from
Other Source without any heading, then CPC is treating
such income under Section 115BBE of the Act. Hence, in
the current scenario, the importance of Section 68 and
other sections covered by Section 115BBE has
increased by leaps and bounds.
There are quite substantial number of cases which are
subject to litigation on account of issues covered by
Section 68 of the Act. Commonly, in any order of Section
68, there is always one age old judgement of Sumati
Dayal v. CIT (1995) 80 Taxman 89 (SC) which is quoted
without exception by the Income Tax Department in
Bold, Underline and Italics. Although the department has
habit of silver lining Sumati Dayal decision under section
68, the real fact is that the decision is heavily reliant on
human probabilities and series of events having
significance of dates of events rather than acid testing
technicalities of Section 68.
In the said case, the Tax Payer had claimed that she had
won huge price money in Horse Race. The department
contended that she had not participated in horse race
but had shown her undisclosed income as winning from
horse race. In the case, the Settlement Commission by
its majority order upheld assessment order holding that
it was reasonable to infer, on facts, that assessee did not
participate in races but purchased winning tickets after
events with unaccounted money. The Apex court held
that matter in question had to be considered in light of
human probabilities and held that having record to
conduct of assessee as disclosed by her in sworn
affidavit as well as other material on record, an inference
could reasonably be drawn that winning tickets were
purchased by her after the race event. Hence, the crux
and main area on focus of Sumati Dayal was never
Identity, Genuineness and Credit Worthiness under
Section 68 but whether she had actually participated in
the Race. Another aspect considered by the Apex court
was the purchase of ticket from undisclosed income. If
the source of purchase of ticket was from undisclosed
sources, then the addition can be made under section 69
or 69A or 69B or 69C of the Act. Considering the same, as
far as question of Section 68 is concerned, the weight
cannot be assigned to this judgement at all. Despite of
these adjustments (Human Probability & Source of
purchase of Ticket) in direct applicability of Sumati
Dayal’s decision, the department has always quite
confidently quoted this decision under all litigations
relating to Section 68 of the Act.
Recently, the Department has been awarded another
weapon to contest the litigation under Section 68, which
is the recent judgement of last year from the Honourable
Supreme Court of PCIT v. NRA Iron & Steel (P) Ltd (2019)
412 ITR 161 (SC). The Judgement is relating to share
application money and share premium received from the
shareholders by the company. It is one the rarest land
mark Judgement of Supreme Court, which was in fact,
an ex parte order wherein there was no lawyer or
argument from the Tax Payer in spite of the fact that two
notices were sent to the tax payer by the honourable
Apex Court, due to which, the Judgement was eventually
developed considering the potential impact of
COVID-19.
• when there is evidence that a financial asset is
credit-impaired include observable data. For
example,the lender, for economic or contractual
reasons relating to the borrower’s financial
difficulty granted to the borrower a concession(s)
that the lender(s) would not otherwise consider.
• impact of any Prudential Regulatory actions to
sustain the economy such as loan repayment
holidays, reduction in interest rates etc.
• If the entity is unable to assess the impact of
COVID-19 in estimating the impairment loss due to
the inadequacy of information, the said fact should
be disclosed appropriately.
Vadodara Branch of WIRC of ICAI
Volume - VIII September 2020
08
delivered on 05th March 2019. After receipt of the order,
the Tax Payer had filed petition to recall the Judgement
on the ground that the Authorized Representative of Tax
Payer was suffering from Cataract due to which he
overlooked Dasti Notice as ‘Some Income Tax Return
Documents’. The honourable Supreme Court rejected
the recall petition vide order dated 25.10.2019 stating
that Tax Payer was provided sufficient opportunities.
The Tax Payer again filed Review petition which was
disposed off by the honourable Supreme Court vide
order dated 04.02.2020 wherein the honourable
Supreme Court rejected the review petition since it could
not find any substance in the content of Review Petition.
Like Sumati Dayal, the decision of NRA Iron has became
the most commonly used decision to quote by the
Income Tax Department. In almost all the cases
contested under Section 68 before any Tribunal or Court,
the decision of NRA is always quoted by the department.
Obiter Dicta: A decade ago, like Sumati Dayal and NRA
Iron, the department had also occasion to heavily
undertake the bombarding on the Tax Payers after the
land mark Apex Court decision of Union of India v.
Dharmendra Textile Processors [2008] 174 Taxman 571
regarding Section 271(1)(c ). To touch the apparent facts
of the case, the case was relating to penalty under
Section 11AC of the Central Excise Act, 1944 and never
of the penalty under Income Tax Act. However, in the said
decision, the honorable Apex Court had ruled that
penalty under section 11AC of CEA is similar to 271(1)(c )
of IT Act. Taking the basis of ruling, the department
started attacking Tax Payers from all sides although the
ruling was never of Section 271(1)(c ) of the Act.
Similarly, same thing has happened positively for cases
under section 68 of the Act in the recent judgment of the
honourable Apex Court in case of Basir Ahmed Sisodia v.
ITO (2020) 271 Taxman 247 (SC).
Leaping to Facts than Law: The question involved before
the honourable SC was relating to the law laid down
under Section 68 of the Act. Despite being given several
opportunities, the assessee had failed to prove the
authenticity of the entries in question and consequently
the AO added the amounts as 'unexplained cash credits'
u/s 68. Although the question before the honourable SC
was relating to Section 68 of the Act, the honourable
court leaped to the appeal against the penalty
proceedings before lower authorities. In appeal against
the penalty, the CIT(A) had held that the Tax Payer had
not made any concealment of income or furnished
inaccurate particulars of income. The apex court
observes that during the penalty proceedings the Tax
Payer had furnished affidavits & statements of
unregistered dealers which was duly verified and
accepted by the AO without any adverse findings. Court
holds that “the factual basis on which the Officer formed
his opinion in the assessment order ..in regard to
addition of Rs.2,26,000/….stands dispelled by the
affidavits and statements of the concerned unregistered
dealers in penalty proceedings.”, SC opines that in such
situation, “..the addition of amount of Rs.2,26,000/-
cannot be justified, much less, maintained.”
The above landmark Judgement has following
beneficial implications:
a) The honourable court can not only be pleaded for
substantial question of law, even substantial
question of fact can also be pleaded in appropriate
cases.
b) If the question before the higher authority is
differently dealt by the lower authorities or vice versa,
this decision can be easily quoted or contended.
c) Question of additional evidences where the appellate
authorities have regret to accept can be contested by
quoting above decision.
d) SC has demonstrated landmark principle that truth
can be searched and dig out from any matter
covered with lower authorities.
e) This Judgement is good fight against NRA Iron on
account of fact that in both proceedings, the original
addition was made without supporting and
satisfaction of Section 68 of the Act.
Contributed by : CA. Narendra Hindochacan be reached at [email protected]
Direct Tax Updates
Income-tax
1. Faceless Assessment
The issue that hogs the limelight right now isFaceless Assessment.
In a rare event, the Prime Minister himselfannounced the broad contours of this reformpertaining to Income-tax on 13th August 2020.
In the manner characteristic of the Government, as
Vadodara Branch of WIRC of ICAI
Volume - VIII September 2020
09
experienced in the event of Demonetisation andLockdown, the announcement has immediateeffect. However, unlike the earlier announcements,by all indications, this announcement is unlikely tocreate hardships and I expect it to bring goodtimes for most assessees, consultants and theOfficers.
In short, the Assessee will not need to attend theIncome-tax Office in person. In fact he may noteven know who is making assessment. Alsoassessment will not be dependent on one person.The selection of cases will not be by an individualofficer but by what may be considered artificialintelligence. The case be selected at one location,the technical inputs may come from anotherlocation, verification may be done from a differentlocation, assessment may be framed at stilldifferent location and the draft assessment ordermay be reviewed at yet another location. Hard tothink of corruption entering this maze.
I recollect the inconvenience of being present inperson at the time and on the date chosen by someOfficer. Sometimes a number of them chose thesame date and time. In the new dispensation, I canpossibly attend an assessment while holidaying inGoa. Or think of large number of senior officialsliving away from family for long periods due toposting at another location. Days may not be farwhen the same official can live with his family whileattending to official duties.
The announcement was followed by variousnotifications detailing the procedures, creation ofhierarchy of CCITs, PCITs, DCITs, ACITs, AOs, etcand defining their jurisdiction within NationalEassessment Centre and Regional Centres.
In an online programme organised by WIRC on 1stSeptember, 2020, 3 Senior Officials responded tos eve ra l q u e r i e s re l a t i n g to i s s u e s n o tcontemplated in or dealt with in thesenotifications.
In short, it would appear that within, say, Income-tax department in Vadodara, the Officers would bedivided into two categories, one dealing withfaceless assessments and the other dealing withother matters. The former may constitute majorityof about 2/3rd.
Local Officers will continue to hold jurisdiction asregards several issues, including issue of noticesunder section 148 and dealing with objections,stay of demand, recovery, rectifications, penalty,appeal effects, filing second appeals prosecutionetc. Cases relating to search and seizure andInternational taxation may not be covered by
faceless assessments, but assessments undersection 147 will be covered.
There will be issues as to how reference will bemade to valuers, how summons will be issued andwho will do cross examination, how the notices willbe issued under section 133(6) and many otherissues, although such issues may not be arising inall cases.
Assessing Officers will no longer have powers ofSurvey which powers will be now exercised byInvestigation Wing.
Let us wait and watch how this plays out and let uscontribute our share to make it successful.
2. Returns of income for Assessment Year 2019-20
By Notification dated 29th July, 2020, furtherextension upto 30th September, 2020 is grantedfor filing Return or Revised Return for theAssessment Years 2019-20
3. First appeal proceedings
As per announcements, first appeals will becomefaceless from 25th September, 2020. moreWhiledetails may become known by then, instructionsby CBDT Chief by communication dated 9th July,2020 indicates that the appeals are required to bedisposed of through e-appeal proceedings bysending the communication through the e-filingportal and or through emails only. The responsesshould also be through the same method as thiswill also ensure social distancing which is ofparamount importance at these times. Even thesubmissions are to be only electronic and thesame are not to be received in paper form.
What is noteworthy is that while very convenientplatforms are available for video conference, thepresent instructions do not contemplate even thatkind of interaction.
4. Notices for E assessment proceedings
While Covid 19 has created stress for almost all, theRevenue had put a hold on issue of notices forassessment as the notices would further add tothe stress. And now that lot of assessees wouldhave composed themselves, instructions areissued to start the Assessment process whichwas on hold so far. While the notices forassessment are always a bitter pill, now they will besugar coated. The notices will state that it is issuedto help you. If you are wondering how a scrutinynotice will help you, it clarifies that it will help you inputt ing end to uncer tainty of a pendingassessment. So time to dust off your digital orphysical records and be ready.
Vadodara Branch of WIRC of ICAI
Volume - VIII September 2020
Due Date CalendarContributed by : CA. Himesh D. Gajjarcan be reached at [email protected]
(1) Vide Notifications issued by the Central Government as on 24th June,2020 & 27th June, 2020 there has been relaxation given inthe Interest Payment and waiver of the Late Fees but it has conditions attached to it. So, here due date for GSTR 3B and GSTR 1given below represents the date till which relaxation in Late Fees and Interest has been granted. (2) Due Date tabulated below is asnotified till 26th August, 2020
DueDates
07-Sep-20
11-Sep-20
12-Sep-20
14-Sep-20
14-Sep-20
15-Sep-20
15-Sep-20
15-Sep-20
20-Sep-20
23-Sep-20
27-Sep-20
30-Sep-20
30-Sep-20
30-Sep-20
30-Sep-20
30-Sep-20
ReportingPeriod
Aug-20
Aug-20
May-20
Jul-20
Jul-20
AY 2021-22
Aug-20
Aug-20
Aug-20
Jun-20
Jul-20
FY 2018-19
FY 2018-19
FY 2018-19
Aug-20
Aug-20
Compliance Details
Deposit of Tax Deducted/TaxColected (TDS/TCS) Under ITAct, 1961
GSTR 1
GSTR 3B
TDS Certificate under section194-IA and 194-IB - Form 16Band Form 16C
TDS Certificate for taxdeducted under section 194M
Second instalment of advancetax
Deposit of Provident Fund
Deposit of ESIC
GSTR 3B
GSTR 3B
GSTR 3B
GSTR 9
GSTR 9A
GSTR 9C
Due date for furnishing ofchallan-cum-statement inrespect of tax deducted undersection 194-IA & IB
Due date for furnishing ofchallan-cum-statement inrespect of tax deducted undersection 194-M
Applicability
All Non Governemnt Deductors/Collectors
GST Registered Taxpayers with Annual Turnover morethan 1.5 crores.
Any Person Registered Under GST having turnoverLess than 5 Cr in Previous Year
As Applicable
As Applicable
As Applicable
Any Person registered with PF Authorities
Any Person registered with ESIC Authorities
Any Person Registered Under GST having turnovermore than 5 Cr in Previous Year
Any Person Registered Under GST having turnoverLess than 5 Cr in Previous Year (For Taxpayerregistered in Gujarat)
Any Person Registered Under GST having turnoverLess than 5 Cr in Previous Year (For Taxpayerregistered in Gujarat)
GST Registered Person having Turover exceeding 2 Crbut less than 5 Cr.
Composite Dealers registered under GST
GST Registered Person having Turover exceeding 5 Cr.
As Applicable
As Applicable
Details to be Furnished
Details relating to transaction of Tax Deducted/TaxColected (TDS/TCS).
Details relating to Outward Supplies made during themonth.
Summary of Supplies Made, RCM Discharged, ITCClaimed and Tax Payment
Deduction of tax at source from payment on renting ofImmovable property
TDS on payment to resident contractors andprofessionals (Individuals and HUFs)
Advance Tax Payment
Employer and Employees Contribution to PFAuthorities along with Admin Charges
Employer and Employees Contribution to ESICAuthorities along with Admin Charges
Summary of Supplies Made, RCM Discharged, ITCClaimed and Tax Payment (Late Fees will be Max Rs.500 Rs if GSTR 3B filled till 30/9/20
Summary of Supplies Made, RCM Discharged, ITCClaimed and Tax Payment
Summary of Supplies Made, RCM Discharged, ITCClaimed and Tax Payment
Annual Return for Normal Registered Taxable Person
Annual Return for Composition Scheme
Reconcilliation Statement
Payment of tax at source from payment on renting ofImmovable property/Buyer of Immovable Property
TDS on payment to resident contractors andprofessionals (Individuals and HUFs)
10
OB
IT
UA
RY
CA. Narendra Lalpuria
left for Heavenly Abode on 22.08.2020May the departed Soul rest in peace
Vadodara Branch of WIRC of ICAI
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15th August Celebration