February_2019_Newsletter

GEAR - UP NEWSLETTER

Notifications and Circulars
Due Dates
Caselaws

Knowledge Trivia

#6/B-1| MNK Rao Road, Off: Govindappa Road, Basavanagudi|Bengaluru 560004
Ph No. 65670050-55. Email: [email protected]. Website: www.annveshan.com.

Gear Up

February 2019

I. NOTIFICATIONS/ CIRCULARS/INSTRUCTIONS:

A. Direct Tax:

(i) CBDT notifies New Centralised Verification scheme vide Notification No. 5/2019 dated
30th Jan 2019 - CBDT notifies Centralised Verification scheme u/s 133C for Centralised issuance
of notice and for processing of information or documents and making available the outcome of
the processing to the Assessing Officer applicable to any information or document in possession
of or made available to the Centralised Verification Centre (the Centre). The Centre may issue a
notice to any person requiring him to furnish information or documents for the purposes of
verification to be provided before a specified date. The Centre shall then process the information
or documents furnished by the person as specified. No personal Appearance is required at the
Centre.

(ii) Clarification regarding liability and status of Official Assignees under the Income tax Act
– Circular No. 4/2019 dated 28thJanuary 2019

The Official Assignee(Appointed by court who gets vested with debtors property on an order of
insolvency by court) realizes property of the insolvent and allocates it amongst the creditors of
the insolvent and has the responsibility to handle income-tax matters of the estate assigned to
him. CBDT has issued the following clarification regarding applicability of clause (iii) of section
160( 1) which applies on a 'Representative Assessee' in the case of an Official Assignee and status
of the Official Assignee's:
(a) It is hereby clarified that since Official Assignee does not receive the income or manage the

property on behalf of the debtor, they cannot be considered as a 'Representative Assessee'
of the debtor under the Act while computing the tax-liability arising from the estate of the
debtor.
(b) As property of the insolvent is vested with the Official Assignee as per specific provisions of
the Act/Law regulating functioning of the Official Assignee's, they have to be treated as a
'juristic entity' for purposes of the income-tax Act. Hence, it is clarified that for purpose of
discharge of tax-liability under the Act, the status of Official Assignees is that of an 'artificial
juridical person' as prescribed in section 2(31 )(vii) of the Act, not being one of the 'persons'
falling in sub-clauses (i) to (vi) of section 2(31) of the Act.
(c) Official Assignee is required to file income-tax return electronically in the ITR Form
applicable to 'artificial juridical person' separately for each of the estate of the insolvent and
the income shall be taxed as per the rates applicable in a particular year to an 'artificial juridical
person'.
(d) Official Assignees would have to obtain a separate PAN for each of the estate of the
insolvent.

This is only for internal circulation amongst clients and business associates of Annveshan

2

Gear Up

February 2019

B. Corporate Law:

The COMPANIES (AMENDMENT) ORDINANCE, 2019 was notified on 12th of January, 2019.
The Companies (Amendment) Ordinance, 2018 which was notified on 2nd November 2018 has been
repealed by this Ordinance and the following amendments are brought into action.

(i) Earlier, an application was required to be made to the Tribunal by a company or body corporate,
which is a holding company or a subsidiary or associate company of a company incorporated
outside India to follow a different financial year for consolidation of its accounts outside India.
The Tribunal may, if it is satisfied, allow any period as its financial year, whether or not that
period is a year. But now the above section has been amended, giving the aforesaid powers to
Central Government. Provided also that any application pending before the Tribunal as on the
date of commencement of the Companies (Amendment) Ordinance, 2019, shall be disposed of
by the Tribunal in accordance with the provisions applicable to it before such commencement.

(ii) A company incorporated after the commencement of the Companies (Amendment) Ordinance,
2019 and having a share capital shall not commence any business or exercise any borrowing
powers unless:

a. A declaration is filed by a director within a period of 180 days of the date of incorporation of
the company with the Registrar that every subscriber to the memorandum has paid the value of
the shares agreed to be taken by him on the date of making of such declaration; and

b. The company has filed with the Registrar a verification of its registered office through Form
No. INC. 22

Penalty for non-compliance - The company shall be liable to a penalty of Rs. 50,000/- and every
officer who is in default shall be liable to a penalty of Rs.1000/- for each day during which such
default continues but not exceeding an amount of one lakh rupees. Where no such declaration
has been filed and if Registrar has reasonable cause to believe that the company is not carrying
on any business or operations and initiate action for the removal of the name of the company
from the register of companies.

If the Registrar has reasonable cause to believe that the company is not carrying on any business
or operations, he may cause a physical verification of the registered office of the company and if
any default is found to be made he may without prejudice to the provisions of sub-section (8)
(which prescribes penalty for non-compliance), initiate action for the removal of the name of the
company from the register of companies.

(iii) The Company has a period of 30 days to report the creation of charge. Further 30 days could be
allowed on payment of additional fees[Earlier, reporting was allowed upto 270 days with
additional fee]. After the expiry of 60 days from creation of charge, the Company will be required
to make an application to the Central Government for further extension of 60 days with
‘Advalorem fees’. After the expiry of 120 days of the creation of charge, the Company will not
be able to register the charge as the Central Government, no more has the power to condone the
delay as per section 87. Yet, the Central Government can allow condonation as per section 460.

This is only for internal circulation amongst clients and business associates of Annveshan

3

Gear Up

February 2019

Every Company is required to maintain register of Significant beneficial owners (SBO) of the
Company. The Company shall give notice to anyone whom it believes to be SBO or who had
been SBO at any time during the 3 years immediately preceding the date of notice asking for
information like names, addresses and other details. If the person fails to provide the information,
the Company may apply to the Tribunal and the Tribunal may make such order restricting the
rights attached with the shares.

(iv) The company or the person aggrieved by the order of the Tribunal may make an application to
the Tribunal for relaxation or lifting of the restrictions placed only within a period of one year
from the date of such order. Provided that if no such application has been filed within a period
of one year from the date of the order, such shares shall be transferred to the Investor Education
and Protection Fund.

C. GST

(i) Notification No. 1/2019 - Central Tax dated 15th January 2019
Link: Notification No. 1/2019 - Central Tax
The notification specifies requirement of Chartered Accountant certificate in respect of input tax
credit taken on inputs used in manufacture of exports in respect of Supply of goods by a
registered person against Advance Authorisation which constitute deemed export as per
notification 48/2017. Chartered Accountant certificate is to be submitted to the jurisdictional
commissioner of GST or any other officer authorised by him within 6 months of such supply.

(ii) Circular No. 82/01/2019 - GST dated 1st January 2019
Link: Circular No. 82/01/2019 - GST

Sl. Periods Programmes offered by Indian Institutes of Whether

No. Management exempt from

GST

1 1st July 2017 i. Two-year full time Post Graduate Programmes Exempt from
in Management for the Post Graduate Diploma GST
To 30th in Management, to which admissions are made
January 2018 on the basis of Common Admission Test

(CAT) conducted by the Indian Institute of

Management,

ii. Fellow programme in Management,

iii. Five years integrated programme
in Management.

This is only for internal circulation amongst clients and business associates of Annveshan
4

Gear Up

February 2019

i. One- year Post Graduate Programs for Not exempt

Executives, from GST

ii. Any programs other than those mentioned at
Sl. No. 67 of notification No. 12/2017- Central
Tax (Rate), dated 28.06.2017. [i, ii and iii above]

iii. All short duration executive development
programs or need based specially designed
programs (less than one year).

31st January, All long duration programs (one year or more) Exempt from
2 2018 onwards conferring degree/ diploma as recommended by GST

Board of Governors as per the power vested in
them under the IIM Act, 2017 including one- year
Post Graduate Programs for Executives.

All short duration executive development Not exempt from
programs or need based specially designed GST
programs (less than one year) which are not a
qualification recognized by law.

(iii) Circular No. 83/02/2019 - GST dated 1st January 2019
Link: Circular No. 83/02/2019 - GST

The services provided by ADB and IFC shall be exempt from GST as per the provisions of ADB
Act and IFC Act for the services provided by ADB and IFC and not to any entity appointed by
or working on behalf of ADB and IFC.

(iv) Circular No. 84/03/2019 - GST dated 1st January 2019
Link: Circular No. 84/03/2019 - GST
It has been clarified that printing of pictures is to be classified under the HSN Code 998386-
Photographic and Videographic processing services attracting 18% GST and not under 998912
as 998912 clearly excludes colour printing of images from film or digital media and audio and
video production services is covered under 999613.
998386 includes printing pictures as per customers specifications such as enlargement of
negatives or slides, reprints, negative duplicates, colour prints of images from film or digital
media.

(v) Circular No. 85/04/2019 - GST dated 1st January 2019
Link: Circular No. 85/04/2019 - GST
Issue: In Notification No.11/2017 prescribes a GST rate of 5% on supply of food and beverages
services, supplied at mess, canteens, cafeteria of an institution like schools, hospitals, etc.
However, entry 66 to Notification No.12, states services provided by an educational institution
to its students, faculty and staff has been exempted from tax.

This is only for internal circulation amongst clients and business associates of Annveshan

5

Gear Up

February 2019

Clarification: Through this circular it has been clarified that the Notification No.11/2017 –
Central Tax (Rate) has to be read with Notification No.12/2017 – Central tax (Rate). Any supply
that has been covered under Notification No.12/2017 – Central tax (Rate) is specifically
exempted from tax despite the rate of tax being prescribed under the Notification No.11/2017-
Central Tax (Rate).
This clarifies that, supply of all services including supply of food and beverages by an educational
institution to its students, faculty and staff is exempt, where such supply is made by the education
institution itself. However, if such supply is by any person other than the educational institution
on a contractual basis, the same shall be taxable @ 5%.

(vi) Circular No. 86/05/2019 - GST dated 1st January 2019
Link: Circular No. 86/05/2019 - GST

Issue 1: What is the value to be adopted for the purpose of computing GST on services provided
by Business Facilitator (BF) /Business Correspondent (BC) to a banking company?
Clarification: Banks may pay reasonable commission/fee to the BC, the rate and quantum of
which may be reviewed periodically. Banking company is the service provider in the business
facilitator model, or the business correspondent model operated by a banking company as per
RBI guidelines. The banking company is liable to pay GST on the entire value of service charge
or fee charged to customers whether or not received via business facilitator or the business
correspondent.
Issue 2: What is the scope of services provided by BF/BC to a banking company with respect
to accounts in its rural area branch that are eligible for existing GST exemption?
Clarification: The services provided by a BF/BC to a banking company in their respective
individual capacities should fall under the Heading 9971 and that such services should be with
respect to accounts in a branch located in the rural area of the banking company. The procedure
for classification of branch of a bank as located in rural area and the services which can be
provided by BF/BC, is governed by the RBI guidelines. Therefore, classification adopted by the
bank in terms of RBI guidelines in this regard should be accepted.

(vii) Circular No. 87/06/2019 - GST dated 2nd January 2019
Link: Circular No. 87/06/2019 - GST

Issue: Whether the expression “eligible duties” under section 28(a) of the CGST Amendment
Act, would include CENVAT Credit of Service Tax within its scope or not?
Clarification:
1. The circular clarifies that the transition of credit of taxes paid under section 66B of the
Finance Act, 1994 was never intended to be disallowed under section 140(1).
2. As per 140(1), the CENVAT Credit of Service Tax paid was available as a transitional
credit and the same continues after the Amendment Act.
3. No transition of credit of cesses would be allowed in terms of Explanation 3 to section
140, inserted vide sub-section (d) of section 28 of CGST Amendment Act, 2018.

This is only for internal circulation amongst clients and business associates of Annveshan

6

Gear Up

February 2019

II. DUE DATES:

Important Due Dates for Filing of Returns and Payment of Taxes Under

Various Central and State (Karnataka) Statute During the Month of February 2019

DUE PARTICULARS STATUTE PERIOD FORM /

DATES CHALLAN

7-Feb- Due date for deposit of Income Tax Jan 2019 ITNS 281
2019 TDS/TCS for the month of Jan,
2019 [sum deducted by an office
of the government shall be paid
on the same day where tax is paid
without production of an
Income-tax Challan]

10-Feb- Details of supplies affected GST Jan 2019 GSTR-8
2019 through e-commerce operator
and details of tax collected at
source

10-Feb- Return for authorities deducting GST Jan 2019 GSTR-7
2019 tax at source

10-Feb- Details of outward supply for GST Jan 2019 GSTR-1
2019 taxpayers having aggregate Jan 2019 GSTR-6
turnover of more than Rs.1.50
13-Feb- crores
2019
Return for Input Service GST
Distributor

14-Feb - Due date for issue of TDS Income Tax Jan 2019
2019 Certificate for tax deducted
under Section 194-IA/Section
194-IB

15-Feb- Monthly Payment of Provident PF Jan 2019
2019 Fund Contribution for the
previous month

16-Feb- Monthly Payment of ESI ESI Jan 2019
2019 Contribution for the previous
month

This is only for internal circulation amongst clients and business associates of Annveshan
7

Gear Up

February 2019

20-Feb- Due date for filing Details of GST Jan 2019 GSTR-3B
2019 Outward Supplies and inward Jan 2019 GSTR-5
supplies and payment of Tax Jan 2019 GSTR-5A
20-Feb-
2019 Return for Non-Resident GST
20-Feb- Taxpayers
2019
Return for Non-Resident GST
OIDAR Service Provider

This is only for internal circulation amongst clients and business associates of Annveshan
8

Gear Up

February 2019

III. CASELAWS:

1. International Taxation

(i) ACIT vs. Grant Thornton [TS-10-ITAT-2019(DEL)] - In the absence of no make available of
technical knowledge, Article 13 of DTAA defining Fee for Technical Services being more favourable
to the assessee as compared to the provisions of section 9(1)(vii) of the Act, ITAT upheld CIT(A)
order stating that the assessee was not liable for deducting tax at source under section 195 of the Act
in respect of the payments made to non-residents under reference and deleted the disallowance under
section 40(a)(i) of the Act.

(ii) GE Energy Parts Inc. vs. CIT [TS-765-HC-2018(DEL)] - HC holds that the premises were
indeed used for activities of some form like marketing, selling, negotiating which were not of
preparatory or auxiliary character, ITAT upheld that the premises constituted a fixed place PE as
Article 5(3) makes no mention of the authority to conclude contracts. HC also held that the activities
also intersect and overlap with the content of the principle of dependent agent, as these agencies
work solely for the overseas companies, in their core activities and thus, it was a dependent agent PE
also. Thus, HC upheld the attributability of income to the extent of 10% of sales(26% of total profit
in India) and apportionment of 3.5% of the total values of supplies made to the customers in India
as income.

2. Transfer Pricing

(i) Pr. CIT vs. J P Morgan India Pvt Ltd [TS-24-HC-2019(BOM)-TP] - HC upholds ITAT order
that an adjustment on account of interest earned on the margin money deposited by the
AE should be factored into for determining the ALP being directly linked to the interest earned
on the margin money deposited by the AE's and unrelated parties while engaging the services of
the respondent as a broker in future and option trade. ITAT rules on inclusion and exclusion of
comparables based on functionality of services rendered, existence of abnormal events like merger
and so on.

(ii) CLSA India Private Ltd vs. DCIT[TS-17-ITAT-2019(Mum)-TP] - ITAT directs AO to delete
the upward TP adjustment on the transaction of payment of intra group services. ITAT upholds
TNMM method applied by the assessee as the most appropriate method within the meaning of
section 92C of the Act noting that TPO had not made the transfer pricing adjustment by following
the mandatory provisions of the law and determined the same on estimation basis.

(iii) L.G. Electronics India Pvt. Ltd vs. ACIT[TS-14-ITAT-2019(DEL)-TP] - ITAT holds that
incurring of expenditure in question does not give rise to any international transaction as per judicial
discussion hereinabove and without prejudice to these findings, since the operating margins of the

This is only for internal circulation amongst clients and business associates of Annveshan

9

Gear Up

February 2019

assessee are in excess of the selected comparable companies, no adjustment is warranted. ITAT holds
that the adjustment computed by the TPO/DRP on account of allocation of RHQ expenses was
uncalled for and to be deleted.

(iv) Integreon Managed Solutions (India) Pvt. Ltd vs. ACIT[TS-1385-ITAT-2018(Mum)-TP] -
ITAT orders exclusion of TCS e-Serve Limited as comparable for computing ALP for its
international transactions with its AE noting that one of the main criteria of the standalone turnover
of TCS e-Serve Limited was 23 times the turnover of assessee company.

(v) Whirlpool of India Ltd vs. DCIT[TS-25-ITAT-2019(DEL)-TP] - AMP expenditure had been
considered to be international transaction by TPO by applying bright line test. ITAT rejected the
stand of revenue that there was a mutual agreement/arrangement between assessee and its AE, for
discharge of function of marketing and market development in addition to agreement/arrangement
for sale and distribution of goods purchased from its AE, for which cost has been borne by AE.
ITAT held that since TP adjustment was being made on the basis of bright line test itself which was
rejected by High Court in assessee’ s own case for AY 2008-09, TP adjustment on AMP Expenditure
was not called for.

3. Profits and Gains from Business or profession

(i) Cholamandalam MS General Insurance Co. Ltd vs. DCIT[TS-772-HC-2018(MAD)] - On
disallowance of reinsurance premium ceded to non-resident reinsurers, HC held that the Tribunal
exceeded its jurisdiction in stating that the assessee had engaged in a transaction, which was
prohibited by law and therefore, not entitled for deduction under Section 37 of the Act. HC
remands the matter to ITAT to decide on 40(a)(i) dis-allowance.

(ii) Rajan Bhatia vs. CBDT[TS-25-HC-2019(DEL)] - HC dismissed assesses writ petition
challenging the constitutional validity of section 155BBDA as no basis and the provision making
hostile discrimination between a resident assessee and non-resident assessee. HC upholds
constitutional validity of Sec 115BBDA and proviso to Sec 10(34) providing for taxation of
dividend income in the hands of specified assessee’ s for specified limits stating that Taxation
regime applicable to non-residents need not identical to that applicable to residents.

This is only for internal circulation amongst clients and business associates of Annveshan

10

Gear Up

February 2019

(iii) Pr. CIT vs. Macquarie Global Services Pvt. Ltd [TS-766-HC-2018(DEL)] - HC noted that
the Tribunal has accepted that the new unit was a separate identity for its income to qualify for
exemption under Section 10AA for it was not formed and created by ‘splitting up’ or
‘reconstructing’ the existing business. The new unit was also not formed by transferring any
machinery or plant previously used. Fresh investment was made in the new unit. The revenue
earning and profits generated were clearly attributable to the new unit. States that the eligibility
requirements in 10AA(4) are unit specific and not assessee specific.

(iv) ACIT vs. Veritas (India) Ltd and Veritas (India) Ltd vs. ACIT [TS-29-ITAT-2019(Mum)]
- ITAT holds that CIT(A) was justified in deleting the addition made u/s 68 of the Act as the
assessee had discharged the initial burden placed upon it u/s 68 of the Act by proving the three
main ingredients (the identity of the investors, the creditworthiness of the investors and
genuineness of transactions) whereas the AO has failed to discharge the burden shifted to his
shoulders. Proving sources of source for section 68 not applicable in case of non-resident
investors.

(v) Pr. CIT vs. ORACLE (OFSS) BPO SERVICES LTD [TS-27-HC-2019(DEL)] - HC
upholds ITAT order in holding that the assessee was entitled to claim enhanced deduction under
Section 10A of the Income Tax Act as per the revised computation filed when the assessment
proceedings were in progress as the disallowance made would result in enhancement of the
business income which was exempted under Section 10A of the Act.

4. Capital Gains

(i) The Pr. CIT vs. Vernan Pvt. Trust [TS-763-HC-2018(BOM)] - HC upholds taxing income arising to
the trust from sale of shares as capital gains noting that the shares in question were not
purchased by the Trust at all but were settled by the settler of the Trust. The Settler had received
majority of the shares by way of Employee Stock Option Plan and the shares so received
as well as small numbers of shares purchased by the settler were held by himself for over two years
before settling them in the Trust.

This is only for internal circulation amongst clients and business associates of Annveshan

11

Gear Up

February 2019

(ii) Innoviti Payment Solutions Pvt. Ltd vs. ITO[TS-4-ITAT-2019(Bang)] – On equity shares
valuation report obtained, ITAT rules that AO cannot change the method of valuation which has
been opted by the assessee and for scrutinizing the valuation report, the facts and data available on
the date of valuation only has to be considered and actual result of future cannot be a basis to decide
about reliability of the projections. ITAT opines that the primary onus to prove the correctness of
the valuation Report is on the assessee as he has special knowledge and he is privy to the facts of the
company and only he has opted for this method. Hence, he has to satisfy about the correctness of
the projections, Discounting factor and Terminal value etc. with the help of Empirical data or
industry norm if any and/or Scientific Data, Scientific Method, scientific study and applicable
guidelines regarding DCF Method of Valuation.

(iii) Rajkumar B. Agarwal vs. DCIT [TS-5-ITAT-2019(PUN)] - ITAT upholds addition made in
treating the short term capital gain as income from undisclosed other sources stating that PIL was a
penny stock company and the assessee obtained only accommodation entries in the garb of short
term gain from transfer of shares of PIL as the prices of shares of PIL were also manipulated on
enquiries launched by BSE and SEBI; Completion of paper-trail by producing contract notes not
considered in view of detailed enquiries.

(iv) AIG Offshore Systems Services Inc. vs. ACIT [TS-24-ITAT-2019(Mum)] - ITAT allowed
deduction claimed by assessee under section 48(i) of the Act relating to legal/professional
expenditure incurred towards transfer of shares while computing the capital gains.

(v) Aura Securities Pvt. Ltd vs. DCIT[TS-769-ITAT-2018(Ahd)] - ITAT directs AO to delete the
addition made stating that the loss incurred by the assessee on account of sale of shares and
extinguishment of its right cannot be held as a colorable device as there was no malafide intention
and transaction carried out among the related parties cannot lead to bogus loss claimed by the
assessee. Holds Investment made at a high premium and subsequent sale at a loss cannot be the basis
holding that loss as bogus and the taxability of the transaction has to be seen as per the provision of
the Act. Holds commission paid against the sales effected through the use of credit card by the
customers as not liable for deduction of TDS u/s 194H as the same were in the nature of interest.

5. Search and Seizure, Assessment and Penalties

(i) Pr. CIT vs. Manzil Dineshkumar Shah [TS-34-SC-2019] – SC dismissed revenue SLP
challenging HC order in quashing re-assessment proceedings initiated beyond the period of 4 years
based on the information received from the VAT Department.

This is only for internal circulation amongst clients and business associates of Annveshan

12

Gear Up

February 2019

(ii) Ankita A. Choksey vs. ITO[TS-11-HC-2019(BOM)] - Notice u/s 148 for re-opening assessment
quashed and set-aside as the AO proceeded on fundamentally wrong facts to come to the reasonable
belief conclusion that income chargeable to tax has escaped assessment as the flat was not sold at all
and this was clearly stated in objections filed.

(iii) Bharti Infratel Limited [TS-23-HC-2019(DEL)] - HC allowed the writ petition and issued Writ
of Certiorari quashing the notice for re-assessment issued under Section 148 read with Section 147
of the Act stating that it was case of change of opinion as the assessee had disclosed and had brought
on record all facts relating to transfer of passive infrastructure, its book value, fair market value
including the dates of transfer and the of creating one-step subsidiary Bharti.

(iv) Orchid Infrastructure vs. Union of India [TS-26-HC-2019(DEL)] - HC holds that sub-section
(2A) to Section 234B would be applicable to all proceedings in which orders are pending and /or in
which orders under Section 245 D (4) as the amendment was intended to apply to all pending
proceedings in which orders under Section 245 D(4) are passed after sub-section (2A) was introduced
and made part of the Statute.

(v) Hareshkumar Becharbhai Patel vs. JCIT [TS-13-ITAT-2019(Ahd)] - ITAT directs AO to delete
the penalty u/s 271D of the Act levied for the violation of the provision of section 269SS of the Act
as the transaction between son and father was substantiated with the gift deed and there was nothing
on record to show that money was loan and paid back to the father by the assessee directly or
indirectly.

(vi) Sanjay Dattatray Kakade vs. ACIT [TS-28-ITAT-2019(PUN)] - ITAT held that there was no
question of penalty when the income itself has not been taxed and is not an income of the `specified
previous year’ and ergo sheds the character of `undisclosed income’ in terms of Expl. (a) to section
271AAA of the Act. ITAT holds that power of the ld. CIT(A) for enhancement of penalty could not
be extended to income on which the AO had chosen not to impose penalty under this section.

(vii) Shri Anil Kumar Maheshwari vs. ACIT [TS-32-ITAT-2019(JPR)] - ITAT upheld the levy of
late fees under section 234E till the date of actual filing of the TDS return and deletes the balance
late fee so levied noting that intimation under section 200A was issued much prior to the amendment
to section 200A of the Act w.e.f. 1.6.2015 empowering the Assessing officer levying the fees under
section 234E of the Act.

This is only for internal circulation amongst clients and business associates of Annveshan

13

Gear Up

February 2019

IV. KNOWLEDGE TRIVIA

Search and Seizure

Search and Seizure action are conducted by the Income Tax Department involves through 'looking for'
or 'seeking out' through an inspection of a building, office, place, vehicle. The assessing officer must
always have a reason to believe that the person, whether or not a notice has been served on him, is not
likely to produce his books which may be useful and also relevant to income tax proceedings. Also, there
must be information with the authorizing authority that the person should be in possession of money
and secondly, such money represents either wholly or partly income or the property which has not been
disclosed.

Circumstances under Search and Seizure:

(i) Section 132(1)(a) – (i) summons u/s131(1) or (ii) notice u/s 142(1), was issued to produce or cause
to produce any books of accounts, or other documents which has been willfully omitted or failed to
produce such books of accounts as required by such issued summons or notice to assessee.

(ii) Section 132(1)(b) - any person to whom summons or notice has been issued, will not or would not
produce any books of accounts which will be useful or relevant to any proceedings undertaken under
the income tax act, 1961.

(iii) Section 132(1)(c) - any person who is in possession of any money, bullion, jewelry or any other
valuable things and these assets represent either wholly or partly the income or property which has
not been disclosed by the person concerned for the purposes of this act.
The officer who is authorized for conducting search is referred to as Authorized officer. The
authorization is done by issuing a search warrant in Form 45.

Reasons for Income Tax Raids - A raid, technically known as the process of Search and Seizure, gets
triggered under any of the following circumstances:

 Credible information of tax evasion; for instance, any evasion coming out of reports received from
the Intelligence Wing of the Income tax department

 Information coming from government departments
 Information procured from assessment records of taxpayers
 Information received with regard to spending being disproportionate to income of the taxpayer i.e.

an instance of lavish spending without corresponding income to match the same
 Manipulation of books of accounts, vouchers, invoices etc.
 Illegal investment in real estate
 Unexplained cash credits, share transactions etc.

This is only for internal circulation amongst clients and business associates of Annveshan

14

Gear Up

February 2019

Power of tax authorities during a raid:
 The officer authorized to carry out the raid can:
 Enter and search any building, place, etc. where he has a reason to suspect that the books of account,

other documents, money, bullion, jewellery or other valuable article or thing representing undisclosed
income is kept
 Break open the locks, where the keys are unavailable
 Carry out personal search of a person who is suspected to have secreted some item as mentioned in
(1) above
 Seize the items as mentioned in (1) above
 Place marks of identification and take extracts or copies of the books of account and other
documents
 Make a note or inventory of the valuables found during the search.

This is only for internal circulation amongst clients and business associates of Annveshan
15

Gear Up

February 2019

(All the updates are sourced from – Taxsutra, itatonline, Tax Management India and
few other Trusted Sources)

Disclaimer: The information included above is a summary of recent developments and is not
intended to be advice on any particular matter. Annveshan expressly disclaims liability to any
person in respect of anything done in reliance of the contents of these publications. Professional
advice should be sought before taking action on any of the information contained in it.

This is only for internal circulation amongst clients and business associates of Annveshan
16