Receipt of a notice for scrutiny causes shivers in the body and mind of assessees. The problem is not generally on the legal side but of recalling all records relevant for the scrutiny as the scrutiny involves a period other than the current year. Like scrutiny for assessment year 2014-15 would be taken up now when returns for assessment year 2015-16 and 2016-17 have already been filed. Under scrutiny proceedings one would have to recall bases for various claims made in the return for the financial year 2014-15. This at times becomes a herculean task given the nature of life today. It is also true that the Income Tax Department is not under any obligation to accept the return filed by the assessee. They have every right to scrutinize the claims made by the assessee in the return. The number of scrutiny cases is going to be on the rise in the coming days, given the edge which the department has gained owing to computerization. Annual Information Returns are throwing valuable input for selecting a case for scrutiny. Linking of Bank Accounts, which would be on going, is likely to provide further armour to the department.
Scrutiny assessment, from statute point of view, though prima facie appears to be restricted to section 143(2)/(3), the case is not however so. Such an assessment involves almost all computation provisions including provisions relating to accounting method. Once a return is selected for scrutiny, the assessee has to keep handy the evidences substantiating his claims made in the return. He is further required to identify and keep at hand the various other aids such as the supporting case law, circulars, notifications, etc., and keep them ready for use as and when required.
In view of the fact that the scope of scrutiny assessment is vast enough, writing a book on this topic particularly when the challenge to complete the entire material in a single volume is accepted, becomes an uphill task. This has, however, tried to be accomplished by us. This never-to-before treatise on scrutiny assessment, being a consequence of our very very special efforts, covers the entire spectrum of scrutiny assessment including the scrutiny assessments post-survey and post-search.
We have designed this book as a solution to the problem in hand. That is how to tackle any Income Tax Scrutiny Assessment. We have identified areas which are generally delved deeply into by the department during scrutiny proceedings. These common areas of inquiry are taken up for through discussion of practice specific issues such as : (i) Agricultural income; (ii) Deemed dividend; (iii) Expenditure against exempt income; (iv) Depreciation; (v) Addition to fixed assets; (vi) Business deductions; (vii) Business expenditure; (viii) Disallowances under section 40, 40A, etc.; (ix) Payments to specified persons; (x) Cash payments; (xi) Cessation of liabilities, etc.; (xii) Disallowance under section 43B; (xiii) Capital gains; (xiv) Cash Credits; (xv) Investment, expenditure, etc.; (xvi) Gifts; (xvii) Trading results; (xviii) Increase in capital; (xix) Stock statement; (xx) Low withdrawals; (xxi) Acceptance/repayment of deposits.
There topics are generally enquired into while making a comprehensive scrutiny.
We have discussed these topics in enough detail fully backed up by relevant important case law so as to enable one dealing with anticipated issues comfortably and at ease.
We have also identified certain particular areas of inquiry and drafted specimen replies for meeting out various commonly occurring adverse situations. Though there cannot be any tailor made replies to situations which arise in day-to-day practice, however, we have tried our best to provide a whole lot of grounds and bases for drafting the replies in Book 5 titled Sample Inquiries in Scrutiny Assessment with Replies”. This part contains specimen replies covering issues relevant to the fact situations arising in contemporary practice.
Readers are aware that all survey and search cases go for compulsory scrutiny. We have discussed these topics in enough detail so that the related issues during survey or search assessments can be handled with without problem. This book accordingly incorporates all aspects relating to Post-Survey Assessments. Obtaining of forced confessions during survey is a well known practice of the authorities so much so that it is almost a rule rather than exception. A separate chapter titled “Evidentiary Value of Statement Recorded During Survey Operation” is therefore devoted to this. We have also taken care of the “Conveyancing in Relation to Scrutiny Assessment Post Survey”. This part inter alia comprises the following Chapters :
- Application under section 133A for Release of Books of Account and Documents Impounded During Survey,
- Justification for Retraction from Surrender Made During Survey,
- Justification for Alleged on Money Found During Survey,
- Assessment Completed without adding Income Surrendered During Survey : Notice under section 263 by CIT,
- Addition Towards Investment in Building on the Basis of Statement Recorded During Survey and Retraction Therefrom,
- Allowability of Partner’s Remuneration out of Income Surrendered During Survey : Specimen Reply.
Search assessment is another issue in the life of taxpayer having faced search. Book 3 is a Practice Specific Commentary on Post-Search Scrutiny Assessments. The law relating to sections 153A to 153C, which is in developmental stage, is discussed in full detail with the help of a whole lot of case law, in 170 well crafted Chapters.
Besides above, the Conveyancing in regard to post-search assessments, which is no less important, is also provided. We, on our part, have identified several real life post-search situations and tried to provide ready made solutions. The list of chapters dealing with “Conveyancing in Relation to Post Search Assessment includes the following :
- Application for Issue of Copy of Statement Recorded under Section 132(4)
- Application for Xerox Copy of Seized Books, Etc.
- Application for Return of Seized Books of Account or Documents
- Application for Providing Details of Requisition Under Section 132A
- Application for Release of Cash Seized
- Application for Photocopy of Documents Seized
- Application of Cash Seized Towards Advance Tax on Income Surrendered
- Reply to Notice Asking for Furnishing of Return
- Rejection of Books in Case of Nursing Home
- Addition Towards Alleged On-Money Paid/Received on Purchase/Sale of Properties
- Search Carried Out in Rented Out Premises–Challenging Action Under Section 153A
- Search at Premises of Branch Manager of Company–Validity of Action under Section 153A on Assessee Company
- Reply to Notice Under Section 153C
- Challanging Action Under Section 153C
No doubt this is our third attempt at handling the topic Scrutiny Assessments. The first one in 2011 was highly successful from marketing point of view. Three years down the line in 2014 the story got repeated in a shorter period. Two and half years down the lane we felt that the requirement now was to bring out an entirely new book, a thoroughly, reconceived, restructured and rewritten one, and the outcome is now therefore, for every income-tax practitioner to see. The readers would find that the present is an entirely new product on many counts. It also perhaps sets a benchmark for comprehensiveness and wholesomeness of an Income Tax Practice book.
This book has gained immensely from our past experiences. Apt and suitable classification of Chapters and their appropriate groupings under various Books or Parts would help a lot in taking away the rigour out of the complex subject matter dealt with herein. The result, the readers should naturally find, is a convincingly plain, simple, useful and practical guide on the subject of Income Tax Scrutiny Assessment.
We have tried to provide our very best while presenting totality of the subject matter in regard to Income Tax Scrutiny Assessment from all possible angles, perspectives and dimensions thereof. We will consider ourselves lucky if this effort of ours takes away some of the pains and troubles of our readers and makes them all the more successful in handling their client’s, cases than ever before. We have tried our best to make it an error-free and quality publication. We shall however be grateful for any valuable and constructive suggestions from our readers.
Avadhesh OjhaFCA Manoj Gupta