Due Date for Income tax Compliance (December 2024)

After providing relief to many taxpayers in previous Vivad Se Vishwas Scheme, 2020; the Finance Bill, 2024 introduced Vivad Se Vishwas Scheme, 2024 to curtail the pendency of cases at CIT(A), ITAT, HC and SC. Specified pending appeal as on July 22, 2024 (day before budget presented) will be eligible for the new Scheme and eligible persons can apply from October 1, 2024.

Note: In case of pending appeal is filed by department or where appeal is filed by the taxpayer but favourable order is already received by appellant himself in any other year from higher authority/court, amount payable will be 50% of amount mentioned above

2.Revised limit for filing appeals by the income tax department before the ITAT, HC or SC

The CBDT vide instruction no. 17/2019 dated 8 August 2019 ha​d fixed the monetary limit for filing appeals by the income tax department before the ITAT, HC or SC​.

Vide circular 9/2024 dated 17th Sep 2024, said limit is revised.

‘Tax effect’ refers to the difference between the tax on the assessed income and tax on the returned income.

An Assessing Officer should determine the tax effect for each assessment year for a taxpayer. IT is clarified that though the above are the monetary limits for filing appeals, merits of the case should before filing appeal.

The assesse, a Discretionary Trust, filed its return for the assessment year 2022-23 declaring an income of Rs. 6.73 lakhs. The Assessing Officer (AO) assessed the income at the same amount but levied a surcharge of 37%, which the assesse had not computed.

The Commissioner (Appeals) upheld the surcharge, stating that the maximum marginal rate applied to the assesse and that a 37% surcharge was due. On appeal to the Tribunal, the assesse contended that, as per the Finance Act, 2022, surcharge applies only when the total income exceeds Rs. 50 lakhs, which was not the case here. The Revenue, however, argued that since the assesse’s tax liability would fall under the maximum marginal rate, the surcharge should apply under section 2(29) of the Finance Bill, 2022.

Key Issue Involved

In this case, the issue revolves around whether a surcharge can be levied on the income of an assesse whose total income is below Rs. 50 lakhs, specifically in the context of a private Discretionary Trust incorporated under the Indian Trust Act, 1882.
Tribunal’s Decision
i. The Tribunal examined the provisions of the Finance Act, 2022, and found that the surcharge on tax is only applicable to individuals, Hindu Undivided Families (HUFs), Associations of Persons (AOPs), and Bodies of Individuals (BOIs) when their total income exceeds Rs. 50 lakhs.
ii. The Tribunal noted that in the present case, the income of the assesse was below Rs. 50 lakhs (Rs. 6.73 lakhs), and therefore, the surcharge should not have been levied.
iii. The Tribunal directed the Assessing Officer to delete the surcharge levied on the assesse.

Conclusion

The Tribunal held that the surcharge was incorrectly levied as the total income of the assesse was less than Rs. 50 lakhs, and hence, the Assessing Officer was directed to remove the surcharge.

This decision clarifies that the surcharge provisions under the Finance Act, 2022, apply only when the total income exceeds Rs. 50 lakhs, and it cannot be levied on lower incomes, such as the one in this case.
Case 2: –
Exemption under section 54 could be allowed based on amount utilised by assesse out of sale consideration towards construction of new house property even if construction was not complete: ITAT Banglore – DCIT v. Bagalur Krishnaiah Shetty Vijay Shanker
[2024] 168 taxmann.com 153 (Bangalore – Trib.) [21-10-2024]

Facts in Brief: –

The assesse, an individual, sold a property for Rs. 18.7 crore and realized long-term capital gains of Rs. 12.81 crore after adjusting for acquisition cost and selling expenses. The assesse claimed an exemption under Section 54 for the amount invested in constructing a residential property, amounting to Rs. 12.06 crore. However, the construction of the property was not completed during the assessment year. The Assessing Officer (AO) scrutinized the claim and disallowed the exemption for the uncompleted portion of the property. The AO relied on the Supreme Court’s decision in Giridhar G. Yadalam (which dealt with wealth tax) and restricted the exemption to Rs. 2.80 crore, based on his own estimation of the cost of construction. The CIT(A) ruled in favour of the assesse, observing that under Section 54, the requirement is that the capital gains should be invested in the construction of a residential house, and not necessarily that the construction must be completed.

The CIT(A) relied on the jurisdictional High Court’s decision in Sambandam Uday Kumar (2012), which held that the condition for exemption under Section 54 is the investment of the capital gains in the construction of a house, and not its completion. The CIT(A) thus deleted the disallowance made by the AO. The Revenue argued that the Supreme Court’s decision in Giridhar G. Yadalam (2016) required the construction to be completed for the exemption to be allowed. They contended that the assesse was not entitled to the benefit under Section 54 as the construction was incomplete.

Issue Involved: – –

The key issue in this case is whether the assesse is eligible for the exemption under Section 54 of the Income Tax Act on the long-term capital gains arising from the sale of a property, despite the fact that the new residential property in which the gains were reinvested is still under construction and not yet completed at the time of the exemption claim.

Hon’ble Tribunal Decision:

The Tribunal agreed with the assesse’s position, referring to the jurisdictional High Court’s decision in C. Gopalaswamy (2017), which had upheld the decision in Sambandam Uday Kumar.

• The Tribunal noted that the Giridhar G. Yadalam case dealt with the definition of “constructed” under wealth tax provisions, which was not directly applicable to the provisions of Section 54 of the Income Tax Act, which allows exemption for capital gains invested in the construction of a house.

• Therefore, the Tribunal dismissed the Revenue’s appeal, affirming that the exemption under Section 54 could be granted based on the amount invested in construction, even if the construction was not completed.

• The appeal filed by the Revenue was dismissed, and the CIT(A)’s order allowing the exemption under Section 54 was upheld, as long as the capital gains were invested in constructing the residential property, irrespective of whether the construction was completed during the assessment year.

Case:3
AO can’t restrict TDS credit to sum claimed in ITR if assessee’s refund was to be computed as per ITAT’s order: High Court of Delhi ESS Singapore Branch v. Deputy Commissioner of Income-tax [2024] 165 taxmann.com 645 (Delhi) [22-08-2024]

Facts in Brief:
For the assessment year 2014-15, the Income-tax Tribunal directed the Assessing Officer to address the issue of short TDS credit as reflected in Form 26AS. The Assessing Officer initially denied this credit because the assessee had not claimed it in their return.

Under Section 240 of the Income-tax Act, when a refund is due following an appeal or other proceedings, the Assessing Officer must issue the refund without requiring a separate claim from the assessee. Therefore, the Tribunal ruled that the assessee should receive the full TDS credit as shown in Form 26AS, along with interest calculated according to Section 244A. This interest accrues from April 1 of the relevant assessment year until the refund is issued, as stipulated by Section 244A(1)(a).

Issue Involved:

The issue involved is whether, following the Tribunal’s direction to the Assessing Officer to verify and refund the TDS based on the details shown in Form 26AS, the Assessing Officer is required to issue the refund to the assessee automatically, without the need for the assessee to make a separate claim in the income tax return.

Hon’ble Tribunal Decision:

In the present case, the Court has thoroughly examined the issues surrounding the credit of Tax Deducted at Source (TDS) and the computation of refunds as per the petitioner’s claims. The Tribunal had previously directed the Assessing Officer (AO) to verify and address the grievance regarding the short credit of TDS amounting to INR 2,03,36,66,125 as reflected in Form 26AS.The Court has determined that:
• Mandatory TDS Credit: The AO was obligated to grant TDS credit as per Form 26AS without requiring the petitioner to make a specific claim in the Return of Income. The argument that the TDS credit should be limited to the amount claimed in the return is not sustainable. Section 240 of the Income Tax Act mandates that a refund due as a result of an appeal or other proceedings must be processed without any claim by the assessee.
• Interest Calculation: Interest on the TDS credit should be computed from the start of the relevant assessment year, not from the date of the Tribunal’s order, as per Section 244A of the Act.
• Incorrect Restriction: The AO’s position, which restricted the TDS credit to the amount claimed in the return, was incorrect. It disregarded the Tribunal’s direction to account for the total TDS reflected in Form 26AS.
• Supreme Court Precedents: The reliance on the Goetze (India) Ltd. decision was found to be misplaced. The Court emphasized that the Tribunal’s plenary powers under Section 254 of the Act allow for relief beyond what was initially claimed in the return, consistent with principles from Mitsubishi Corporation and Wipro Finance Ltd. judgments.
• Final Decision: The Court has decided to quash the order dated April 8, 2024, and directed the respondents to acknowledge and grant the credit for TDS as reflected in Form 26AS, amounting to INR 2,27,83,28,430 and to re compute the total refund to be INR 2,03,40,32,090. Ensuring that the appropriate steps are taken to process this refund and calculate interest as per the statutory provisions.

The writ petition is allowed, and the impugned order is quashed to ensure that the petitioner receives the correct TDS credit and refund, including due interest

Case:4
Reassessment notice issued without obtaining sanction of Pr. CCIT is void ab initio:
ITAT bench ‘F’ Manish Jagdish Joshi v. CIT [2024] 165 taxmann.com 836 (Mumbai – Trib.) (26-08-2024)

Facts in Brief:

The assessee, a non-resident individual, derived income from other sources. For the year under consideration, the assessee filed its return of income. On basis of the information received from the office of DIT (I&CI), the Assessing Officer observed that the assessee had purchased immovable property for a consideration of Rs. nil and the stamp duty value of the said property as per the Stamp Value Authority was at Rs. 43.32 lakhs. The Assessing Officer, further, observed that the assessee had not declared the difference between the value of purchase consideration and market value of Rs. 43.32 lakhs as the income for the year under consideration as per the provisions of section 56(2)(vii)(b). Accordingly, a notice under section 148 was issued on the basis that the difference of Rs. 43.32 lakhs was the income of the assessee chargeable to tax which had escaped assessment. Thereafter, the final assessment order was passed under section 147 read with section 144C (13) making an addition of Rs. 43.32 lakhs under section 56(2)(vii)(b).

Issue Involved:

The issue in this case is whether the notice issued under section 148 is legally invalid due to:

Violation of Section 151: The notice was issued without obtaining the necessary sanction from the specified authority, as required by section 151.

Time-Barred Notice: The notice was issued after the expiration of the three-year period specified in section 149, making it time-barred.

Assessment Amount: The amount alleged to have escaped assessment was less than Rs.50lakh which affects the validity of the notice.

Hon’ble Tribunal Decision:

In this case, the Tribunal concluded that the notice issued under section 148 of the Income Tax Act was legally invalid for the following reasons:

Violation of Section 151: The notice was issued without obtaining the required sanction from the appropriate Specified Authority. According to section 151, if more than three years have elapsed from the end of the relevant assessment year, the sanction must be obtained from the Principal Chief Commissioner, Principal Director General, Chief Commissioner, or Director General, not from the Principal Commissioner.

Time-Barred Notice: The notice was issued after the three-year period specified in section 149, making it time-barred. Furthermore, since the amount alleged to have escaped assessment was less than Rs. 50 lakh, the conditions for issuing a notice beyond three years were not met.

Legal Precedents: The Tribunal referred to relevant judgments, including those by the Hon’ble Jurisdictional High Court, which reinforced that the notice and subsequent reassessment proceedings must comply with the legal requirements in force at the time.
Given these points, the Tribunal held that the notice under section 148 was void ab initio and therefore quashed it. Consequently, the entire reassessment proceedings and the final assessment order passed under section 147 read with section 144C(13) were also quashed. The other grounds raised by the assessee were considered academic due to the resolution of these jurisdictional issues.The appeal by the assessee was thus allowed.