Query No. 1: (Penalty u/s. 271D)
A farmer’s co-op. society, situated in a remote area which works for the benefit of farmers such as to get them seeds, fertilizers etc., the society received some amounts from some members as cash deposits exceeding ` 20,000/- which were subsequently repaid by account payee cheques by the society.
The case was under scrutiny for the A.Y. 2010-11, the Assessing Officer did not discuss anything or issue any notice to the assessee till the order passed under Section 143(3) on March 01, 2013. The Joint Commissioner of Income tax thereafter issued notice under Section 271D of the Act, on January, 2014 i.e., after 11 months.
The objection was taken for the proceedings as barred by limitation as per provision of Section 275(1)(c) of the Act along with the submission but the penalty under Section 271D of the Act was levied and order was passed. Whether JCIT was justified?
From the query, it is not clear, when the Joint Commissioner of Income tax levied the penalty under Section 271D. However, it is presumed that it is within the time prescribed under section 275(1)(c) of the Act.
Similar question arose before the Special Bench of Chandigarh in Dewan Chand Amrit Lal v. DCIT [283 ITR (AT) 203], wherein the Tribunal has held that:
“The Legislature has not considered it necessary to provide for limitation for intimation of penalty proceedings under Section 271D and 271E of the Income tax Act, 1961. The intention behind incorporation of the provisions of Sections 269SS, 269T, 271D and 271E was to counter the proliferation of black money, which when found in the course of search is sought to be explained by cash loans from various persons. There is no time limit for conducting searches. When in the course of search, some information is found about cash loans or deposits or repayment of loans or deposits or such claims are made, the necessity for initiating proceedings under Section 271D and 271E arises. If one were to compute the limitation with reference to the assessment proceedings, then in no case penalty under Sections 271D and 271E could be initiated in the cases where the information is gathered in the course of search. That would defeat the very purpose of legislating the provisions of Sections 271D and 271E. The limitation has been prescribed for imposition after its initiation by the competent authority.
Further, under Section 271, recording of satisfaction before initiation of penalty in the course of proceedings is a condition precedent for imposition of penalty for specified defaults. Under Sections 271D and 271E there is no such requirement of recording of satisfaction in the course of any proceeding”.
In Grihalakshmi vision v. ADIT [379 ITR 100 (Ker.)], the assessee challenged penalty order contending that if period of limitation prescribed in Section 275(1)(c ) was reckoned from the date of the assessment order dated November 6,2007, penalty order passed by the Joint Commissioner on July 29, 2008 was beyond time permitted
The Kerala High Court held that in the instant case, the assessment order was passed on November 6, 2007. It was relying on the last sentence in the assessment order that “Accordingly initiated penalty proceedings under Sections 271D and 271E”, the assessee contends that the Assessing Officer having initiated the proceedings vide his order dated November 6,2007, the order passed by the Joint Commissioner on July 29, 2008 levying penalty is beyond the time permitted in Section 275(1)(c). The Court observed, as already seen, although sections 271D and 271E provide, for levy of penalty for contravention of Sections 269SS and 269T, as per sub-section (2) of both these sections, any penalty imposable under sub section (1) of these provisions shall be imposed by the Joint Commissioner. The matter was referred to the Joint Commissioner who passed an order on July 29, 2008 levying penalty.
As already held, that the initiation of the penalty proceedings is not by the Assessing Officer but by the Joint Commissioner and if that be so, the order levying penalty passed by the Joint Commissioner is within the time prescribed in section 275(1)(c ).
On the basis of above decisions, the action of Joint Commissioner was justified.
Query No. 2: (Share income of a member of HUF)
Whether the exemption is available for share in income of HUF of the relevant assessment year or for lump sum payment out of past accumulated incomes. Please intimate can it come within the preview of Section 56(2)?
Heading of Chapter III of the Act, is “Income which do not form part of the total income”, which contain Section 10.
Thus, in computing the total income of a previous year of any person, any income falling within any of the classes of the said section will not be included.
Section 10(2) reads as under:
Subject to the provisions of sub section (2) of section 64, any sum received by an individual as a member of a Hindu Undivided Family, where such sum has been paid out of the income of the family, or in the case of any impartible estate, where such sum has been paid out of the income of the estate belonging to the family”
Thus, any sum received by a member of Hindu Undivided Family of the income of the family whether current or out of accumulated income will not be liable to be included, including Section 56(2), while computing the total income of the member.
Query No. 3: (Leave Travel Allowance)
An assessee wanted to take 2 LTC during the block of 4 years i.e. 2014-17. However, he took one in December 2015 and another he wants to take in February, 2016, in the same financial year. Can he claim exemption of one LTC in A.Y, 2016-17 and another in A.Y. 2017-18?
Section 10(5) provides for exemption from tax in the hands of an employee in respect of value of any travel concession or assistance received from his employer for himself and his family in connection with his proceeding to any place in India either on leave or after the termination of his service.
Rule 2B(2) of the Income-tax Rules, 1962 provide that the exemption shall be available to an individual in respect of two journeys performed in a block of four calendar years commencing from the calendar year 1986.
Thus, the assessee is entitled for two leave travel concession or assistance from his employer during block of four calendar years commencing from January 1, 2014 to December 31, 2017.
Now, if he has availed one LTC in December, 2015 and another in February, 2016 i.e. in one financial year. Then, he is entitled to claim only in assessment year 2016-17 and he will not be entitled to claim in assessment year 2017-18.
Query No. 4 (Return of Deceased)
Kindly enlighten up to when the return of the deceased can be filed by the executor if estate was not distributed fully?
Section 159 of the Act is meant to enable the revenue to make an assessment on legal representative in respect of income which accrued to or was received by the deceased till his death.
While Section 168 enjoins an assessment on executors in respect of the income which accrues to the deceased after his death, the estate being vested in executor.
As per Section 168(3), the executor will continue to be assessed until the estate is distributed among the beneficiaries. Thus, till the estate is completing distributed , the executors will have to file return of income of the estate.
Query No. 5: (TDS on purchase of property by NRI)
NRI (US citizen) wants to sell his ancestral property. Can the said sale proceeds be transferred from India directly or any RBI permission will be required?. At what rate TDS deductible by purchaser? Whether it would be 30% of sale consideration or 30% of LTCG,
As per Regulation 6 of Foreign Exchange Management (Remittance of Assets) (Amendment) Regulations 2014, dated October 31, 2014 the NRI / POI has been permitted to remit not exceeding US$ 1 million per year of balance held in NRO accounts or sale proceeds of assets or sale proceeds of assets acquired in India by way of inheritance / legacy without prior permission of RBI. If the remittance is in relation to sale proceeds of immovable property the condition is that the property or deposit cumulatively must have been held for a period of ten years.
The purchaser is liable to deduct tax while making payments to NRI on the amount “chargeable under the provisions of the Act” as per section 195 and as per GE India Technology Centre P. Ltd. v. CIT [327 ITR 456 (SC)].
Note: Please send your queries relating to Direct, Indirect & International taxation, Accounting & Auditing Standards and Company Law, FEMA etc. to AIFTP, having interest to the Members.