The Central Board of Direct Taxes (CBDT) on Thursday issued the Guidelines for compulsory selection of returns for Complete scrutiny during the Financial Year 2021-22.
In the case pertaining to Survey under Section 133A after the issue of notice u/s 143(2) of the Act by the Jurisdictional Assessing Officer for compulsory selection, cases selected for re compulsory scrutiny which has impounded material, shall have to be transferred to Central Charges u/s 127 of Ot the Act within 15 days of issue of notice u/s 143(2) of the Act. After the issue of notice u/s 143(2) of the Act by the Jurisdictional Assessing Officer ed for compulsory selection, assessment proceedings in respect of cases selected for compulsory scrutiny and where there is no impounded material will be conducted by National Assessment Centre (NaFAC). The Assessing Officer shall upload the Survey Report in the ITBA at the time of issue of notice u/s 143(2) of the Act. In cases of search and seizure if the case is falling u/s 153C, if lying outside Central Charges, the Jurisdictional Assessing Officer is required to issue notice u/s 143(2) in cases where return is furnished u/s 153C or 142(1) calling for information in cases where no return is furnished u/s 153C. Such cases shall be transferred to Central Charges u/s 127 of the Act within 15 days of issue of notice u/s 143(2) or 142(1) of the Act. In cases where no return has been furnished in response to a notice u/s 142(1) of the Act, these cases will be taken up for compulsory scrutiny by NaFAC. Cases where return has been furnished in response to notice u/s 142(1) of the Act and where notice u/s 142(1) of the Act was issued due to the information contained in NMS Cycle/AIR information/information received from Directorate of 1&CI. These cases will not be taken up for ice u/s compulsory scrutiny and the selection of such cases for scrutiny will be through CASS mation cycle. Cases where return has been furnished in response to notice u/s 142(1) of the Act and where notice u/s 142(1) of the Act was issued due to the specific information received from Law Enforcement Agencies, including Investigation the Wing; Intelligence/Regulatory Authority/Agency; Audit Objection; etc. After the issue of notice u/s 143(2) of the Act by the Jurisdictional Assessing Officer specific for compulsory selection, assessment proceedings in such cases will be conducted by NaFAC. Cases where no return has been furnished in response to notice u/s 148 of the Act, Jurisdictional Assessing shall issue notice u/s 142(1) of the Act, calling for information regarding the issues on the basis of which notice u/s 148 was issued, subsequent to which, assessment proceedings in such cases will be conducted by NaFAC. Cases where return is furnished in response to notice u/s 148 of the Act, after the issue of notice u/s 143(2) of the Act by the Jurisdictional Assessing Officer for compulsory selection, assessment proceedings in such cases will be conducted by NaFAC. In the cases related to registration/approval under various sections of the Act, such as 12A, 35(1)(ii) or (iia) or (iii), 10(23C), etc. after the issue of notice u/s 143(2) of the Act by the Jurisdictional Assessing Officer for compulsory selection, assessment proceedings in such cases will be conducted by NaFAC. “The exercise of selection of cases for compulsory scrutiny on the basis of the above parameters and service of notice u/s 143(2) of the Act will have to be completed by 30.06.2021. As per the amendments brought vide Finance Act, 2021, the time limit for service of notice u/s 143(2) of the Act is been reduced to three months from the month of the end of the Financial Year in which the return is filed,” the CBDT said.
Pertaining to Ground 1:The assessee has shown total purchases of Rs.8,27,50,188/- in respect of Finished Sarees, Grey and Border. According to the AO, the purchases claimed to have been made from Shri Chandresh D. Dalal of Rs.56,48,508/- and Smt. Damini Chandresh Dalal of Rs.58,23,095/- were treated as bogus purchases and thus added to her total income.
Pertaining to Ground 2:Also, the assessee had taken unsecured loans of Rs.1,87,37,285/- from various persons. After issuing notices u/s 133(6) to all parties and on account of non compliance of notice by certain number of parties, the assessing officer held that assessee failed to prove the identity, creditworthiness and genuineness of the transactions therefore he made an addition of Rs.1,23,00,000/- and also disallowed the interest payment made on the unsecured loan of Rs.2,76,499/-.
Assessee’s Contention
Ground 1:The assessee contented that purchases were made through account payee cheque and they were genuine. The assessee had submitted before the Assessing officer the copy of the ledger account with contra confirmation, PAN card, ITR-V acknowledgment computation of income, bank statement showing entries of payment receipts and sale bills/delivery challans duly signed by the authorized signatory of the seller in support that the purchases made by these two parties were genuine.
Ground 2: The assessee contented that she had received unsecured loans of Rs.1,87,37,285/- from 23 parties and the complete details of these loans with the name, address, PAN, amount of loan, etc. was provided in the tax audit report. The Ld. CIT(A) noticed that all the loans were repaid before 22.12.2011 whereas the scrutiny notice was issued upon the assessee on 31.07.2012. The assessee provided to the assessing officer, the new addresses of these parties during the assessment proceedings along with the confirmations, ledger account, capital account, bank statement, ITR return and computation of income & all these persons were assessed to tax and the balance sheet filed by them reflect the unsecured loans given to the assessee.
Crux of the case
Ground 1: Where the purchases are supported by bills, there are entries in the books of account, payment was made by account payee cheques and the assessee maintains quantitative details, and also no inflation in purchase price was found by the AO & the AO in remand proceedings have scrutinised the bank account of the creditors and has failed to prove that payment made by assessee for such purchases came back to assessee in cash, and thus the addition on account of bogus purchases stands deleted.
Ground 2: Once the Assessing officer gets hold of the PAN of the lenders, it is his duty to ascertain from the Assessing officer of those lenders, whether in their respective return they had shown existence of such amount of money and had further shown that those amount of money had been lent to the assessee. Where department had accepted repayment of loan in subsequent year, no addition was to be made in current year on account of cash credit.
Recently, on 31.05.2021 Reserve Bank of India vide its Circular No. DOR. AML.REC 18 /14.01.001/2021-22 came clear on its stance about Crypto trading in India.
It was noticed that many Banks in India were warning their customers about trading in crypto currencies or flagging the customer’s transactions related to crypto currency trading on the basis of RBI’s circular in the year 2018 about the legality of crypto currency trading in India. And this demotivated many people to start or continue investing or trading in crypto currencies.
So, RBI through this latest Circular gave a clear guidance to the Banks and other regulated banking institutions about dealing with the customers investing or trading in Crypto currencies in India.
The detailed circular is as follows
“All Commercial and Co-operative Banks / Payments Banks/ Small Finance Banks /NBFCs / Payment System Providers
DearMadam / Sir,
Customer Due Diligence for transactions in Virtual Currencies (VC)
It has come to our attention through media reports that certain banks/ regulated entities have cautioned their customers against dealing in virtual currencies by making a reference to the RBI circular DBR.No.BP.BC.104/08.13.102/2017-18 dated April 06, 2018. Such references to the above circular by banks/ regulated entities are not in order as this circular was set aside by the Hon’ble Supreme Court on March 04, 2020 in the matter of Writ Petition (Civil) No.528 of 2018 (Internet and Mobile Association of India v. Reserve Bank of India). As such, in view of the order of the Hon’ble Supreme Court, the circular is no longer valid from the date of the Supreme Court judgement, and therefore cannot be cited or quoted from.
2. Banks, as well as other entities addressed above, may, however, continue to carry out customer due diligence processes in line with regulations governing standards for Know Your Customer (KYC), Anti-Money Laundering (AML), Combating of Financing of Terrorism (CFT) and obligations of regulated entities under Prevention of Money Laundering Act, (PMLA), 2002 in addition to ensuring compliance with relevant provisions under Foreign Exchange Management Act (FEMA) for overseas remittances.
Yours faithfully,
(Shrimohan Yadav)
Chief General Manager”
As it is very much clear from the above circular that the RBI’s 2018 circular was set aside by the Hon’ble Supreme Court of India vide Writ Petition (Civil) No.528 of 2018 (Internet and Mobile Association of India v. Reserve Bank of India) on 04th march 2020, and hence citing the said circular by banks and other institutions to warn their customers about the Cryptocurrency trading is invalid.
However, the RBI has asked banks to continue to carry on customer Due Diligence through KYC’s and other modes.
The Catchnote of the Supreme Court’s Judgement as cited supra :
…… The position as on date is that VCs are not banned, but the trading in VCs and the functioning of VC exchanges are sent to comatose by the impugned Circular by disconnecting their lifeline namely, the interface with the regular banking sector. What is worse is that this has been done (i) despite RBI not finding anything wrong about the way in which these exchanges function and (ii) despite the fact that VCs are not banned. 6.172. As we have pointed out earlier, the concern of RBI is and it ought to be, about the entities regulated by it. Till date, RBI has not come out with a stand that any of the entities regulated by it namely, the nationalized banks/scheduled commercial banks/cooperative banks/NBFCs has suffered any loss or adverse effect directly or indirectly, on account of the interface that the VC exchanges had with any of them. there must have been at least some empirical data about the degree of harm suffered by the regulated entities (after establishing that they were harmed). It is not the case of RBI that any of the entities regulated by it has suffered on account of the provision of banking services to the online platforms running VC exchanges. When the consistent stand of RBI is that they have not banned VCs and when the Government of India is unable to take a call despite several committees coming up with several proposals including two draft bills, both of which advocated exactly opposite positions, it is not possible for us to hold that the impugned measure is proportionate. Therefore, in the light of the above discussion, the petitioners are entitled to succeed and the impugned Circular dated 06-04-2018 is liable to be set aside on the ground of proportionality…..
Thus with the above circular and judgement of RBI and Supreme Court Of India respectively the people investing or trading in cryptocurrencies have got a great sigh of relief.
The circular has thrown some light on the Central Govt’s / RBI’s intention for Legalisation and regularisation of trading or investing in Crypto Currencies in India.
Begani Dyeing Mills Pvt.Ltd., Surat v. The Pr.CIT., Surat [ITA 404/SRT/2019]
Facts of the case The case of the assessee was selected for scrutiny through CASS and accordingly original assessment in case of assessee was completed u/s. 143(3) of the Income Tax Act, 1961. Subsequently, the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 on the ground that assessee has claimed deduction u/s. 80IA of the Act. Further, the assessee preferred an appeal before CIT-(A), Surat against the re-assessment proceedings where Ld. CIT(A) dismissed the assessee’s appeal. Thereafter, assessee had filed an appeal before Honorable Tribunal, Surat bench. In the result, appeal of the assessee was allowed. Assessee’s Contention The ld. Counsel for the assessee contented that the issue was of section 14A of the Act was examined by AO in the assessment order passed under section 143(3) of the Act on 30.01.2015. Later, the assessment was reopened under section 147 on the issue of deduction under section 80IA and there was no issue with regard to the disallowance of 14A of the Act. Thereafter, the order under section 263 of the Act was passed on 07.12.2018, which is beyond the prescribed period of limitation of 2 years from the end of relevant assessment year when the assessment order was passed i.e. upto 31.03.2017. Another contention the learned AR of the assessee submitted that the assessee earned exempt income of Rs.2,02,337/- which the AO already disallowed more than the exempt income i.e. Rs.2,35,039/-. Therefore, the order passed by the AO was not erroneous as per the settled law that disallowance under section 14A of the Act should not exceed the exempt income. Crux of the case The Ld. Tribunal held that the issue of section 14A of the Act was discussed and disallowance was made by the AO in the assessment order dated 30.01.2015 and the case was reopened under section 147 on the issue of deduction under section 80IA of the Act. The ld. PCIT passed order under section 263(1) of the Act on 07.12.2018, which is beyond the 2 years period of limitation, therefore, the order passed by the ld. PCIT is barred by limitation. Even on merit, it was observed that the Ld. PCIT instead of accepting the contention of assessee proceeded to direct the AO to frame the de-novo assessment. Considering the fact that it is settled law that disallowance under section 14A of the Act should not exceed the exempt income. The assessee has earned total exempt income of Rs.2,02,337/- and the maximum disallowance do not exceed to the exempt income. Thus, the assessee succeeded on merit also. Reliance Placed upon CIT Vs. Alagendran Finance Lt. [162 Taxmann 465] (SC) and CIT Vs. ICICI Bank Ld., [19 taxmann.com 142] (Bombay HC) Download judgement from here: https://www.itatorders.in/appeal/ita-404-srt-2019-14-begani-dyeing-mills-pvt-ltd-surat-the-pr-cit-circle-1-surat
Sh. Mukesh Nanubhai Desai vs ACIT
[ITA No. 781/SRT/2018]
Facts of the case
Assessee has earned exempt income of Rs. 8,67,79,658/- on account of Long term capital gain on which STT was paid exempt u/s 10(38) of Rs. 8,66,13,252/- and profit share from firm of Rs. 1,66,406/- exempt u/s 10(2A).
Assessee submitted that the transactions were genuine and that
all the details were furnished to the assessing officer such as books of
accounts of assessee and details of various scrips of shares with their date of purchase and
its sales.
The Assessing Officer also stated that out of the directors
of the companies “Nimbus Industries Ltd’ and Regency Trust Ltd in which
assessee has invested were banned from trading by SEBI.
CIT (A) directed the Assessing Officer to furnish a factual
report confirming if the aforesaid details were filed or not. Assessing Officer
in his remand report admitted before the Ld. CIT (A) that the transactions were genuine.
The Ld. CIT (A) was of the view that although the basis of making the addition did not survive, there existed a prearranged scheme to bring unaccounted income back into the books by claiming exempt Long term capital gain.
Assessee’s Contention
The Ld. AR of assessee contented that Assessing Officer made addition on account of the transactions not being genuine but later the assessing officer admitted by way of his remand report that the transactions were genuine.
Ld. CIT (A) cannot confirm addition merely on the basis of
probability, surmises, suspicion or conjectures that the Assessing
Officer didn’t conduct any verification of the documents.
The director who was banned was only one of the common
directors and price rigging (the reason for which the director was banned) didn’t
take place in Nimbus Industries (the company in which assessee has invested. Both
the companies in which assessee transacted were not
alleged to be involved in price rigging or manipulation.
Additions in this
case is not
based on investigation report
of either income tax department or other authority or
on the statement of
entry provider. Further, SEBI has not taken any action against
alleged two companies
or their directors or concern brokers for any manipulation of
prices prevailing in the stock exchange.
Once the department accepts the purchases, the sales
of similar shares cannot be doubted.
Crux of the case
When the assessee furnishes complete details of purchase and sales of the shares were provided to the assessing officer and these details are able to prove the genuineness of transaction, the addition cannot be made by a higher authority merely on the basis of probability, surmises, suspicion or conjectures.
The genuineness of the transactions was proved and also admitted by the Assessing officer in his Remand report and Also, since addition in this case was not based on any investigation report of either income tax department or other authority or on the statement of entry provider, the addition cannot sustain.
Reliance placed on:
CIT Vs Mahesh Chandra G. Vakil [220 Taxman
166 (Gujarat HC)]
CIT
Vs Himani M. Vakil [10 taxmann.com 326 (Guj HC)]
PCIT
Vs Dhwani M.
Shah [Tax Appeal
No. 674 of
2017 ] (Gujarat HC )
ITAT ruled in favour of assesse.
Download full judgment at https://www.itatorders.in/appeal/ita-781-srt-2018-14-shri-mukesh-nanubhai-desai-surat-the-assistant-commissioner-of-income-tax-circle-1-1-2-surat
Nilkanth Developers vs PCIT – 3 [ITA No.95/ SRT/2020]
Facts of the case
Assessment order u/s. 143(3) was passed
26.03.2013 for A.Y.2010-11 disallowing
deduction claimed u/s. 80IB(10) of Rs.1,25,78,872/-. The same was confirmed by
CIT(A) but on further appeal before ITAT, the same was allowed in favour of
assessee.
Notice u/s. 148 was issued and
order u/s. 143(3) r.w.s 147 was passed on 22.09.2017 for A.Y. 2010-11 proposing
to reduce the deduction claimed by the amount of interest and remuneration
payable to partners on notional basis.
PCIT passed order u/s. 263 on
16.03.2020 revising the assessment made u/s. 147 on 22.09.2017 disallowing the deduction
claimed u/s.80IB(10).
Assessee’s Contention
The subject matter of revision
u/s.263 being unconnected with the issues which were subject matter of the
assessment under 143(3) r.w.s 147, the order passed by the Ld. PCIT was
proposing to revise the original assessment made u/s. 143(3) for which the
action has become time barred.
Crux of the case
Revision cannot be made on a issue which was not part of the Order to be revised.
No order under section 263(1) after the expiry of 2 years from the end of the financial year in which the order sought to be revised was passed.
We have audited the accompanying Financial Statements
of ABC PRIVATE LIMITED (“the Company”), which comprises the Balance Sheet as
at March 31, 2021, the
Statement of Profit and Loss, the Statement of changes in Equity and the Statement
of Cash Flows for the year ended
on that date and a summary of significant accounting policies and other
explanatory information.
In our opinion and to the best
of our information and according to the explanations given to us, the aforesaid
financial statements give the information required by the Companies Act, 2013 (“the
Act”) in the manner so required and give a true and fair view in conformity
with the Accounting Standards prescribe under section 133 of the Act read with
the Companies (Accounting Standards) Rules, 2015, as amended, (“AS”) and other
accounting principles generally accepted in India, of the state of affairs of
the Company as at March 31, 2021, the profit, changes in equity and its cash flows
for the year ended on that date.
Basis for Opinion:
We conducted our audit of the Financial
Statements in accordance with the Standards on Auditing specified under section
143(10) of the Act. Our responsibilities under those Standards are further
described in the Auditor’s
Responsibility for the Audit of the Financial Statements section
of our report. We are independent of the Company in accordance with the Code of
Ethics issued by the Institute of Chartered Accountants of India (ICAI)
together with the ethical requirements that are relevant to our audit of the
financial statements under the provision of the Act and Rules made there under,
and we have fulfilled our other ethical responsibilities in accordance with
these requirements and the ICAI’s Code of Ethics. We believe that the audit
evidence obtained by us is sufficient and appropriate to provide a basis for
our audit opinion on the financial statements.
Key Audit Matters:
Key audit matters are those
matters that, in our professional judgement, were of most significant in our
audit of the Financial Statements of the current period. These matters were
addressed in the context of our audit of the financial statement as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on
these matters. In the audit of the current period, we does not have observed any
key audit matters required to be reported separately.
Other Matters:
The
continuous spreading of COVID -19 across India has resulted in restriction on
physical visit to the client locations and the need for carrying out
alternative audit procedures as per the Standards on Auditing prescribed by the
Institute of Chartered Accountants of India (ICAI). As a result of the above,
the entire audit was carried out based on remote access of the data as provided
by the management of the Company. This has been carried out based on the
advisory on “Specific Considerations while conducting Distance Audit/ Remote
Audit/ Online Audit under current Covid-19 situation” issued by the Auditing
and Assurance Standards Board of ICAI. We have been represented by the management
of the Company that the data provided for our audit purposes is correct,
complete, reliable and are directly generated by the accounting system of the
Company without any further manual modifications.
We
bring to the attention of the users that the audit of the financial statements
has been performed in the aforesaid conditions.
Our
audit opinion is not modified in respect of the above.
Information Other than the Financial Statements and
Auditor’s Report Thereon:
The Company’s Board of
Directors is responsible for the preparation of the other information. The
other information comprises the information included in the Management
Discussion and Analysis, Board’s Report including Annexure to Board’s Report,
Business Responsibility Report, Corporate Governance and Shareholder’s
Information, but does not include the Financial Statements and our auditor’s
report thereon.
Our opinion on the Financial Statements
does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit
of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge obtained
during the course of our audit or otherwise appears to be materially misstated.
If, based on the work we have
performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in
this regard.
Management’s Responsibility for the
Financial Statements:
The Company’s Board of Directors is responsible for
the matters stated in section 134(5) of the Companies Act, 2013 (“the Act”)
with respect to the preparation of these financial statements that give a true
and fair view of the financial position, financial performance, changes in
equity and cash flows of the Company in accordance with the accounting
principles generally accepted in India, including the Accounting Standards
specified under Section 133 of the Act, read with Rule 7 of the Companies
(Accounts) Rules, 2014 and the Companies (Accounting Standards) Rules, 2015, as
amended.
This responsibility also includes the maintenance of
adequate accounting records in accordance with the provision of the Act for
safeguarding of the assets of the Company and for preventing and detecting the
frauds and other irregularities; selection and application of appropriate
accounting policies; making judgments and estimates that are reasonable and
prudent; and design, implementation and maintenance of adequate internal financial
control, that were operating effectively for ensuring the accuracy and
completeness of the accounting records, relevant to the preparation and
presentation of the financial statements that give a true and fair view and are
free from material misstatement, whether due to fraud or error.
In preparing the financial statement , management is
responsible for assessing the Company’s ability to continue as a going concern,
disclosing ,as applicable, matters related to going concern and using the going
concern basis of accounting unless management either intends to liquidate the
Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors are responsible for overseeing
the Company’s financial reporting process.
Auditor’s
Responsibility for the Audit of the Financial Statement:
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with SAs will
always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of these financial statements.
As part of an audit in accordance with SAs, we
exercise professional judgment and maintain professional scepticism throughout
the audit. We also:
-Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
-Obtain an understanding of internal financial control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.
-Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management.
-Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
-Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the
financial statements that, individually or in aggregate, makes it probable that
the economic decisions of a reasonably knowledgeable user of the financial
statements may be influenced. We consider quantitative materiality and
qualitative factors in (i) planning the scope of our audit work and in
evaluating the results of our work; and (ii) to evaluate the effect of any
identified misstatements in the financial statements.
We communicate with those charged with governance
regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those
charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with
governance, we determine those matters that were of most significance in the
audit of the financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report unless law
or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such
communication.
Report on Other Legal and Regulatory
Requirements:
1.As required by section 143(3) of the Act, based on our audit, we report that:
-We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.a)In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;
-The Balance Sheet, the Statement of Profit and Loss, Statement of Changes in Equity and the Statement of Cash Flow dealt with by this Report are in agreement with the books of account.
-In our opinion, the aforesaid Financial Statements comply with the AS specified under Section 133 of the Act.
-On the basis of written representations received from the directors as on March 31, 2021 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2021, from being appointed as a director in terms of section 164(2) of the Act.
-With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in “Annexure A”. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company’s internal financial controls over financial reporting.
-With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rule 2014, as amended in our opinion and to the best of our information and according to the explanation given to us
a)The Company does not have any pending litigation which would impact its Financial position;
b)The Company did not have any long-term contracts including derivative contracts for which they were any material foreseeable losses under the applicable law or accounting standards.
c)There has been no delay in transferring amounts if applicable, required to be transferred, to the Investor Education and Protection Fund by the Company.
2. As required by the Companies (Auditor’s Report) Order, 2016 (“the Order”) issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the “Annexure B”, a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
FOR XYZ & ASSOCIATES. CHARTERED ACCOUNTANTS
NAME OF AUDITOR
(PARTNER /
PROPREEITOR)
M. No.: 000000 FRN: XXXXXXXX Place: XXXXX Date: XXXXX UDIN:
Annexure – A to the Independent
Auditors’ Report
(Referred to in paragraph 1 (f) under ‘Report on Other
Legal and Regulatory Requirements’ section of our report to the Members of ABC
PRIVATE LIMITED of even date)
Report on the Internal Financial
Controls over financial reporting under Clause (i) of Sub-section 3 of Section
143 of the Companies Act, 2013 (“the Act”)
We
have audited the internal financial controls over financial reporting of ABC PRIVATE LIMITED (“the Company”) as
of March 31, 2021 in conjunction with our audit of the financial statements of
the Company for the year ended on that date.
Management’s Responsibility for Internal
Financial Controls
The
Company’s management is responsible for establishing and maintaining internal
financial controls based on the internal control over financial reporting
criteria established by the Company considering the essential components of
internal control stated in the Guidance Note on Audit of Internal Financial
Controls over Financial Reporting issued by the Institute of Chartered
Accountants of India (‘ICAI’). These responsibilities include the design,
implementation and maintenance of adequate internal financial controls that
were operating effectively for ensuring the orderly and efficient conduct of
its business, including adherence to Company’s policies, the safeguarding of
its assets, the prevention and detection of frauds and errors, the accuracy and
completeness of the accounting records, and the timely preparation of reliable
financial information, as required under the Companies Act, 2013.
Auditors’ Responsibility
Our
responsibility is to express an opinion on the Company’s internal financial
controls over financial reporting based on our audit. We conducted our audit in
accordance with the Guidance Note on Audit of Internal Financial Controls over
Financial Reporting (the “Guidance Note”) and the Standards on Auditing, issued
by ICAI and deemed to be prescribed under section 143(10) of the Companies Act,
2013, to the extent applicable to an audit of internal financial controls, both
applicable to an audit of Internal Financial Controls and, both issued by the
Institute of Chartered Accountants of India. Those Standards and the Guidance
Note require that we comply with ethical requirements and plan and perform the
audit to obtain reasonable assurance about whether adequate internal financial
controls over financial reporting was established and maintained and if such
controls operated effectively in all material respects.
Our
audit involves performing procedures to obtain audit evidence about the
adequacy of the internal financial controls system over financial reporting and
their operating effectiveness. Our audit of internal financial controls over
financial reporting included obtaining an understanding of internal financial
controls over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. The procedures selected depend on
the auditor’s judgment, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error.
We
believe that the audit evidence we have obtained, is sufficient and appropriate
to provide a basis for our audit opinion on the Company’s internal financial
controls system over financial reporting of the Company.
Meaning
of Internal Financial Controls over Financial Reporting
A
Company’s internal financial control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A Company’s internal
financial control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of the Company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the Company’s assets that could have a
material effect on the financial statements.
Inherent Limitations of Internal
Financial Controls over Financial Reporting
Because
of the inherent limitations of internal financial controls over financial
reporting, including the possibility of collusion or improper management override
of controls, material misstatements due to error or fraud may occur and not be
detected. Also, projections of any evaluation of the internal financial
controls over financial reporting to future periods are subject to the risk
that the internal financial control over financial reporting may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Opinion
In
our opinion, to the best of our information and according to the explanations
given to us, the Company has, in all material respects, an adequate internal
financial controls system over financial reporting and such internal financial
controls over financial reporting were operating effectively as at March 31,
2021 based on the internal control over financial reporting criteria
established by the Company considering the essential components of internal
control stated in the Guidance Note on Audit of Internal Financial Controls
Over Financial Reporting issued by the Institute of Chartered Accountants of
India (ICAI).
FOR XYZ & ASSOCIATES CHARTERED ACCOUNTANTS
NAME OF AUDITOR
(PARTNER /
PROPRETOR)
M. No.: 000000 FRN: XXXXXXX
Place: XXXXXX Date: XXXXXX UDIN:
Annexure
– B to the Independent Auditor’s Report:
The
Annexure referred to in Independent Auditor’s Report to the members of the
Company on the financial statements of the Company for the year ended March 31,
2021, we report that:
(i) (a) The Company does
not have any fixed assets during the year, therefore, provision regarding
thereto are not applicable.
(b) As the Company does not have any
fixed assets as specified in Paragraph (i)(a), reporting under Clause (i)(b)
and (i)(c) of Companies (Auditor’s Report) Order, 2016 is not applicable.
(ii) (a) According to information and
explanations give to us, the management of the
Company has conducted physical verification at reasonable intervals of
inventories during the period and no material discrepancies have been noticed
during such verification.
(iii) (a)
In our opinion and according to the information and explanation given to us,
the Company has not granted any loan secured or unsecured to the companies,
firms or other parties covered in the register maintained under section 189 of the Companies Act, 2013.
(b) As the Company has not granted
any loan as specified in Paragraph (iii)(a), reporting under Clause (iii)(b)
and (iii)(c) of Companies (Auditor’s Report) Order, 2016 is not applicable.
(iv) In
our opinion and according to the information and explanations given to us, the
company has neither given any loan nor made any investment during the year,
therefore provisions of section 185 and 186 of the Act regarding thereto are
not applicable.
(v) The Company has not accepted deposits during the year
and does not have any unclaimed deposits as at March 31, 2021 and therefore,
the provisions of the Clause 3 (v) of the Order are not applicable to the
Company.
(vi) To
the best of our knowledge and explanation given to us, the provisions of
maintenance of cost records under sub section (1) of Section 148 of the Act are
not applicable to Company for the financial year 2020-21. Accordingly, Clause (vi) of Order is not applicable.
(vii) According to the information and explanations given to
us, there is no undisputed amounts payable for a period of more than six months
from the date they became payable.
(viii) The Company does not have any loans or borrowings from any
financial institution, banks, government or debenture holders during the year.
Accordingly, Clause (viii) of the Order is not applicable.
(ix) The Company did not raise any money by
way of initial public offer or further public offer (including debt
instruments) and term loans during the year. Accordingly, Clause (ix) of Order
is not applicable.
(x) According to the information and
explanation given to us, no material fraud by the Company or on the Company by
its officers or employees has been noticed or reported during the course of our
audit.
(xi) According to the information and
explanations given to us, and based on our examination of the records of the
Company, the Company has not paid/provided for any managerial remuneration.
Accordingly, Clause (xi) of Order is not applicable.
(xii) In our opinion and according to the
information and explanation given to us, the Company is not a Nidhi Company in
terms of section 406 of the Companies Act, 2013. Accordingly, Clause (xii) of
the order is not applicable.
(xiii) According to the information and
explanations given to us and based on our examination of the records of the
Company, transactions with the related parties are in compliance with sections
177 and 188 of The Companies Act, 2013 where applicable and details of such
transactions have been disclosed in the financial statements as required by the
applicable Accounting Standards.
(xiv) According to the information and
explanations give to us and based on our
examination of the records of the Company, the Company has not made any
preferential allotment or private placement of shares or fully or partly
convertible debentures during the year.
(xv) According to the information and
explanations given to us and based on our examination of the records of the
Company, the Company has not entered into non-cash transactions with directors
or persons connected with him. Accordingly, Clause (xv) of the Order is not
applicable.
(xvi) According to the information and
explanations given to us the Company is not required to be registered under
section 45-IA of the Reserve Bank of India Act, 1934.
Ashish N. Vashi vs ITO [ITA No.2744, 1403/ AHD/2015][2219/ AHD/2016]
Facts of the case The assessee is an insurance agent, he used to collect cash from various parties and deposit them into his bank account and out of the same payment was made to insurance companies. The said cash deposited was added back to his income u/s. 69A as unexplained cash deposits into the bank.
Assessee’s Contention
The ld. Counsel for the assessee contended that the assessee was merely an employee and in pursuance to providing core services also provided additional services to accommodate the policyholder for making payment of premium and there is no responsibility of the Assessee to keep track of the investors.
Crux of the case
The assessee has submitted a plethora of documents to prove the genuineness of the transactions. The assessee is a salaried employee and he can’t maintain accounts department for his small business and clients. The corroborative evidence was suggestive of the fact that the assessee had simply acted as a facilitator to make payment on behalf of the policyholders and where each entry was traceable and identifiable the addition should not be made in the hands of the assessee. This way, the assessee had fully discharged his onus of explaining the source of deposits in the bank account particularly with evidence, hence there was no reason for the assessing officer to make addition under section 69A of the Act. The assessee was never found to be the owner of the impugned deposits in the said bank accounts particularly because all the said deposits were immediately transferred to the insurance company by way of insurance premium in the names of the respective insurers and hence there was no question of not recording such investment in the books of accounts of the assessee in as much as there was no investment of the assessee himself.
The Income Tax Department will launch a new income tax filing portal on June 7.
What new income tax makeover aims at?
The new e-filing portal (www.incometax.gov.in) is aimed at providing taxpayer convenience and a modern, seamless experience to taxpayers by:-
-New taxpayer friendly portal integrated with immediate processing of Income Tax Returns(ITRs) to issue quick refunds to taxpayers;
-All interactions and uploads or pending actions will be displayed on a single dashboard for follow-up action by taxpayer;
-Free of cost ITR preparation software available online and offline with interactive questions to help taxpayers fill ITR even without any tax knowledge, with pre- filling, for minimizing data entry effort;
-New call center for taxpayer assistance for immediate answers to taxpayer queries with FAQs, Tutorials, Videos and chatbot/live agent;
-All key portal functions on desktop will be available on Mobile App which will be enabled subsequently for full anytime access on mobile network;
-New online tax payment system on new portal will be enabled subsequently with multiple new payment options using netbanking, UPI, Credit Card and RTGS/NEFT from any account of taxpayer in any bank, for easy payment of taxes.
Therefore, the existing portal will remain suspended for 6 days from June 1 to June 6,” said a circular by the Income tax Department.
As per the circular, officers including AOs, CIT(A) etc access the information for taxpayers from the portal.
Likewise, taxpayers also use extensive use of the portal for filing their ITR, checking refund and raising grievance among others. Due to unavailability of the system for six days, officers have also been advised to not fix anything for compliance during these 6 days.
The Department has directed that any hearing or compliance is to be fixed only from June 10 such that taxpayers are given ample time to respond via the new system.
As per the official circular, the officers in the field including AOS, CIT (A), PCIT interact with taxpayers through E-proceedings over the E-filing portal directly or through the NeAC/NFAC for issuance of notices, sCNs and getting a response to various e-proceedings, conducting of video conference or adjournments, issuing questionnaires, summons, letters.
In preparation for the transition to the new system, the existing E-filing portal will not be available to both taxpayers as well as Departmental Officers for a period of 6 days from 1″ June to 6th June 2021.
“Hence, it is requested that all officers may be immediately informed about this so that they may not fix any compliance dates during this period. All Officers may be directed to fix any hearing or compliances only from June 10 onwards to give taxpayers time to respond on the new system. If they have already scheduled any hearing or compliance which requires submissions online during this period, they may prepone or adjourn the hearing and reschedule the work items after this period, etc”, the circular said.
“They may also view/download any submissions in E-proceedings prior to June 1″ and the PDF of any ITRS and non-ITR forms that may be needed by them in advance so that they can continue to work in the ITBA system including completion of assessment proceedings where no further interaction with the taxpayer is necessary. It is clarified that the ITBA system and the CPC systems will continue to function for assessment-related functions. All Orders, notices issued during this period, however, will be made visible to the taxpayer only after the new portal goes live on June 7th, 2021,” the circular said.
It would also encourage all Officers/professionals to complete all their urgent tasks involving interactions with taxpayers prior to June 1 to avoid the blackout period during the launch of new website.
Sh. Haresh P. Shah, Legal Heir, Late Manjula P. Shah Vs ITO [ITA No.894/ AHD/2016]
Facts of the case
Notice for
reassessment proceedings u/s 147/148 was issued to dead person by the
department. Death certificate was furnished by the legal heir of the assesse.
Assessee’s Contention
The Ld. AR of the
legal heir of assesse contented that despite pointing out by her legal heirs
that assesse had expired long back, the assessing officer continued reassessment
proceedings against her, which is not valid, therefore reassessment proceedings
initiated against her by the assessing officer under section 147/148 of the Act
should be quashed.
Crux of the case
Notice u/s 148 was
issued in the name of dead person which is invalid in the eyes of law.
Reliance placed on
Rasid Lala vs. ITO,
[2017] 77 taxmann.com 39 (HC- Gujarat)
Rupa Shyamsundar Dhumatkar vs. ACIT & Ors., in Writ Petition No. 404 of 2019 (HC- Bombay)
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