CBDT notifies e-Appeals Scheme, 2023; implements functioning of JCIT(A)

The Finance Act 2023 introduced the Joint Commissioner (Appeals) [JCIT (Appeals)], a designated income tax authority, to handle certain small appeal disputes. To operationalize the JCIT (Appeals), the CBDT has introduced the e-Appeals Scheme, 2023, effective from 29-05-2023. The scheme outlines the scope, procedure, penalty proceedings, rectification proceedings, and other provisions for smooth implementation. Here are the key highlights of the scheme:

Applicability (a): The scheme applies to individuals or classes of individuals covered under Section 246 of the IT Act.

Allocation of Appeals (b): The Principal Director General (Systems) or the Director General (Systems) will randomly assign or transfer appeals to the JCIT (Appeals).

Notice and Submissions (c): Upon assignment of an appeal, the JCIT (Appeals) will issue a notice to the appellant, requesting submissions within the prescribed time. A copy of the notice will also be sent to the Assessing Officer (AO).

Information and Evidence (d): The JCIT (Appeals) can request additional information, documents, or evidence from the appellant or any other person. They may also obtain a report from the AO regarding the grounds of appeal or information provided by the appellant.

Additional Grounds of Appeal (e): The appellant can file additional grounds of appeal with the JCIT (Appeals). The AO can request the JCIT (Appeals) to direct the production of relevant documents, evidence, or examination of witnesses during the appellate proceedings.

Show-Cause Notice (f): If the JCIT (Appeals) intends to enhance an assessment, penalty, or reduce the refund amount, they will prepare a show-cause notice stating the reasons for their decision.

Appeal Order (g): The JCIT (Appeals) will prepare an appeal order in accordance with section 251, specifying the points for determination, the decision, and the reasoning behind it.

Penalty Proceedings (h): In case of non-compliance with any notice, direction, or order, the JCIT (Appeals) can issue a show-cause notice to initiate penalty proceedings. After considering the relevant materials and response, they will prepare a penalty order or drop the penalty proceedings.

Rectification of Mistake (i): The JCIT (Appeals) can amend any order to rectify a mistake apparent from the record upon receiving an application from the appellant or the Assessing Officer. After examining the application and considering all relevant material, they will issue an order to rectify the mistake or reject the application.

Appeal to ITAT (j): An appeal against an order passed by the JCIT (Appeals) can be made to the ITAT having jurisdiction over the jurisdictional Assessing Officer of the appellant-assessee.

Personal Hearing (k): While personal appearance or representation is not required under this scheme, a request for a personal hearing can be made. The hearing can be conducted through video conferencing or video telephony.

Amendments and Filing of Appeals (l): The CBDT has also amended existing Rules 45 and 46A with Form 35 to enable the filing of appeals before the JCIT(A).

Comprehensive Scrutiny of Non-Filers and Tax Evasion Cases

The income tax department has announced its plans for the current financial year, emphasizing the thorough scrutiny of certain cases. The focus will be on two main categories: cases where no return was furnished, and cases where specific instances of tax evasion were detected. The Central Board of Direct Taxes (CBDT) has listed these criteria as parameters for the compulsory selection of returns for complete scrutiny during the fiscal year 2023-24.

1. Cases with No Furnished Return

The income tax department will give special attention to cases where taxpayers have failed to furnish their returns. These are individuals or entities who have not complied with their obligation to file a tax return for the relevant assessment year. By conducting comprehensive scrutiny of these cases, the department aims to ensure that all taxpayers fulfill their legal responsibilities and contribute their fair share towards the nation's development.

2. Cases with Specific Instances of Tax Evasion

Another crucial focus area for the income tax department is cases in which specific instances of tax evasion have been detected. These instances may have been brought to the attention of the department through various means, such as information provided by law enforcement agencies. The CBDT has emphasized the significance of such information, recognizing it as a valuable resource for identifying potential tax evasion and ensuring compliance with tax regulations.

When both specific information pointing out tax evasion for the relevant assessment year and the return for that year are furnished by the taxpayer, the department will prioritize these cases for complete scrutiny. This indicates the department's commitment to thoroughly investigate instances where taxpayers may have intentionally or inadvertently evaded their tax liabilities.

By implementing these measures, the income tax department aims to strengthen its enforcement mechanisms and enhance tax compliance. Complete scrutiny of these selected cases will help uncover any potential tax irregularities, ensure fairness in the tax system, and maintain public trust in the integrity of the income tax department.

In conclusion, the income tax department's decision to prioritize search and survey cases, as well as instances of specific tax evasion, for complete scrutiny during the fiscal year 2023-24 reflects its dedication to promoting transparency, accountability, and fairness in the tax administration process.

 

Increased Limit for Tax Exemption on Leave Encashment for Non-Government Salaried Employees Notified

 Introduction:

In a significant move, the Central Government has recently announced a noteworthy update concerning tax exemption on leave encashment for non-government salaried employees. Previously limited to Rs. 3 lakh under section 10(10AA)(ii) of the Income-tax Act, 1961, the government has now raised the limit to Rs. 25 lakh, effective from April 1, 2023. This amendment comes as a result of the proposal put forth in the Budget Speech, 2023, by the honorable Finance Minister. The revised limit applies to retirement or other cases where non-government salaried employees receive leave encashment payments.

Key Highlights:

1. Increased Limit: The new limit for tax exemption on leave encashment for non-government salaried employees has been raised to Rs. 25 lakh, compared to the previous limit of Rs. 3 lakh. This change aims to provide substantial relief and support to employees upon retirement or under other circumstances.

2. Multiple Employers: In cases where a non-government employee receives leave encashment payments from more than one employer within the same previous year, the aggregate amount exempt from income tax under section 10(10AA)(ii) of the Act should not exceed Rs. 25 lakh. This provision prevents individuals from surpassing the set limit when receiving payments from different employers.

3. Adjustments for Previous Years: The amount exempt from income tax under section 10(10AA)(ii) of the Act should not exceed Rs. 25 lakh, taking into account any previous tax exemptions already granted. This ensures that the limit is applied effectively, considering any previous years where tax exemption was availed.

Conclusion:

The Central Government's decision to increase the tax exemption limit on leave encashment for non-government salaried employees to Rs. 25 lakh is a welcome step in providing financial relief during retirement or other circumstances. This move acknowledges the evolving needs and aspirations of the workforce, aligning with the government's commitment to fostering employee welfare. Non-government salaried employees can now avail higher tax exemptions on their earned leave encashment, thereby helping secure their financial future.

To learn more about the updated regulations and guidelines, interested individuals can refer to Notification No. 31/2023 dated May 24, 2023, available at the official e-gazette website: [https://egazette.nic.in].

A Comprehensive Guide to TDS on GST @ 2% (with Examples)

 Introduction:

Tax Deducted at Source (TDS) on Goods and Services Tax (GST) is an important provision introduced by the government to monitor transactions, ensure compliance, and prevent tax evasion. In this comprehensive guide, we will delve into the intricacies of TDS on GST, its applicability, deductions, deposit procedures, and consequences of non-compliance. We will also provide illustrative examples to enhance understanding.

TDS @ 2% on GST: TDS @ 2% is required to be deducted when making payments to suppliers of taxable goods or services if the contract value exceeds Rs. 2.5 Lakhs. The provisions of TDS on GST became effective from October 1, 2018 (Notification No. 50/2018 – Central Tax dated 13th Sept 2018). The following elements are excluded when computing the contract value for TDS purposes:

1. Central GST
2. State GST
3. Union Territory GST
4. Integrated GST
5. Cess

TDS Rate: 1% or 2%? The TDS rate is 1% under both the CGST and SGST Acts, resulting in a total TDS deduction of 2%. In the case of inter-state transactions, where IGST is levied, the TDS rate remains 2%. Let's consider an example to understand this better:

Example: A supplier makes an intra-state supply worth Rs. 10,00,000 to a recipient, with CGST @ 9% and SGST @ 9%. In this case, the recipient deducts 1% TDS (Rs. 10,000) under the CGST Act and 1% TDS (Rs. 10,000) under the SGST Act. Hence, the total TDS deducted would amount to Rs. 20,000.

Applicability of TDS on GST: TDS on GST is applicable to the following class of persons who deduct TDS when making payments exceeding Rs. 2.5 Lakhs:

• Departments or establishments of the Central or State governments
• Local authorities
• Government agencies
• Persons or categories of persons notified by the government

The government has specified the following categories of persons on whom the provisions of TDS on GST would be applicable:

1. Authorities, boards, or bodies with 51% or more equity or control: a. Established by an Act of Parliament or State Legislature, or b. Established by any government

2. Societies established by the Central or State governments or a local authority under the Society Regulations Act, 1860.

3. Public Sector Undertakings

Exceptions to TDS Deductions: TDS on GST is not required to be deducted in the following cases:

1. When the contract value does not exceed Rs. 2.5 Lakhs.

   • Example 1: If a contract is valued at Rs. 2 Lakhs for Income Tax Advisory and Rs. 1.5 Lakhs for GST Advisory, TDS provisions will not apply since the value of each contract is less than Rs. 2.5 Lakhs.
   • Example 2: If a single contract worth Rs. 3 Lakhs is divided into two payments of Rs. 1.5 Lakhs each, TDS provisions will apply as the total contract value exceeds Rs. 2.5 Lakhs.

2. When the location of the recipient is different from the location of the supplier and the place of supply.

   • Example 1: If Delhi Government contracts with Radisson Haryana to rent space for an event, and the place of supply and the location of the recipient is Haryana, TDS provisions will not apply.

TDS Deposit and Certificate Issuance: After deducting TDS, the deductor is required to deposit the TDS amount with the government by the 10th of the following month through the GST portal. Failure to deposit TDS within the prescribed time may attract interest liabilities.

The deductor must issue a TDS certificate (Form GSTR 7A) to the deductee within five days of depositing the TDS. Late issuance of the certificate may lead to the payment of late fees.

Claiming TDS Credit and Penalty for Non-compliance: Suppliers can view TDS deductions in Form GSTR 2A and include them in their returns (GSTR 2) to claim credit. Non-compliance with TDS provisions may result in penalties, such as interest on non-deduction or late payment, late fees for delayed issuance of TDS certificates, and late fees for late filing of TDS returns.

Refund of Excess or Erroneous Amounts: Excess or erroneous amounts deducted as TDS can be refunded under Section 54, except when already credited to the supplier's electronic cash ledger.

Conclusion: Understanding the provisions of TDS on GST @ 2% is crucial for businesses and individuals involved in taxable transactions. By following the guidelines, deductors can ensure compliance and contribute to a transparent and efficient taxation system. We hope this comprehensive guide has shed light on the various aspects of TDS on GST, helping you navigate this aspect of GST with confidence.

Enhancing Exemptions for Agricultural Land in the Income Tax Act: Promoting Fairness and Consistency

Introduction: The Income-tax Act provides crucial exemptions for agricultural land, recognizing its unique importance to the economy. However, certain provisions within the Act, particularly Section 54B, present limitations that hinder the accessibility and flexibility of exemptions. In this article, we delve into the existing provisions, highlight the disparities between different sections, and advocate for aligning the exemption provision under Section 54B with Sections 54 and 54F. By doing so, we can establish a fair and efficient tax system that benefits individuals and Hindu Undivided Families (HUFs) involved in agricultural activities.

Understanding the Current Provisions: The Income-tax Act grants exemptions for agricultural land based on its classification as rural or urban. Rural land is defined as situated beyond a specified distance from the boundaries of a municipality or cantonment board, as determined by aerial measurement. The transfer of rural agricultural land enjoys tax exemptions without any conditions. In contrast, the transfer of urban agricultural land is only exempt from taxes if the capital gains from the transfer are reinvested in new agricultural land, as outlined in Section 54B of the Income-tax Act.

Eligibility and Restrictions: According to Section 54B, individuals or HUFs can claim an exemption on capital gains from the transfer of urban agricultural land if they reinvest the gains in a new agricultural land. However, there are specific conditions to be met. The exemption is only available if the new land is purchased within two years of the transfer and can be located anywhere, regardless of its rural or urban classification or whether it is situated in India or abroad.

Disparity with Other Sections: Section 54B, although providing an exemption on capital gains from the transfer of urban agricultural land, has limitations that differentiate it from Sections 54 and 54F. Notably, Section 54B does not allow the purchase of agricultural land prior to the date of transfer, which is a significant limitation compared to the provisions of Sections 54 and 54F. These sections allow exemptions for the purchase of residential properties both before and after the transfer of the original asset.

The Tribunal Ruling and the Call for Alignment: The case of Paras Chinubhai Jani v. Pr. CIT shed light on the limitations of Section 54B. The Tribunal ruled that the exemption can only be claimed if the agricultural land is purchased after the transfer of the original capital asset. Acquiring land before the transfer date is deemed invalid, as it goes against the language of the Act. The Tribunal emphasized the clarity of the legislature's intention, as other sections of the Act use phrases such as "before or after the transfer of the capital asset." Therefore, the Tribunal upheld the decision to disallow the exemption under Section 54B in the specific case.

Enhancing the System for Fairness and Efficiency: To ensure consistency and fairness, it is recommended that the exemption provision in Section 54B align with the provisions of Sections 54 and 54F. This alignment would allow individuals and HUFs to claim exemptions even if they acquire new agricultural land before disposing of the original asset. By doing so, we would simplify the process for taxpayers, eliminate disparities between different types of assets, and reduce administrative burdens. This harmonization would ultimately establish a more fair and efficient tax system that benefits the agricultural community.

Conclusion: Enhancing the exemptions for agricultural land in the Income-tax Act is essential to support the growth and development of the agricultural sector. Aligning the exemption provision in Section 54B with Sections 54 and 54F will create consistency, promote fairness, and reduce administrative burdens for taxpayers. It is imperative that we work towards a tax system that encourages investment, supports agricultural activities, and fosters economic prosperity. By advocating for alignment, we can pave the way for a fairer and more efficient tax environment.