VERY SHORT NOTICES , UN-NECESSARY ELABORATE DETAILS AND EVIDENCES ASKED IN FACELESS PROCEEDINGS. Taxpayers time is also valuable for his tax paying capacity.

[DEV KUMAR KOTHARI]

Earlier article

VERY SHORT NOTICES ASKING ELABORATE DETAILS AND EVIDENCES IN FACELESS PROCEEDINGS IS NOT JUSTIFIED - REASONABLE TIME MUST BE ALLOWED AND UN-NECESSARY DETAILS AND EVIDENCES MUST NOT BE ASKED TO AVOID WASTAGE OF TIME OF TAX AUTHORITY AND ASSESSEE AND ALSO TO AVOID LITIGATION. Published on this website on 05.02.2021

Bias, presumption and conjectures appear in minds of Ld. AO

As discussed in earlier article and this article, author feels that lot of  bias , lack of faith and trust and  presumption of tax payer being tax evader  appear in minds of Ld. AO, even in face less proceedings.

 Notices are issued with elaborate queries and requisitions even without considering records and information available at the time of issue of notices.

Wastage of time:

Tax authority’s time is at cost of tax paid by tax payer:

This causes lot of wastage of time of tax authorities and can be a reason of litigation, further proceedings and high pitched assessment and harassment of tax payers.

Tax payer time is valuable to earn income and pay taxes:

Tax payer is paying tax because he has earned income. Income is earned by efforts made to earn. Earning requires time to work. In case of business and profession there is no fixed income irrespective of performance and productivity (as the tax officers generally have, as a matter of fortune of being a tax officer).

Therefore, time of tax payer is very important for collection of taxes also. Unless taxpayer has time to earn, he will not be able to earn and in turn will not be able to pay tax.

Every hour of tax payer lost in un-necessary proceedings reduces his time available to earn and in turn his ability to pay taxes.  This must be understood by tax officers also and they must have some regard to taxpayers.

Earlier article:

In earlier article author had discussed matter pertaining to an old  manufacturing company, in which elaborate requisitions and queries were raised by the Ld. AO ignoring online returns and reports, submissions and past assessment orders etc. for precedence.

This article:

In this article author is discussing matter pertaining to a trading firm, which filed its first e- return, TDS returns and Tax Audit Report with audited accounts etc. In this case also elaborate requisitions and queries were raised by the Ld. AO ignoring online returns and reports, earlier submissions and ignoring that this is a new assessee having first year of operations.

The firm had total income of about ₹ 100 lakh and paid tax and interest  of ₹ 33 lakh.

From the notices issued it appears that:

Ld. AO is trying to question wisdom of businessman in course of business and business operandi is being asked. Expenses incurred , including petty capital expenditure incurred and claim of depreciation thereon  is being doubted.

There seems bias and presumption against businessman.

Or that the officers have no idea about how business is carried , still they are trying to make investigation with biased mind set.

From the notices issued to trading partnership firm some aspects are highlighted:

Notice dated 17.12.20 date of compliance fixed 01.01.2021

Sub:-Assessment Proceedings-Assessment Year:- 2018-19..reg As you aware that your case has been selected for scrutiny (CASS) under the Complete category . The points to be verified are as under :

1 Share Capital/Other Capital 2 Unsecured Loans Accordingly the notices/letters were issued from time to time. In continuation of the proceedings, you are hereby required to furnish/explain/clarify/substantiate the following points with supporting relevant documentary evidence and material

 Kindly give the details of the activities given rise to the income/loss during the Financial Year -2017-18 relevant to Assessment year:-2018-19

 Kindly furnish the detailed statement of computation of total income  

 Kindly furnish the details of all bank accounts held by you during the Financial Year 2017-18 relevant to the assessment year 2018-19 in the following format  (table was given for following):

 Sr No

 Name of the bank

Address of the bank Branch

Name of the holder,

 whether self held /Jointly held , if held jointly then name and address of the joint holder

 Nature of Account Account Number

 Reason

 description:

(a) It has been observed that the firm is incorporated on 01.04.2017 and there is introduction of large capital of ₹ 4,48,89,595/- by partners . In this connection you are required to furnish the following documentary evidences and material to substantiate your claim:

 (1) Kindly provide a detailed note on nature and modus operandi of business

(2) Kindly provide copy of partnership deed

(3) Date-wise capital account of partners

 (4) Copy of last three years’ return of income along with statement of income of all partners and their bank account details.

 (5) Explain, justify and substantiate introduction of capital of ₹ 4,48,89,595/- by partners. Please prove identity and creditworthiness of partners and genuineness of the transactions.

(b) It has been observed that you have shown squared up loans / deposits during the year

In this connection you are required to furnish the following documentary evidences and material to substantiate your claim: (1) Please provide details of loan/ advances squared up as under  ( in table format):

Sr.No

Name

 PAN

 Op Balance

 Addition Reduction

Closing balance

 Rate of interest Interest paid

TDS

 (2) Name, address and PAN of the lender along with loan agreements.

(3) Purpose/utilization of the loan amount and nature of such activity.

 (4) Details of bank accounts together with bank statements for the previous year.

(5) Ledger folios of such loan creditors

 (6) Nature of relationship with the creditors

 (7) Mode of repayment of such loans

 (8) Provide documentary evidence to substantiate the identity and creditworthiness of of the lenders and also theirs creditworthiness.

 Also provide copy of ITR of last 3 years of lenders. Kindly furnish the above documentary evidences and material along with your explanatory submission according to the FAS-2019 on or before the date and time mentioned in notice u/s 142(1) of the Income Tax Act ,1961

Another notice :

Notice dt. 09.03.2021 date of compliance 13.03.2021- very short time allowed.

Kindly refer to notice issued u/s 142(1) dated 17.12.2020 for which compliance in totality is pending as on date.   In continuation of the assessment proceedings proceedings, kindly provide the following information / details with supporting relevant documentary evidence and material :

 1 In the balance sheet, you have reported tangible assets at ₹ 57,525/-. Please explain source of the same, provide corresponding bank statement, bank book, ledger, depreciation claimed and assets put to use

 2 In the balance sheet, you have reported loan and advances given at ₹ 29,20,426/-. In this connection, kindly furnish the following information in respect of new debtors : (i) In respect of new debtors, provide corresponding bank statement, bank book, ledger account reflecting the transactions, rate of interest, interest earned , justify purpose and its tax treatment and TDS (ii) Information in tabular form :

Sr.No

 Name, address and PAN of debtor

 Opening balance

 Addition Reduction

 Closing balance

Rate of interest

 Interest earned

TDS Tax treatment of interest

Sr.No Name, address and PAN of debtor Opening balance Addition Reduction Closing balance Rate of interest Interest earned TDS Tax treatment of interest

In the year under consideration, you have made payment of remuneration to partners of ₹ 46,25,000/- and interest of ₹ 20,21,226/-. In this connection, please explain, justify and substantiate reasonability of the same and also provide the following information :

Sr.No

 Name of the partners

 Nature of payment u/s 40A(2)

(b) Payment (Rs) Rate of interest ( %) Interest paid/ payable (Rs) TDS

During the year under consideration, you have made commission expenditure of ₹ 40,23,945/-, out of which commission of ₹ 19,65,205/- is paid to the related persons covered u/s.40A(2)b). In this regard, you are requested to furnish working of commission and comparison between payment made to other parties and related parties. Also explain and justify reasonability of the commission payment to related parties.

Kindly furnish the above documentary evidences and material along with your explanatory submission according to the FAS-2019 on or before the date and time mentioned in notice u/s 142(1) of the Income Tax Act,1961.