Rationalization Measures - BUDGET UPDATES

[CS Swati Dodhi]

Section 248 - Appeal by person denying liability to deduct tax in certain cases - Amendment in the provisions of section 248 of Income-tax Act and insertion of new section 239A 

As per section 248 of the Income tax Act where under an agreement or other arrangement, the tax deductible on any income, other than interest, under section 195 is to be borne by the person by whom the income is payable, and such person having paid such tax to the credit of the Central Government, claims that no tax was required to be deducted on such income, he may appeal to the Commissioner (Appeals) for a declaration that no tax was deductible on such income.

Such appeal can be filed after making payment of tax so deducted to the credit of the Government account. Further, section 249 of the Act lays  down that an appeal under section 248 of the Act should be filed within 30 days of  making payment of such tax to the Government account. 

For the claim of refund of the tax deducted and paid by a person, where it was not deductible, as per the provisions of section 248 of the Act, a taxpayer has no recourse to approach the Assessing Officer with such request. He has to only enter the Appellate process by filing an appeal before the Commissioner (Appeals)

Thus to remove such lacking in procedure a New section 239A is proposed to be inserted in the Act to provide that such a person, who has made the deduction of tax under such an agreement or arrangement and borne the tax liability, when no tax deduction was required, may file an application for refund of such tax deducted before the Assessing Officer. 

Such person if not satisfied with the order of the Assessing Officer, can go into appeal before the Commissioner (Appeals), under section 246A of the Act. Accordingly, the provisions of section 248 of the Act will not apply in cases where the date of tax payment, to the credit of Central Government is on or after  01.04.2022.  

These amendments will take effect from 1^st April, 2022. 

Cash credits under section 68 of the Act – Onus to prove

Section 68 of the Act provides where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.

The onus to prove of such credits is on the person in whose books such sum is credited. If such person fails to offer an explanation or the explanation is not found to be satisfactory then the sum is added to the total income  of the person.

It is proposed to amend the provisions of section 68 of the Act so as to provide that the nature and source of any sum, whether in form of loan or borrowing, or any  other liability credited in the books of an assessee shall be treated as explained only if the source of funds is also explained in the hands of the creditor or entry provider. This additional onus of proof of satisfactorily explaining the source in the hands of the creditor, would not apply if the creditor is a well regulated entity or SEBI registered venture capitalist company.

This amendment will take effect from 1st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years.