IMPORTANT CHANGES :

FINANCE ACT 2017

Organised by:

BHILWARA BRANCH OF CIRC OF ICAI

Speaker:

CA. Rajesh Mehta, Indore 98270-36956

CHAIRMAN CA. SUNIL SOMANI

VICE CHAIRMAN CA. ARUN KUMAR KABRA

SECRETARY CA. ALOK PALOD

CA RAJESH MEHTA FCA, DISA(ICAI),

203 MANAS BHAWAN EXTENSION, 11, RNT MARG, NEAR HOTEL SHREEMAYA,

INDORE (M.P.) 9827036956 9424818719

Date 20th May, 2017

IMPORTANT INCOME TAX CHANGES EFFECTIVE FROM A.Y. 2017-18 &

2018-19

First ever the finance bill (2017), have been passed and got the assent of

Honourable President, before start of the Financial year. This budget aimed to

achieve target of cashless economy (digital economy) and also tried to reduce

prevailing litigation due to ambiguity in some old provisions and also tried to

pluck loopholes which were being (mis)used to evade/save tax by corporate/non-

corporate/ trust/institutions and other entities and also introduced many new

provisions by rationalizing old provisions and which would also create more

positive atmosphere for ease of doing business.

Some of the key points of Finance Act, 2017 are enumerated hereunder :-

1. Section 2(42A) short term capital asset :- an immovable property being

land or building or both if held for more than 24 months (it was 36 months

upto A.Y. 2017-18) immediately prior to the date of its transfer will be a

long term capital asset. W.e.f. A.Y. 2017-18 holding period for share of a

company (not listed) was also reduced from 36 months to 24 months.

2. Section 10(23C) 12th proviso :- newly inserted 12th proviso specifies that if

any trust or institution or any university or other educational institution or

any hospital or other medical institution referred to in 10(23C)

(iv)/(v)/(vi)/(via), makes voluntary contribution to a trust or fund

registered U/s 12AA, with a specific direction that they shall form part of

corpus of the recipient trust or fund then such contribution shall not be

treated as application of income.

3. Section 10(38) :- If any equity share of a company, acquisition of which has

been entered into on or after 1-10-2004 and such transaction was not

subject to STT, then transaction of sale of such equity share will not be

excluded from income as per Sec. 10(38).

4. Corpus donation not an application of income :- Any contribution by a

charitable or religious trust or institution to any other trust or institution

registered U/s 12AA, with a specific direction that it shall form part of

corpus of recipient trust/institution then for the donor trust/institution it

shall not be treated as application of income U/s 11(1)(a)/(b).

5. Modification of objects of trust or institution Section 12A(1)(ab) :- if there

is any modification of objects clause which do not conform to the

conditions of registration U/s 12AA or 12A, then such trust will have to

again make an application for 12AA registration within 30 days of

modification.

6. Trust registered U/s 12AA to furnish return U/s 139 [Sec. 12A(1)(ba)]:- The

trust/institution to qualify for provisions U/s 11 & 12 will filed its return of

income as required U/s 139(4A) within time allowed U/s 139.

7. Building (stock in trade) will be deemed vacant for one financial year

Section 23(5):- Any building held as stock in trade can remain vacant for

one year just after the financial year in which completion certificate is

obtained but after that year its annual value of such property or part of

property (deemed to be let out) will have to be taken as rental income.

8. Payment U/s 40A(2)(b) not SDT U/s 92BA :- Upto A.Y. 2016-17 payment to

persons specified U/s 40A(2)(b) being relatives of individual or director of

company, partner of firm or member of AOP or HUF or relative of

director/partner/member of AOP or HUF etc. were covere U/s 92BA if SDT

aggregates to more than Rs. 20 Crores then had to obtain audit report in

3CEB. Now w.r.e.f. A.Y. 2017-18 payment U/s 40A(2)(b) have been excluded

from 92BA.

9. No purchases/capital or revenue expenditure exceeding Rs. 10000/- in

cash Sec 40A(3)/(3A)/43(1)second proviso:- if any payment exceeding Rs.

10000/- in a day is made otherwise than through an a/c payee cheque or

a/c payee bank draft or use of ECS through a bank account, for any

expenditure or to creditor for such expenditure, then no deduction shall be

made for such expenditure, earlier this limit was Rs. 20000/-. Purchase of

asset were not earlier covered now if there is any payment exceeding Rs.

10000/- in a day for purchase of any asset or to any creditor for purchase of

such asset, otherwise than through an a/c payee cheque or a/c payee bank

draft or use of ECS through a bank account then such payment will not //be

considered for determining actual cost of asset as per Sec. 43(1) for the

purpose of Sec. 28 to 41, therefore depreciation will not be allowed on such

payment exceeding Rs. 10000/-.

10. Payment of interest on loan from cooperative bank covered U/s 43B :-

Earlier payment of interest to scheduled bank on loans and advances were

covered U/s 43B now cooperative banks other than a primary agricultural

credit society or a primary cooperative agricultural and rural development

bank , are covered.

11. Maintenance of books of accounts 1st and 2nd proviso to Sec. 44AA(2) :-

Individual and HUF carrying on business or profession (other than person

carrying on legal, medical, architectural, engineering or accountancy or

interior profession), if has income exceeding (or likely to exceed in case of

new business or profession) Rs. 2.50 Lakh or sale/turnover/receipt exceeds

(or likely to exceed in case of new business or profession) Rs. 25 Lakh in any

one of the three years immediately preceding the previous year, shall keep

and maintain such books of accounts which may enable the assessing

officer to compute income as per Income tax act. For persons other than

individual and HUF limits have been kept as earlier at Rs. 1.20 Lakh income

and Rs. 10 Lakh sales/turnover/receipts. W.e.f. A.Y. 2017-18 any

individual/HUF or partnership firm declares profit as per Sec. 44AD and in

any subsequent year does not opt for Sec. 44AD then for subsequent 5

years during which he/they can’t opt for 44AD hence if their income

exceeds Rs. 2.50 Lakh they will be required to keep and maintain books of

account.

12. Section 44AB amended but no amendment made under chapter XVII-B &

BB:- Assessees opting for presumptive taxation are required to deduct

TDS and collect TCS earlier there was no such need :- Upto A.Y. 2016-17

only those individual and HUF who were liable to get their books of

accounts audited U/s 44AB(a)/(b) during the preceding previous year were

required to deduct TDS and were required to collect TCS in/from the just

following previous year.

But from A.Y. 2017-18 limits for tax audit have been increased to Rs. 2 crore in

case of individual, HUF and firms i.e. if that person opts for presumptive taxation

u/s 44AD then he is not required to tax audit U/s 44AB(a). otherwise any person

having turnover exceeding Rs. 1 Crore is required to get his books of accounts

audited u/s 44AB(a).

Chapter XVII-B AND XVII-BB casts a responsibility on individual and HUF assessees

to deduct and collect TDS/TCS, whose turnover exceeds the limits specified u/s

44AB(a)/(b) or who are liable to get their books of accounts audited U/s

44AB(a)/(b). Section 44AD was amended in Finance bill 2016 but no consequential

amendments have been made in provisions relating to TDS/TCS liability (through

Finance bill 2017) relating to individual and HUF who were liable to audit U/s

44AB(a) during preceding previous year.

Since no suitable amendments have been made in chapter XVII-B & XVII-BB from

A.Y. 18-19 (effective from Financial year 2017-18) therefore all individual and HUF

whose turnover was exceeding Rs. 1 crore during Financial Year 2016-17 are

required to deduct and collect TDS/TCS under sections 194A, 194H, 194I, 194J and

206C(1)/(1C)/(1F) from financial year 2017-18 i.e. from 1-4-2017 even if they are

not required to maintain books of accounts due to applicability of Sec. 44AD (but

since their turnover is more than Rs. 1 crore but not more than Rs. 2 crore even

though they are required to deduct/collect TDS/TCS under the sections as

referred to above). However language of section 194C is quite perfect therefore

even if the turnover of the individual/HUF is exceeding Rs. 1 crore but not

exceeding Rs. 2 crore even though no TDS is required to be deducted u/s 194C,

because Section 194C says that individual and HUF who are required to get their

books of accounts audited u/s 44AB(a) are required to deduct tds. Therefore if

anyone who has opted for 44AD even if his turnover exceed Rs. 1 crore but not

required to get books audited u/s 44AB(a) so not required to deduct tds u/s 194C,

whereas other above referred sections of chapter XVII-B & XVII-BB says that,

“individual & HUF are liable to deduct/collect TDS/TCS if their turnover exceed

the limit specified u/s 44AB(a)”, so the sections other than 194C should also use

the wordings as used u/s194C.

13. 6% presumptive income in case of digital receipts :- Sec. 44AD of the act

says that minimum 8% income will be declared if gross receipt or turnover

of eligible business does not exceed Rs. 2 Crore. W.r.e.f. A. Y. 2017-18 it has

also been provided that if turnover or receipt which is received during the

previous year or before the due date U/s 139(1) by an a/c payee cheque or

draft or ECS through a bank a/c in respect of that previous year, then on

such receipt 6% or more income will be declared.

14. Section 45(5A) Joint development agreement :- if an individual or HUF transfer a capital asset being land or building or both to a person and

through a registered agreement allow such other person to develop a real estate project on it in consideration of a share being land or building or both whether with or without payment of part of the consideration in cash, then capital gain in the hands of transferor shall be chargeable to income

tax in the previous year in which the completion certificate for whole or part of the project is issued by the competent authority. The stamp duty value of his (transferor’s share - being land owner’s) share on the date of issue of the said certificate shall be deemed to be the full value of

consideration as increased by consideration received in cash, if any. Provisio to section 45(5A) states that section 45(5A) shall not be applicable if land owner transfer his share in the project on or before the date of issue

of completion certificate, and in such a case capital gain shall be deemed to

be the income of the previous year in which such transfer of share takes place, and provisions of this act, other than the provisions of this sub-section shall apply for the purpose of determination of full value of consideration. Where capital gain arises as per section 45(5A) and not as

per proviso to section 45(5A) the cost of acquisition of share of land or building received shall be the amount which is deemed as full value of

consideration in that sub-section. Definition of ‘transfer’ as per Section 2(47)(v) of the Income Tax Act says that any transaction involving the

allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882. Section 53A of The Transfer of Property Act, 1882 :-

53A. Part performance.—Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with

reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has

performed or is willing to perform his part of the contract, then, notwithstanding that where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefore by the law for the time being in force, the transferor or any person claiming under him shall be debarred from

enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: Provided that nothing in this section shall affect the rights of a transferee for

consideration who has no notice of the contract or of the part performance thereof. Section 50D of the Income tax act states that, “ Where the consideration received or

accruing as a result of the transfer of a capital asset by an assessee is not

ascertainable or cannot be determined, then, for the purpose of computing

income chargeable to tax as capital gains, the fair market value of the said asset

on the date of transfer shall be deemed to be the full value of the consideration

received or accruing as a result of such transfer.”

Therefore if the provisions of section 45(5A) are not applicable in a case then

even if the completion certificate is not obtained and as and when the possession

is handed over to the developer then the capital gain arises in the hands of

transferor (land owner), even if no consideration is received either in cash or as a

share in developed project.

15. Valuation of unquoted shares Section 50CA :- Where the consideration

received on transfer of unquoted shares is less than fair market value

determined as per prescribed income tax rule then such FMV shall be taken

to be full value of consideration for the purpose of Section 48.

16. Base year for capital gain shifted from 1981 to 2001 :- for the purpose of

Section 55(1)(b)(2) and 55(2)(b)(i) base year is shifted from 1-4-1981 to 1-4-

2001.

17. Sum of money of property received without or at less than stamp duty

value or at less than FMV :- Section 56(2)(vii) for individual & HUF & (viia)

for firm and private companies omitted from A.Y. 2018-19. New section

56(2)(x) states that if any person (individual, HUF, company, firm, trust)

receives any sum of money, without consideration the aggregate value of

which exceeds Rs. 50000/- the whole of aggregate value of such sum will be

income. If any immovable property is received without consideration stamp

duty value of which exceeds Rs. 50000/- whole of the stamp duty value of

such property will be income, if received for a consideration which is less

than stamp duty value of such property by an amount exceeding Rs.

50000/- the stamp duty value of such property as exceeds such

consideration shall be income. If date of agreement and date of transfer is

different and any amount is received through a/c payee cheque/account

payee draft/ ECS through a bank account on or before the date of

agreement then stamp duty value on the date of agreement will be taken.

If any property other than immovable property is received by any person

without consideration then aggregate fair market value of such property if

it exceeds Rs. 50000/-, and received for a consideration which is less than

aggregate FMV of the property by an amount exceeding 50000/- then the

aggregate FMV as exceeds such consideration will be treated as income.

This clause is not applicable to any sum of money or property received from

any relative, on the occasion of marriage of individual, under will or

inheritance, in contemplation of death, received by any trust or institution

referred to in U/s 10(23C)(iv)/(v)/(vi)/(via), any distribution of capital asset

on partition of HUF, etc., from an individual by a trust created or

established solely for the benefit of relative of that individual. Here

property means capital asset namely :- immovable property, shares and

securities, jewellery, archaeological collections, drawings, paintings,

sculptures, any work of art or bullion. Property word doesn’t include car,

mobile, furniture, rural agricultural land etc. which are not a capital asset

or property.

18. Disallowance U/s 40(a)(ia) also applicable to income from other sources,

Section 58(1A) :- Presently no disallowance can be made (trtust,

educational institution etc.) to any expenses incurred (without deduction of

tax at source) out of income from other sources, now such disallowance is

also applicable to income from other sources as applicable to profit & gains

of business or profession.

19. Set off of loss from house property Section 71(3A) :- if there is any loss

from house property it can be set off only upto Rs. 2 Lakh during the year

from income under any other head, and remaining loss can be carried

forward for next 8 assessment years to be set off from income from house

property.

20. Cash donation not allowed exceeding Rs. 2000/- U/s 80G(5D) :- No

donation exceeding Rs. 2000/- will be allowable U/s 80G unless such sum is

paid by any mode other than cash.

21. Power of survey U/s 133A extended to charitable institutions :- Presently

survey can be carried out at place of business or profession but not at the

place of charitable institution, now w.e.f. 1-4-2017 survey can be carried

out at place of charitable institution whether it be the principal place of

business or not. So now hospital, educational institutions etc, also covered.

22. Revised return can be filed within same assessment year :- upto A.Y.

2016-17 any person can file return of income within time allowed U/s

139(1) of the act or if not filed within time allowed U/s 139(1) or within

time allowed U/s 142(1) then return U/s 139(4) can be filed for any

previous year at any time before expiry of one year from the end of

assessment year or before completion of assessment whichever is earlier.

w.e.f. A. Y. 2017-18 (as amended by finance act 2016) if a person has not

furnished return U/s 139(1) then return U/s 139(4) can be filed by at any

time before the end of relevant assessment year or before completion of

assessment, whichever is earlier therefore returns of A.Y. 2016-17 can be

filed U/s 139(4) upto 31-3-2018 and return for A.Y. 2017-18 can be filed

upto 31-3-2018 only and returns for A.Y. 2018-19 can be filed U/s 139(4)

upto 31-3-2019 only. For and upto assessment year 2016-17 any return

filed U/s 139(1) or in pursuance of notice U/s 142(1) can be revised at any

time before expiry of one year from the end of relevant assessment year or

before completion of assessment, whichever is earlier. Any return filed U/s

139(1) or U/s 139(4) for assessment year 2017-18 can be revised at any

time before expiry of one year from the end of relevant assessment year or

before completion of assessment whichever is earlier so any return filed for

A.Y. 2017-18 U/s 139(1) or 139(4) can be revised upto 31-3-2019. And w.e.f.

A.Y. 2018-19 any return filed U/s 139(1) or 139(4) can be revised before the

end of relevant assessment year or before completion of assessment

whichever is earlier. So return filed for A.Y. 2018-19 on 25-7-2018 or 25-9-

2018 or on 25-11-2018 can be revised upto 31-3-2019 only.

23. Every person to quote Aadhaar number Section 139AA :- if any person

applies new PAN or furnishes return of income on or after 1st july, 2017,

then he will be required to quote aadhaar number. If a person has PAN

allotted on the 1-7-2017 then he will intimate aadhaar number in such form

and manner prescribed. If aadhaar number not quoted as required by ruels

then PAN allotted will become invalid.

24. Late fee U/s 234F on delayed filing of return of income :- From return to

be furnished for A. Y. 2018-19 onwards if any person required to file a

return of income U/s 139(1) fails to do so within the time prescribed then

he will be liable to late fee U/s 234F, Rs. 5000/- upto 31st December of the

assessment year, and Rs. 10000/- thereafter and if the total income does

not exceed Rs. 5 Lakh then late fee will not exceed Rs. 1000/- . such late fee

and interest will be paid alongwith tax U/s 140A. if there is any shortfall

then amount shall first be adjusted towards late fee then interest and then

towards tax due. Return U/s 143(1)(a) shall be processed for 234F also.

25. Return of income to be processed U/s 143(1)(a) :- upto assessment year

2016-17 as per section 143(1D) processing or return is not compulsory if

notice U/s 143(2) is issued. For any return furnished for A.Y. 2017-18

onwards even if notice U/s 143(2) is issued processing of return cannot be

withheld, so if there is any refund it will be granted,

26. Time limit for assessment reduced Sec. 153 :- Assessment U/s 143 or 144

for A. Y. 2018-19 can be completed upto 30-09-2020 [ within 18 months

(earlier 21 months)] from the end of assessment year in which income was

first assessable). Presently If notice U/s 148 is issued then assessment U/s

147 has to be completed within 9 months from the end of the financial year

in which the notice U/s 148 was served. Now if any notice U/s 148 is

served on or after 1-4-2019 then such assessment U/s 147 shall be

completed within 12 months from the end of the financial year in which the

notice was served.

27. TDS on rent U/s 194IB :- if an individual and HUF who is not liable to TDS

U/s 194-I pays any rent to a resident exceeding Rs. 50000/- per month will

have to deduct TDS @ 5% on aggregate rent paid during a year from the

last installment of the year.

28. TDS U/s 194IC :- notwithstanding anything contained in Section 194IA any

person responsible for paying any sum to an individual or HUF for

agreement referred to in Sec. 45(5A), by way of consideration not being in

kind, shall deduct an amount equal to 10% of TDS on any sum paid in cash

or by cheque or draft or any other mode, whichever is earlier.

29. No TDS U/s 194LA on compensation under RFCTLARR, 2013 :- Since

land acquisition under RFCTLARR is exempt under section 96 of that act

therefore any compensation under that will also not be liable to TDS.

30. NO TCS U/s 206C(1D) :- w.e.f. 1-4-2017 there will be no TCS U/s 206C(1D)

even if single cash sale exceeds Rs. 2 Lakh because penalty under section

271DA enacted for violation of 269ST. there was no due date specified to

deposit TCS collected U/s 206C(1D) under rule 37CA and still no due date of

depositing TCS U/s 206C(1F) notified under 37CA.

31. Higher TCS if no PAN 206CC :- if any person paying any sum on which TCS

is collectible under chapter XVII-BB then he will furnish his PAN to collector,

otherwise PAN at twice the applicable rate will be collected or at the 5%

whichever is higher. Small (buyers) of scrap will face difficulty who

purchases scrap from firms/companies/individual & HUF liable to audit U/s

44AB(a)/(b). small buyers who are even not liable to file income tax returns

will have to obtain PAN to purchase scrap from sellers who are liable to

collect TCS.

32. No person shall receive an amount of 2 Lakh rupees or more (Section

269ST):- (a) in aggregate from a person in a day; or

(b) in respect of a single transaction; or

(c) in respect of transactions relating to one event or occasion

from a person,

Otherwise than by an account payee cheque or an account payee bank draft or

use of ECS through a bank account:

Provided that the provisions of this section shall not apply to any receipt by

Government, any banking company, post office savings bank or cooperative bank,

transactions of nature referred to in Section 269SS, such other receipts as may be

notified.

Proviso to Section 269SS says that provisions of section 269SS shall not apply to

any loan or deposit taken or accepted from a banking company, post office

savings bank or cooperative bank, or to any loan or deposit taken or accepted by

a banking company, post office savings bank or cooperative bank. Loan or deposit

as per Section 269SS means loan or deposit of money.

269T says that no branch of a banking company or cooperative bank and no other

company or cooperative society and no firm or other person shall repay any loan

or deposit made with it otherwise than by an account payee cheque or account

payee bank draft or ECS through bank account if amount of loan or deposit is

20000/- or more. Provided that where the repayment is by a branch of a banking

company or cooperative bank, such repayment may also be made by crediting

amount to saving bank account or current account of that person. Under section

269T definition of loan or deposit means any loan or deposit of money which is

repayable after notice or repayable after a period and, in the case of a person

other than a company, includes loan or deposit of any nature. Withdrawal from

savings bank account and current account/CC loan account were already

covered under exception of Section 269T, even though to remove the ambiguity

CBDT issued a press release and notification to exempt withdrawal from savings

and current account from banks.

34. PENALTY u/s 271DA :- Section 269ST needs clarification on the word,

“a person” :- Section 269ST says that ‘No person shall receive an

amount of two lakh rupees or more-

(a) in aggregate from a person in a day; or (b) in respect of a single transaction; or (c) in respect of transactions relating to one event or occasion from a person, otherwise than by an a/c payye cheque or an a/c payye bank draft or use of ECS through a bank account.

Section 269ST(a) says that, “in aggregate from a person in a day”, here the word used, “a person” or the word, “a day”, may create litigation in future. Because there so many judgements for the purpose of Section 54 of the Income Tax Act which specified that the word, “a house” is plural so, “a” means “any” and “any” means “many”. Because there were many judgements viz. CIT v. Ananda Basappa (2009) 309 ITR 329/ 180 taxmann 4 by the Honourable Karnataka High Court and one more judgement by Karnataka High Court in CIT V. Smt. K. G. Rukminiamma (2011) 196 taxmann 87, (2010) 8 taxmann.com 121 where, “a” word was used as plural and not singular. So the word, “a person” used in Section 269ST may in future be interpreted to include more than one person. This will result in that any person cannot accept Rs. 2 Lakh or more from one or more person in aggregate in a day. Because the revenue may put its view that in clause (b) of Section 269ST the word, “a single transaction”, has been used and in clause (c) of Section 269ST the word, “one person” has been used so the revenue may say that intentionally the word, “ a person” has been used in place of, “one person” whereas wherever need in other two clauses of Section 269ST the word, “single”, and the word, “one person” has been used. So if a person receives Rs 1 Lakh each from 5 persons in a day then he

will be hit by violation of Section 269ST clause (a) which says the word, “a person”, which means no one can receive more than Rs. 199999/- in a day in aggregate from one or more person because, “a person” is plural not singular. So it must also be clarified in the context of various High Court Judgements. As per section 271DA of Income Tax Act, if a person receives any sum in contravention any of the provisions of section 269ST, he shall be liable to pay penalty of amount sum equal to the amount of such receipt. Further the section, also provides a proviso, which states that, penalty shall not be imposable if the person proves that, there were good and sufficient reasons for contravention. 35. Taxation u/s 115BBE :- Section 115BBE was introduced w.e.f. A.Y. 2013-

14 with a view to prevent malpractice of set off of any expenditure or allowance or deductions or taking benefit of slab rate out of undisclosed income arising due to additions u/s 68/69/69A/69B/69C/69D. There was no restrictions on set off losses out of income from undisclosed sources u/s 68/69/69A/69B/69C/69D upto A.Y. 2016-17, now w.e.f. A.Y. 2017-18 set off of any loss is also not permissible out of such income. Section 115BBE(2) specifies that if an assessee himself includes income referred to in section 68/69/69A/B/C/D in the return of income then no deduction will be allowed for any expenditure/allowance/set of of any loss while computing income u/s 115BBE(1)(A), BUT if the income referred to in section 68/69/69A/B/C/D is determined by the assessing officer u/s 115BBE(1)(b) then out of such income any expenditure/allowance/set of any loss will be available as clearly evident from section 115BBE(2).

36. If any addition is made by the AO u/s 68 to 69D and imposed tax u/s 115BBE then no penalty will be imposed u/s 270A penalty will be imposed u/s 271AAC, and if the assessee himself declared income and pay the tax u/s 115BBE then no penalty u/s 270A or 271AAC.

37. Upto A.Y. 2016-17 there was special rate of tax on income assessed u/s 68/69/69A/69B/69C/69D @ 30% of such income. But w.e.f. A.Y. 2017-18 rate of tax on income assessed u/s 115BBE shall be 60% of such income. A surcharge of 25% on such tax (i.e. 15% tax on such income) shall be increased on tax payable.

38. High Court of Kerala in the case of Mada Thil Zainuddin V. CIT (2013) 86 CCH 0345 (KerHC) held and confirmed the view of ITAT that the stand of the Assessee was different from time to time, so also opined Assessee was not even able to establish that the source of income was from gold business. If the first stand of the Assessee that funds were transferred from Mumbai to Kerala through bank accounts was to be believed, said amount cannot be his amount. But it was also surprising to see that he admitted income of Rs.50 Lakhs in his bulk return as peak credit. There were no details with regard to the nature of business. the Tribunal was justified in not placing much reliance on the cash flow statement furnished by the Assessee, as it was a self serving one without supported by any regular bank account and documents. In the absence of documents supporting such contention, the Tribunal was justified in confirming the opinion of the appellate authority that all the amounts shown in the bank accounts was entirely different from the amount of cash Rs.65 Lakhs found in the hands of the Assessee in December, 2012, because if he was really dealing with gold business, it was hard to believe that he was keeping Rs.65 Lakhs idle with him for a period of more than nine months, that too, to start business for his brother in gold. Income of Assessee shall be assessed as undisclosed income when amount reflected in bank accounts pertaining to transactions has no connectivity with cash shown in hands of Assessee.

39. In the case of CIT v. Surinder Pal Anand, High Court of P & H (2011) 242 CTR 0061 : (2010) 48 DTR 0135 : (2010) 192 TAXMAN 0264, held that Assessment being made under s. 44AD, the assessee was not under obligation to explain individual entry of cash deposit in the bank unless such entry had no nexus with the gross receipts and therefore no addition under s. 68 was called for.

40. In the case of CIT v. Ranjit Kumar Sethia, High Court of Rajasthan (2005) 73 CCH 0799 RajHC, (2005) 198 CTR 0550. Held that The peak credit of the bank account cannot be held to be undisclosed income of the assessee. Obviously, the banking transaction in regular course of business cannot be considered as cash credit so as to invoke s. 68 of the Act and so far as whether the finding that bank transaction represents undisclosed income of the assessee, it is open to be inquired as has rightly been done by the Tribunal, therefore, this does not give rise to any substantial question of law.

41. In the case of CIT v. Jayant Kumar Motichand Doshi, Gujarat High Court held that (2013) 84 CCH 0344 GujHC, (2013) 217 TAXMAN 0247 (Gujarat), Order of Tribunal in assessee’s own case came to be carried in appeal by Revenue in Tax Appeal No.612 of 2009 and appeal came to be dismissed by Order of this Court holding that Tribunal had recorded that AO & CIT(A) had mainly disallowed interest on ground that income of assessee was to be taxed as income from undisclosed sources and not as business income. Tribunal having already held that income of assessee was to be taxed as business income and not as income from undisclosed sources, deleted addition in relation to interest expenditure. However, before the Tribunal, AO had pointed out that interest had not been paid and as such was not allowable u/s. 43B. Tribunal, therefore, confirmed addition to some extent, since assessee had not paid amount and deleted addition to some extent. Conclusions arrived at by Tribunal do not give rise to question of law as proposed or otherwise and dismissed appeal of the revenue. Following order of the Court in Appeal No. 612 of 2009, appeal of revenue is dismissed. Labour income received by assessee from commercial exploitation of machinery was treated as business income in earlier assessment years, same was to be followed in current assessment year.

42. ITAT Hyderabad ‘A’ Bench in the case of D. RAJESHKUMAR & CO. vs. INCOME TAX OFFICER (1987) 06 CCH 0165 HydTrib. Unexplained money—Represented sales not recorded in books of assessee-firm—Partners admitted that the amount has come out from disclosed business—Once an unexplained amount is found to be a receipt from a known source the previous year relevant to that known source must be adopted—This sum is not an income from a new and independent source—Amount was recovered on 14th Dec., 1982—Previous year for assessing this amount is the previous year of business i.e., Diwali 1982 to Diwali, 1983—Sec. 68 has not application as it is no a case of cash credit. Once it is found to be a receipt from a known source the previous year relevant to that known source must be adopted. In this connection we will refer to the decision of the Supreme Court in the case of Chidambaram Mulraj & Co. (P) Ltd. vs. CIT 1976 CTR (SC) 61 (1976) 102 ITR 7 (SC). In that case the assessee was a recipient of compensation for termination of managing agency. Under s. 10(5A) of the Indian IT Act, 1922 it was treated as taxable and the submission of the assessee in

that case was that s. 10(5A) deems this as an income to be treated as receipt from a new source and that being so the relevant previous year would be different from the previous year of managing agency business. This contention was rejected by the Supreme Court. They pointed out that the amount received was a payment for termination of managing agency and as such the receipt is obviously related to that business. It is of course true that the amount was not earned in carrying on the business of managing agency but it is clear that the source of receipt was managing agency itself. It cannot therefore be said that the receipt was income from a new and independent source. We will emphasise the last finding that it was not an income from a new and independent source. ITAT Cochin Bench in the case of ITO v. Abraham Varghese Charuvil in ITA NO. 30/Coch/2017 on 24-4-2017 held that any surplus money arising to an assessee on sale of agricultural land would apartake character of agricultural income. The consideration stated in the registered sale deed was agricultural income. Likewise, “the on money” also should be treated as agricultural income, therefore the appeal filed by the revenue was dismissed.

43. ITAT DELHI BENCH in the case of ITO v. Integra Products Pvt. Ltd. (2012) 31 CCH 0416 held that Commission income of Rs. 89,93,9900/- shown by assessee in its profit and loss account was not assessable undisclosed income u/s 68 or as income from other sources but is assessable as business income where assessee has proved and established nature of services rendered by it on account of which commission was received.

44. ITAT AGRA BENCH in the case of ITO v. Sanjeev Kumar Gupta (2012) 34 CCH 0052 AgraTrib held that CIT (A) held that 5 percent profit on the whole turnover which comes to Rs.1,90,544/- was reasonable and justifiable. Since the assessee did not maintain regular books of account, therefore, business income of the assessee was accordingly assessed at Rs.1,90,545/- in place of what declared by the assessee in the ITR. In view of this it was found that the CIT (A) had rightly held that gross amount of the sale cannot be added. Only relevant profit on such sale was required to be taxed. The A.O. did not bring on record that how the gross amount of sale is to be added. Thus the order of CIT(A) was held to be reasonable confirmed.

Regarding the sales credited in assessee’s bank account the CIT (A) held that the A.O. had failed to bring any material on record to prove that the assessee had undisclosed bank accounts or that the alleged payments received in respect of these amounts were undisclosed income of the assessee. On consideration of the facts of the case, it was found that some cheques and drafts have been received by the assessee from two parties. When amounts were received from two parties, those should be on credit side and not on asset side. Therefore, the case of the A.O. was not correct that these were unexplained investments. Finding of the A.O. was on presumption that there were undisclosed bank accounts. The assessee received the cheques and drafts from parties, such transaction cannot be held to be unexplained investments. At the most this may be cash credits subject to section 68 as the assessee received cheques and drafts from the parties. However, the CIT(A) after appreciating the facts of the case found that at the most it is unaccounted sales. The CIT(A) had rejected the assessee's contention that the said sale has been included in the total turnover. When there is a sale, the addition to the extent of profit is warranted. Therefore, the CIT(A) had rightly sustained the addition to the extent of profit. It was, therefore, held that there was no infirmity in the order of CIT(A). Order of the CIT(A) was confirmed in favour of the assessee.

45. Passbook is not books :- ITAT Pune bench in the case of Vinod Kewalchand Bafna V. ITO ITA/935/PUNE/2014 it was held that These cash deposits are not routed through the regular cash book maintained by the assessee for business purpose as the said income was agricultural income. On merits, we find that penalty has been levied in respect of unexplained deposits to the tune of `4,05,000/- in ICICI Bank account. The addition has been made u/s. 68 of the Act. The additions u/s. 68 can be made only where cash credit appears in books of account of the assessee. The Bank passbook is not part of books of account of the assessee. Therefore, the additions made u/s. 68 on the basis of entries in the bank passbooks are not sustainable. Our view is further fortified by the decision rendered in the case of Mayawati Vs. DCIT reported as 113 TTJ 178 (Del.) and the decision of Hon'ble Bombay High Court in the case of Commissioner of Income Tax Vs. Bhaichand N. Gandhi (supra). The Hon'ble Jurisdictional High Court has upheld the order of Tribunal,

where the Tribunal deleted the addition u/s. 68 holding that cash credit for the previous year shown in the assessee's bank passbook issued to him by the bank but not shown in the cash book maintained by him for the year, does not fall within the ambit of section 68 of the Act. ITAT MUMBAI BENCH ‘B’ in the case of Mehul V. Vyas v. Income Tax Officer, Mumbai ((2017) 80 taxmann.com 311 (Mumbai Trib.) held that where assessee was not maintaining any account books, bank statement could not be construed to be a books of account maintained by her, merely on the basis of information that assessee made a ‘cash deposit’ in her saving bank account, no addition could be made as unexplained cash credit.

46. High Court of Delhi in the case of CIT v. Goel Jewellers (2013) 258 CTR 0254 : (2012) 74 DTR 0345 Any amount in the profit/income cannot be included without appropriate and required increase in the turnover when the formula mentioned in s. 80HHC(3) is applied. In National Legguard Works versus Commission of Income Tax (Appeals), (2007) 288 ITR 18 (P&H), the assessee surrendered of Rs.12 lacs as business income at the time of survey. The contention of the assessee was that said surrender should be treated as income from exports as the assessee was an export oriented unit. The surrendered amount was treated and reflected in the profit and loss account as profits derived from exports. The assessee was unsuccessful before the tribunal and the High Court affirmed the decision observing that deduction under Section 80HHC could be claimed only on showing facts which make an assessee eligible for the deduction. There was no presumption that the surrender made was on account of unexplained stocks representing the export income. It was further observed that burden to prove to said facts was on the assessee and not on the Revenue. We fail to understand how this decision helps and supports the case and the stand of the assessee. The said decision supports the version and the stand of the Revenue. Similarly, in Commissioner of Income Tax versus Bawa Skin Company (2007) 294 ITR 537 (P&H), the Assessing Officer rejected the books of accounts under Section 145 of the Act and had made an addition of Rs. 2,50,000/- in the trading account. In the first appeal, this amount of Rs. 2,50,000/- was directed to be included for computing deduction under Section 80HHC. The tribunal affirmed the said decision. In the said case, the assessee had both domestic as well as export turnover. The addition

made was not to the turnover but by applying a higher GP rate. The factual matrix was different. The Punjab and Haryana High Court again in Sarla Handicraft Private Limited versus Additional Commissioner of Income Tax, (2008) 296 ITR 94 examined a case in which surrender of Rs.13 lacs and Rs. 6 lacs was made at the time of survey on account of discrepancy in stock and investment in construction of the building, respectively. The surrender was added to the business income and the assessee had claimed benefit under Section 80HHC. Before the tribunal it was pleaded that the assessee was 100% export oriented unit and did not have any other source of income. However, the said contention was not accepted. The High Court affirmed the said decision holding that there cannot be any presumption that the surrender made represents income from exports. The assessee therefore cannot claim that the surrendered income should be treated as income from business for purpose of calculating deduction under Section 80HHC. In view of the aforesaid position, High court held that we have no hesitation in answering the aforesaid question of law in ITA No. 16/2004 in negative, i.e., in favour of the Revenue and against therespondent assessee. In view of our findings recorded above, the appeal Nos. 24/2006 and 1070/2005 are rendered infructuous and need not be answered. Substantial question of law framed therein are not answered.

47. High COURT of Rajasthan in the case of CIT v. Ram Gopal Manda (2013)

359 ITR 0389 (Raj) Whether the surrendered amount is an income from

business or from other sources was essentially a question of fact. In the

present case, the Commissioner of Income Tax (Appeals) as well as

Income Tax Appellate Tribunal, both have recorded a concurrent finding

of fact based on cogent material available before them, that

surrendered amount was an income of the assessee from business and

not from other sources. Revenue was unable to point out any perversity

in the said finding recorded by Appellate Authority as well as Appellate

Tribunal. There is no dispute between the parties on the issue that in

case, the surrendered amount is treated as an income from business,

then assessee is entitled to get set off of the amount of Rs.54,10,054/- .

In view of the above it can be concluded that there have been so many

important amendments effective from A.Y. 2017-18 & 2018-19 all these have far

reaching impact on most of the class of taxpayers, therefore every provision has

to be analysed and implemented carefully.