Kalpesh Classes

Accelerated assessment

Question 1 (Accelerated assessment) (ID – 01) (Revision ​​ / Home work)

An assessee has applied for tax clearance certificate. Can the AO. make an assessment U/s.​​ 174?

Question 2 (Accelerated assessment) (Revision ​​ / Home work)

In​​ pursuance of an agreement entered into with a non-resident firm by the company X, the firm supplied drawings and designs, etc. One Mr. Davis, one of the partners of the firm, also visited India to supervise the erection of the plant and the firm was paid some remuneration as per the agreement. The presence of the partner of the non-resident firm in India was brought to the notice of the Income-tax Officer, who recorded his statement also. Company X also requested the officer to make a note of 174 and make the assessment on Mr Davis before he leaves India. The Income-tax Officer, however, issued a notice to the company to show cause why it should not be treated as agent of the non-resident firm. Officer also treated the company as agent of non-resident. Whether action of the officer is justified ?

Question 3 (Accelerated assessment) (ID – 11)

Assessee company X is selling its factory building plant and machinery to Company Y on 1-6-PY. Net income of the company as on the date is 30 crore. Assessing officer is​​ invoking the provisions of section 175 and making the assessment of the company immediately by issuing a notice. Assessing officer has worked out the tax liability as 30 crore * 30 % + SC and CESS (tax rate for AY 2012-13). However CIT is of the view that​​ tax liability should be worked as ​​ 30 crore * 30 % + SC and CESS ​​ (tax rate for AY 2011-12) since the previous year is same as assessment year. You are required to offer your comments on the issue.

legal heirs and executors

Question 1 (legal heirs and executors) (ID – 02) (Revision ​​ / Home work)

A notice of demand has been sent to the deceased assessee during his lifetime. The assessing officer wants to recover the dues. Is there any necessity of sending further notice?​​ 

Question 2 (legal heirs and executors) (ID – 03) (Revision ​​ / Home work)

The assessee died leaving behind more than one legal representative. The assessing officer
served notice U/s 148 on one of them. How far the proceedings are valid?

Question 3 (legal heirs and executors) (ID – 04)​​ (Revision ​​ / Home work)

While making an assessment on executor, as AOP U/s 168(1) (b) the assessing officer noticed that there were some brought forward losses. Can these be allowed to be set off ?​​ 

Question 4 (legal heirs and executors) (ID – 05)​​ (Revision ​​ / Home work)

One Mr. B having extensive business interests did not file returns. He died leaving behind ten legal representatives. J, who was one of legal representatives, filed returns for the three assessment years disclosing the income received by B. The returns were signed by J alone and not by the other legal representatives. The Assessing Officer issued notices under sections 142(1)​​ and 143(2) to him to appear and produce documents, accounts and other material. He complied with the same without raising any objection that in the said assessment proceedings notice must be given to the other legal representatives also. However, assessment orders were made mentioning the names of all ten legal representatives against the column' Name of the assessee'. On appeal, J contended for the first time that inasmuch as all the legal representatives of B were not given notice of the assessment proceedings, the assessments made were illegal and void. The CIT rejected the contention and held that completing the assessment without serving notices upon all the legal representatives was only an irregularity in completing the assessment. Accordingly, he set aside the assessment orders and remitted the matter to the Assessing Officer for making fresh assessments after notice to all the legal representatives. The Tribunal affirmed the view of the CIT. On reference, the High Court held that in the absence of service of notice on all the legal - representatives, the assessment made upon them was a nullity and not a mere irregularity. It accordingly, set aside the direction of the CIT as affirmed by the Tribunal. The revenue wants to challenge it Do you think it would be successful ?​​ ​​ 

Question 5 (legal heirs and executors) (ID – 06)

On the death of Mr Kalpesh Sanghavi​​ who had not left any Will, the properties were managed by his mother. The widow of the deceased did not receive any share from the estate till year end. Her mother-in- law filed a consolidated return showing income of 6 lakhs and the ITO made assessment on​​ the widow for her 50 % ​​ share in income and assets. Is the action of the officer justified ?​​ 

You are also requested to advise assessing officer on making the assessment of the said income in correct manner.

Succession and discontinuation of Business

Question 1 (Succession of Business) (ID – 07) (Revision ​​ / Home work)

In the following cases, mention whether there is a ‘succession’ for the purpose of section 170 of Income Tax Act.

• B and Co. owned rolling mills and other manufacturing units. It transferred the rolling milts to a newly formed company.

• A HUF carried on a money lending business. It was partitioned and the erstwhile co-parceners carried on the same business in partnership.

• A five member HUF carried on a money lending business. The HUF was​​ partitioned. One of the members was assigned a one fifth share of the assets of the business and separated. The other four carried on the business at old premises in the manner in which it was carried on before partition.

Question 2 (Discontinuation of business) (ID – 08) (Revision ​​ / Home work)

A business was discontinued during the previous year. Assessing officer wants to make cumulative assessment i.e. assessment of the earlier previous year in which business existed for the whole year and the part of​​ the next previous year during which business was discontinued is such cumulative assessment valid?

Question 3 (Discontinuation of business) (ID – 09) (Revision ​​ / Home work)

An HUF was carrying on a business. It was partitioned & the business was split​​ Two of the erstwhile members continued the business activities as their own, taking over the premises of the business. Is there a discontinuation within the meaning of sec. 176 ?

Companies in liquidation

Question 1 (Companies in liquidation) (ID – 10)

Imperial Chit Funds (P) Ltd. was under liquidation. On completion of assessment the official liquidator informed the I.T.O. that tax dues determined constituted debt provable in the winding up proceedings. I.T.O. however, issued a certificate to the T.R.O.​​ and demanded the tax dues immediately and issued a demand notice. Can the income tax department be treated as a secured creditor' and the amount set aside by official liquidator U/s 178(3)(b) fall outside the area of winding up proceedings? Can the A.O. be entitled to payment of tax demand otherwise than as U/s 530 of Companies Act ?​​