Income Tax

Taxes can be defined as an obligatory contribution to the Government by individuals or corporations who fall within the tax bracket. Taxes are levied on citizens to generate revenue for commercial ventures, improve the country’s economy, and raise the national standard of living. Litigations on the other hand can be defined as ‘the process of taking legal action in a court of law’. Corporate litigation law deals with disputes that arise from non-criminal business and commercial activities. Thus, tax litigation consists of legal actions taken around disputes arising from tax non-payment or delayed payment by the taxpayers or unwanted/unauthorised tax collection by the authorities etc. What is Income Tax Litigation? Income tax litigation refers to legal disputes and conflicts related to the interpretation, application, and compliance with income tax laws and regulations. Income tax is a direct tax levied on the income of individuals, businesses, and other entities by the government. When disputes arise between taxpayers and tax authorities regarding the calculation, reporting, or payment of income tax, it can lead to income tax litigation. Some Key Aspects Taxpayer Challenges: Individuals, businesses, and other entities may challenge decisions made by tax authorities related to their income tax liability. Disputes can arise from issues such as the classification of income, allowable deductions, exemptions, tax credits, and other aspects of income tax calculations. Assessments:  Tax authorities often select few taxpayers & assess their income to verify the accuracy and completeness of taxpayers’ income tax returns. If discrepancies are identified, tax authorities may issue assessments, and taxpayers have the right to challenge these assessments if they believe them to be incorrect. Appeals Process:  Taxpayers have the option to appeal decisions made by tax authorities. The appeals process typically involves presenting the case before appellate authorities or tax tribunals. These bodies have the authority to review the facts of the case, interpret tax laws, and make decisions on the disputed matters. Change in Legislation or Policy:  Changes in income tax laws or policies can impact ongoing litigation. Governments may amend tax laws, and these changes can influence the interpretation and application of income tax provisions, potentially affecting the resolution of disputes. Income tax litigation is a complex area of law that requires a thorough understanding of tax regulations and legal processes. Taxpayers often seek the assistance of tax professionals, including tax attorneys and accountants, to navigate income tax laws, respond to tax audits, and represent them in legal proceedings if disputes arise. What are the consequences of Income Tax Litigation Income tax litigation can have several consequences for individuals, businesses, and other entities involved. The specific outcomes can vary depending on the nature of the dispute, the legal processes involved, and the decisions made by the relevant authorities. Here are some common consequences of income tax litigation: Financial Impact: One of the most significant consequences is the financial impact on the taxpayer. If the outcome of the litigation is unfavorable, the taxpayer may be required to pay additional taxes, penalties, and interest. This can result in a substantial financial burden. Mental Stress: Income tax litigation can indeed be a source of significant mental stress for individuals and businesses. Various factors contribute to this stress, and it’s essential to address both the emotional and practical aspects of dealing with tax-related legal challenges. Legal Costs: Engaging in income tax litigation incurs legal fees and associated costs. Regardless of the final outcome, taxpayers may need to bear the expenses related to hiring legal representation, court fees, and other litigation-related costs. Operational Distractions: Dealing with income tax litigation can be time-consuming and may divert resources and attention from regular business or personal activities. The management and staff may need to dedicate significant time and effort to address the legal proceedings. Reputation Impact: Public knowledge of income tax litigation can impact the reputation of individuals or businesses. Stakeholders, including clients, customers, and investors, may view ongoing legal disputes unfavorably, potentially affecting trust and relationships. Compliance Scrutiny: Ongoing income tax litigation may lead to increased scrutiny from tax authorities even after the resolution of the dispute. Taxpayers may face heightened attention in terms of compliance monitoring, audits, and reviews. It’s essential for individuals and businesses to proactively manage their tax affairs, stay informed about tax laws, and seek professional advice to minimize the likelihood of income tax disputes. In the event of a dispute, engaging qualified tax professionals, including tax attorneys, can help navigate the complexities of tax laws and legal processes. Benefits OF Income Tax Litigations Clarity on Tax Laws: Income tax litigations can lead to clarifications and interpretations of tax laws. Court decisions provide guidance on the proper application of tax laws, helping taxpayers and tax authorities better understand their obligations. Precedent Setting: Court rulings in income tax cases can set legal precedents that influence the resolution of similar cases in the future. This contributes to the development of a consistent and predictable legal framework. Fairness and Equity: Litigations provide a platform to address issues of fairness and equity in the tax system. If taxpayers believe that a particular tax provision is unjust or discriminatory, the legal process allows them to challenge it. Protection of Taxpayer Rights: Income tax litigations ensure that taxpayers have the opportunity to defend their rights. This includes the right to due process, the right to appeal adverse decisions, and the right to be heard before an impartial tribunal. Correction of Errors: If tax authorities make errors in assessments or interpretations, litigation can be a means to correct these mistakes. The legal process allows for a thorough examination of the facts and application of the law. Encourages Compliance: The existence of a legal recourse through litigation may encourage taxpayers to comply with tax laws, as they know they have the ability to challenge unfair or incorrect assessments. Incentive for Legislation Improvement: When recurring issues arise in income tax litigations, it may prompt legislators to review and revise tax laws to address ambiguities or shortcomings. This can lead to more effective and clearer tax legislation. Alternative Dispute Resolution: Income tax litigations can also lead

Every assessee, who earns income beyond the basic exemption limit in a Financial Year (FY), must file a statement containing details of his income, deductions, and other related information. This is called the Income Tax Return (ITR). Once you as a taxpayer file the income returns, the Income Tax Department will process it. There are occasions where, based on set parameters by the Central Board of Direct Taxes (CBDT), the return of an assessee gets picked for an assessment. Income tax assessment is the process of verification of the information a taxpayer has provided in the returns submitted by a taxpayer to the income tax department. An assessment is carried out by the Income Tax department after the filing of an income tax return by an assessee. The purpose of conducting the assessment is for the Income Tax department to verify the return filed for correctness with respect to the amount of taxable income declared and tax paid. There are various types of income tax assessment. In this article, we briefly discuss the concept of a scrutiny assessment under Section 143(3). You can learn about income tax notice under Section 143(1) here. Scrutiny Assessment Scrutiny assessment under Section 143(3) is a detailed assessment of an income tax return filed by a taxpayer. In a scrutiny assessment, a tax officer would perform various tests and processes to confirm the correctness and genuineness of various claims, deductions, and so on, made by the taxpayer in the income tax return. The objective of a scrutiny assessment is to ensure that the taxpayer has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner. Scrutiny assessment under Section 143(2) would be applicable for the following scenarios: An income tax return has been filed under Section 139 or in response to an income tax notice under Section 142(1). The Assessing Officer or Income Tax Authority deems it necessary or expedient to ensure that the taxpayer has not understated the income or has not computed excessive loss or has not under-paid income tax in any manner. After submitting an income tax return, an Income Tax Officer may be assigned by the Income Tax Department to assess the tax filing. The taxpayer is informed of this through an Income Tax Notice under Section 143(2). The officer may request information, documents, and books of accounts for scrutiny assessment, which will be thoroughly examined. The officer then calculates the income tax payable by the taxpayer, and if there is a mismatch between the income and the tax due, the taxpayer can either pay the extra amount or receive a refund. If the taxpayer is not satisfied with the assessment, they can apply for recitation under Section 154 or submit a revision application under Section 263 or Section 264. If the Scrutiny Assessment order is still considered invalid, the taxpayer can appeal to higher authorities such as CIT (A), ITAT, High Court, and The Supreme Court, in that order. Scrutiny Assessment u/s 143(3)? A scrutiny assessment may be initiated under Section 143(3) in the following scenarios: When a taxpayer has filed a Section 139 income tax return or responded to a Section 142 income tax notice. When the Assessing Officer or Income Tax Authority deems it necessary to conduct an audit to ensure the accurate reporting of income and taxes paid. Income Tax Notice u/s 143(2) To initiate a scrutiny assessment, the concerned Income Tax officer must first issue an income tax notice under Section 143(2). In the income tax notice under Section 143(2), the Assessing Officer would request the taxpayer to appear in person or complete the process through e-Assessment and/or produce information and documents which the tax officer ascertains to be important for determining the taxable income and tax payable. An income tax notice under Section 143(2) should be served within a period of six months from the end of the financial year in which the return is filed. For example if an income tax return is filed on 2nd November 2018, notice under Section 143(2) can be served on the assessee up to September 30, 2019. If the notice is issued on 29th September 2019 and is received by the assessee after 30th September 2019, it is not a valid notice. The taxpayer or his/her authorised representative can appear before the Assessing Officer and will place his arguments, supporting evidence, and so on, on various matters/issues as required by the Assessing Officer. Time Limit for Scrutiny Assessment As per Section 153, the time limit for making scrutiny assessment under section 143(3) is: Within 21 months from the end of the assessment year in which the income was first assessable. [For the assessment year 2017-18 or before] 18 months from the end of the assessment year in which the income was first assessable. [For the assessment year 2018-19] 12 months from the end of the assessment year in which the income was first assessable [For the Assessment year 2019-20 and onwards] Scrutiny Assessment Hearing While conducting a scrutiny assessment, the concerned tax officer will provide ample opportunity for the assessment to be heard and to produce documents or evidence to support the information filed in a tax return. In case of failure to produce information or non-cooperation by the taxpayer, the tax officer is empowered to complete the best judgement assessment under section 144. In case of co-operation of the taxpayer and submission of information, after hearing/verifying such evidence and taking into account all the information produced by the taxpayer, the Assessing Officer would pass an order. On the passing of the order by the Assessing Officer, the assessee has one of the choices below: To agree with the order passed by the Income Tax authority and pay any tax demand or receive a refund or accept the loss determined Make an application for a refund under Section 154, if any clerical error persists Can make a revision application to Commissioner of Income Tax under section 263/264 Appeal the order Actions After Scrutiny Assessment After the scrutiny assessment, the

Filing income tax returns (ITR) is an essential responsibility for salaried individuals in India. The ITR-1 form is specifically designed for individuals with income from salary, pension, or interest. This article aims to provide a step-by-step guide to help salaried individuals file their ITR-1 accurately and efficiently. Who is eligible to file ITR-1 for FY2023-24 (AY2024-25)? ITR-1 is a simplified one-page form for individuals receiving income of up to Rs 50 lakh from the following sources : Income from salary/pension Income from one house property (excluding cases where loss is brought forward from previous years) Income from other sources (excluding winning from the lottery and income from race horses) In the case of clubbed Income Tax Returns, where a spouse or a minor is included, this can be done only if their income is limited to the above specifications. Aadhaar Card is mandatory for income tax return filing: The income tax department has made it mandatory for all taxpayers to link their Aadhaar card with their PAN on the income tax department website.  Who cannot file ITR-1 for AY 2024-25? An individual with an income above Rs 50 lakh. An individual who is either a director of a company or has held any unlisted equity shares at any time during the financial year. Residents not ordinarily resident (RNOR) and non-residents. Individuals  who have earned income through the following means: More than one house property Lottery, racehorses, legal gambling, etc. Taxable capital gains (short-term and long-term) Agricultural income exceeding Rs 5,000 Business and profession A resident that has assets (including financial interest in any entity) outside India or is a signing authority in any account located outside India Individuals claiming relief of foreign tax paid or double taxation relief under section 90/90A/91 Deferred income tax on ESOP received from an eligible start-up How to file ITR-1 (SAHAJ) Online on Income Tax Portal Step 1 – Visit the Income Tax e-filing portal’  Step 2 – Register or Log in to your account  Step 4 – Select e-file > Income Tax Returns > File Income Tax Return  Step 5 – Select the Assessment Year as 2023-24 and the mode of filing as ‘Online’  Step 6 – Click on ‘Start New Filing’   Step 7 – Select the applicable status  Step 8 – Select ITR-1 as form type   Step 9 – Click on ‘Let’s Get Started’  Step 10 – Select the appropriate reason and ‘continue’  Step 11 – Now you will have to fill up 5 sections here Personal Information – This section requires you to provide basic details such as your full name, PAN and Aadhar number, contact information, and bank account details. Gross Total Income – In this section, you need to enter and verify income from all the sources like salary pension, house property, and other sources (such as interest income, family pension, etc.). Additionally, you need to provide details of any exempt income, if any Total Deductions – The Income Tax Act 1961 allows for various deductions under different sections, which you should claim accordingly. Commonly known sections for deductions include 80C, 80D, 80TTA, 80TTB, and others. Tax Paid – This section displays the tax payments you have made from all sources, including TDS, TCS, Advance Tax, and Self-Assessment Tax. Total Tax Liability – In this section, you will find the computed tax liability based on the information provided in the previous sections. To clarify, the tax payable on the Total Income is calculated as (Income – deductions claimed – Tax paid till date). If the resulting amount is negative, it can be claimed as a refund. If it is positive, it needs to be paid as tax.  Step 9 – Double-check to ensure the summary of tax computation is correct  Step 10 – Rectify the errors, if any and complete the validation  Step 11 – E-verify the ITR What are the documents needed to file ITR? Documents which you need to file the ITR-1 form are: Form 16: Issued by all your employers for the given financial year Form 26AS: Remember to verify that the TDS mentioned in Form 16 matches the TDS in Part A of your Form 26AS Receipts: If you have not been able to submit proof of certain exemptions or deductions (such as HRA allowance or Section 80C or 80D deductions) to your employer on time, keep these receipts handy to claim them on your income tax return directly. PAN card Bank investment certificates: Interest from bank account details – bank passbook or FD certificate Significant changes made in the ITR-1 Form for AY 2024-25 Some changes have been incorporated into the ITR-1 form: Under the schedule ‘Salary’, you can disclose income from retirement benefit accounts maintained in the notified country under Section 89A, and claim relief for the same. Pensioners must now select the ‘Nature of employment’ (Central government, state government, public sector unit and others). You can now claim relief for the taxes paid on the income from the retirement benefit account m Penalty for Late Filing Income Tax Return Taxpayers who do not file their income tax return on time are subject to penalty and charged an interest on the late payment of income tax. Also, the penalty for late filing income tax return on time has been increased recently. The penalty for late filing income tax return is now as follows: Late Filing between 1st August and 31st December – Rs.5000 Late Filing After 31st December – Rs.10,000 Penalty if taxable income is less than Rs.5 lakhs – Rs.1000 FAQs Q: Can I file ITR-1 with exempt agricultural income? Yes, you can file ITR-1 if the agricultural income does not exceed Rs 5,000. If the agricultural income exceeds Rs 5,000, you should file ITR 2. Q: How to report bank accounts in ITR-1? You must provide details of all the savings and current accounts held at any time during the previous year. However, it is not mandatory to provide details of dormant accounts that haven’t been operational for more than three years. The account number should be as per the Core Banking Solution (CBS) system of the bank. It is to be provided in Part

Taxes collected from citizens are the foundation of the Indian economy. NRI taxation under the Indian Income Tax Act, 1961 applies to those earning income outside the home country. The income tax rules and perks allowed to them are drastically different from those applicable to resident Indians. The income of a non-resident Indian (NRI) earned in India is taxable. Whether a person will be classified as NRI or not will depend on the number of days he or she has stayed in India and the quantum of income earned.​Tax on an individual’s income depends on the source of such income and the residential status in India. The residential status of an Indian citizen needs to be determined individually for every financial year which may vary from year to year. Who is a Non-Resident? “Non-Resident” is a person who has not been residing in India for a specified period of time. The Residential Status of an individual in a given year determines whether the individual is a Resident or Non-Resident for the year. Non-Resident Indian (NRI)” is an individual who is a citizen of India or a person of Indian origin and who is not a resident of India. In India, Non-Resident Indians are mainly governed by two Acts- The income Tax Act, 1961 & Foreign Exchange and Management Act, 1999(FEMA). The term “Non-Resident Indian” is defined differently under both acts. However, one needs to understand that for the purposes of Income-tax, the FEMA Act holds no relevance, and you just need to conform to the provisions of the Income Tax Act 1961. Person of Indian origin (PIO) – A person is said to be of Indian origin if he or any of his parents or any of his grandparents were born in undivided India. Types of Non-Resident Under the Income Tax Act 1961, a non-resident is broadly classified under the following three heads: Non-Resident Indian/Person of Indian Origin Foreign Company Other Non-Resident Person How do I determine my residential status? You are considered an Indian resident for a financial year if you satisfy any of the conditions below: When you are in India for at least 6 months (182 days to be exact) during the financial year You have been in India for 2 months (60 days) in the previous year and have lived for one whole year (365 days) in the last four years. Note: If you are an Indian citizen working abroad or a crew member on an Indian ship, only the first condition is available to you – which means you are a resident when you spend at least 182 days in India. The same applies to a Person of Indian Origin (PIO) who visits India. The second condition does not apply to these individuals. A PIO is a person whose parents or any of his grandparents were born in undivided India.   If you do not meet any of the above conditions, you are a Non-Resident Indian.   Resident but Not-Ordinary Resident (RNOR) definition amended Individuals will be considered as RNOR for the year if they meet the following conditions: If you’ve been a non-resident in India for 9 years out of 10 previous years preceding the year of consideration, or If you have stayed in India for 729 days or less during 7 previous years preceding the year of consideration The Finance Act 2020 has amended the residency provisions to include Indian Citizen/Person of Indian Origin, who comes to visit India and shall now be considered as RNOR subject to the following conditions: Total income other than foreign income is Rs 15 lakh or more The individual has stayed in India for more than 120 days but less than 182 days in the previous year The individual has stayed in India for 365 days or more in four years preceding the previous year Before this amendment, such individuals were classified as non-residents. Due to the amendment mentioned above, the individual’s residential status may be classified as RNOR, which will lead to loss of DTAA benefits, increased scope of total income for taxability, loss of various exemptions allowed, etc. It is to be further noted that in the above amendment, an individual staying for more than 182 days shall be classified as a resident irrespective of the level of income in the previous year.  Deemed residency status introduced in Finance Act 2020 Finance Act 2020 introduced the concept of ‘Deemed residency’. According to this, Citizens of India earning more than Rs 15 lakh from Indian sources shall be deemed a resident of India if they are not liable for payment of taxes in any other country. The deemed residents shall be classified as RNOR with effect from the financial year 2020-21. This amendment was brought into force to tax the incomes of Indian citizens who are not liable to pay tax in any country.  Special relief due to COVID lockdown For FY 2019-20, if individuals have come to India on a visit before 22nd March 2020 and they are: Unable to leave India because of lockdown on or before 31st March 2020– the period of stay from 22nd to 31st March shall not be considered. Quarantined due to COVID-19 on or after 1st March 2020 and departed on an evacuation flight on or before 31st March 2020, or unable to leave India- the period of stay from the beginning of quarantine to 31st March shall not be considered. Departed on an evacuation flight on or before 31st March 2020– the period of stay from 22nd March 2020 to the date of departure shall not be considered. Is my income earned abroad taxable? An NRI’s income taxes in India will depend upon his residential status for the year as per the income tax rules mentioned above. If your status is ‘resident’, your global income is taxable in India. If your status is ‘NRI,’ your income earned or accrued in India is taxable in India. Salary received in India or salary for service provided in India, income from a house property situated in India, capital gains on transfer

An income tax notice is a written communication sent by the Income Tax Department to a taxpayer alerting an issue with his tax account. The notice can be sent for different reasons like filing/ non-filing their income tax return, making the assessment, asking for certain details, etc. When the Income Tax Department sends a notice, the taxpayer has to act on the notice within the given timeline and resolve the matter with the tax authorities. The Income Tax Department sends the notices for various reasons like not filing the income tax returns, any defect while filing the returns, or other instances where the tax department is requiring any additional documents or information. Types of Income Tax Notice Type of Notice Description Notice u/s 143(1) – Intimation This is one of the most commonly received income tax notices. The income tax department sends this notice seeking a response to the errors/ incorrect claims/ inconsistencies in an income tax return that was filed.If an individual wants to revise the return after receiving this notice, it must be done within 15 days.Else, the tax return will be processed after making the necessary adjustments mentioned in the 143(1) tax notice. Notice u/s 142(1) – Inquiry This notice is addressed to the assessee when the return is already filed and further details and documents are required from the assessee to complete the process.This notice can also be sent to necessitate a taxpayer to provide additional documents and information. Notice u/s 139(1) – Defective Return An income tax notice under Section 139(1) would be issued if the income tax return filed does not contain all necessary information or incorrect information.If tax notice under Section 139(1) is issued, you should rectify the defect in the return within 15 days. Notice u/s 143(2) – Scrutiny An income tax notice under Section 143(2) is issued if the tax officer was not satisfied with the documents and information that was submitted by the taxpayer.Taxpayers who receive notice under Section 142(2) have been selected for detailed scrutiny by the Income Tax department and will have to submit additional information. Notice u/s 156 – Demand Notice This type of income tax notice is issued by the Income Tax Department when any tax, interest, fine, or any other sum is owed by the taxpayer.All demand tax notice will stipulate the sum which is outstanding and due from the taxpayer. Notice Under Section 245 If the officer has reason to believe that tax has not been paid for the previous years and he wants to set off the current year’s refund against that demand, a notice u/s 245 can be issued.However, the adjustment of demand and refund could be done only if the individual has been provided proper notice and an opportunity to be heard. The recipient has to respond to the notice is 30 days from the day of receipt of the notice.If the individual does not respond within the specified timeline, the assessing officer can consider this as consent and proceed with the assessment.Therefore, it is advisable to respond to the notice at the earliest. Notice Under Section 148 The officer may have a reason to believe that you have not disclosed your income correctly and therefore, you have paid lower taxes.Or the individual may not have filed his return at all, even if you must have filed it as per law. This is termed as income escaping assessment. Under these circumstances, the assessing officer is entitled to assess or reassess the income, according to the case.Before making such an assessment or reassessment, the assessing officer should serve a notice to the assessee asking him to furnish his return of income.The notice issued for this purpose is issued under the provisions of Section 148. What is the Purpose of an Income Tax Notice? An income tax notice may be issued for the following reasons – When no ITR has been filed. Errors or discrepancies in the returns filed. A mismatch between the TDS values and income tax returns is accessible through the Income Tax Department’s Form 26AS records. The assessing officer can ask for specific documents or information from the taxpayer through an income tax notice. It might be issued to conduct an audit as per section 143(1) of the income tax act. For other reasons as the assessing officer might deem fit Service of Income Tax Notice The Income Tax Act,1961 has laid down the law for the service of a notice, summons, order, or any other communication by delivering or transmitting a copy to the person in any method that is sanctioned under the Act. Here are the various ways in which the Income Tax Notice is served. Recipient of the Notice: Income Tax Notices are directly addressed to the individual but if they are meant for a minor they are addressed to the guardian Incorrect description of the assessee is usually rectifiable but in case of scenarios where the status of the assessee is entangled with the identity of the assessee, the name mentioned on the face of the return may become material. Service by Post: Service of the income tax notice can be processed through a registered post. Section 27 of the General Clauses Act 1897, specifies that the service is to be initiated by properly addressing, pre-paying, and posting by a registered post a letter that contains the document. This delivery can be made to the address, an employee, agent, or any other authorized person. Service by Affixture: In case a defendant refuses to sign the acknowledgment or where the officer is not able to find the defendant, then the office has to affix a copy of the summons or notice or requisition order on the outer door or any other noticeable part of the residence where the defendant is residing or pursuing the business activities. HUFs and the Partnership Firm: If the officer discovers the total partition of any HUF it may be recorded by the assessing officer and the notices can be served on the person who was

Section 1 of the Income Tax Act, 1961 begins with the marginal note ‘Short title, extent and commencement’. The Act is to called the Income-tax Act, 1961 per sub-section 1. The Act extends to the whole of India per sub-section 2. The Act came into force on April 1, 1962 per sub-section 3. The history of Income Tax in India is later back to the 1800s, In 1860 the tax was first introduced in India by Sir James to cover the losses incurred by the government as a result of the military mutiny of 1857. In 1918, a new income tax was passed and it was again replaced by another new law passed in 1922. This Act remained in force till the assessment year 1961-62 with several amendments. In discussion with the Ministry of Law, the Income Tax Act, of 1961 was eventually passed. The Income Tax Act, of 1961 came into force on 1 April 1962. It applied to the whole of India and Sikkim (including Jammu and Kashmir). Since 1962, many far-reaching amendments to the Income Tax Act have been made every year by the Union budget. In this article, we will be concerned about the brief history of income tax in India and Section 1 of the Income-tax Act, 1961. What is the Income Tax Act 1961? The Income Tax Act 1961 is the set of rules and regulations upon which the Income Tax Department levies, administers, collects and recovers taxes. It contains 298 sections, 23 chapters and several important provisions which contain all the aspects of taxation in India.  Now, the nature of the Income Tax Act 1961 can be classified into – direct and indirect taxes. The taxpayer must pay direct taxes at a certain percentage based on his/her income. While the latter is levied by the government indirectly during the sale of goods and services.  History of Income Tax in Ancient India In India, the system of direct taxation has come into force in one form or another since ancient times. In both the Manu Smriti and the Arthasastra, references have been made to a variety of tax measures. The thorough analysis given on this subject by Manu Smriti and the Arthasastra has clearly shown the existence of a judicious system of taxation even in ancient times. Not only that, taxes were levied on various classes of individuals such as actors, dancers, singers, and every stratum. Taxes in ancient times were payable in the form of gold coins, livestock, grain, raw materials, and also personal service. Manu Smriti-Manusmrti is the oldest and predominant source of income tax provisions. Manusmrti emphasizes the strategic imposition and regulation of corporate income tax.According to him, taxation must not be a painful experience for subjects. Taxation must be right enough to meet a reasonable revenue target and also feel right to the masses. The income tax provisions under Manusmrti are: Merchants would pay 20% of income Artisans would pay 20% of the income Farmers would pay 1/6, 1/8, or 1/10 of the value of the total production. Rates vary according to circumstances affecting crop production. In addition, merchants and artisans were required to pay an income tax in the form of gold or silver. Arthashastra-Arthashastra is one of the more prominent sources of tax laws and regulations in India. The Arthashastra could be considered the primary Indian text mentioning public finance, financial administration, and financial laws in a structured manner.The book was written by Kautilya around 2300 BC. It has been accredited to have a huge impact on the development of the income tax system in India.Kautilya suggested a tax system according to the principle of “maximum welfare for society”.The text contemplated the creation of a defined tax code. The principles, tax rates, and duties of tax collectors were predetermined in the book.The schedule of each payment, due dates, quantity, and type of commodities received were also coded. The book also mentions the taxation of export and import of goods, tolls, etc. The income tax provisions as stated in the Arthashastra are; Farmers would pay 1/6 of production flat rate for land taxation The rich would pay higher taxes and the less privileged would be levied lower taxes Book rule with limited flexibility to tax collectors Income Tax Act 1860-The taxation policy adopted by the British Government of India had the greatest influence on the present taxation system of India. The policy of income tax laws that were structured under the British Indian government could be credited to the well-known incident of mutiny. The mutiny of 1857 by the Indian soldiers of the British army caused huge losses to the then-British government. The Income Tax Act was introduced in 1860 to cover the losses suffered as a result of the rebellion. The Act of 1860 was applied for 5 years and was repealed accordingly. The salient features of the Income Tax Act, of 1860 are; Exemption of income from agricultural production from taxation Life insurance premiums were exempt from tax Hindu undivided family was approached as a separate taxable unit Income Tax Act 1918-Some major changes were made by the Income Tax Act of 1918 in the income tax system. For the very first time, income and deductions of a contingent or non-occurring nature were also included in the calculation of taxable income. The salient features of the Income Tax Act, of 1860 are as follows; Non-recurring income in the course of business or professional activity was also included in the calculation of net profit Non-recurring deductions have been included in the calculation of taxable income. Income Tax Act 1922-The Income Tax Act of 1922 was the most notable milestone in the history of the Income Tax system in India. The Act was introduced to represent the primary organized income tax structure in India.The 1922 Act provided much-needed flexibility in India’s income tax system. In addition, it established a proper system of tax administration in India, which continued to function for the next 40 years. The Income Tax Act, of

The income tax department in India examines the filed tax returns, and if there are any reasons to believe that the information provided by the taxpayer is incorrect or incomplete, the case is selected for scrutiny assessment. The taxpayer is then issued a notice by the department and is required to take necessary actions as communicated by the department in response to the notice. Income-tax scrutiny refers to the act of summoning taxpayers for making enquiries about the returns filed in relation to an assessment year. The provision regarding Income Tax Scrutiny is invoked if the concerned tax officials have a reason and evidence to believe that the expenses and income declared in the returns have been incorrectly stated. The scrutiny is aimed at providing taxpayers with an opportunity to substantiate the accuracy of the filing through documentary evidence. The provision of scrutiny is initiated with the issue of a scrutiny notice to the concerned taxpayers, who are in turn required to respond. The notice is issued under a particular section or clause and would include the reason for such scrutiny. Post this stage, the officer may conduct inquiries with the assessee as considered necessary. As already stated, the notice is meant to facilitate the assessee with an opportunity to substantiate the relevant particulars declared while filing the returns What is scrutiny assessment? The tax department examines the returns filed and if it has any reason to believe that the information declared by the assessee is incorrect or incomplete then the case is taken up for scrutiny assessment. The assessee is informed throughissue of a notice and is supposed to take the required action as communicated by the department.After the assessee has filed their income tax return, whether within the due date or in response to a notice, the tax department has the authority to initiate scrutiny proceedings if there is a reason to believe that income has escaped assessment. This means that the department suspects that the income declared by the assessee is understated or the expenditure is overstated. In such cases, the department issues a notice to the assessee, requesting them to visit the department’s office and provide any additional documents that may be required. Reasons for Scrutiny The Income-tax Department pursues scrutiny assessment by means of following a set of predetermined guidelines. The process is also carried out using sophisticated technology that aids in identifying instances of errors. Listed below are some of the most common reasons for the enactment of this provision: Non-filing of tax returns Rapid rise or fall in income Abnormal value of transactions Mismatch in TDS credit Understated income Non-declaration of exempted income Underpayment of tax or misappropriation Understanding the Process of Scrutiny It is important to note that receiving a notice does not imply any wrongdoing or crime on the part of the assessee. It simply signifies that an investigation is being conducted to determine if any income has indeed escaped assessment. The notice indicates a difference of opinion between the Assessing Officer (AO) and the assessee, and the scrutiny proceedings aim to resolve this difference and arrive at a correct assessment of the income. Timeline for Issue of Notice A notice under this provision is to be issued within six months from the end of the financial year of filing returns. An issue of notice after this period will entitle the assessee to raise an objection with the jurisdictional tax authority. Selection of cases for scrutiny The following are the most general reasons for selection of your case for scrutiny along with ways to dodge them. Reason 1: Non filing of Income Tax Return (ITR) Any person whose gross income (without any deductions) is above the exempted limit (Rs 2,50,000 in case of individuals below the age of 60) is required to file annual Income tax return in due time If you are a resident Indian and you own a foreign asset or are a signing authority in a foreign bank account, you have to file tax return irrespective of your income Even where your employer has already deducted TDS from your pay you need to file your return to avoid a notice How to dodge Pay your advance taxes on time and file returns within the due date. Reason 2: Error with respect to TDS The TDS that you show in your return and what is actually shown on the Traces website might not match. When there is such a mismatch, there are high chances of getting a notice. How to dodge Request your employer or any person who is deducting TDS on your income to deposit the amount with government treasury and file TDS return in due time Always first reconcile the actual TDS that has been deducted from your income with your Tax Credit Statement (Form 26AS). Report the deductor if you find any discrepancy Reason 3: Non-disclosure of other incomes Every income that has been earned in the financial year is required to be reported in the tax return. People generally ignore interest income on the savings account, fixed deposits and recurring deposits There are many cases where TDS is deducted at a lower rate by your banker but you belong to a higher tax slab. For example, banks deduct TDS on interest at 10% while you may be falling in tax slab of 30%. In such cases, you might come under scrutiny for non disclosure of complete information or an attempt to minimise tax liability How to dodge At the year end, request your banker to give interest statement of your deposits in various bank accounts Report all the income from any source in your tax return even if that amount is exempt from tax Note: Penalty for concealment of income can be up to a maximum of 300% of tax payable Reason 4: Unnatural or high value transaction Incidences where the transaction value is a lot higher considering the disclosure of your income in the return can attract issue of notice. For example, a

ind something the presence of which is suspected etc. Seize means to take possession of goods, contrary to the wishes of the owner or to take forcible possession. From income tax point of view, in common parlance search is referred to as ‘RAID’. However, there is no such term as raid anywhere in income tax law.Search and Seizure is a very powerful tool available to Income Tax Department (ITD) to unearth any concealed income or valuables and to check the tendencies of tax evasion thereby mitigating the generation of black money. Search operations are exploratory exercises on the basis of information with the Income Tax Department to find hidden income and wealth in cases of tax payers, who have not disclosed their true financial state of affairs in discharge of their tax obligations. Seizure implies taking possession of assets, which have not been disclosed to the Income-tax Department and of accounts/documents, papers which contain details of unaccounted wealth/income not disclosed to the income tax authorities. The Income Tax Department resorts to search and seizure only in cases where there is sufficient reason to believe that the person concerned would not disclose the true picture of his income in the normal course of filing of return and regular assessment. Search & seizure-from income tax perspective Search operations are exploratory exercises on the basis of information with the income tax department to find hidden income and wealth in cases of tax payers, who have not disclosed their true financial state of affairs in discharge of their tax obligations. Seizure implies taking possession of assets, which have not been disclosed to the Income-tax Department and of accounts/documents, papers which contain details of unaccounted wealth/income not disclosed to the income tax authorities. Thus, search and seizure is a very powerful weapon in the armory of income tax department to unearth any concealed income or valuables and to check the tendencies of tax evasion thereby mitigating the generation of black money. Who can authorize (i.e., issue search warrants) proceedings u/s 132 Sec.132 empowers the Principal Director General or Director General or Principal Director or Director or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner to authorize proceedings under this section. Who can conduct search? Income tax authority, having power to initiate search u/s 132, can authorize its subordinate(s) (not below the rank of Income tax officer) to conduct search. Following subordinates can be authorized Authorized Officer who can conduct search Authorized from Additional Director or Additional Commissioner or Joint Director, Joint Commissioner, Assistant Director, Deputy Director, Assistant Commissioner, Deputy Commissioner or Income tax officer Principal Director General or Director General or Principal Director or Director or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner Assistant Director, Deputy Director, Assistant Commissioner, Deputy Commissioner or Income tax officer Additional Director or Additional Commissioner or Joint Director or Joint Commissioner (on the basis of authorization from above authority and being empowered by the Board) Power of authorized officer While conducting search, authorized officer has following powers – 1. Enter and search any building, etc.: Enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept. 2. Break open the lock of any door, etc.: Break open the lock of any door, box, locker, safe, almirah or other receptacle, where the keys thereof are not available. 3. Search person: Search any person who – has got out of; or is about to get into; or is in, the building, place, vessel, vehicle or aircraft if the authorised officer has reason to suspect that such person has secreted about his person any books of account, other documents, money, bullion, jewellery or other valuable article or thing. 4. Require any person to facilitate the authorised officer: Require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record, to afford the authorised officer the necessary facility to inspect such books of account or other documents. 5. Seizure: Seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search. 6. Place marks of identification: Place marks of identification on any books of account or other documents or make extracts or copies therefrom. 7. Make inventory: Make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing. 8. Examine on oath: Examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing. Any statement made by such person during such examination may thereafter be used as evidence in any proceeding. The examination of any person may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under Act. Time limit for release of asset Asset or any portion thereof shall be released within a period of 120 days from the date on which the last of the authorisations for search u/s 132 or for requisition u/s 132A, as the case may be, was executed. Interest payable to the assessee Where the aggregate amount of money (either seized or realized through sale of assets) seized exceeds the aggregate of the amount required to meet the liabilities, Government shall pay simple interest at the rate of ½% p.m. The interest shall be payable from the date immediately following the expiry of the period of 120 days (from the date on which the last of the authorisations for search u/s 132 or requisition u/s 132A was executed) to the date of completion of the assessment u/s 153A. Discharge of excess money After discharging

Filing an Appeal before Commissioner of Income Tax (Appeals), Orders Which Are Appealable by Assessee before Commissioner of Income-tax (Appeals), Fees For Filing Appeal Before CIT (Appeals) and Documents To Be Submitted for Appeal before Commissioner of Income-tax (Appeals). Any person or an assessee who is aggrieved by an order of an Assessing Officer (AO), can file an appeal against the order before the Commissioner of Income Tax (Appeals) by submitting Form 35 online on the Income tax e-Filing portal within 30 days from the date of service of order or demand. Procedure of Filing an Appeal before Commissioner of Income Tax (Appeals) After filing Form no. 35 on the income- tax portal, 1. The Commissioner of Income-tax (Appeals) will communicate to the taxpayer and the Assessing Officer for whose order is preferred about the date and place for hearing the appeal by issuing a notice to both parties. 2. On the date of hearing the taxpayer or the Assessing Officer can either appear personally or through an authorized representative. 3. The Commissioner of Income-tax (Appeals) would either hear the appeal or may adjourn the appeal from time to time as he may think fit.4. Before passing the order, the Commissioner of Income-tax (Appeal) may either or may direct the Assessing Officer to make necessary inquiries as he may deem fit and report the result directly to him.5. During the appeal, the taxpayer also has a right to go into additional grounds of appeal which is correlated to it. However, additional grounds will only be accepted by the Commissioner of Income-tax (Appeals) if he is satisfied that the omission of these grounds was not willful or unreasonable. Orders Which Are Appealable by Assessee before Commissioner of Income-tax (Appeals) Section 246A lists the orders against which an appeal can be filed before the Commissioner of Income-tax (Appeals). Some of them are given as below: 1. Notice passed against the taxpayer in a case where is not satisfied with the notice passed under Income Tax Act. 2. Notice issued under section 143(1) (1B) where adjustments have been directed in the return of income. 3. Notice issued under section 200A (1) where adjustments have been made in the filed statement. 4. Notice issued under section 143(3) except in case of a judgment passed by the Dispute Resolution Panel. 5. A notice of assessment or reassessment passed under section 153A or under section 158BC in case of search/seizure. 6. Rectification order passed under section 154 or under section 155. What is Form 35 of the Income Tax Act? Form 35 is available for assessees or deductors aggrieved by any order of an Assessing Officer (AO). They can file an appeal to the Commissioner of Income Tax (Appeals) against any order of the Assessing Officer by submitting a duly filled Form 35. People who need to mandatorily e-file income tax returns can also e-file Form 35. If you do not file your income tax returns online, you can also file Form 35 offline.  When you are filing Form 35, you need to file your appeal along with a Memorandum of Appeal, provide a statement of facts and explain the ground behind your appeal. Apart from that, your Form 35 should also be accompanied by a copy of the order appealed against the notice of demand. How to Download Form 35 of Income Tax Act? You can file Form 35 on the official e-filing website of the Income Tax Department.  You can also download the offline version of Form 35 from the Income Tax website.  How to File Form 35 of Income Tax? Here are the steps that you can follow if you want to fill up and submit Form 35 online:  Step 1: Visit the official Income Tax e-filing portal and log in using your user ID and password. Step 2: A new page will open. Click on the e-file option from the taskbar. A drop-down menu will open. Click ‘Income Tax Form’ and select the ‘File Income Tax Forms’ option. Step 3: On the ‘File Income Tax Forms’ page, enter Form 35 in the search bar and click on it once the option comes up.  Step 4: Once a new page opens, click ‘Let’s Get Started’.  Step 5: Now the Form 35 page will open. On this page, fill in all the necessary details and click the ‘Preview’ button. Step 6: Check all the details on the ‘Preview’ page and click ‘Proceed to E-Verify’. Step 7: A dialogue box for a confirmation to proceed with e-verification will appear on the screen. Click ‘Yes’ here. Step 8: An e-verification page will open where you need to verify the form. After successful verification, a success message will be displayed on the screen along with the Transaction ID and Acknowledgement Number. You need to note these numbers for future reference.  Form 35 Income Tax Appeal Fees Fees payable before you file an appeal to the Commissioner of Income Tax (Appeal) depend on your total income calculated by the Assessing Officer (AO). Here is a table mentioning the fees you must pay while submitting Form 35. After payment of the fees, you need to attach the proof of payment along with Form 35.  Total Income Determined by AO Appeal Fee Assessed total income of Rs. 1 lakh or less Rs. 250 Assessed total income of more than Rs. 1 lakh and up to Rs. 2 lakh Rs. 500 Assessed total income of more than Rs. 2 lakh  Rs. 1000 Appeals for any other case Rs. 250 FAQS Q: How can I check my Form 35 status? Form 35 status by using the steps you use to check your ITR filing status. Visit the e-filing portal homepage and log in with your user ID and password. Choose ‘e-File’ from the taskbar, select ‘Income Tax Return’, and then click ‘View Filed Returns’. Once redirected, you can view the status of all the returns you have filed.  Q: What should I fill in Form 35? Any assessee or deductor aggrieved by an order announced by an Assessing Officer can file an appeal against