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Saturday 20 December 2014

CAG - Report Exposes Shocking



December 20th, 2014 

The Comproller &Auditor General of India (CAG) has issued a report No. 32 of 2014 setting out the results of the performance audit of “Appreciation of Third Party (Chartered Accountant) Certification in Assessment Proceedings of the Department of Revenue”.

The report makes for shocking reading because it exposes the utterly careless manner in which the Chartered Accountants have conducted audits and issued certificates in blatant disregard of all basic norms.

According to the CAG’s report, there has been short levy of taxes to the extent of Rs 2,813.11 crore in the 367 cases which were surveyed, as a result of wrong audit reports issued by CAs.

The report also points out that there are 616 cases where CAs have committed mistakes in allowance of exemption or deductions, charging of tax on book profit under Section 115JB, adoption of arm’s length price and reporting on cash payments exceeding Rs 20,000 per day.

The CAG report gives several illustrations of such carelessness and also provides the names and membership numbers of the CAs who have conducted the audit.

The report also laments that no action u/s 288 of the Act has been taken by the department against the erring CAs.

It may be recalled that the ITAT has recently in Vijay V Meghani vs. DCIT (ITAT Mumbai) passed severe strictures against the CA profession for alleged falling standards. The Tribunal has also advised the ICAI to take action against erring members and to tackle the issue on a war footing.

In response to the criticism advanced by the ITAT, the ICAI had issued a stern response that the comments of the ITAT are “sweeping” and “not warranted”. The ICAI also assured that it would take steps to “expunge” the comments made by the ITAT.

Now, it requires to be seen what action the ICAI will take in the light of the scathing criticism of the CAG.

Goods and Services Tax (GST) regime in India



Union Government introduced the Constitution (122nd Amendment) Bill, 2014 in the Lok Sabha on 19 December 2014. The introduction of this Bill will facilitate the introduction of the Goods and Services Tax (GST) regime in India.

The 122nd Constitution Amendment Bill seeks to inserts Article 246A, 269A, Article 279A and omits Article 268A which was inserted by the Constitution (88th Amendment) Act, 2003. It also omits Entry 92 and 92C from the Union List and Entry 52 and 55 of the State List of the Seventh Schedule

Besides, it amends Article 248, 249, 250, 268, 269, 270, 271, 286, 366, 368, Sixth Schedule and the Entry 84 of the Union List and Entry 54 and 62 of the State List of Seventh Schedule of the Constitution.

Article 246A: Empowers Legislature of every State to make laws with respect to goods and services tax imposed by the Union or by such State provided that these powers are subject to laws made by Parliament in accordance with the Article 246A (2).

Article 246A (2): Parliament has the exclusive power to make laws with respect to GST where the supply of goods, or of services, or both take place in the course of Inter-State trade or commerce.

Article 269A: Provides that GST on supplies of the good and services taking place in the coruse of inter-state trade will be levied and collected by the Union and apportioned between the Union and the States in the manner provided by the Parliament by law on the recommendations of the GST Council.

Article 279A: Empowers President of India to constitute a Goods and Service Tax (GST) Council within sixty-days of the commencement of the 122nd Constitution Amendment Act.

Main Provision of the Bill
  • It provides for constitution of a Goods and Services Tax (GST) Council to recommend to the Union and States on the inclusion and exclusion of goods and services
  • It brings petroleum crude, high speed diesel, motor spirit, natural gas, aviation turbine fuel and tobacco and tobacco products within the purview of Union List and State list.
  • It proposes an additional tax on supply of goods, not exceeding one percent, in the course of inter-State trade will be levied and collected by the Union for a period of two years and apportioned to the States
  • The net proceeds of additional tax on supply of goods, except the proceeds from Union Territories, will not form the part of Consolidated Fund of India and shall be deemed to have been apportioned to States from where the supply originates.
  • It proposes that Parliament by Law on the recommendation of the GST Council provide for the compensation to the States for loss of revenue arising on account of implementation of GST for a period of five years.
  • It subsumes all the Central indirect taxes, levies and Central Sales Tax and State Value Added Tax and Sales Tax
  • It dispenses with the concept of declared goods of special importance under the Constitution
  • It covers all goods and services except alcoholic liquor for human consumption for the levy of GST.
  • In case of petroleum products, these goods will not be subjected to GST till a date is notified on the recommendation of the GST Council
About Goods and Services Tax (GST) Council

1.The GST Council comprises of following members
  • Union Finance Minister: Chairperson
  • Union Minister of State in charge of Revenue or Finance: Member
  • Minister in charge of Finance ot Taxation or any other Minister nominated by each State government: Members
2.The GST Council should choose one amongst them to be the Vice-Chairperson of the Council for such period as they may decide.

3.Functions of GST Council
  • To make recommendations to Union and State on the taxes, cesses and surcharges levied by Union, State or local bodies that can be subsumed in the GST
  • To make recommendations on goods and services that may be subjected to, or exempted from the GST
  • To propose a model GST Laws, principles of levy, apportionment of Integrated GST and the principles that govern the place of supply
  • Recommend the threshold limit of turnover below which goods and services amy be exempted from GST
  • Recommend the rate including floor rates with bands of GST
  • Recommend any special rate or rates for a specified period to raise additional resources during any natural calamity or disaster
  • Recommend special provisions with respect to the States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand
4.Every decision of the Council shall be taken by a majority of not less than three-fourth of the weighted votes of the members present and voting in accordance with the following principles:

(a) The vote of the Union government shall have a weightage of one-third of the total votes cast

(b) The votes of all the States government taken together shall have  a weightage of two-third of the total votes cast in the meeting

5. One half of the total number of members of the GST Council shall constitute the quorum at its meeting

VAT - G.O.No.82

From the Commercial Tax and Registration Department on action taken against Tax Evasion on Tobacco Products

for Further details Visit:http://cms.tn.gov.in//sites/default/files/press_release/pr181214_t_638.pdf 

Friday 19 December 2014

Do Not Coerce Taxpayers To Admit Undisclosed Income - CBDT To AOs



The CBDT has issued a letter dated 18.12.2014 pointing out that instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys opriducted by the Department. It is pointed out that that many such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence. Such actions defeat the very purpose of Search/Survey operations as they fail to bring the undisclosed income to tax in a sustainable manner leave alone levy of penalty or launching of prosecution. Further, such actions show the Department as a whole and officers concerned in poor light The CBDT has drawn attention to earlier Instructions and Guidelines issued by the CBDT from time to time through which the Board has emphasized upon the need to focus on gathering evidences during Search/Survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence.

The CBDT has also issued the warning that any instance of undue influence/coercion in the recording of the statement during Search/Survey/Other proceeding under the I.T.Act,1961 and/or recording a disclosure of undisclosed income under undue pressure/ coercion shall be viewed by the Board adversely.


F. No. 286/98/2013-IT (Inv.I1)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
Room No. 265A, North Block
New Delhi, the 18th December, 2014

To

1. All Principal Chief Commissioners of Income Tax
2. All Chief Commissioners of Income Tax
3. All Directors General of Income Tax (Inv.)
4. Director General of Income Tax (I &CI), New Delhi

Subject: Admissions of Undisclosed Income under coercion/pressure during Search/Survey –reg.

Ref:  1) CBDT letter F. No. 286/57/2002-IT (Inv.11) dt. 03-07-2002
         2) CBDT letter F. No. 286/2/2003-IT (Inv.II) dt. 10-03-2003
         3) CBDT letter F. No. 286/98/2013-IT (Inv.11) dt. 09-Q1-2014

Sir/Madam,

Instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence. Such actions defeat the very purpose of Search/Survey operations as they fail to bring the undisclosed income to tax in a sustainable manner leave alone levy of penalty or launching of prosecution. Further, such actions show the Department as a whole and officers concerned in poor light

2. I am further directed to invite your attention to the Instructions/Guidelines issued by CBDT from time to time, as referred above, through which the Board has emphasized upon the need to focus on gathering evidences during Search/Survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence.

3. In view of the above, while reiterating the aforesaid guidelines of the Board, I am directed to convey that any instance of undue influence/coercion in the recording of the statement during Search/Survey/Other proceeding under the I.T. Act, 1961 and/or recording a disclosure of undisclosed income under undue pressure/ coercion shall be viewed by the Board adversely.

4. These guidelines may be brought to the notice of all concerned in your Region for strict compliance.

5. I have been further directed to request you to closely observe/oversee the actions of the officers functioning under you in this regard.

6. This issues with approval of the Chairperson, CBDT

(K. Ravi Ramchandran)
Director (Inv.)-II, CBDT