Introduction
In the realm of international business transactions, taxation issues often arise, particularly when it comes to determining the taxability of income received from overseas subsidiaries. One such case of significance is the dispute regarding the taxability of guarantee commission received by Johnson Matthey Public Limited Company (hereinafter referred to as "the Company") from its Indian subsidiaries. This article delves into the legal intricacies surrounding this matter and the recent judicial interpretation thereof.
Background
The crux of the issue revolves around the tax treatment of guarantee charges received by the Company from its Indian subsidiaries under the India-UK Double Taxation Avoidance Agreement (DTAA). The Company initially characterized the guarantee charges as interest income, subject to taxation under Article 12 of the DTAA. However, during the assessment proceedings, the tax authorities took the stance that the guarantee charges should be classified as "other income" under Article 23(3) of the DTAA, thus subjecting it to taxation in India.
Legal Analysis
The primary contention before the court was twofold:
<ol>
<li>Whether the guarantee charges received by the Company from its Indian subsidiaries can be categorized as "interest" under Article 12 of the DTAA.</li>
<li>Whether the income derived from guarantee fees can be said to arise or accrue in India.</li>
</ol>
Upon careful consideration of the arguments presented, the court opined that the guarantee charges cannot be construed as "interest" under Article 12(5) of the DTAA. This conclusion stemmed from the fact that the guarantee charges were not received in connection with any debt owed to the Company by its Indian subsidiaries. Rather, they were remunerations for providing parent company guarantees and counter-indemnification services to lending entities extending credit facilities to the Indian subsidiaries.
Judicial Ruling
The court upheld the decision of the Income Tax Appellate Tribunal, affirming that the guarantee charges do not fall within the ambit of "interest" as defined in Article 12 of the DTAA. Consequently, the court ruled against the Company, holding that the guarantee charges are taxable under the category of "other income" as per Article 23(3) of the DTAA.
Conclusion
The judicial pronouncement in the case of Johnson Matthey Public Limited Company provides clarity on the tax treatment of guarantee charges received from Indian subsidiaries under the India-UK DTAA. While the court's decision sheds light on the characterization of guarantee charges, it leaves open the question of whether such income could constitute business income under Article 7 of the DTAA, to be addressed in future cases.
In conclusion, the case underscores the importance of carefully analyzing the nature of income in cross-border transactions to determine its taxability under relevant tax treaties and domestic laws.
Citation: ITA 727/2018, Delhi High Court

Taxability of Guarantee Commission Received by Johnson Matthey Public Limited Company from Indian Subsidiaries: A Legal Analysis

Taxability of Guarantee Commission Johnson Matthey Case India UK DTAA

The Chennai Income Tax Appellate Tribunal (ITAT) recently set aside a substantial penalty of Rs. 10.92 crore imposed under Section 270A(9) of the Income Tax Act for 'under reporting of income' and 'misreporting of income.' The tribunal's decision highlights the critical need for specificity in penalty notices issued under Section 274 read with Section 270A.
<h4>Background</h4>
The case arose when the Revenue initiated penalty proceedings against an assessee following a search operation that uncovered unaccounted money. The Revenue accepted the additional income admitted by the assessee. However, the penalty notice issued was found to be vague, failing to specify whether the penalty was for 'under reporting of income' or 'misreporting of income.'
<h4>Tribunal's Findings</h4>
The ITAT held that the penalty order was unsustainable due to the Revenue's failure to specify the exact charge in the penalty notice. This omission was seen as a clear non-application of mind and a violation of the principles of natural justice. Without a specific charge, the assessee could not adequately respond to the show cause notice, compromising their ability to defend against the allegations.
The tribunal referenced several key judgments, including:
<ul>
<li>SSA's Emerald Meadows (Supreme Court)</li>
<li>Babuji Jacob (Madras High Court)</li>
<li>Manjunatha Cotton &amp; Ginning Factory (Karnataka High Court)</li>
<li>Prem Brothers Infrastructure (Delhi High Court)</li>
</ul>
These cases consistently held that a vague notice without specifying the limb of Section 270A being invoked is erroneous and arbitrary. The ITAT reinforced that 'under reporting of income' and 'misreporting of income' have distinct definitions and cannot be used interchangeably. Each term requires specific and clear satisfaction from the assessing officer (AO) before initiating penalty proceedings.
<h4>Importance of Specific Charge</h4>
The ITAT emphasized that without specifying the charge, the penalty proceedings are fundamentally flawed. The tribunal noted, "In absence of proper notice, which is mandatory, the AO cannot impose penalty, because, it is a clear violation of principles of natural justice." The ITAT further stated that issuing a vague notice vitiates the entire proceedings, as the assessee was not given an opportunity to explain its case on a specific charge.
<h4>Conclusion</h4>
The Chennai ITAT's decision underscores the importance of precise and clear communication in penalty proceedings under the Income Tax Act. The ruling ensures that the principles of natural justice are upheld, providing fair treatment to assessees and preventing arbitrary penalty impositions.
By quashing the penalty order, the ITAT reinforced the need for the Revenue to meticulously follow procedural requirements, thereby safeguarding the rights of taxpayers.
Citation:
[TS-369-ITAT-2024(CHNY)]&nbsp;

ITAT: 270A Penalty SCN Invalid Without Specific Charge; Penalty Order Quashed

Section 270A Penalty Invalid - Quashed Due to Lack of Specific Charge

Introduction: In a recent judgment by the High Court of Madras, the principles of natural justice took center stage in the realm of tax assessment. The case of Vijaykumar Poornima vs. Additional/Joint/Deputy/Assistant Commissioner of Income-tax sheds light on the significance of providing adequate time and opportunity to taxpayers to respond to show cause notices and draft assessment orders. Let's delve deeper into this landmark judgment and its implications.
Overview of the Case: The petitioner challenged two assessment orders dated 30.03.2022, pertaining to the assessment years 2014-15 and 2015-16, citing a lack of compliance with the mandatory requirement of Section 143(2) of the Income Tax Act, 1961. The crux of the matter revolved around the hurried nature of the assessment proceedings, which seemingly aimed to circumvent the limitation under Section 153 of the Act.
Violation of Natural Justice: The petitioner argued that the assessment orders were passed hastily without affording adequate opportunity to respond to the show cause notices containing draft assessment orders. Despite the petitioner's attempts to engage with the authorities, including filing returns manually due to technological constraints, the process seemed rushed and lacking in procedural fairness.
Judicial Pronouncement: The court, upon careful consideration, upheld the petitioner's contention, emphasizing the manifest violation of principles of natural justice. It deemed the hurried assessment orders as a breach of the taxpayer's right to a fair hearing. Consequently, the impugned orders were quashed, and the case was remitted back to the assessing authority to ensure a fresh assessment with proper opportunity for the petitioner to present their case.
Implications and Conclusion: This judgment underscores the significance of upholding principles of natural justice in tax assessment proceedings. It reiterates the importance of providing taxpayers with sufficient time and opportunity to respond to notices and present their case effectively. Moving forward, this decision serves as a reminder to tax authorities to conduct assessments in a fair, transparent, and procedurally sound manner, thus fostering trust and confidence in the tax administration system. In essence, the case of Vijaykumar Poornima vs. Additional/Joint/Deputy/Assistant Commissioner of Income-tax exemplifies the triumph of fairness and equity in the realm of taxation.
CItation: [2024] 162 taxmann.com 394 (Madras) HIGH COURT OF MADRAS Vijaykumar Poornima v. Additional/Joint/Deputy/Assistant Commissioner of Income-tax, (NFAC)

Ensuring Fairness in Tax Assessment: Vijaykumar Poornima vs. Additional/Joint/Deputy/Assistant Commissioner of Income-tax, High Court of Madras

Fairness in Tax Assessment: A Case of Natural Justice Prevailing

The core issue involved in the Case:
The core issue involved in the judgment of the Bombay High Court in the case of Hexaware Technologies Limited Vs ACIT revolves around the validity of a notice issued by the Jurisdictional Assessing Officer (JAO) on 27th August 2022. The central question was whether this notice complied with the provisions outlined in Section 151A of the Income Tax Act.
Specifically, the appellant argued that the notice was invalid and against the law as it was not issued by the National Faceless Assessment Centre (NFAC) as mandated by the Scheme formulated under Section 151A. This raised broader questions about the authority's adherence to statutory provisions and the framework established for conducting income tax assessments, reassessments, and recomputations in a transparent and accountable manner.
Therefore, the key issue at hand was the interpretation and application of Section 151A and whether the notice issued by the JAO aligned with the statutory scheme outlined in this section.
&nbsp;
Appellant&rsquo;s Plea
The appellant, in the case of Hexaware Technologies Limited Vs ACIT, pleaded that the notice issued by the Jurisdictional Assessing Officer (JAO) on 27th August 2022 was invalid and contrary to the law. Specifically, they argued that the notice did not adhere to the provisions of Section 151A of the Income Tax Act.
Their plea centered on the contention that the notice should have been issued by the National Faceless Assessment Centre (NFAC) in accordance with the Scheme formulated under Section 151A. By issuing the notice through the JAO instead of the NFAC, the appellant argued that the process deviated from the prescribed framework, thereby rendering the notice invalid and legally questionable.
In essence, the appellant's plea focused on ensuring compliance with the statutory scheme outlined in Section 151A, which emphasizes automated allocation and faceless proceedings for income tax assessments, reassessments, and recomputations.
&nbsp;
Arguments by the Revenue
The Revenue, in the case of Hexaware Technologies Limited Vs ACIT, presented several arguments:
Validity of Notice Issued by JAO: The Revenue argued that the notice issued by the Jurisdictional Assessing Officer (JAO) was valid and in compliance with the provisions of the Income Tax Act. They contended that the notice did not need to be issued by the National Faceless Assessment Centre (NFAC) as mandated by the Scheme under Section 151A.
Relevance of Internal Guidelines: The Revenue relied on Office Memorandum dated 20th February 2023 issued by Central Board of Direct Taxes (TPL division) to support their position, asserting that these guidelines provided the necessary framework for issuing notices and conducting income tax proceedings. They argued that these guidelines were applicable and did not contradict the provisions of the Act or the Scheme framed under Section 151A.
Concurrent Jurisdiction: The Revenue argued for concurrent jurisdiction, suggesting that both the JAO and the NFAC could issue notices under Section 148 of the Income Tax Act. They contended that allowing both entities to issue notices would ensure flexibility and efficiency in income tax proceedings.
Interpretation of Scheme's Applicability: The Revenue raised questions about the applicability of the Scheme formulated under Section 151A, particularly in relation to Section 144B of the Act. They argued that the Scheme should be interpreted in a manner that allows for flexibility and discretion in issuing notices under Section 148.
No Prejudice the Assessee: The Revenue argued that there was no prejudice to the appellant due to the issuance of the notice by the Jurisdictional Assessing Officer (JAO) instead of the National Faceless Assessment Centre (NFAC). They contended that the procedural deviation did not impact the appellant's rights or legal standing in any significant way.
Overall, the Revenue's arguments focused on defending the validity of the notice issued by the JAO and interpreting the statutory provisions and guidelines in a way that aligns with their position.
&nbsp;
What Court Held?
The court held in favor of the appellant and ordered the following:
Invalidity of the Notice: The court ruled that the notice issued by the Jurisdictional Assessing Officer (JAO) on 27th August 2022 was invalid and contrary to the law. They found that the notice did not comply with the provisions of Section 151A of the Income Tax Act, as it should have been issued by the National Faceless Assessment Centre (NFAC) according to the prescribed scheme.
Adherence to Scheme Under Section 151A: The court emphasized the importance of adhering to the scheme formulated under Section 151A, which mandates automated allocation and faceless proceedings for various income tax processes. They highlighted the significance of transparency, efficiency, and accountability in income tax proceedings.
Clarification on Jurisdiction: The court clarified that the Scheme assigns specific jurisdiction either to the JAO or the NFAC for issuing notices under Section 148. They emphasized that deviating from this framework would undermine the purpose of faceless proceedings and lead to procedural inconsistencies.
Remedy for Procedural Irregularity: As a result of the invalidity of the notice, the court likely ordered the Revenue to take corrective measures and issue a new notice in compliance with the statutory scheme outlined in Section 151A. This would ensure that the appellant's rights are upheld, and the assessment proceedings are conducted in accordance with the law.
Prejudice from Procedural Irregularity: The court acknowledged that while the procedural irregularity might not have directly impacted the substantive rights or interests of the appellant, it nonetheless constituted a violation of the statutory scheme under Section 151A of the Income Tax Act. They likely emphasized that adherence to procedural requirements is essential for ensuring the fairness, transparency, and legality of income tax proceedings.
Preservation of Legal Principles: Even if the appellant did not suffer direct harm or prejudice from the procedural irregularity, the court emphasized the importance of upholding legal principles and statutory provisions. They highlighted that allowing deviations from established procedures could set a dangerous precedent and undermine the rule of law.
Para 37: At para 37, the court observed that:
<blockquote>
&ldquo;When an authority acts contrary to law, the said act of the Authority is required to be quashed and set aside as invalid and bad in law and the person seeking to quash such an action is not required to establish prejudice from the said Act. An act which is done by an authority contrary to the provisions of the statue, itself causes prejudice to assessee. All assessees are entitled to be assessed as per law and by following the procedure prescribed by law. Therefore, when the Income Tax Authority proposes to take action against an assessee without following the due process of law, the said action itself results in a prejudice to assessee. Therefore, there is no question of petitioner having to prove further prejudice before arguing the invalidity of the notice.&rdquo;
</blockquote>
Accordingly, the court concluded that the scheme outlined in the notification dated 29th March 2022 is of a mandatory nature. This means that all notices issued under Section 148 of the Income Tax Act must strictly adhere to the provisions laid out in this scheme. 
&nbsp;
Citation: Hexaware Technologies Limited Vs ACIT (Bombay High Court), Appeal Number: Writ Petition No. 1778 of 2023.

Understanding the Bombay High Court Verdict: Impact of Procedural Compliance on Income Tax Notices Issued u/s 148

Bombay High Ruling on Section 151A and Section 148 Notice

Introduction
The Reserve Bank of India (RBI) has introduced new guidelines under the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023. These regulations, which took effect on December 21, 2023, replace the earlier regulations from 2016. This comprehensive guide breaks down the new rules, highlighting their implications for residents and businesses in India engaging in foreign exchange transactions.
These regulations are referred as Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023. They became effective immediately upon their publication in the Official Gazette i.e. 21-Dec-2023.&nbsp;Further, these regulations suppress the eralier regulations: Notification No. FEMA 14(R)/2016-RB dated May 02, 2016,
&nbsp;
Scope of the Regulations
The regulations stipulate that no resident of India shall make or receive payments from a non-resident except in the manner prescribed by these regulations or as otherwise provided by the Act, its rules, or specific directions issued under the Act.
&nbsp;
Detailed Provisions on Receipts and PaymentsFor Trade Transactions: For trade-related transactions, the manner of receipts and payments is specified based on the countries involved:
Nepal and Bhutan
- Payments for exports and imports are to be made in Indian Rupees (INR).
- For exports to Nepal, if the Nepal Rashtra Bank permits, payments can be made in foreign currency.
Member Countries of the Asian Clearing Union (ACU)
- Payments should be made through the ACU mechanism, except for Nepal and Bhutan.
- If goods are shipped from a member country of the ACU to India, but the supplier is from a non-ACU member country, payments can be made in INR or foreign currency.
Other Countries
- Payments can be made in INR or any foreign currency, providing flexibility for trade with countries outside the ACU.
&nbsp;
For Transactions Other Than Trade: For non-trade transactions, the regulations specify the following:
Nepal and Bhutan
- Payments are generally to be made in INR.
- For overseas investments in Bhutan, payments can be made in foreign currency.
Other Countries
- Payments can be made in INR or any foreign currency, ensuring flexibility for various types of non-trade transactions.
&nbsp;
Special Provisions for Visitors: For non-trade current account transactions involving visitors to India, the regulations mandate:
- Payments and receipts must be made in INR.
- Transactions can also be managed through debits or credits to a bank account maintained as per the applicable rules.
Implications for Businesses and Individuals
The updated regulations provide clear guidelines for businesses involved in international trade, particularly with neighboring countries like Nepal and Bhutan. This clarity is expected to streamline financial transactions related to export and import, ensuring compliance with RBI norms and reducing the risk of non-compliance penalties.
Link to New Regulations: <a href="https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12579&amp;Mode=0" target="_blank" rel="noopener">Click here</a>
Link to Earlier Regulations (supressed): <a href="https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10392&amp;Mode=0" target="_blank" rel="noopener">Click here</a>

Demystifying the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023: A Comprehensive Guide

RBI's New Foreign Exchange Regulations Explained

<h2>Introduction:</h2>
The Central Board of Indirect Taxes and Customs (CBIC) has issued Instruction No. 05/2023-GST on 13th December 2023, addressing the ramifications of the Hon&rsquo;ble Supreme Court's landmark judgment dated 19th May 2022 in the case of CC, CE &amp; ST, Bangalore (Adj.) etc. Vs. Northern Operating Systems Private Limited (NOS). This article delves into the key instructions provided by CBIC in relation to Section 74(1) of the Central Goods and Services Tax Act, 2017 (CGST Act).
&nbsp;
<h2>1. Background of the NOS Judgment:</h2>
The focal point of CBIC's instruction lies in the aftermath of the NOS case, where the Supreme Court examined the nature of secondment of employees by overseas entities to Indian firms and its Service Tax implications. The judgment emphasized a nuanced examination based on the unique characteristics of each arrangement, rejecting a one-size-fits-all approach.
&nbsp;
<h2>2. Nuances in Tax Implications:</h2>
2.1 The CBIC, after a meticulous examination, notes that the NOS judgment, while primarily focusing on Service Tax, has implications in the realm of GST. The court's emphasis on a nuanced examination implies that each case of secondment must be scrutinized based on its specific terms and conditions.
&nbsp;
2.2 Citing the Hon'ble Supreme Court's observation in the Commissioner of Central Excise, Mumbai Vs. M/s Fiat India(P) Ltd, the CBIC underscores the need to avoid mechanical application of legal principles. Each case, as the court emphasized, depends on its unique facts, and a broad resemblance to another case is not decisive.
&nbsp;
2.3 Considering the diverse nature of secondment arrangements, the CBIC clarifies that the NOS judgment should not be mechanically applied to all cases. Instead, the tax implications must be determined based on the distinct factual matrix, including the terms of the contract between the overseas company and the Indian entity.
&nbsp;
<h2>3. Caution Against Mechanical Invocation of Section 74(1):</h2>
3.1 The CBIC addresses concerns raised by the industry regarding the mechanical invocation of the extended period of limitation under Section 74(1) of the CGST Act in cases involving secondment.
&nbsp;
3.2 Section 74(1) reads, "Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilized by reason of fraud, or any wilful-misstatement or suppression of facts to evade tax..."
&nbsp;
3.3 The CBIC clarifies that Section 74(1) can only be invoked if there is evidence of fraud, wilful misstatement, or suppression of facts to evade tax. Mere non-payment of GST without these elements cannot trigger Section 74(1). The CBIC emphasizes that the provision should only be invoked when there is concrete evidence of fraudulent activities, and such evidence should be included in the show cause notice.
&nbsp;
<h2>4. Recommendations for Investigation and Show Cause Notices:</h2>
In light of the above, the CBIC advises field formations to consider the unique aspects of each case involving secondment. Investigation should focus on the distinct factual matrix, terms of contracts, and evidence of fraud or wilful misstatement before invoking Section 74(1). The CBIC emphasizes the need for a meticulous examination, aligning with the principles laid down by the Hon&rsquo;ble Supreme Court in the NOS case.
&nbsp;
<h2>Conclusion:</h2>
CBIC's Instruction No. 05/2023-GST serves as a guiding beacon for GST investigations concerning secondment in the post-NOS judgment era. The nuanced approach advocated by the CBIC aligns with the Supreme Court's emphasis on a case-specific examination. It also provides a cautionary note against the mechanical application of Section 74(1), ensuring that its invocation is warranted only in cases involving fraud or wilful misstatement. Field formations are encouraged to undertake thorough investigations, taking into account the unique facets of each secondment arrangement.

Decoding CBIC Instructions on Section 74(1) Post NOS Judgment

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If any NRI&rsquo;s PAN is still inoperative, he/she is requested to intimate his/her NRI status along with supporting documents to respective jurisdictional Assessing Officer.
List of supporting documents required for making PAN operative for NRI&rsquo;s is as under:
A.&nbsp;&nbsp; &nbsp;Copy of PAN Card; and B.&nbsp;&nbsp; &nbsp;Any of the following documents: a.&nbsp;&nbsp; &nbsp;Copy of passport showing stay confirming NRI, or b.&nbsp;&nbsp; &nbsp;Copy of Person of Indian Origin (PIO) card issued by Government of India, or c.&nbsp;&nbsp; &nbsp;Copy of Overseas Citizen of India (OCI) card issued by Government of India, or d.&nbsp;&nbsp; &nbsp;Copy of other national or citizenship Identification Number or Taxpayer Identification Number duly attested by &ldquo;Apostille&rdquo; (in respect of countries which are signatories to the Hague Convention of 1961) or by the Indian Embassy or High Commission or Consulate in the country where the applicant is located or authorized officials of overseas branches of Scheduled Banks registered in India.
Further for information regarding Jurisdictional Assessing Officer (JAO), please visit e-filing home page and go to tab &ldquo;know your AO&rdquo; to find out your JAO.
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Inoperative PAN of Non Resident-Steps to Make it Operative

Inoperative PAN of Non Resident

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Non-resident Indians (NRIs) and Overseas Citizenship of India (OCIs) are facing a significant issue with their PAN cards becoming inoperative, despite being exempted from linking PAN with Aadhaar. This development has caused widespread concern among affected individuals, especially in terms of the consequences they might face. Fortunately, the Income-tax Department has taken steps to address these concerns and has shared helpful clarifications on its Twitter handle.
The first clarification pertains to NRIs. The Income Tax Department has mapped the residential status of NRIs based on their filed income tax returns (ITR) in the last three assessment years. Alternatively, if NRIs have informed their Jurisdictional Assessing Officer (JAO) about their residential status, it has also been taken into account. However, if any of these criteria are not met, PAN cards have been rendered inoperative. To rectify this situation, NRIs with inoperative PAN cards are requested to inform their respective JAOs about their current residential status and submit supporting documents for an update in the PAN database.
Similarly, PAN cards of OCIs and foreign citizens who may have applied for PAN under the resident status but have not corrected or updated their residential status with the JAO or filed ITR in the last three assessment years have been rendered inoperative. To resolve this issue, OCIs and foreign citizens are urged to inform their respective JAOs about their current residential status and provide supporting documents for an update in the PAN database.
It's important to note that an inoperative PAN is different from an inactive PAN. Despite PAN becoming inoperative, individuals can still file their Income Tax Returns (ITR). However, there are a couple of consequences associated with inoperative PANs. Firstly, pending refunds and the corresponding interest on such refunds will not be issued to individuals with inoperative PANs. Additionally, tax deductions or collections will be required to be made at a higher rate for inoperative PANs, in accordance with section 206AA/206CC.
Staying informed about these clarifications and following the guidelines provided by the Income-tax Department is crucial for NRIs and OCIs to ensure a smooth income tax filing process. By updating their residential status with the Jurisdictional Assessing Officer (JAO) and providing the necessary documents, individuals can rectify the inoperative PAN situation and avoid potential complications.
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Clarifications on Inoperative PANs for NRIs and OCIs-Clarifications provided by Income Tax on Twitter Handle

Clarifications on Inoperative PANs for NRIs and OCIs

<h2>Introduction to Disclosure of Foreign Income and Assets in Income Tax Returns:</h2>
In today's globalized world, individuals and businesses often have financial interests and assets located outside their home country. It is important to understand the legal obligations surrounding the disclosure of foreign assets, as failure to comply can have severe consequences. This article explores the provisions of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (in short Black Money Act, 2015), and highlights the significance of disclosing foreign assets for transparency and accountability.
<h2>The Importance of Disclosing Foreign Assets:</h2>
The Finance Act of 2012 made it mandatory to disclose foreign assets in income tax returns. This requirement aims to promote transparency and prevent tax evasion. Non-disclosure of foreign assets can lead to prosecution as upheld by various High Courts. Disclosing foreign assets is not only a legal obligation but also crucial for ensuring transparency and accountability in financial matters. By complying with the disclosure requirements, individuals and entities can avoid penalties and legal implications.
<h2>Section 139 of Income tax Act-Foundation step to make Disclosure:</h2>
The proviso to Section 139 of the Income Tax Act imposes an important disclosure mandate on residents who hold assets or have financial interests outside India. Even if their total income is below the threshold of Rs. 2,50,000 (for individuals), residents must furnish a return before the due date if they meet any of the following conditions:
<ul>
<li>Holding assets or financial interests abroad: If a resident holds any asset, including financial interests in any entity, located outside India, or has signing authority in any account located abroad, they are required to disclose these details by filing a return within the specified timeline.</li>
<li>Beneficiary of foreign assets: The disclosure obligation also applies to individuals who are beneficiaries of assets located outside India, including financial interests in entities abroad. It is important for beneficiaries to fulfill their disclosure obligations to maintain compliance with the law.</li>
</ul>
<h2>Scope of Foreign Income and Assets:</h2>
The scope of foreign assets encompasses a wide range of assets held outside the jurisdiction of India. Under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, the term "undisclosed asset located outside India" is defined to include various types of assets. Here is an overview of the scope of foreign assets:
<ul>
<li>Income from a foreign source: Any income generated from a source located outside India that has not been disclosed in the income tax return falls within the scope of foreign assets.</li>
<li>Unreported income: If an individual is required to furnish an income tax return under Section 139 of the Income-tax Act, but fails to do so within the specified time frame (as per Explanation 2 to sub-section (1), sub-section (4), or sub-section (5) of Section 139), the income from a foreign source that remains unreported is considered a foreign asset.</li>
<li>Value of undisclosed assets: The scope of foreign assets also includes the value of assets located outside India that have not been disclosed. This includes movable assets (such as bank accounts, investments, and valuable possessions), immovable assets (such as properties and real estate), intangible assets (such as intellectual property rights and patents), and any other asset held abroad and even a signing authority is also included.</li>
</ul>
It is important to note that the scope of foreign assets is comprehensive and encompasses a wide range of holdings and income streams situated outside India. Compliance with the disclosure requirements is crucial to avoid penalties and legal implications under the Black Money Act.
<h2>Understanding the Consequences of Non-Disclosure:</h2>
Non-disclosure of foreign assets can have severe consequences. The Black Money Act of 2015 addresses undisclosed foreign income and assets. Section 4(1) of the Act defines the scope of undisclosed foreign income and assets, including unreported income, unfiled returns, and the value of undisclosed assets located outside India.
To avoid penalties and lethal consequences, it is important to note that while fully explained foreign assets acquired from tax-paid income are not considered undisclosed foreign assets, their non-disclosure in previous income tax returns can result in a penalty of Rs. 10 lakhs under Section 43 of the Act.
<h2>Concluding Remark on Disclosure of Foreign Income and Assets:</h2>
The disclosure of foreign assets is a significant legal obligation that individuals and entities must fulfill to maintain transparency and compliance with the law. Non-disclosure can lead to severe consequences under the Black Money Act, including penalties and tax implications. By understanding the provisions of the Act and the scope of undisclosed foreign income and assets, individuals can take the necessary steps to comply with the disclosure requirements.
<h2>Contact us:</h2>
If you have any question or need assistance regarding the disclosure of foreign assets, compliance with tax regulations, or any other related matter, our team of experts is here to help. Feel free to <a href="https://harchandani.in/contact">contact us.</a>
Note: This article is for informational purposes only and should not be considered as legal or financial advice.

The Importance of Disclosing Foreign Assets in Income Tax Returns: A Comprehensive Guide

The Importance of Disclosing Foreign Assets in Income Tax Returns ITR

<h2>Introduction:</h2>
Double Taxation Avoidance Agreements (DTAA) play a significant role in international taxation, aiming to prevent the double taxation of income earned by taxpayers in two different countries. However, the requirement of a Tax Residency Certificate (TRC) for claiming DTAA benefits has become a subject of legal complexities and practical challenges. In this article, we will delve into the various aspects surrounding TRCs, including their differentiation from other registration certificates, the legal issues surrounding Section 90(4) of the Income Tax Act, the absence of TRC provisions in India's DTAA agreements, and the implications for businesses.
<h2>TRC vs. Incorporation Certificate and Other Registration Certificates:</h2>
It is crucial to clarify that a TRC cannot be equated with an incorporation certificate or any other registration certificates. The provision stated in Section 90(4) of the Income Tax Act explicitly mandates the production of a TRC, along with other relevant information (in Form 10F), for claiming DTAA benefits. While obtaining a TRC can be challenging, especially for individuals, it is vital to comply with the law's mandate.
<h2>Legal Issues Surrounding Section 90(4):</h2>
One of the key legal issues arises from the potential contradiction between Section 90(4) and Section 90(2) of the Income Tax Act, as well as various judgments of the High Court, including the Supreme Court. These judgments establish that, in case of conflict between the Income Tax Act and the provisions of the DTAA, the provisions of the DTAA should prevail. This raises questions about the absolute necessity of a TRC as mandated by Section 90(4).
<h2>Skaps Industries India Pvt Ltd vs ITO, International Taxation, Ahmedabad ITAT</h2>
In this case, the ITAT held that Section 90(2) of the Income Tax Act, 1961 in India provides a unique and unqualified "treaty override" provision. This means that regardless of the provisions in the Income Tax Act, if a person is covered by an agreement under Section 90(1), the provisions of the Act will only apply to the extent that they are more beneficial to the taxpayer. The Act cannot impose a greater burden on the taxpayer than what is specified in the applicable tax treaty.
However, the only limitation to this unqualified treaty override provision is that the provisions of Chapter X-A, which deals with the General Anti Avoidance Rules, will apply to the taxpayer even if they are not beneficial. This exception is stated in Section 90(2A), which is the only provision in the Income Tax Act, 1961 that starts with a non-obstante clause in relation to Section 90(2). Therefore, it is the only restriction on the superiority of tax treaty provisions over the provisions of the Indian Income Tax Act, 1961.
ITAT also observe that:
<blockquote>
8. In the light of our this analysis, when we turn to Section 90(4), as indeed other sub sections of Section 90, we find that these provisions do not start with a obstante clause vis-&agrave;vis Section 90(2) and, therefore, these sub sections cannot be construed as limitation to, or rider to, somewhat unqualified treaty override stipulated in Section 90(2). Whatever interpretation one assigns to this sub section, essentially the fundamental approach has to be that this sub section will be applicable only when the same are more beneficial to the assessee vis-&agrave;-vis the provisions of the applicable tax treaty; that principle of treaty override, as set out in Section 90(2), remains unaffected by these provisions. As we hold so, we make it clear that whether the same position will also apply with respect to Explanations to Section 90 or not is still an open question, uninfluenced by these discussions, as Explanations to Section 90 may perhaps not have the same legal connotations as the sub sections to Section 90. We leave it that for the time being.
</blockquote>
The above decision was also cited and relied by Hyderabad ITAT in the case of Sreenivasa Reddy Cheemalamarri [TS-158-ITAT-2020(HYD)].
<h2>A Unilateral Attempt to Deny Treaty Benefits:</h2>
Furthermore, Section 90(4) can be seen as a unilateral attempt to deny treaty benefits, potentially conflicting with international law and the principles of reciprocity and mutual benefits that underpin international tax treaties. The timing of the insertion of Section 90(4) through the Finance Act 2012, which came after the conclusion of various DTAA agreements, adds to the complexity and requires careful evaluation.
In the realm of international law, the position on unilateral modification of treaties is guided by the principle of pacta sunt servanda, which means that treaties must be observed and complied with in good faith by all parties involved. This principle serves as the cornerstone of the international legal system and promotes stability, predictability, and trust among nations.
Under customary international law, a treaty can only be modified or terminated by the consent of all parties involved. This principle of consent ensures that the rights and obligations established by a treaty are protected and that no party can unilaterally alter or disregard the provisions of a treaty without the agreement of others.
Unilateral modification of a treaty by one party without the consent of the other parties is generally considered a violation of the treaty and may be viewed as a breach of international law. Unilateral modifications can undermine the integrity of the treaty and erode the trust and confidence among the parties.
<h2>Non-Inclusion of Mandatory TRC Requirement in India's DTAA Agreements:</h2>
A noteworthy observation is that none of India's DTAA agreements with other countries contain provisions specifically requiring the mandatory submission of a TRC for availing DTAA benefits. If the TRC were universally mandated, it would necessitate countries to enter into agreements clarifying that benefits can only be availed upon producing a TRC. However, the absence of such provisions in the DTAA agreements raises questions about the absolute necessity of a TRC for claiming DTAA benefits.
<h2>Navigating the Way Forward:</h2>
Considering the legal complexities and practical challenges surrounding TRCs, businesses are advised to make diligent efforts to obtain TRCs from payees. However, in cases where obtaining a TRC is not feasible, businesses must carefully assess the facts and circumstances of each case. This assessment should consider the legal issues discussed earlier, the absence of TRC provisions in DTAA agreements, and the potential risks and consequences of proceeding without a TRC.
It is essential to weigh the available legal avenues and evaluate the potential litigations that may arise from deviating from the TRC requirement. Seeking professional guidance is recommended to ensure compliance with prevailing regulations while balancing the practical challenges faced in obtaining TRCs.
<h2>Conclusion:</h2>
The requirement of a TRC for claiming DTAA benefits presents businesses with a complex and intricate landscape to navigate. While the legal issues surrounding Section 90(4) and the absence of explicit TRC provisions in India's DTAA agreements raise valid concerns about the essential nature of a TRC, businesses must still endeavor to obtain TRCs whenever possible. In cases where TRCs cannot be procured, a meticulous evaluation of the specific circumstances, coupled with expert guidance, is crucial to making informed decisions that ensure compliance and mitigate potential litigations.

Navigating the Complexities of Tax Residency Certificate (TRC) for DTAA Benefits

Navigating the Complexities of Tax Residency Certificate TRC for DTAA

<h2>Overview Tax Residency Certificate (TRC)</h2>
A tax residency certificate (TRC) is a document that confirms an individual's or a company's residency status for tax purposes. The certificate is issued by the tax authorities of the country where the taxpayer is considered a tax resident, based on the local tax laws and regulations.
The purpose of a TRC is to avoid double taxation on income earned in a foreign country. Double taxation occurs when two or more countries levy taxes on the same income. To prevent this, many countries have entered into Double Taxation Avoidance Agreements (DTAAs) with each other. These agreements typically provide for reduced withholding tax rates or NIL withholding on certain types of income, such as dividends, interest, royalties or business income.
To take advantage of these reduced tax rates, taxpayers must provide proof of their residency status in the form of a tax residency certificate. The certificate is usually valid for one fiscal year.
To obtain a tax residency certificate, the taxpayer needs to provide evidence of their residency status, such as proof of their address, employment, and income sources. The application process and requirements may vary depending on the country's tax laws and regulations.
<h2>Regulations for TRC in UAE</h2>
In UAE, the TRC is categorised in two broad catagoreis viz: (1) Natural persons &amp; (2) Legal persons
<h2>Eligibility Criteria Natural Persons</h2>
The applicant must have been a resident of the UAE for at least 180 days. Also an annual lease agreement officially documented by the competent authorities, such as EJARI in Dubai, municipalities in other Emirates and free zone authorities must be attached to the application.
<h2>Eligibility Criteria Legal / Judicial Persons</h2>
In order to be eligible to apply for a TRC, the legal person must have been established for a period of at least one year. Financial accounts must be audited or prepared by an accredited audit firm and attached with other required documents to the application. The report must be certified and stamped by the audit firm. The audited financial report to be attached to the application must cover the year for which the certificate is requested. If the certificate is requested for the present year, the audit report must be covering the past year.
(Note: Offshore companies are not allowed to apply for the service because they are not listed in the Double Taxation Avoidance agreements.)
However, the Cabinet Decision which is effective from 1 Mar 2023 provides that a juridical person shall be considered a Tax Resident in the State in either of the following cases:
1. It was incorporated, formed or recognised in accordance with the legislation in force in the State, and that does not include the branch that is registered by a foreign juridical person in the State. 
2. It is considered a Tax Resident in accordance with the Tax Law in force in the State.
<h2>TRC v/s Citizenship</h2>
It's important to note that tax residency is not the same as citizenship. A person may be a citizen of one country but a tax resident of another. Factors that determine tax residency status vary by country but generally include the number of days spent in the country, the person's permanent home, and the location of their economic interests.
Overall, a tax residency certificate is a useful tool for avoiding double taxation and accessing tax benefits under DTAAs. It's important for taxpayers to understand the local tax laws and regulations and maintain proper documentation to obtain and keep their tax residency certificate.
<h2>Benefits of Having TRC</h2>
TRC is now a days part of legal framework of many contries. In India, section 90(4) of the Income tax Act, 1961 mandatorily requires TRC for availing the benefits of the Double Tax Avoidance Agreements (DTAAs). Such benefits are:
<ul>
<li>Avoidance of double taxation</li>
<li>Reduced or NIL withholding tax rates</li>
<li>Access to tax benefits under the DTAA</li>
<li>Considered as an evidence for the purpose of determing resident country</li>
</ul>
<h2>Connect with Us</h2>
In case if you want to apply for the TRC in UAE or India, then connect with us. Our contact details are as follows:
Mail: <a href="mailto:info@harchandani.in">info@harchandani.in</a>
Mobile: +91 9909880111
WhatsApp: +91 9909880111

How to Apply for Tax Residency Certificate (TRC) of the United Arab Emirates (UAE)

Apply for Tax Residency Certificate (TRC) of UAE

<h2>Search on 23 Registered Unrecognized Political Parties (RUPP)</h2>
The search u/s 132 of the Act was conducted upon various Registered Unrecognized Political Parties (RUPP) during the month of September 2022 at Ahmedabad and various other locations. In this search, a total of 23 Registered Unrecognized Political Parties (RUPP) were detected and it was alleged that those parties were involved in providing bogus donation entries.
The raids were conducted on the recommendation of the Election Commission, which recently struck off 87 entities from its list of RUPP after they were found non-existent during physical verification.
<h2>Documents Seized form Registered Unrecognized Political Parties (RUPP)</h2>
During the course of search action, large number of incriminating documents related to bogus donation receipts, diaries containing details of commission charged, loose papers containing vital information and WhatsApp chats in the mobile phones of the office bearers of the RUPPs and their key handlers confirming the allegations, were found. Documentary and digital evidences collected during the course of search action, were confronted with the key persons of the group and subsequently seized.
Further, during the course of pre as well as post search it has been established that these RUPPs were involved in the activity of providing accommodation entry by way of bogus donation. Thereafter, on the basis of bank account statements of these RUPPs, beneficiaries/donors who had availed deduction for the bogus donation made to these RUPPs have been identified.
<h2>Reassessment Proceedings on the Beneficiaries / Donors</h2>
Based on such information, the Income Tax Department is set to issue a notices under section 148A of Act will initiate the reassessment proceedings on the beneficiaries.
Section 147 of the Income Tax Act empower the Income Tax Authorities to assess or reassess the income which escaped assessment.
<h2>Section 147 of the Income Tax Act:</h2>
If any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessing Officer may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for such assessment year (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year). 
Explanation.&mdash;For the purposes of assessment or reassessment or recomputation under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, irrespective of the fact that the provisions of section 148A have not been complied with.]
&nbsp;
<h2>Section 148A of the Income Tax Act:</h2>
[Conducting inquiry, providing opportunity before issue of notice under section 148.
148A. The Assessing Officer shall, before issuing any notice under section 148,&mdash;
(a)&nbsp; conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;
(b)&nbsp; provide an opportunity of being heard to the assessee, 1[***] by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);
(c)&nbsp; consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b);
(d)&nbsp; decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires:
Provided that the provisions of this section shall not apply in a case where,&mdash;
(a)&nbsp; a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or
(b)&nbsp; the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or
(c)&nbsp; the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, 2[relate to, the assessee; or
(d)&nbsp; the Assessing Officer has received any information under the scheme notified under section 135A pertaining to income chargeable to tax escaping assessment for any assessment year in the case of the assessee.]
Explanation.&mdash;For the purposes of this section, specified authority means the specified authority referred to in section 151.]
<h2>Whether Notices u/s 148A can be issued to the Donors of the Political Parties?</h2>
Section 147 read with section 148 to 153 empower the assessing officer to initiate the reassessment proceedings to assess or reassess the income which is escaped assessment. The entire reassessment scheme was revamped in the year 2021 and various litigations were surrounded post enactment of new reassessment scheme. So, depending on the circumstances of each case, objections can be raised before the Income Tax Department for challenging the reassessment proceedings.
<h2>Consequences of the Reassessment?</h2>
Consequent to reassessment proceedings, the Donation u/s 80GGC may be disallowed and charged to the tax at applicable tax rate or applicable slab. The applicable interest u/s 234B, 234C will also be charged and the interest received (if any) u/s 244A will also be recovered from the Assessee.
<h2>Defense and arguments to contest alleged bogus donation case</h2>
Since the AO may propose to initiate the reassessment proceedings. In response thereto, the assessee, apart from factual grounds, may also raise legal grounds to defend his case. As submitted above, the new regime of reassessment is not free from litigation. The assessee may raise the grounds challenging the reassessment proceedings as well as the assessee may also argue based on cash trail, validity of the notice u/s 148, incriminating material recovered from the political parties, statement recorded, cross examination of the witnesses etc. Apart from these, the assessee may raise further grounds to defend his case.
<h2>Whether Penalty will be imposed on Donations made to Registered Unrecognized Political Parties (RUPP)</h2>
Section 270A empowers the assessing officer to impose a penalty on under reporting of income and mis-reporting of income. The rate of penalty in the case of under reporting is imposed at 50% of the tax and the rate of penalty in the case of mis-reporting of the income is 200% of the tax.

Income Tax Department will issue a Notice Under Section 148A to the Donors of the Registered Unrecognized Political Parties (RUPP)

IT notice us 148A to bogus political donation to 23 political parties

<h2>Abstract: </h2>
In this article, the author has attempted to analyze the provisions of the new scheme of reassessment in the light of judgement of CIT vs. Jet Airways (I) Limited (2011) 331 ITR 236 (Bom.) and other judgement (which infact were relevant for the old regime of the reassessment) in which it was concluded that once additions have not been sustained/made on the issues forming part of notice issued under section 148 of the Income Tax Act, 1961, no further addition can be made to the issues found subsequently in the course of proceedings under section 147 of the Income Tax Act, 1961. Now, it is important to analyze that whether the ratio / interpretation laid down in those judgements still are relevant in the new regime of reassessment as introduced by the Finance Act, 2021.
<h2>Introduction of Old and New Reassessment Proceedings: </h2>
The erstwhile provision of the section 147 provides that &ldquo;If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section&hellip;&rdquo;
Various High Courts and Tribunal had concluded that the AO has reason to believe, that any income chargeable to tax has escaped assessment, for any assessment year, and it was found, that the section puts no bar on the powers of the AO, to put to tax, any other income, chargeable to tax, which has escaped assessment, and which subsequently comes to his notice, in the course of the proceedings, but then, the prefixing words "and also", which succeeded "any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of ss. 148 to 153, assess or reassess such income". This expression was found to be making clear, that existence of the income, for which the AO formed belief, to have escaped assessment, is a precondition, for including any other income chargeable to tax, escaping assessment, and coming to the notice of the AO subsequently, in the course of the proceedings. Thus, unless and until such income, as giving rise to form belief, for escaping assessment, continues to exist, and constitutes a subject-matter of assessment, under s.147 "no other income" coming to the notice of the AO, during the course of the proceedings, can be roped in.
Indeed, the above interpretation was valid for the old regime. However, it is relevant to analyze the new regime in context of such ratio. Does the ratio laid down by various High Courts is still hold good in context of new regime? In the reading of the Author, the answer is yes, in fact, in the reading of the author, the ratio of said judgements has been deeply incorporated in the new regime. So, let&rsquo;s analyze the provisions of the new regime of reassessment.
<h2>Provision of Section 147 of New Regime:</h2>
The section 147 of the Act provides as under:
Income escaping assessment.
<ol start="147">
<li> If any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessing Officer may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for such assessment year (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year).</li>
</ol>
Explanation.&mdash;For the purposes of assessment or reassessment or recomputation under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, irrespective of the fact that the provisions of section 148A have not been complied with.]
The main provision of the section 147 provides that the Assessing Officer may, &ldquo;subject to the provisions of sections 148 to 153&rdquo;, assess or reassess &ldquo;such income&rdquo;. Here it is relevant submit that the reassessment under new regime is subject to the provisions of the Section 148 to 153 and the phrase &ldquo;such income&rdquo; means the income which has escaped assessment and for which the proceedings u/s 148A has been / was initiated.
Now, let&rsquo;s analyze the explanation to section 147 which provides that Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, irrespective of the fact that the provisions of section 148A have not been complied with.
The main provision provides that Assessing Officer may, &ldquo;subject to the provisions of sections 148 to 153&rdquo; assess or reassess &ldquo;such income&rdquo; and explanation to said section provides that the AO may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, irrespective of the fact that the provisions of section 148A have not been complied with.
So, the explanation to section 147 only carve out / relaxed the requirement of the section 148A proceedings and the said explanation have not carve out / relaxed the requirement of other applicable range of the sections as contained in the main provision of the section 147. Therefore, in the reading of the author, 
<ul>
<li>the AO can assess or reassess &ldquo;other issue&rdquo; and for making assessment of such other issue. For making such assessment or reassessment of the &ldquo;other issue&rdquo; the AO has not to comply with the provisions of the section 148A (i.e. Conducting inquiry, providing opportunity before issue of notice under section 148).</li>
<li>However, for making assessment of such &ldquo;other issue&rdquo;, the AO has to comply with the other range of the provisions i.e. 148 to 153 (except 148A) as mandated by the main section (i.e. Sec 147).</li>
</ul>
Hence, for making an assessment of the other issue, the AO must have to issue a notice u/s 148 and must have to fulfil the requirements of the other provisions of the range of sections as mandated by the main section (i.e. Sec 147).
&ldquo;The legislature could not be presumed to have intended to give blanket powers to the Assessing Officer that on assuming jurisdiction under Section 147 regarding assessment or reassessment of escaped income, he would keep on making roving inquiry and thereby including different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. For every new issue coming before Assessing Officer during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice under Section 148.&rdquo; This observation was made by the Hon&rsquo;ble Delhi High Court in the case of Ranbaxy Laboratories Limited vs CIT (ITA No. 148/2008). The said observation is apparently fit in the new regime as well when we read main provision of the section 147 along with explanation thereto.
In the context of the above discussion, it is also relevant here to analyze the contents of the section 148 notice. The same are reproduced as under:
<table>
<tbody>
<tr>
<td width="623">
<h2 style="text-align: center;">Notice under section 148 of the Income-tax Act,1961</h2>
&nbsp;
Sir/Madam/ M/s.
&nbsp;
&middot; I have the following information in your case or in the case of the person in respect of which you are assessable under the Income tax Act, 1961(here in after referred to as "the Act") for Assessment Year &hellip;&hellip;&hellip;.
&nbsp;
&middot; information flagged by the risk management strategy formulated in this regard suggesting that income chargeable to tax has escaped assessment within the meaning of section 147 of the Act. Order under sub-section (d) of section 148A of the Act has been passed in such case vide DIN &hellip;&hellip;&hellip;&hellip;&hellip;.. dated &hellip;&hellip;&hellip;&hellip;&hellip;. and annexed herewith for reference,
&nbsp;
2. I, therefore, propose to assess or reassess such income or recompute the loss or the depreciation allowance or any other, allowance or deduction for the Assessment Year &hellip;&hellip;.. and I, hereby, require you to furnish, within 30 days from service of this notice, a return in the prescribed form of the Assessment Year &hellip;&hellip;&hellip;.
&nbsp;
3. This notice is being issued after obtaining the prior approval of the &hellip;&hellip;&hellip;&hellip;&hellip;. accorded on date &hellip;&hellip;&hellip;&hellip;&hellip;&hellip; vide Reference No. &hellip;&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;&hellip;
</td>
</tr>
</tbody>
</table>
&nbsp;
It is apparently clear from the reading of the notice u/s 148 that the law makers, empower the AO to assess or reassess the specific issue involved in the assessment. The reading of the main provisions of the section 147 read with explanation thereto and read with the content of the notice u/s 148, make it clear that the AO is empowered only to assess or reassess &ldquo;issue&rdquo; which forming part of the 148A proceedings, forming part of 148 notice and such &ldquo;issue&rdquo; fulfilled the requirements of the other applicable sections. i.e. Section 148 to 153. Therefore, the AO is not impowered to assess or reassess other issues which comes to his notice subsequently in the course of the proceedings u/s 147 without fulfilling the requirements of the section 148 to 153 (except section 148A).
Above reading by the author is also rational as the legislature could not be presumed to have intended to give blanket powers to the Assessing Officer that on assuming jurisdiction under Section 147 regarding assessment or reassessment of escaped income, he would keep on making roving inquiry and thereby including different items of income not connected or related with the original issue.
Around decade back, the concept of the limited scrutiny was introduced in the regular assessment proceedings, in which the AO was empowered to examine only the issues identified by the CASS (however, with approval of the higher authorities, the AO is empowered to examine the other issues as well). This attempt of the Board / CBDT can be analyzed in way to reduce litigation and to do not empower the AO to keep on making roving inquiry and to give blanket powers of the assessment to the AO.
<h2>Conclusion:</h2>
Therefore, in view of the author, the following conclusion can be drawn from the reading of the above article:
<ol>
<li>The AO is empowered to assess / reassesses &ldquo;other issue&rdquo; (i.e. the issue which not form part of the 148A proceedings and 148 notice). However, for making assessment / reassessment of such &ldquo;other issue&rdquo; the AO has to comply with the provisions of the section 148 to 153 (except section 148A).</li>
</ol>
&nbsp;
<ol start="2">
<li>The assessment proceedings u/s 147 of the Act are issue specific and hence, for every new issue (which comes to his notice subsequently in the course of the proceedings under this section) must fulfill the requirements of the section 148 to 153 (except section 148A).</li>
</ol>
&nbsp;
<ol start="3">
<li>The Judgement of the Bombay High Court in the case of CIT vs. Jet Airways (I) Limited (2011) 331 ITR 236 (Bom.) and Hon&rsquo;ble Delhi High Court in the case of Ranbaxy Laboratories Limited vs CIT (ITA No. 148/2008), which are relevant for the old regime, can be said to have deeply incorporated in the new regime of reassessment as well.</li>
</ol>
&nbsp;
<h2>About Author:</h2>
The author, Manish Harchandani (founder of Harchandani &amp; Associates, Chartered Accountants) is practicing Chartered Accountant and engage in the practice of Direct Tax, International Taxation, Transfer Pricing, FEMA and FCRA related advisory, litigation &amp; compliance matters. He can be reached at <a href="mailto:info@harchandani.in">info@harchandani.in</a>, <a href="https://harchandani.in/">https://harchandani.in/</a> and <a href="http://www.linkedin.com/in/mnharchandani">www.linkedin.com/in/mnharchandani</a>
&nbsp;
<h2>Disclaimer:</h2>
The contents of this publication are solely for informational purpose. It does not constitute professional advice or a formal recommendation. While due care has been taken in preparing this publication, the existence of mistakes and omissions herein is not ruled out. Neither the author nor the publisher or its affiliates accepts any liabilities for any loss or damage of any kind arising out of any inaccurate or incomplete information in this publication nor for any actions taken in reliance thereon.
This artical was originally publised on Taxmann (Ref: [2023] 148 taxmann.com 170 (Article))

New Scheme of Reassessment - Whether AO is empowered make an assessment of “other issue” as well?

assessment under section 147 and 148 income tax act

The RBI has rationalised the FIRMS portal in order auto acknowledge the Forms and to process the same for determining any violation involved therein.
Following are the salient features of the changes made on the FIRMS portal:
- All forms submitted with the requisite documents will be auto-acknowledged on the FIRMS portal with a time stamp and an auto-generated e-mail will be sent to the applicant.
- The forms submitted within prescribed timelines, will be verified by the AD banks based on the uploaded mandatory documents and ensure that the same are in compliance with the extant guidelines.
- The system would identify the delay in reporting, if any.
- For forms filed with a delay less than or equal to three years, the AD banks will approve the same, subject to payment of LSF.
- The LSF will be computed by the system and an e-mail will be sent to the applicant and the concerned Regional Office (RO) of RBI specifying the amount and the timeline within which it is to be paid to the concerned RO of RBI.
- Once the LSF amount is realised, the concerned RO will update the status in the FIRMS portal and the updated status will be communicated to the applicant through a system generated e-mail, which can also be viewed in the FIRMS portal.
- The AD bank will approve the forms filed with a delay greater than three years, subject to compounding of contravention. The applicant may thereafter approach RBI with their application for compounding.
- The remarks of the AD Bank for rejection of forms, if any, will be communicated to the applicant through a system generated e-mail and the same can also be viewed in the FIRMS portal.
Conclusions:
These changes are welcomed steps which are intended to improve transparency and better implementation of the reporting requirements. Earlier, the AD Banks had to process these forms within three working days, however, now they have to process these forms within five working days. It is also important here to state that the relevant date for the compliance is date of reporting to the RBI by the AD Bank and not the date of uploading. So, it is advisable to the user to file the relevant forms much before the due date to avoid any delay which may result in Late Submission Fees or Compounding Fees.

Foreign Direct Investment in India - Update on Reporting and Compliances

FDI Foreign Direct Investment Reporting Compliances Update

<h2>Introduction of the One Person Company</h2>
One Person Company (OPC) in India is a new concept that has been introduced with the Companies Act 2013. This form of company is mainly designed for an individual who are not willing to enter in partnership with others but want a corporate structure. OPC can be termed as Organized / Corporate Structure of the Proprietorship along-with a feature of limited liability.
Section 2(62) of the Act provides that the &ldquo;One Person Company means a company which has only one person as a member.&rdquo; That means the 100% of shareholding being held by the single individual.
However, it is important to note that no individual shall be eligible to incorporate more than one OPC or become a nominee in more than one such company. However, if an individual, being a member in OPC becomes a member in another OPC by virtue of his being a nominee in that OPC within a period of 180 days then he shall withdraw his membership from either of the OPCs within 180 days.
<h2>Whether FDI in OPC is allowed?</h2>
In OPC, the whole shares are held by single individual i.e. a natural person and not by any legal entity. Therefore, FDI by the Foreign Company in the OPC will not be permissible as per the provisions of Companies Act however, FDI by non-resident Indian who is citizen of India may form an OPC.
NRIs can invest in OPC on non-repatriation basis as well as repatriation basis in OPC.
<h2>Investment on Non-Repatriation basis</h2>
Investment on Non-Repatriation basis is treated at par with domestic investment. Therefore, FEMA pricing guidelines and reporting compliances are not applicable at the time of investment. &nbsp;The disinvestment / sales proceeds shall be credited only to the NRO account of the person concerned, irrespective of the type of account from which the consideration was paid.
There are certain businesses in which investment is prohibited under this route such as a Nidhi company or a company engaged in agricultural or plantation activities or real estate business or construction of farm houses or dealing in transfer of development rights.
The amount of consideration shall be paid as inward remittance from abroad through banking channels or out of funds held in NRE/FCNR(B)/NRO account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.
<h2>Investment on Repatriation basis</h2>
Investment on Repatriation basis will require compliance with sectoral caps and conditions, FEMA pricing guidelines and reporting compliance such as FCGPR, FCTRS, FLA etc. The Sales proceed can either be credit to the NRE account or can be transfer to the foreign bank account (subject to deduction of applicable taxes)
In this route, the prohibited sectors are: (a) Lottery business including Government or private lottery, online lotteries, etc. (b) Gambling and betting including casinos, etc. (c) Chit funds (d) Nidhi company (e) Trading in Transferable Development Rights (f) Real estate business or construction of farm houses (g) Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes. (h) Activities or sectors not open to private sector investment e.g. (I) Atomic energy and (II) Railway operations (other than permitted activities mentioned in paragraph (3) of Schedule I) (i) Foreign technology collaborations in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for lottery business and gambling and betting activities.
The amount of consideration shall be paid as inward remittance from abroad through banking channels or out of funds held in NRE/FCNR(B)/Escrow account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.
Disclaimer
The information contained in this article is for general informational purposes only and is not intended as legal advice or to create an professional-client relationship. The contents of this article should not be relied upon as a substitute for obtaining legal advice from a qualified attorney. No professional-client relationship is formed by the use of this information, and no reader should act on this information without seeking professional / legal counsel. Hence, we recommend that professional advice is sought before taking any action on specific issues before entering into any investment or financial obligation based on this Content

Foreign Direct Investment (FDI) in One Person Company (OPC)

There are merits and demerits of both the old tax regime and new regimes, it becomes dificult for the taxpayers to pick the best suited tax regime. Whether to opt new tax regime or old tax regime, the said decision shall be based on quantom of allowable deductions such HRA, Deductions u/s 80C, Interest Dedution of Housing Loan, Deductions u/s 80TTA and 80TTB etc.
The following table exhibit a break even point of the amount of total deductions at which, the taxes under both regime would be equal. This table would be useful for the FY 2023-24 only.
So, if your actual deductions are More than Break Even Point of deduction, then you must opt for old tax regime as it would be lead to decrease in tax liability. 
And if, your actual deductions are Less than Break Even Point of deduction, then you must opt for new tax regime as it would be lead to decrease in tax liability.
Table for Analysis
For the Financial Year 2023-24
<img src="https://res.cloudinary.com/netd/image/upload/v1675430514/post-img/vjvgkiscbbconk1gx97e.jpg" alt="Tax under old tax and new tax regim" width="800" height="1131" />

How to choose beneficial tax regime. Whether to opt for old old tax regime or for new tax regime.

How to choose beneficial tax regime old old tax regime new tax regime

What is late submission fees (LSF) under FEMA as provided by the RBI?
LSF is simple process of paying a prescribed late fee to regularise reporting delays of various complianes applicable under the FEMA such as delay in reporting of Form ODI Part-II/ APR, FCGPR (B), FLA Returns, Form OPI, FC-GPR, FCTRS, Form ESOP, Form LLP(I), Form LLP(II), Form CN, Form DI, Form InVi, Form ODI-Part I, Form ODI-Part III, Form FC, Form ECB, Form ECB-2, Revised Form ECB or any other return which captures flows or returns which capture reporting of non-fund transactions or any other transactional reporting.
LSF payment is an additional facility for regularizing reporting delays without undergoing the lenghthy compounding procedure. LSF is voluntary and advisable. However, reporting party may still opt for compounding by not paying LSF.
&nbsp;
What is the process to LSF?
Belated reporting or cmpliances received by the AD Bank are forwarded to the RBI. The RBI shall then condone the delay and issue a conditional acknowledgment subject to payment of LSF within a stipulated timeframe.
LSF is levied as per the computation matrix. Final acknowledgment of reporting shall be issued only upon payment of LSF by the reporting party.
LSF is not refundable.
LSF Matrix
<table>
<tbody>
<tr>
<td width="312">
Type of Reporting delays
</td>
<td width="312">
LSF in Rs
</td>
</tr>
<tr>
<td width="312">
&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Form ODI Part-II
&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; APR
&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; FCGPR (B)
&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; FLA Returns
&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Form OPI,
&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; evidence of investment or any other return which does not capture flows or any other periodical reporting
</td>
<td width="312">
Rs. 7,500/-
</td>
</tr>
<tr>
<td width="312">
&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; FC-GPR
&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; FCTRS
&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Form ESOP
&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Form LLP(I)
&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Form LLP(II)
&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Form CN
&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Form DI
&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Form InVi
&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Form ODI-Part I,
&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Form ODI-Part III,
&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Form FC,
&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Form ECB,
&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Form ECB-2,
&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Revised Form ECB or any other return which captures flows or returns which capture reporting of non-fund transactions or any other transactional reporting
</td>
<td width="312">
[ Rs. 7,500/- + (0.025% &times; A &times; n) ]
&nbsp;
&nbsp;
&nbsp;
</td>
</tr>
</tbody>
</table>
&nbsp;
Notes:
<ul>
<li>&ldquo;A&rdquo; is the amount involved in the delayed reporting.</li>
</ul>
&nbsp;
<ul>
<li>&ldquo;n&rdquo; is the number of years of delay in submission rounded-upwards to the nearest month and expressed up to 2 decimal points.</li>
</ul>
&nbsp;
<ul>
<li>LSF amount is per return. However, for any number of Form ECB-2 returns, delayed submission for each LRN will be treated as one instance for the fixed component. Further, &lsquo;A&rsquo; for any ECB-2 return will be the gross inflow or outflow (including interest and other charges), whichever is more.</li>
</ul>
&nbsp;
<ul>
<li>Maximum LSF amount will be limited to 100 per cent of &lsquo;A&rsquo; and will be rounded upwards to the nearest hundred.</li>
</ul>
&nbsp;
<ul>
<li>Where an advice has been issued for payment of LSF and such LSF is not paid within 30 days, such advice shall be considered as null and void and any LSF received beyond this period shall not be accepted. If the applicant subsequently approaches for payment of LSF for the same delayed reporting, the date of receipt of such application shall be treated as the reference date for the purpose of calculation of &ldquo;n&rdquo;.</li>
</ul>
&nbsp;
<ul>
<li>The facility for opting for LSF shall be available up to three years from the due date of reporting/ submission. The option of LSF shall also be available for delayed reporting/submissions under the Notification No. FEMA 120/2004-RB and earlier corresponding regulations, up to three years from the date of notification of Foreign Exchange Management (Overseas Investment) Regulations, 2022.</li>
</ul>
&nbsp;
<ul>
<li>In case a person responsible for any submission or filing under the provisions of FEMA, neither makes such submission/filing within the specified time nor makes such submission/filing along with LSF, such person shall be liable for penal action under the provisions of FEMA, 1999.</li>
</ul>
&nbsp;
Concluding Remarks:
LSF is business friendly approach which bypass the lenghthy process of compounding under the FEMA. This initiative can be viewed from the perspective of ease of doing business.&nbsp;

RBI Revised a matrix of late submission fees / penalty under FEMA vide RBI/2022-23/122 A.P. (DIR Series) Circular No. 16 dated September 30, 2022 

Late filing penalty under FEMA

New Overseas Direct Investment (ODI) / Overseas Investment (OI) Regime under the FEMA

FEMA ODI New Rules, Regulations Overseas Investment OI ODI new rules

The Ministry of Home Affairs, on 1st July 2022 issues a new notification vide S.O. 3025(E) dated 1st July 2022 in suppression of earlier notification vide S.O. 2291(E), dated the 5th June, 2018.
The said new notification is reproduced as under:
MINISTRY OF HOME AFFAIRS 
NOTIFICATION
New Delhi, the 1st July, 2022
S.O. 3025(E).&mdash;In exercise of the powers conferred by sub-section (1) of section 41 of the Foreign Contribution (Regulation) Act, 2010 (42 of 2010) and in supersession of the notification of the Government of India, Ministry of Home Affairs published in the Gazette of India, Extraordinary, Part-II, Section 3, Subsection (ii), vide S.O. 2291(E), dated the 5th June, 2018, except as respects things done or omitted to be done before such supersession, the Central Government hereby specifies the officer in column (4) of the Table, who may, before institution of any prosecution under the said Act, compound the offences under the said Act specified in column (2), on payment of the amount specified in column (3), of the said Table, namely:-
<table style="width: 100%; height: 2357px;">
<tbody>
<tr style="height: 67.1875px;">
<td style="text-align: center; width: 8.62866%; height: 67.1875px;" width="56">
Sr. No.
</td>
<td style="text-align: center; width: 34.9769%; height: 67.1875px;" width="227">
Offence
</td>
<td style="text-align: center; width: 26.1941%; height: 67.1875px;" width="170">
Amount of Penalty
</td>
<td style="text-align: center; width: 26.1941%; height: 67.1875px;" width="170">
Officer competent for compounding
</td>
</tr>
<tr style="height: 47.5938px;">
<td style="text-align: center; width: 8.62866%; height: 47.5938px;" width="56">
(1)
</td>
<td style="text-align: center; width: 34.9769%; height: 47.5938px;" width="227">
(2)
</td>
<td style="text-align: center; width: 26.1941%; height: 47.5938px;" width="170">
(3)
</td>
<td style="text-align: center; width: 26.1941%; height: 47.5938px;" width="170">
(4)
</td>
</tr>
<tr style="height: 145.562px;">
<td style="width: 8.62866%; height: 145.562px;" width="56">
1.
</td>
<td style="width: 34.9769%; height: 145.562px;" width="227">
Offence punishable under section 35 for accepting any hospitality in contravention of section 6 of the Act.
</td>
<td style="width: 26.1941%; height: 145.562px;" width="170">
Ten thousand rupees
</td>
<td style="width: 26.1941%; height: 145.562px;" width="170">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
<tr style="height: 218.344px;">
<td style="width: 8.62866%; height: 218.344px;" width="56">
2.
</td>
<td style="width: 34.9769%; height: 218.344px;" width="227">
Offence punishable under section 37 for transferring any foreign contribution to any other person in contravention of section 7 of the Act or any rule made thereunder:
Provided that transfer of foreign contribution (inclusive of more than one instances of transfer, if any) shall be compoundable only once.
</td>
<td style="width: 26.1941%; height: 218.344px;" width="170">
One lakh rupees or ten per cent. of such transferred foreign contribution, whichever is higher.
</td>
<td style="width: 26.1941%; height: 218.344px;" width="170">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
<tr style="height: 165.156px;">
<td style="width: 8.62866%; height: 165.156px;" width="56">
3.
</td>
<td style="width: 34.9769%; height: 165.156px;" width="227">
Offence punishable under section 37 for defraying of foreign contribution beyond twenty per cent of the contribution received for administrative expenses in contravention of section 8 of the Act.
</td>
<td style="width: 26.1941%; height: 165.156px;" width="170">
One lakh rupees or five per cent. of such foreign contribution so defrayed beyond the permissible limit, whichever is higher
</td>
<td style="width: 26.1941%; height: 165.156px;" width="170">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
<tr style="height: 145.562px;">
<td style="width: 8.62866%; height: 145.562px;" width="56">
4.
</td>
<td style="width: 34.9769%; height: 145.562px;" width="227">
Offence punishable under section 35 for accepting foreign contribution in contravention of section 11 of the Act.
</td>
<td style="width: 26.1941%; height: 145.562px;" width="170">
One lakh rupees or thirty per cent. of the foreign contribution received, whichever is higher.
</td>
<td style="width: 26.1941%; height: 145.562px;" width="170">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
<tr style="height: 145.562px;">
<td style="width: 8.62866%; height: 145.562px;" width="56">
&nbsp;
</td>
<td style="width: 34.9769%; height: 145.562px;" width="227">
(a) receiving foreign contribution in any account other than specified account in his application for grant of certificate;
</td>
<td style="width: 26.1941%; height: 145.562px;" width="170">
One lakh rupees or five per cent. of the foreign contribution received in such account, whichever is higher;
</td>
<td style="width: 26.1941%; height: 145.562px;" width="170">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
<tr style="height: 159.562px;">
<td style="width: 8.62866%; height: 159.562px;" width="56">
&nbsp;
</td>
<td style="width: 34.9769%; height: 159.562px;" width="227">
(b) non-reporting the prescribed amount of foreign remittance or source and manner of such remittance by banks and authorised persons.
&nbsp;
</td>
<td style="width: 26.1941%; height: 159.562px;" width="170">
One lakh rupees or three per cent. of the foreign contribution received or deposited in such account, whichever is higher.
</td>
<td style="width: 26.1941%; height: 159.562px;" width="170">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
<tr style="height: 145.562px;">
<td style="width: 8.62866%; height: 145.562px;" width="56">
&nbsp;
</td>
<td style="width: 34.9769%; height: 145.562px;" width="227">
(c) receiving and depositing any fund other than foreign contribution in the account or accounts opened for receiving foreign contribution or for utilising the foreign contribution.
</td>
<td style="width: 26.1941%; height: 145.562px;" width="170">
One lakh rupees or two per cent. of such deposit, whichever is higher.
</td>
<td style="width: 26.1941%; height: 145.562px;" width="170">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
<tr style="height: 184.75px;">
<td style="width: 8.62866%; height: 184.75px;" width="56">
6.
</td>
<td style="width: 34.9769%; height: 184.75px;" width="227">
Offence punishable under section 37 for non-furnishing of intimation of the amount of each foreign contribution received and the source from which and in the manner in which, such foreign contribution is received as required under section 18 of the Act.
</td>
<td style="width: 26.1941%; height: 184.75px;" width="170">
One lakh rupees or five per cent. of the foreign contribution received during the period of non submission, whichever is higher.
</td>
<td style="width: 26.1941%; height: 184.75px;" width="170">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
<tr style="height: 165.156px;">
<td style="width: 8.62866%; height: 165.156px;" width="56">
7.
</td>
<td style="width: 34.9769%; height: 165.156px;" width="227">
Offence punishable under section 37 for not maintaining the account and records of foreign contribution received and manner of its utilisation as required section 19 of the Act.
</td>
<td style="width: 26.1941%; height: 165.156px;" width="170">
One lakh rupees or five per cent. of the foreign contribution during the relevant period of nonmaintenance of accounts, whichever is higher.
</td>
<td style="width: 26.1941%; height: 165.156px;" width="170">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
<tr style="height: 145.562px;">
<td style="width: 8.62866%; height: 145.562px;" width="56">
8.
</td>
<td style="width: 34.9769%; height: 145.562px;" width="227">
Offence punishable under sections 3, 11 and 35 of the Act read with rule 6 for failure to intimate about receipt of foreign contribution within the prescribed time limit.
</td>
<td style="width: 26.1941%; height: 145.562px;" width="170">
Five per cent. of such foreign contribution received in a financial year.
</td>
<td style="width: 26.1941%; height: 145.562px;" width="170">
The Director, or as the case may be, the Deputy Secretary incharge of the section responsible for the administration of the Act.
</td>
</tr>
<tr style="height: 165.156px;">
<td style="width: 8.62866%; height: 165.156px;" width="56">
9.
</td>
<td style="width: 34.9769%; height: 165.156px;" width="227">
Offence punishable under section 37, section 17 and section 19 of the Act read with clause (e) of sub-rule (1) of rule 9 for failure to intimate about opening of account or accounts within the prescribed time.
</td>
<td style="width: 26.1941%; height: 165.156px;" width="170">
Ten thousand rupees per utilisation account for failure to intimate within the prescribed time.
</td>
<td style="width: 26.1941%; height: 165.156px;" width="170">
The Director, or as the case may be, the Deputy Secretary incharge of the section responsible for the administration of the Act.
</td>
</tr>
<tr style="height: 165.156px;">
<td style="width: 8.62866%; height: 165.156px;" width="56">
10.
</td>
<td style="width: 34.9769%; height: 165.156px;" width="227">
Offence punishable under section 37, section 17 and section 19 of the Act read with clause (e) of sub-rule (2) of rule 9 for failure to intimate about opening of account or accounts within the prescribed time.
</td>
<td style="width: 26.1941%; height: 165.156px;" width="170">
Ten thousand rupees per utilisation account for failure to intimate within the prescribed time.
</td>
<td style="width: 26.1941%; height: 165.156px;" width="170">
The Director, or as the case may be, the Deputy Secretary incharge of the section responsible for the administration of the Act.
</td>
</tr>
<tr style="height: 145.562px;">
<td style="width: 8.62866%; height: 145.562px;" width="56">
11.
</td>
<td style="width: 34.9769%; height: 145.562px;" width="227">
Offence punishable under section 37, section 11 and section 17 of the Act read with rule 17A, for failure to intimate about details within the prescribed time.
</td>
<td style="width: 26.1941%; height: 145.562px;" width="170">
Ten thousand rupees for each violation of failure to intimate within the prescribed time.
</td>
<td style="width: 26.1941%; height: 145.562px;" width="170">
The Director, or as the case may be, the Deputy Secretary incharge of the section responsible for the administration of the Act.
</td>
</tr>
<tr style="height: 145.562px;">
<td style="width: 8.62866%; height: 145.562px;" width="56">
12.
</td>
<td style="width: 34.9769%; height: 145.562px;" width="227">
Offence punishable under section 37 and section 19 of the Act read with rule 13, for failure to place on website as prescribed in clause (a) of rule 13 within the prescribed time.
</td>
<td style="width: 26.1941%; height: 145.562px;" width="170">
Ten thousand rupees for each violation.
</td>
<td style="width: 26.1941%; height: 145.562px;" width="170">
The Director, or as the case may be, the Deputy Secretary incharge of the section responsible for the administration of the Act.
</td>
</tr>
</tbody>
</table>
&nbsp;
2. The amount of penalty computed under column (3) of the Table in respect of any offence or offences referred to in column (2) thereof shall not be more than the value of the foreign contribution received.
3. The application to compound offences specified above may be processed in physical or electronic form as may be specified by the Government.
&nbsp;
[F. No. II/21022/23 (04)/2021-FCRA-III]
V.S. RANA, Director (FCRA)

Various Penalties (Compounding Fees) under the FCRA-As amended from 1st July 2022

Penalty under FCRA, Late filing fees and Penalties under FCRA

The Ministry of Home Affairs issued a notification vide G.S.R. 506(E) dated 1st July, 2022 and amended certain rules of the Foreign Contribution (Regulation) Rules, 2011. The main amendments are discussed as under:
&nbsp;
<h2>1. Increase the monetary limit of Foreign Contribution received from relative - Rule 6 of the FC Rules</h2>
Earlier, any person receiving foreign contribution in excess of Rs. 1 Lakhs or equivalent thereto in a financial year from any of his relatives shall inform the Central Government regarding the details of the foreign contribution received by him in electronic form in Form FC-1 within 30 days from the date of receipt of such contribution.
Now by virtue of the amendment, the monetary limit of Rs. 1 Lakh increased to Rs. 10 Lakhs and the time limit for reporting of such FC also increased from 15 days to 45 days.
<h2>2. Increase the limit for intimation of the Bank Account - Rule 9(1)(e) &amp; 9(2)(e) of the FC Rules</h2>
Earlier, the person may open one or more accounts in one or more banks for the purpose of utilising the foreign contribution after it has been received and, in all such cases, intimation in electronic form in Form FC-6D shall be furnished to the Secretary, MHA, New Delhi within 15 days of the opening of any account.
In a same way, a person seeking prior permission under this rule may open one or more accounts in one or more banks for the purpose of utilising the foreign contribution after it has been received and in all such cases intimation in electronic form in Form FC-6D shall be furnished to the Secretary, Ministry of Home Affairs, New Delhi within 15 days of the opening of any account.
Now by virtue of the amendment, the limit for intimation for the both rules increased from 15 days to 45 days.
<h2>3. Declaration of Quarterly Foreign Contribution on the official website is no longer required - Rule 13(b)</h2>
Earlier, a person receiving foreign contribution in a quarter of the financial year shall place details of foreign contribution received on its official website or on the website as specified by the Central Government within fifteen days following the last day of the quarter in which it has been received clearly indicating the details of donors, amount received and date of receipt.
Now, the said clause has been omitted and consequently, the requirement to place details of foreign contribution received in a quarter on its official website is no longer required.
However, it may kindly be noted that the placing of the annual audited accounts on official website of the NGO is still mandatory
<h2>4. Other Miscellaneous Amendments</h2>
Earlier, any change in the bank account, name, address, aim, objectives or key members were required to be intimated with 15 days from the date of such changes, however, by the amendment, the said time limit are also increased to 45 days. (Rule 17A)
Further, Rule 20 provides that the application for revision of order passed by the competent authority under section 32 of the FCRA Act shall be made on plain paper, however, by amendment, the Government may prescribe form and manner for making such revision application.

Important FCRA Amendments (Applicable from 1st July 2022)

FCRA amendment relating to gift from relative and quarterly report

<h2>FCRA Registration - Overview</h2>
Any association such as Charitable Trusts, Societies, Section 8 Company, NGO etc. having a definite cultural, economic, educational religious or social program can accept foreign contribution. However, such association should not be of a political nature. For accepting such contribution, the association must have been registered with Central Government under section 12(1) of Foreign Contribution Regulation Act (FCRA) read with section 11(1) of the FCRA.
Alternatively, it can accept foreign contribution with prior permission of Central Government, even if not registered as discussed above. The prior permission is for specific donor and specific purpose.
Thus, for accepting Foreign Contribution, there are two kinds of permissions:
1. Regular registration is required if the foreign contribution is or will be obtained on regular basis,
2. Prior permission (without registration) is required to be obtained when such foreign contribution is one time and not on a regular basis.
<h2>Eligibility and condition for granting FCRA Registration or FCRA Prior Permission</h2>
Section 12(4) of the FCRA contain various conditions and eligibility criteria for the purposes of obtaining registration under the FCRA or obtaining prior permission. These are discussed as under:
(a) the person making an application for registration or grant of prior permission
(i) is not fictitious or benami; 
(ii) has not been prosecuted or convicted for indulging in activities aimed at conversion through inducement or force, either directly or indirectly, from one religious faith to another; 
(iii) has not been prosecuted or convicted for creating communal tension or disharmony in any specified district or any other part of the country; 
(iv) has not been found guilty of diversion or mis-utilisation of its funds; 
(v) is not engaged or likely to engage in propagation of sedition or advocate violent methods to achieve its ends; 
(vi) is not likely to use the foreign contribution for personal gains or divert it for undesirable purposes; 
(vii) has not contravened any of the provisions of this Act; 
(viii) has not been prohibited from accepting foreign contribution;
(b) the person making an application for registration under sub-section (1) has undertaken reasonable activity in its chosen field for the benefit of the society for which the foreign contribution is proposed to be utilised;
In this context, Rule 9(1)(f) of the Foreign Contribution (Regulation) Rules, 2011 (FCRA Rules) provides that A person seeking registration under clause (b) of sub-section (4) of section 12 of the Act shall meet the following conditions, namely:
(i) it shall be in existence for three years and have spent a minimum amount of rupees fifteen lakh on its core activities for the benefit of society during the last three financial years:
Provided that the Central Government, in exceptional cases or in cases where a person is controlled by the Central Government or a State Government may waive the conditions;
(ii) if the person wants inclusion of its existing capital investment in assets like land, building, other permanent structures, vehicles, equipment in the computation of its spending during last three years, then the chief functionary shall give an undertaking that the assets shall be vested henceforth with the person till the validity of the certificate and they shall be utilised only for the activities covered under the Act and the rules made thereunder and shall not be diverted for any other purpose till the validity of its certificate of registration remains valid.
(c) the person making an application for giving prior permission under sub-section (1) has prepared a reasonable project for the benefit of the society for which the foreign contribution is proposed to be utilised;
(d) in case the person being an individual, such individual has neither been convicted under any law for the time being in force nor any prosecution for any offence pending against him; 
(e) in case the person being other than an individual, any of its directors or office bearers has neither been convicted under any law for the time being in force nor any prosecution for any offence is pending against him; 
(f) the acceptance of foreign contribution by the person referred to in sub-section (1) is not likely to affect prejudicially&mdash;
(i) the sovereignty and integrity of India; or 
(ii) the security, strategic, scientific or economic interest of the State; or 
(iii) the public interest; or 
(iv) freedom or fairness of election to any Legislature; or 
(v) friendly relation with any foreign State; or 
(vi) harmony between religious, racial, social, linguistic, regional groups, castes or communities; 
(g) the acceptance of foreign contribution referred to in sub-section (1),&mdash; 
(i) shall not lead to incitement of an offence; 
(ii) shall not endanger the life or physical safety of any person.
Other Conditions
1. No person shall prefer a second application for registration or prior permission within a period of six months after submitting an application either for the grant of prior permission for the same project or for registration. (Rule 9(3) of the FCRA Rules)
2. Any person making an application for obtaining prior permission under clause (a) of sub-rule (1) shall have an FCRA Account. (Section 12(1A) and Rule 9(2)(d) of the FCRA Rules)
3. A person seeking prior permission for receipt of specific amount from a specific donor for carrying out specific activities or projects mentioned in clause (c) of sub section (4) of section 12 of the Act shall meet the following criteria, namely:
(i) submit a specific commitment letter from the donor indicating the amount of foreign contribution and the purpose for which it is proposed to be given;
(ii) for the Indian recipient persons and foreign donor organisations having common members, prior permission shall be granted to the person subject to it satisfying the following conditions, namely:
(A) the chief functionary of the recipient person shall not be a part of the donor organisation;
(B) seventy-five per cent of the office-bearers or members of the governing body of the person shall not be members or employees of the foreign donor organisation;
(C) in case of foreign donor organisation being a single individual that individual shall not be the chief functionary or office bearer of the recipient person; and
(D) in case of a single foreign donor, seventy-five per cent of the office bearers or members of the governing body of the recipient person shall not be the family members or close relatives of the donor.
&nbsp;
<h2>Government Fees for FCRA Registration or Prior Approval</h2>
Rule 9(4) provides the Fees for the FCRA Registration or Prior Approval. The same is mentioned as under:
- Rs. 5,000 for application of grant of prior permission
- Rs. 10,000 for application of grant of registration
(the above fees is subject to change from time to time)
&nbsp;
<h2>AADHAAR or passport (in case of foreigner) to be mandatory for the purpose of FCRA Registration or Prior Approval</h2>
Section 12A empower the Central Government to require Aadhaar number, etc., as identification document and provides that Notwithstanding anything contained in this Act, the Central Government may require that any person who seeks prior permission or prior approval under section 11, or makes an application for grant of certificate under section 12, or, as the case may be, for renewal of certificate under section 16, shall provide as identification document, the Aadhaar number of all its office bearers or Directors or other key functionaries, by whatever name called, issued under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 (18 of 2016), or a copy of the Passport or Overseas Citizen of India Card, in case of a foreigner.
&nbsp;
<h2>Documents required for FCRA Registration or Prior Approval</h2>
- Self-certified copy of registration certificate/Trust deed etc., of the association
-Self-certified copy of relevant pages of Memorandum of Association/ Article of Association showing aim and objects of the association.
- Activity Report indicating details of activities during the last three years;
- Copies of relevant audited statement of accounts for the past three years (Assets and Liabilities, Receipt and Payment, Income and Expenditure) clearly reflecting expenditure incurred on aims and objects of the association and on administrative expenditure;
- Affidavit of each key functionary
- Seal of the Association
- Statement on Project and Activities
- A true copy of the resolution passed by the Governing Body of the NGO.
- A Copy of certificate issued by the Income Tax Authority under 80G &amp; 12A of the Income Tax Act. (if any)
- Jpg file of signature of the chief functionary.
- Passport size of all members of Governing Body
- Detail about the current and past management of the trust.
<h2>FCRA Act having overriding effect over the FEMA and other general Acts</h2>
Since the FCRA is a special Act, its provisions will prevail over provisions of Foreing Exchange Management Act, 1999 (FEMA). Thus, even if there is permission for certain transactions (like donation, gift etc.) under FEMA, restrictions under FCRA will be applicable if the transaction is covered under provisions of the FCRA.
<h2>Conclusion</h2>
The above article for information purpose only and does not consider as professional advise.
&nbsp;

All about FCRA Registration or Prior Approval - Eligibility, Procedure and Documents Required for FCRA Registration 

FCRA Registration, FCRA Prior Approval, Registration under FCRA

<h2>Extension of FCRA Registration Due for Renewal</h2>
The Ministry of Home Affairs on 22-June-2022 issues a Public Notice and extended the validity of the registrations till 30-Sept-2022.
Section 12(6) of the FCRA Act provides that The certificate granted under sub-section (3) shall be valid for a period of five years and the prior permission shall be valid for the specific purpose or specific amount of foreign contribution proposed to be received, as the case may be. Further, section 16 of the Act provides that Every person who has been granted a certificate under section 12 shall have such certificate renewed within six months before the expiry of the period of the certificate.
This is sixth public notice regarding extension of the FCRA Registrations since amendment of FCRA Act in the year 2020. The summary of the said public notices are under:
&nbsp;
<table>
<tbody>
<tr>
<td width="85">
<h2>Sr. No.</h2>
</td>
<td width="378">
<h2>Description</h2>
</td>
<td width="161">
<h2>Date</h2>
</td>
</tr>
<tr>
<td width="85">
<h2>1</h2>
</td>
<td width="378">
<h2><a href="https://fcraonline.nic.in/home/PDF_Doc/fc_notice_12012021.pdf" target="_blank" rel="noopener">Extension of the validity of the registration certificates issued under the Foreign Contribution (Regulation) Act, 2010 expiring during the period between 29th September, 2020 and 31st May, 2021 upto 31st May, 2021.</a></h2>
</td>
<td width="161">
<h2>12-Jan-2021</h2>
</td>
</tr>
<tr>
<td width="85">
<h2>2</h2>
</td>
<td width="378">
<h2><a href="https://fcraonline.nic.in/home/PDF_Doc/fc_notice_19052021.pdf" target="_blank" rel="noopener">Extension of the validity of registration certificates issued Under The Foreign Contribution (Regulation) Act, 2010 expiring/ expired during the period between 29th September, 2020 and 30th September, 2021 up to 30th September, 20.</a></h2>
</td>
<td width="161">
<h2>18-May-2021</h2>
</td>
</tr>
<tr>
<td width="85">
<h2>3</h2>
</td>
<td width="378">
<h2><a href="https://fcraonline.nic.in/home/PDF_Doc/fc_notice_30092021.pdf" target="_blank" rel="noopener">Extension of the validity of the registration certificates issued under the Foreign Contribution (Regulation) Act, 2010 expiring during the period betwe 29th September, 2020 and 31st December, 2021 upto 31st December, 2021.</a></h2>
</td>
<td width="161">
<h2>30-Sept-2021</h2>
</td>
</tr>
<tr>
<td width="85">
<h2>4</h2>
</td>
<td width="378">
<h2><a href="https://fcraonline.nic.in/home/PDF_Doc/fc_notice_31122021.pdf" target="_blank" rel="noopener">Extension of the validity of FCRA registration certificates expiring between the period 29th September, 2020 and 31st March, 2022 of those entities who have applied for renewal on FCRA portal in accordance with rule 12 of the Foreign Contribution (Regulation) Rules, 2011 before expiry of the validity of their certificates of registration.</a></h2>
</td>
<td width="161">
<h2>31-Dec-2021</h2>
</td>
</tr>
<tr>
<td width="85">
<h2>5</h2>
</td>
<td width="378">
<h2><a href="https://fcraonline.nic.in/home/PDF_Doc/fc_notice_24032022.pdf" target="_blank" rel="noopener">Extension of the validity of the FCRA registration certificates-Extended till 30-June-2022</a></h2>
<h2>This Public Notice is in continuation of the Public Notice Dated 31-Dec-2021</h2>
</td>
<td width="161">
<h2>24-Mar-2022</h2>
</td>
</tr>
<tr>
<td width="85">
<h2>6</h2>
</td>
<td width="378">
<h2><a href="https://fcraonline.nic.in/home/PDF_Doc/fc_notice_22062022.pdf" target="_blank" rel="noopener">Extension of the validity of the FCRA registration certificates-Extended till 30-Sept-2022</a></h2>
<h2>This Public Notice is in continuation of the Public Notice Dated 24-Mar-2022</h2>
</td>
<td width="161">
<h2>22-June-2022</h2>
</td>
</tr>
</tbody>
</table>
&nbsp;
The latest public notice dated 22-June-2022 is reproduced as under:
&nbsp;
Ministry of Home Affairs
(Foreigners Division-FCRA)
First Floor, Major Dhyan Chand National Stadium, India Gate Circle, New Delhi-110001
&nbsp;
Dated: the 22nd June, 2022
PUBLIC NOTICE
Subject: Extension of the validity of FCRA registration certificates
In continuation of Ministry of Home Affairs' Public Notice No. II/21022/23(22)/2020 FCRA-III, Dated 24th March, 2022, the Central Government, in public interest, has decided to extend the validity of FCRA registration certificates of certain categories of FCRA registered entities, as follows:
(i) The validity of registration certificates of such entities whose validity was extended till 30.06.2022 in terms of the Public Notice dated 24th March, 2022 and whose renewal application is pending will stand extended till 30.09.2022 or till the date of disposal of renewal application, whichever is earlier.
(ii) The validity of those FCRA entities whose 5 years validity period is expiring during 01.07.2022 to 30.09.2022 and who have applied/apply for renewal before expiry of 5 years validity period will stand extended upto 30.09.2022 or till the date of disposal of renewal application, whichever is earlier.
2. All FCRA registered associations are therefore advised to take note that in case of refusal of the application for renewal of certificate of registration, the validity of the certificate shall be deemed to have expired on the date of refusal of the application of renewal and the association shall not be eligible either to receive the foreign contribution or utilise the foreign contribution received.
3. This issues with the approval of the Competent Authority. All concerned may take note of the above decision and take appropriate action in the matter.
&nbsp;
SD/-
VS Rana
Director (FCRA)
Tele. 011-23077512

MHA Extend the validity of the registration certificates issued under the Foreign Contribution (Regulation) Act, 2010 

FCRA Renewal of Registration, FCRA Extension for renewal 

Summary of the instructions: CBIC issued instructions vide 03/2022-GST dated 14-June-2022 - instructs GST officials to upload Speaking Order along with GST Refund sanction order in FORM GST RFD-06 - also instructed regarding details to be mentioned in the speaking order in order to ensure uniformity - specified that Post-Audit may be conducted within 3 months from issue of FORM GST RFD-06 order for GST Refund claims exceeding Rs. 1 Lakh and review shall be completed at least 30 days before the expiry of the time period allowed for filing appeal under Section 107(2) of the CGST Act.
The instructions are as follows:
F. No. CBEC-20/16/35/2019-GST Government of India Ministry of Finance Department of Revenue Central Board of Indirect Taxes &amp; Customs GST Policy Wing, New Delhi *****
Instruction No. 03/2022-GST | Dated: 14th June, 2022
To, The Principal Chief Commissioners / Chief Commissioners / Principal Commissioners / Commissioners of Central Tax (All) The Principal Directors General / Directors General (All) Madam/Sir, Subject: &nbsp; &nbsp;Procedure &nbsp; &nbsp;relating &nbsp; &nbsp;to &nbsp; &nbsp;sanction, &nbsp; &nbsp;post-audit &nbsp; &nbsp;and &nbsp; &nbsp;review &nbsp; &nbsp;of refund claims&ndash; reg.
Attention is invited to sub-section (2) of section 107 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as &ldquo;CGST Act&rdquo;) which provides that the Commissioner may review any decision or order, including an order of refund, with respect to its legality or propriety and he may direct any officer subordinate to him to file an appeal against the said decision or order within 6 months of the date of communication of the said decision or order. Reference is further drawn to entry against the subject pre-audit in table under para 3.3 of the Circular 17/17/2017-GST dated 15.11.2017 wherein it has been stated that pre-audit of refund orders is not required to be carried out but the post-audit of the refund orders may, however, continue on the basis of extant guidelines.
2. Subsequently, Board has been receiving reports of different practices being followed by the field formations regarding sanction, review and post-audit of refund claims.
The matter has been examined with the twin purpose of ensuring uniformity in procedure and enabling effective monitoring of sanction of refund claims in order to safeguard interest of revenue. Accordingly, the Board hereby issues the following instructions/guidelines for sanction, post-audit and review of refunds:
2.1 Sanction of Refund
2.1.1 &nbsp; &nbsp;Detailed guidelines for processing of refund claims in GST have been issued by the Board vide Circular 17/17/2017-GST dated 15.11.2017 (for manual processing of refunds) and Circular No. 125/44/2019-GST dated 18.11.2019 (for electronic filing and online processing of refunds) to ensure uniformity in processing of refund claims. In both of these Circulars, it has been mentioned that the proper officer shall follow the principle of natural justice before taking the final decision with regard to refund claim. Principle of natural justice inter- alia provides that a detailed speaking order needs to be issued providing a basis for sanction/rejection of refund. Therefore, while passing the refund sanction order in FORM GST RFD-06, the proper officer should also upload a detailed speaking order along with refund sanction order in FORM GST RFD-06. In order to ensure uniformity in issuance of such speaking order, it is clarified that such speaking order should inter alia contain the following details:
A. Details for all category of refund claims:
a) &nbsp; &nbsp;The period for which refund claim has been filed, date of filing &amp; the category in which refund has been claimed.
b) &nbsp; &nbsp;Whether it has been checked that refund claim for the same period has not been filed in the same category including any claim filed under &lsquo;Any Other&rsquo; Category.
c) &nbsp; &nbsp;Details of Deficiency Memo, if any, in FORM GST RFD-03 issued in respect of the said refund claim previously.
d) &nbsp; &nbsp;Whether the refund claim has been filed within limitation of time, as provided under CGST Act and Rules thereof, including in the cases, where Deficiency Memo in FORM GST RFD-03 had been issued previously.
e) &nbsp; &nbsp;Details of the documents/ statements uploaded along with the refund claim. Whether all the necessary documents have been uploaded with the refund claim in terms of rule 89(2) of the CGST Rules. Details of document furnished by the applicant via e-mail/ in soft copy/ in hard copy, if any, may also be provided.
f) &nbsp; &nbsp;Whether all the due returns have been filed by the applicant or not, whether any dues are pending recovery from the applicant, and whether refund is required to be withheld/ any amount is required to be deducted as per provisions of section 54(10) of CGST Act on account of non-filing of returns or dues being pending for recovery from the applicant.
g) &nbsp; &nbsp;Whether any SCN was issued to the applicant. Details of reply of the applicant and PH details.
h) &nbsp; &nbsp;Discussion and findings in respect of applicant submission. Details of case laws relied upon in deciding the matter, if any.
i) &nbsp; &nbsp;Whether provisions of unjust enrichment are applicable or not in terms of the provisions of section 54(8) of the CGST Act. If unjust enrichment is applicable in the refund, whether the applicant has furnished due &nbsp; documents/ certificates, in terms of clause (b) of section 54(4) of CGST Act, certifying/ establishing not passing burden of tax, in respect of which refund is being claimed, on any other person.
B. &nbsp; &nbsp;Additional details in case of the refund of accumulated ITC (on account of zero-rated supplies/ inverted rated structure) and refund of IGST paid on account of zero-rated supplies:
a) &nbsp; &nbsp;Whether the refund amount claimed has been debited from the electronic credit ledger, in terms of sub- rule (3) of rule 89 of CGST Rules.
b) &nbsp; &nbsp;In case of refund of IGST paid on account of zero-rated supplies, whether the amount of IGST has been paid through GSTR-3B return.
c) &nbsp; &nbsp;Whether the calculation given by the applicant of export/ zero-rated turnover, adjusted aggregate turnover, turnover of inverted duty supplies. as applicable, is correct as per the relevant provisions.
d) &nbsp; &nbsp;Whether calculation of Net ITC, where ever applicable. is correct as per the relevant provisions. Also, whether the verification of admissibility of ITC as per the provisions of GST Law has been done or not and the findings thereof
e) &nbsp; &nbsp;Whether it has been verified that ITC on capital goods has not been included in calculation of Net ITC for refund of ITC in zero rated supplies.
f) &nbsp; &nbsp;Whether it has been verified that ITC in respect of input services as well as capital goods is not included in calculation of Net ITC in case of inverted tax structure refund.
g) &nbsp; &nbsp;Whether refund has been restricted to the ITC as per those invoices, details of which are uploaded by the supplier in FORM GSTR-1 and are reflected in FORM GSTR-2A of the applicant in terms of Circular No. 135/05/2020-GST dated 31.03.2020.
h) &nbsp; &nbsp;Whether the refund is barred under the provisions of 2? and 3rd proviso to section 54(3) of the CGST Act, 2017.
i) &nbsp; &nbsp;Details of computation of refund claim amount as per the relevant provisions/ prescribed formula in the Act/ Rules and verification whether the refund amount claimed is correct or not.
j) &nbsp; &nbsp;In case of refund on account of inversion, whether the supply qualifies for refund of unutilised ITC under clause (ii) of 1st proviso to section 54(3) of the CGST Act, 2017.
k) &nbsp; &nbsp;In case of refund on account of export of goods, whether the details of shipping bill/ bill of exports, where ever applicable, have been verified from the ICEGATE portal.
l) &nbsp; &nbsp;In case of refund on account of export of services, whether the claimant has furnished the BRC/FIRC/ other relevant documents evidencing receipt of export remittances in respect of zero-rated services for which refund is being claimed.
m) &nbsp; &nbsp;In case of refund on account of zero-rated supply by DTA to SEZ, whether the said supply is meant for authorized operations on the basis of Letter of Authorisation (LoA). Further, whether the details of supply by the applicant to the SEZ have been cross checked from the SEZ Online portal.
n) &nbsp; &nbsp;Whether the documents pertaining to zero-rated supply to SEZ have been endorsed by the specified/authorized officer of the zone. &nbsp; o) &nbsp; &nbsp;Whether the DTA supplier has received the payment from the SEZ recipient in case of supply of services to SEZ.
C. &nbsp; &nbsp;Additional details in case of refund of tax paid on supplies regarded as deemed export:
a) &nbsp; &nbsp;Whether necessary procedure was followed while making procurement/supplying of goods regarded as deemed exports.
b) &nbsp; &nbsp;Whether the ITC claimed against the tax paid on such deemed export supplies has been debited from the electronic credit ledger by the recipient for filing application of refund.
c) &nbsp; &nbsp;Whether it has been verified that no ITC has been claimed by the recipient when refund is claimed by supplier.
D. &nbsp; &nbsp;Additional details in case of refund of excess balance in cash ledger:
a) &nbsp; &nbsp;Whether the amount claimed has been debited from the electronic cash ledger.
b) &nbsp; &nbsp;Whether the amount to be refunded has been calculated in accordance with the provisions of section 49(6) of COST Act.
E. &nbsp; &nbsp;Additional details in case of refund filed under the other categories of refund except those mentioned above:
a) &nbsp; &nbsp;Whether the documents furnished/uploaded along with the refund claim have been verified for their correctness from the source like FORM GSTR-1, FORM GSTR-3B, 10EGATE portal etc., where ever required.
b) &nbsp; &nbsp;Details of the verification conducted and reasoning for grant/ rejection of refund. c) In case of refund ITC filed under &ldquo;Any Other- category, whether the amount claimed has been debited from the electronic credit ledger, wherever required.
2.1.2 &nbsp; &nbsp;It is mentioned that ACES-GST portal provides the facility for uploading a document in pdf format along with the FORM GST RFD-06 order. The same may be utilized by proper officer for uploading the speaking order along with refund sanction order in FORM GST RFD-06 so that the same is made available to the refund applicant as well as Post-audit/Reviewing Authority online.
2.2 &nbsp; &nbsp;Post-Audit and Review:
2.2.1 &nbsp; &nbsp;Sub-section (2) of section 107 of the CGST Act provides that the Commissioner may examine any decision or order, including an order of refund, with respect to its legality or propriety and he may direct any officer subordinate to him to file an appeal against the said decision or order within 6 months of the date of communication of the said decision or order. The said sub-section is reproduced below:
(2) The Commissioner may, on his own motion, or upon request from the Commissioner of State tax or the Commissioner of Union territory tax, call for and examine the record of any proceedings in which an adjudicating authority has passed any decision or order under this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, for the purpose of satisfying himself as to the legality or propriety of the said decision or order and may, by order, direct any officer subordinate to him to apply to the Appellate Authority within six months from the date of communication of the said decision or order for the determination of such points arising out of the said decision or order as may be specified &nbsp; by the Commissioner in his order.
2.2.2 &nbsp; &nbsp;Accordingly, as per extant practice, all refund orders are required to be reviewed for examination of legality and propriety of the refund order and for taking a view whether an appeal to the appellate authority under provisions of sub-section (2) of section 107 of the CGST Act is required to be filed against the said refund order.
2.2.3 &nbsp; &nbsp;As already mentioned in Circular 17/17/2017-GST dated 15.11.2017, refund claims shall not be subjected to pre-audit. However, the post-audit of refund claims may continue. Considering the large number of refund claims filed in GST, it has been decided that post-audit may henceforth be conducted only for refund claims amounting to Rs. 1 Lakh or more till further instructions.
2.2.4 &nbsp; &nbsp;The post-audit and review of the refund claims shall be conducted as per the following guidelines:
(a) &nbsp; &nbsp;All the refund orders passed should be immediately transmitted online to the review module after issuance of refund order in FORM GST RFD-06. The review and post-audit officers shall have access to all documents/ statements on ACES-GST portal pertaining to the said refund claims.
(b) &nbsp; &nbsp;For the purpose of post-audit of refund order, a Post-Audit Cell under a Deputy/Assistant Commissioner along with one/ two Superintendents and Inspectors as required, may be created in Commissionerate Headquarters.
(c) &nbsp; &nbsp;The post-audit should be concluded within 3 months from the date of issue of FORM GST RFD-06 order. The findings of the post-audit shall be communicated to the review branch within the said time period of 3 months.
(d) &nbsp; &nbsp;The review of refund order shall be completed at least 30 days before the expiry of the time period allowed for filing appeal under Section 107(2) of the CGST Act.
2.2.5 &nbsp; &nbsp;Till the time the functionality for conducting post-audit online is developed on ACESGST portal, post- audit of refund orders may be conducted in offline mode. For the said purpose, the refund orders covered under para 2.2.3 above and the relevant documents may be provided to the post-audit cell by the concerned Division through e-Office within 7 days of issuance of refund sanction order in FORM GST RFD-06. The report of the post audit may be furnished by the Post-Audit Cell to the Review Cell through e-Office as per the time-limit specified in para 2.2.4(c) above.
3. &nbsp; &nbsp;Difficulty, if any, in the implementation of these instructions/guidelines may be brought to the notice of the Board.
(Sanjay Mangal)
Principal Commissioner (GST)
&nbsp;

CBIC instructions on the GST refunds, Procedure relating to sanction, post-audit and review of refund claims

GST Refund, CBIC instructions on GST Refund, inverted rated refund GST

On 10-May-2022, the GSTN issued an advisory regarding reporting of taxable value chargeable at 6%. The advisory is reproduced as under:
10/05/2022
<ol>
<ol>
<li>A new tax rate of 6% IGST or 3% CGST+ 3% SGST has been introduced on certain goods vide Notification No. 02/2022 dated 31st March 2022. Changes are being made on the GST portal to include this rate in GSTR-1. As a temporary measure, taxpayers who have to report goods at this rate may do so by reporting the entries in the 5% heading and then manually increasing the system computed tax amount to 6%. This can be done by entering the value in the&nbsp;&lsquo;Taxable value&rsquo;&nbsp;column next to 5% tax-rate and then increasing the system computed tax-amount to 6% IGST or 3% CGST + 3% SGST in the&nbsp;&lsquo;Amount of Tax&rsquo;&nbsp;column under the relevant Table, namely B2B, B2C or Export, as applicable. This will ensure that correct tax amount is reported in GSTR-1. Meanwhile, this rate will be made available on the GST portal shortly.</li>
<li>GSTN regrets any inconvenience caused in this regard.</li>
</ol>
</ol>
&nbsp;
The above advisory is explained as Follows. Suppose the taxpayer has issued an invoice of Rs. 20,000 by charging GST at 6% (3% CGST and 3% SGST) then the tax would be Rs. 1,200/- (Rs. 600 each). Now in such case, the amount is required to reported in 5% column and the value of the tax has to be increased&nbsp;manually.&nbsp;(Please refer following screenshot)
<img src="https://res.cloudinary.com/netd/image/upload/v1652268721/post-img/sgm5gedqqldtz1wehx9b.jpg" alt="Screenshot" width="960" height="720" />

How to Report  6% rate in GSTR-1

6% rate in GSTR-1, GST on Brick Kilns Sector, GST at 6 percent

CBDT, vide Circular No. 8/2022 dated 31-March-2022, extends last date for electronically filing of Form No.10AB for seeking registration or approval under Section 10(23C), 12A or 80G to 30-September-2022 where the last date for filing falls on or before 29-September-2022.
The original due date was 30-June-2021, as per the Income-Tax (6th Amendment) Rules, 2021 and the same was extended further to 31-August-2021.
Thenafter, the same was further extended to 31-March-2022 vide Circular No. 16 dated 29-August-2021.
Now, again same has been extended to 30-September-2022 vide Circular No. 8/2022 dated 31-March-2022.

CBDT further extends e-application under section 10(23C), 12A, 80G to 30-September-2022

Due date for trust registration, 12A, 10(23C), 80G trust registration

The Ministry of Home Affairs extends the due date of FC-4 (Annual return under the FCRA) for the FY 2020-21 to 30-June-2022.
The relevant notification is as under:
<img src="https://res.cloudinary.com/netd/image/upload/v1648751258/post-img/wlimugkrnqoyygdapsrp.jpg" alt="FCRA Due Date Extension Notification " width="779" height="925" />

Due date of FCRA annual return in Form FC-4 for the FY 2020-21 extended to 30-June-2022

FCRA, Annual Return, FC-4 due date, penalty for late filing of FC-4 

CBDT on 29-March-2022, issued Notification prescribed the fees/penalty to be levied in a case person who has been allotted PAN as of July 1, 2017, and who failed to link the same with AADHAAR on or before 31-March-2022.
The fees of Rs. 500 if PAN-Aadhaar is linked by June 30, 2022, and Rs. 1000 in any other case.
[Notification No.17/2022/F. No. 370142/14/2022-TPL]&nbsp;

Penalty for failure to link PAN and AADHAAR by 31-March-2022

Penalty for PAN and AADHAAR non linking, PAN AADHAAR Linking

On 29th March 2022, the Hon'ble Bombay High Court also qushes the reassessment proceedings initiated under the old regime after the 01/04/2021.
The court announced the decision in the favour of assessee and disposed over 1000 writ petitions by following the rulings of Delhi High Court and Allahabad High Court.
On 30th September 2021, the Hon'ble Allahabad High pronounced its decision and held that "the Ordinance, the Enabling Act and Sections 2 to 88 of the Finance Act 2021, as enforced w.e.f. 01.04.2021, are not conflicted. Insofar as the Explanation appended to Clause A(a), A(b), and the impugned Notifications dated 31.03.2021 and 27.04.2021 (respectively) are concerned, we declare that the said Explanations must be read, as applicable to reassessment proceedings as may have been in existence on 31.03.2021 i.e. before the substitution of Sections 147, 148, 148A, 149, 151 &amp; 151A of the Act. Consequently, the reassessment notices in all the writ petitions are quashed. It is left open to the respective assessing authorities to initiate reassessment proceedings in accordance with the provisions of the Act as amended by Finance Act, 2021, after making all compliances, as required by law."
Thereafter, on 15th December 2021, the Hon'ble Delhi High Court pronounce its decision and quashes the notices issued after the 01/04/2021 under the new regime. The Court held that "Executive/Respondents/Revenue cannot use the administrative power to issue Notifications under Section 3(1) of the Relaxation Act, 2020 to undermine the expression of Parliamentary supremacy in the form of an Act of Parliament, namely, the Finance Act, 2021. This Court is also of the opinion that the Executive/Respondents/Revenue cannot frustrate the purpose of substituted statutory provisions, like Sections 147 to 151 of Income Tax Act, 1961 in the present instance, by emptying it of content or impeding or postponing their effectual operation."&nbsp;
However, the High Court of Chhattisgarh in Palak Khatuja vs. Union of India and Ors., W.P.(T) No. 149 of 2021 upholding the legality and validity of similarly issued reassessment notices. In the said judgment, the Chhattisgarh High Court has held, &ldquo;&hellip;.legislative delegation which is exercised by the Central Government by notification to uphold the mechanism as prevailed prior to March, 2021 is not in conflict with any Act and notification by executive i.e. Ministry of Finance would be the part of legislative function.&rdquo;
In this background, the Hon'ble Bombay High Court also quashes reassessment notices issued under the old reassessment regime on or after 01/04/2021 and decides the controversy in favour of the Assessees.

Bombay High Court also quash 148 notices issued after 01 April 2021 under old regime

bombay high cour on 148, old vs new 148 case, reassessment 

The Hon'ble Bangalore Tribunal while dealing with the matter related to the claiming of Foreign Tax Credit (FTC) held that on perusal of provisions of Rule 128 (8) &amp; (9), it is clear that, one of the requirements of Rule 128 for claiming FTC is that Form 67 is to be submitted by assessee before filing of the returns. The Tribunal opined that this requirement cannot be treated as mandatory, rather it is directory in nature. This is because, Rule 128(9) does not provide for disallowance of FTC in case of delay in filing Form No.67. This view is fortified by the decision of coordinate bench of this Tribunal in case of Ms.Brinda Kumar Krishna vs.ITO in ITA no.454/Bang/2021 by order dated 17/11/2021.
During the hearing, the assessee submitted that "when there is no condition prescribed in DTAA that the FTC can be disallowed for non-compliance of any procedural provision. As the provisions of DTAA override the provisions of the Act, the Assessee has vested right to claim the FTC under the tax treaty, the same cannot be disallowed for mere delay in compliance of a procedural provision."
Accordingly, the Tribunal remand this issue back to the AO to consider the claim of assessee in accordance with law, based on the verification carried out in respect of the supporting documents filed by assessee.

Foreign Tax Credit cannot be denied merely because assessee has not filed the Form 67

FTC, foreign tax credit, DTAA, Form 67 of Income Tax 

Various penalties under the FCRA are provided under the Notification S.O. 2291(E) dated 5th June, 2018 and same is reproduced as under;
MINISTRY OF HOME AFFAIRS
NOTIFICATION
New Delhi, the 5th June, 2018
S.O. 2291(E).&mdash;In exercise of the powers conferred by sub-section (1) of Section 41 of the Foreign Contribution (Regulation) Act, 2010 (42 of 2010) and in supersession of the notifications of the Government of India in the Ministry of Home Affairs numbers S.O. 1976(E), dated the 26th August, 2011 and S.O. 2133(E), dated the 16th June, 2016, published in the Gazette of India, Extraordinary, Part-II, Section 3, Sub-section (ii), except as respects things done or omitted to be done before such supersession, the Central Government hereby specifies the officer in column (4) of the table, who may, before institution of any prosecution under the Act, compound the offences specified in column (2), on payment of the amount specified in column (3), of the said table, namely:-
TABLE
<table>
<tbody>
<tr>
<td style="text-align: center;" width="156">
Sr. No.
</td>
<td style="text-align: center;" width="156">
Offence
</td>
<td style="text-align: center;" width="156">
Amount of Penalty
</td>
<td style="text-align: center;" width="156">
Officer competent for compounding
</td>
</tr>
<tr>
<td style="text-align: center;" width="156">
(1)
</td>
<td style="text-align: center;" width="156">
(2)
</td>
<td style="text-align: center;" width="156">
(3)
</td>
<td style="text-align: center;" width="156">
(4)
</td>
</tr>
<tr>
<td style="text-align: center;" width="156">
1.
</td>
<td width="156">
Offence punishable under section 35 for accepting any hospitality in contravention of section 6 of the Act.
</td>
<td width="156">
Rs. 10,000/-
</td>
<td width="156">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
<tr>
<td style="text-align: center;" width="156">
2.
</td>
<td width="156">
Offence punishable under section 37 for transferring any foreign contribution to any other person in contravention of section 7 of the Act or any rule made thereunder.
</td>
<td width="156">
Rs. 1,00,000/- or 10% of such transferred foreign contribution, whichever is higher.
</td>
<td width="156">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
<tr>
<td style="text-align: center;" width="156">
3.
</td>
<td width="156">
Offence punishable under section 37 for defraying of foreign contribution beyond fifty per cent of the contribution received for administrative expenses in contravention of section 8 of the Act.
</td>
<td width="156">
Rs. 1,00,000/- or 5% of such foreign contribution so defrayed beyond the permissible limit, whichever is higher
</td>
<td width="156">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
<tr>
<td style="text-align: center;" width="156">
4.
</td>
<td width="156">
Offence punishable under section 35 for accepting foreign contribution in contravention of section 11 of the Act.
</td>
<td width="156">
Rs. 1,00,000/- or 10% of the foreign contribution received, whichever is higher
</td>
<td width="156">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
<tr>
<td style="text-align: center;" width="156">
5.
</td>
<td width="156">
Offences punishable under section 37 read with section 17 of the Act for- (a) receiving foreign contribution in any account other than specified account in his application for grant of certificate;
</td>
<td width="156">
Rs. 1,00,000/- or 5% of the foreign contribution received in such account, whichever is higher;
</td>
<td width="156">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act
</td>
</tr>
<tr>
<td style="text-align: center;" width="156">
&nbsp;
</td>
<td width="156">
(b) non-reporting the prescribed amount of foreign remittance or source and manner of such remittance by banks and authorised persons.
</td>
<td width="156">
Rs. 1,00,000/- or 3% of the foreign contribution received or deposited in such account, whichever is higher.
</td>
<td width="156">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
<tr>
<td style="text-align: center;" width="156">
&nbsp;
</td>
<td width="156">
(c) receiving &amp; depositing any fund other than foreign contribution in the account or accounts opened for receiving foreign contribution or for utilizing the foreign contribution.
</td>
<td width="156">
Rs. 1,00,000/- or 2% of such deposit, whichever is higher
</td>
<td width="156">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
<tr>
<td style="text-align: center;" width="156">
6.
</td>
<td width="156">
Offence punishable under section 37 for non-furnishing of intimation of the amount of each foreign contribution received and the source from which and in the manner in which, such foreign contribution is received as required under section 18 of the Act.
</td>
<td width="156">
Rs. 1,00,000/- or 5% of the foreign contribution received during the period of non submission, whichever is higher.
</td>
<td width="156">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
<tr>
<td style="text-align: center;" width="156">
7.
</td>
<td width="156">
Offence punishable under section 37 for not maintaining the account and records of foreign contribution received and manner of its utilisation on required section 19 of the Act.
</td>
<td width="156">
Rs. 1,00,000/- or 5% of the foreign contribution during the relevant period of nonmaintenance of accounts, whichever is higher
</td>
<td width="156">
Director, or as the case may be, the Deputy Secretary in-charge of the section responsible for the administration of the Act.
</td>
</tr>
</tbody>
</table>
&nbsp;
<ol start="2">
<li>In case more than one offence has been committed by a person, the total amount of compounding for such offences shall not be more than the value of the foreign contribution involved.</li>
</ol>
--
Reader may also download above notification from the official website. Link is as follows:
<a href="https://www.mha.gov.in/sites/default/files/Compoundingnotification06062018.pdf">https://www.mha.gov.in/sites/default/files/Compoundingnotification06062018.pdf</a>
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