CMA FINAL - DT BCCA INDEX

CHAPTER NAME
1 Basic Concepts
2 Return of Income
3 Income Tax Authorities
4 Assessment Procedures
5 Search, Seizure & Survey
6 Appeals & Revision and Rectification & SC
7 Advance Tax & Interest
8 Collection, Recovery and Refund
9 Business Restructuring & Re-Construction
10 Assessment of Various Entities
11 Tax Planning, Tax Avoidance & Evasion and Tax Management
12 GAAR
13 ICDS
14 Liabilities in Special Cases
15 Black Money
16 Penalties & Prosecution
17 Non-Resident
18 DTAA
19 Transfer Pricing
20 Advance Ruling
21 PGBP
22 Chapter VIA Deductions
23 TDS & TCS

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CMA FINAL - DT BCCA BASIC CONCEPTS

BASIC CONCEPTS
QUESTION 1
Compute tax liability after marginal relief in the following situations for Resident assesses
for the previous year 2023-2024. (Assume that the Assessee has exercised the option to
shift out /opt out of default tax regime i.e., Sec 115BAC)
Name Arun Murthy Shekhar
Age of Assessee 42 years 51 years 58 years
Total income Rs.51 lakhs Rs.1.01 crores Rs.2.20 crores

SOLUTION:
Computation of tax liability of Mr. Arun (42 years) for the A.Y.2024-25
Particulars Amount
(₹)
Step-1: Tax on total income of 51,00,00 + Surcharge @10%
Upto Rs. 2,50,000 Nil Nil
2,50,000 to Rs.5,00,000 (5%) (2,50,000 x 5%) 12,500
5,00,000 to Rs.10,00,000 (20%) (5,00,000 x 20%) 1,00,000
10,00,000 to 51,00,000 (30%) (41,00,000 x 30%) 12,30,000
13,42,500
Add: Surcharge @ 10% on 13,42,500 1,34,250
Total 14,76,750
Step-2: Tax on ₹50L + ₹1Lac
Upto Rs. 2,50,000 Nil
2,50,000 to Rs.5,00,000 (5%) (2,50,000 x 5%) 12,500
5,00,000 to Rs.10,00,000 (20%) (5,00,000 x 20%) 1,00,000
10,00,000 to 50,00,000 (30%) (40,00,000 x 30%) 12,00,000
Total 13,12,500
Add: Surcharge Nil
Add: Income over ₹50L 1,00,000
Total 14,12,500
Step-3: Marginal relief = Step-1 (-) Step-2 [14,76,750-14,12,500] 64,250
Step-4: Tax payable [Step-1 (-) Step-3] 14,12,500
Add: H & EC@4% (14,12,500 x 4%) 56,500
Net tax payable 14,69,000

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CMA FINAL - DT BCCA BASIC CONCEPTS

Computation of tax liability of Mr. Murthy for the A.Y.2024-25

Particulars Amount (₹)

Step-1: Tax on total income of 1,01,00,00 + Surcharge @15%
Upto Rs. 2,50,000 Nil
2,50,000 to Rs.5,00,000 (5%) 12,500
5,00,000 to Rs.10,00,000 (20%) 1,00,000
10,00,000 to 1,01,00,000 (30%) 27,30,000
28,42,500
Add: Surcharge @ 15% on 28,42,500 4,26,375
Total 32,68,875
Step-2: Tax on ₹1Cr +Surcharge @10%+ ₹1Lac
Upto Rs. 2,50,000 Nil
2,50,000 to Rs.5,00,000 (5%) 12,500
5,00,000 to Rs.10,00,000 (20%) 1,00,000
10,00,000 to 1,00,00,000 (30%) 27,00,000
Total 28,12,500
Add: Surcharge @10% (28,12,500 X 10%) 2,81,250
Add: Income over ₹1Cr 1,00,000
Total 31,93,750
Step-3: Marginal relief = Step-1 (-) Step-2 [32,68,875- 75,125
31,93,750]
Step-4: Tax payable [Step-1 (-) Step-3] 31,93,750
Add: H & EC@4% (31,93,750 x 4%) 1,27,750
Net tax payable 33,21,500
Computation of tax liability of Mr. Shekhar for the A.Y.2024-25
Particulars Amount
(₹)
Step-1: Tax on total income of 2,20,00,00 + Surcharge @25%
Upto Rs. 2,50,000 Nil
2,50,000 to Rs.5,00,000 (5%) 12,500
5,00,000 to Rs.10,00,000 (20%) 1,00,000
10,00,000 to 2,20,00,000 (30%) 63,00,000
64,12,500
Add: Surcharge @ 25% on 64,12,500 16,03,125
Total 80,15,625
Step-2: Tax on ₹2Cr +Surcharge @15%+ ₹20Lacs
Upto Rs. 2,50,000 Nil

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CMA FINAL - DT BCCA BASIC CONCEPTS

2,50,000 to Rs.5,00,000 (5%) 12,500

5,00,000 to Rs.10,00,000 (20%) 1,00,000
10,00,000 to 2,00,00,000 (30%) 57,00,000
Total 58,12,500
Add: Surcharge @15% (58,12,500 X 15%) 8,71,875
Add: Income over ₹2Cr 20,00,000
Total 86,84,375
Step-3: Marginal relief = Step-1 (-) Step-2 [80,15,625 – Nil
86,84,375]
Step-4: Tax payable [Step-1 (-) Step-3] 80,15,625
Add: H & EC@4% (80,15,625 x 4%) 3,20,625
Net tax payable 83,36,250

QUESTION 2
Compute the tax liability of X Ltd., a domestic company, assuming that the total income of
X Ltd. is ₹1,01,00,000 and the total income does not include any income in the nature of
capital gains. (Assume that the Assessee has not opted for Provisions of Sec 115BAB/BAA)
Note: The gross receipts of X Ltd. For PY 2021-22 is ₹402 crore.
SOLUTION: Computation of tax liability of X Ltd for the A.Y.2024-25
Particulars Amount (₹)
Step-1: Tax on total income of ₹1,01,00,000 + Surcharge @ 7%
Tax @ 30% 30,30,000
Add: Surcharge @7% 2,12,100
Total
32,42,100
Step-2: Tax on ₹1Cr + 1Lac
Tax @ 30% on 1Cr 30,00,000
Add: Income over 1Cr 1,00,000
Total 31,00,000
Step-3: Marginal relief Step-1 (-) Step-2 [32,42,100 – 31,00,000] 1,42,100
Step-4: Tax payable Step-1 (-) Step-3 31,00,000
Add: H & EC @4% (31,00,000 x 4%) 1,24,000
Net tax payable 32,24,000

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CMA FINAL - DT BCCA BASIC CONCEPTS

QUESTION 3
Mr. Mahesh aged 32 years and a resident in India, has a total income of ₹ 6,50,000,
comprising his salary income and interest on bank fixed deposit. Compute his tax liability
for A.Y.2024-25 under default tax regime under section 115BAC.
SOLUTION:
Computation of tax liability of Mr. Mahesh for A.Y. 2024-25
Particulars ₹
Tax on total income of ₹ 6,50,000
Tax @10% of ₹ 50,000 + ₹ 15,000 20,000
Less: Rebate u/s 87A (Lower of tax payable or ₹25,000) 20,000
Tax Liability Nil

QUESTION 4
Mr. Nitin aged 42 years and a resident in India, has a total income of ₹ 7,15,000, comprising
his salary income and interest on bank fixed deposit. Compute his tax liability for A.Y.2024-
25 under default tax regime under section 115BAC.
SOLUTION:
Particulars ₹
Step 1: Total Income of ₹ 7,15,000 - ₹ 7,00,000 15,000 (A)
Step 2: Tax on total income of ₹ 7,15,000 Tax @10% of ₹
1,15,000 + ₹ 15,000 26,500 (B)
Step 3: Since B > A, rebate u/s 87A would be B-A 11,500
[ ₹ 26,500 - ₹ 15,000]
15,000
Add: HEC@4% Tax Liability 600
15,600

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CMA FINAL - DT BCCA RETURN OF INCOME

RETURN OF INCOME
QUESTION - 1

Manu furnishes the following information for the previous year 2023-24:

(a) Loss from business: ₹16,00,000

(b) Long-term capital loss: ₹10,00,000

(c) Loss from House property: ₹ 2,00,000

Does Manu require to submit return? Also state the consequences for non-filing of return.

What is the due date of submission of such return?

Solution:

An individual-Assessee is not compulsorily required to furnish return of loss. However, the

following losses cannot be carried forward if the return of loss is not submitted within the

time allowed u/s 139(1):

✓ Business loss (speculative or otherwise);

✓ Capital loss;

✓ Loss from the activity of owning and maintaining race

horses.

Manu is required to file his return of income by 31-07-2024 (if audit is not required) else

31- 10- 2024 (if audit is compulsory).

QUESTION - 2

Write the correct answer from the following statements as per provision of 139(1) of

Income Tax Act, 1961.

a) Mr. Rahaman, a salaried employee of Calcutta based company having Taxable Income

₹ 4,00,000 for the Previous year 2023-24, whose due date of filing income tax return

is 30th November, 2024.

b) Mr. Raghav, a salaried employee of Tata Motors having Taxable income ₹ 8,00,000 for

the previous year 2023-24, and fails to file Income Tax Return within Due date as per

Income Tax Act. He wants to file Belated Return. The time limit of filing Belated return

is within 31st March 2025.

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CMA FINAL - DT BCCA RETURN OF INCOME

c) M/s ABC, a Kolkata based partnership firm is required to get its Accounts Audited

under Income Tax Act. The Due Date of filing Income Tax Return of the firm for the

Previous Year 2023-24 is within 31st July 2024.

d) Ms. Ankita is the working partner of a partnership firm and the accounts of the firm

is required to be audited. Due Date of filing Income Tax Return of Ms. Ankita for the

Previous Year 2023-24 is within 31st December, 2024.

Solution:
a) Due Date of filing Income Tax Return shall be 31st July, 2024.

b) He can file belated return up to 31-12-2024.

c) Partnership firm, whose accounts are required to be audited, is required to submit

the return of income by 31-10-2024

d) Due date of filing return shall be 31-10-2024.

QUESTION - 3

State whether the following persons have to mandatorily furnish their return of income

for the assessment year 2024-25:

a) Mr. Choudhury, aged 52 years whose gross total income ₹ 3,00,000 and total income

after deduction u/s 80C is ₹2,00,000.

b) M/s ROXY, a partnership firm, whose total income during the previous year 2023-24

₹ 50,000.

c) Smt. R. Bose aged 62 years, having total income ₹ 2,80,000.

d) Renbo India Ltd., a registered company in India, has incurred loss during the previous

year 2023-24 ₹ 2,20,000.

e) Smt. I. Shing, aged 50 years, whose total income is ₹ 2,40,000 before adjustment of

unabsorbed business loss of ₹ 1,00,000.

Solution:

a) Yes, as his gross total income exceeds basic exemption limit.

b) Yes, partnership firm is required to file its return of income irrespective of its size

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CMA FINAL - DT BCCA RETURN OF INCOME

of turnover or income.

c) No, as her gross total income does not exceed basic exemption limit applicable to

her (i.e., ₹ 3,00,000).

d) Yes, company is required to file its return of income irrespective of its size of

turnover or income.

e) An Assessee is not compulsorily required to furnish return of loss. However, business

loss (among other specified losses) cannot be carried forward if the return of loss

is not submitted within the time allowed u/s 139(1).

QUESTION - 4

With reasons state whether return of income has to filed in the following cases for the

assessment year 2024-2025

a) Allen a resident individual aged 81 years has total income of ₹ 3,10,000. He has claimed

deduction of ₹ 1,50,000 under section 80C. He has long term capital gain of ₹ 1,20,000

taxable under section 112A. He opted normal tax rates.

b) Gomes& Co a partnership firm constituted on 01.04.23 has business loss of ₹22,000

for the previous year 2023-24.

c) Nigiri association eligible for exemption under sec 10(23B) has income from house

property of ₹ 4,30,000.

d) Williams aged 51 years is an employee of Chappell Ltd. Having salary income of

₹2,40,000 before standard deduction and income from bank fixed deposits ₹20,000

and interest on public provident fund ₹ 68,000.

Solution:
a) Not required to file the return of income.
Every person whose total income without giving effect to the provisions of chapter
VIA if exceeds Basic exemption limit must furnish ITR on or before due date.
In this case, the total income is ₹3,10,000+ Sec 80C deduction of ₹1,50,000
aggregating to ₹4,60,000. Since the basic exemption for very senior citizen is
₹5,00,000, Allen is not required to file ITR.
The long-term capital gain of ₹1,20,000 forms part of total income whether which
does not exceed ₹5,00,000.

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CMA FINAL - DT BCCA RETURN OF INCOME

b) Yes, require to file the ROI.

It is mandatory for partnership firm to file their return of income or loss every year.
it is immaterial whether the firm derived any total income or has suffered loss.
In this case, though the firm Gomes & Co has loss of ₹22,000 filing of return of
income is mandatory.

c) Yes, require to file the ROI.

As per sec 139(4C) Every association must file ROI if total income before claiming
exemption under sec 10 exceeds the basic exemption limit.
In this case, the association before exemption under sec 10(23B) has income from
house property of ₹ 4,30,000 and therefore it has to file its return of income
compulsorily for the assessment year 2024-2025.

d) Not required to file the return of income.

The salary income of Williams is ₹1,90,000 after deducting standard deduction of
₹50,000. The income from other sources in respect of bank deposits is ₹20,000 for
which, eligible deduction under section 80TTA is ₹10,000. Income by way of interest
on PPF is exempt under sec 10.
Thus, total income of Williams is ₹2,00,000 only.
As the total income before claiming chapter VIA deduction is ₹2,10,000. William need
not to file ROI for assessment year 2024-25.

QUESTION - 5

With reasons state whether return of income has to filed in the following cases for the

assessment year 2024-2025.

a) Mr. Raj, aged 70 years is a resident and ordinary resident in India for the AY 2024-25.
He owns a house property in Dubai, which he purchased on 30.04.15 and he also has bank
account in the bank of Dubai. His total income is ₹2,80,000 for the PY 2023-24,
Comprising of income from house property and bank interest.
b) Mrs. Radha, an Indian resident receives rental income ₹ 30,000 pm from her residential
house property. Mr. Radha purchased car worth ₹28,00,000 (ex-showroom price) on
which TCS @1% was collected. Mrs. Radha has no other source of income for the
previous year 2022-23.

Solution:
a) Resident Individual (ROR) is required to file ROI mandatorily if
✓ Beneficial Owner of any asset (including Financial Interest) located outside India
& Has signing authority in any bank account outside India.

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CMA FINAL - DT BCCA RETURN OF INCOME

✓ Beneficiary of any asset (including Financial Interest) located outside India.

If Beneficial Owner already includes income from such asset in his ROI, then
Beneficiary is not required to file ROI.
In this case Mr. Raj has the house property located outside India for that asset he is
beneficial owner. So, he required to file return of income for assessment year 2024-25
mandatorily.

b) If the aggregate of TDS & TCS during the PY, in the case of the person, is ≥ ₹25,000 (&
in case of Senior Citizen ≥ ₹50,000); is required to file ROI mandatorily.
In this case Mr. Radha purchased car worth ₹28,00,000 (ex-showroom price) on which
TCS @1% was collected under Sec 206C(1F) is 2,80,000 that is more than
25,000/50,000.

She required to file return of income for assessment year 2024-25 mandatorily.
QUESTION – 6

Rajesh regularly files his return of income electronically. While he was trying to upload his
return of income for assessment year 2024-25 on 31st August, 2024 (extended due date),
last date for filing the same, he found it extremely difficult to do the same due to network
problems and ultimately, he became successful in making e-filing of his return only at 1 a.m.
on 1st September, 2024. The return contained a claim for carry forward of business loss
of Rs.51 lakh. This circumstance was recorded in a letter delivered to the office of the
Deputy Commissioner of Income Tax on 1st September, 2024 during normal office hours.
Rajesh made a request to the CBDT for condonation of delay in filing the return of income.
Discuss whether the CBDT has the power to condone the delay in filing the return of income
and permit carry forward of loss in the given circumstance.
Would your answer change, if the return contained a claim for carry forward of business
loss of Rs.48 lakh.
Solution:
Section 119(2)(b) empowers the CBDT to authorize any income tax authority to admit
an application or claim for any exemption, deduction, refund or any other relief under the
Act after the expiry of the period specified under the Act, to avoid genuine hardship in
any case or class of cases. The claim for carry forward of loss in case of late filing of a return
is relatable to a claim arising under the category of “any other relief available under the
Act”. Therefore, the CBDT has the power to condone delay in filing of such loss return due

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to genuine reasons.

The facts of the case are similar to the case of Lodhi Property Company Ltd. v. Under
Secretary, (ITA-II), Department of Revenue (2010) 323 ITR 0441, where the Delhi High
Court held that the Board has the power to condone the delay in case of a return which was
filed late and where a claim for carry forward of losses was made. The delay was only one
day and the Assessee had shown justifiable reason for the delay of one day in filing the
return of income. If the delay is not condoned, it would cause genuine hardship to the
Assessee. Therefore, the Court held that the delay of one day in filing of the return had
to be condoned.
Further, the CBDT Circular No. 9/2015 dated 09.06.2015 has expressly clarified that
CBDT can consider application for such claim where the amount exceeds Rs.50 lakhs.

Applying the rationale of the above court ruling and the clarification given in CBDT Circular
to the case on hand, the CBDT has the power to condone the delay in filing the return of
income of Mr. Rajesh and permit carry forward of business loss of Rs.51 lakhs, since the
delay of one hour was due to a genuine and justifiable reason i.e., network problem while e-
filing the return. However, if the claim for carry forward of business loss is 48 lakhs, then,
the Principal Chief Commissioner of Income-tax/Chief Commissioner of Income-tax has the
power to condone the delay (since the amount is between 10 lakhs to 50 lakhs). It may be
noted that if the claim is less than Rs.10 lakhs, the Principal Commissioner/Commissioner
of Income-tax is empowered to condone the delay.
QUESTION – 7

The Assessing Officer issued a notice under section 142(1) on the Assessee on 24th April,

2025 calling upon him to file return of income for Assessment Year 2024-25. In response

to the said notice, the Assessee furnished a return of loss and claimed carry forward of

business loss and unabsorbed depreciation. State whether the Assessee would be entitled

to carry forward as claimed in the return.

Solution:

As per the provisions of section 139(3), any person who has sustained loss under the head

‘Profit and gains of business or profession’ is allowed to carry forward such a loss under

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section 72(1) or section 73(2), only if he has filed the return of loss within the time allowed

under section139(1).

Also, the provisions of section 80 specify that a loss which has not been determined as per

the return filed under section 139(3) shall not be allowed to be carried forward and set-

off under, inter alia,

• section 72(1) (relating to business loss) or

• section 73(2) (losses in speculation business) or

• section 74(1) (loss under the head “Capital gains”) or

• section 74A (3) (loss from the activity or owning and maintaining race horses) or

• section 73A (loss relating to a “specified business”).

However, there is no such condition for carry forward of loss from house property under

section 71B or unabsorbed depreciation under section 32.

In the given case, the Assessee has filed its return of loss in response to notice 142(1). As

per the provisions stated above, Assessee furnished return in response to notice under

section 142(1) after the due date specified under section 139(1) and therefore, the benefit

of carry forward of business loss under section 72(1) or section 73(2) or section 73A shall

not be available.

The Assessee shall, however be entitled to carry forward the unabsorbed depreciation as

per provisions of section 32(2).

QUESTION – 8

X, an individual, has got his books of account for the year ending 31.3.2023 audited under

section 44AB. His total income for the assessment year 2024-25 is Rs. 5,20,000. He

desires to know if he can furnish his return of income for the assessment year 2024-25

through a Tax Return Preparer.

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Solution:

Section 139B provides for submission of return of income through Tax Return Preparers.

It empowers the Central Board of Direct Taxes (CBDT) to frame a scheme for the purpose

of enabling any specified class or classes of persons to prepare and furnish their returns of

income through Tax Return Preparers. Specified class or classes of persons have been

defined to mean any person, other than a company or a person whose accounts are required

to be audited under section 44AB or under any other existing law, who is required to furnish

a return of income under the Act. Thus, companies and persons whose accounts are liable

for tax audit under section 44AB do not fall within the definition of ‘specified class or

classes of persons’ and consequently, cannot furnish their returns of income through Tax

Return Preparers.

In the instant case, the books of account of X for the year ending 31.3.2024 have been

audited under section 44AB. As such, he cannot furnish his return of income for the A.Y.

2024-25 through a Tax Return Preparer.

If Mr. Raghav is not able to prove that there was a reasonable cause for the said failure,

penalty under section 272B (2) would be imposable.

QUESTION - 9

Mr. X would like to furnish his updated return for the A.Y. 2022-23. In case he furnished

his updated return of income, he would be liable to pay ₹ 2,50,000 towards tax and ₹

35,000 towards interest after adjusting tax and interest paid at the time filing earlier

return. You are required to examine whether Mr. X can furnish updated return

i. as on 31.3.2024

ii. as on 28.2.2025

iii. as on 31.5.2025

If yes, compute the amount of additional income-tax payable by Mr. X at the time of filing

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his updated return.

Would your answer be different with respect to filing of updated return in case of (ii)

above, where he has received a notice under section 147 for the said A.Y. 2022-23 on

23.7.2024.

Solution:

Mr. X may furnish an updated return of his income for A.Y. 2022-23 at any time within 24
months from the end of the relevant assessment year i.e., 31.3.2025.

Accordingly, Mr. X can furnish updated return for A.Y. 2022-23 as on 31.3.2024 and on
28.2.2025. However, he cannot furnish such return as on 31.5.2025, since such date falls
after 31.3.2025.

Mr. X would be liable to pay additional income-tax

@25% of tax and interest payable, if updated return is furnished after the expiry of the
time limit available under section 139(4) or 139(5) i.e., 31st December 2023 and before the
expiry of 12 months from end of relevant assessment year i.e., 31.3.2024

@50% of tax and interest payable, if updated return is furnished after the expiry of 12
months from end of relevant assessment year i.e., 31.3.2024 and before the expiry of 24
months from end of relevant assessment year i.e., 31.3.2025.

Accordingly, Mr. X is liable to pay additional income-tax in case he furnished his updated
return as on

i. 31.3.2024 - ₹ 71,250 [25% of 2,85,000, being tax of ₹ 2,50,000 plus interest of ₹

35,000]
ii. 28.2.2025 of ₹ 1,42,500 [50% of 2,85,000, being tax of ₹ 2,50,000 plus interest of
₹ 35,000] He cannot furnish updated return where he has received notice u/s 147,
since proceeding for income escaping assessment for the A.Y. 2022-23 are pending.

He can not furnish updated return where he has received notice u/s 147, since proceedings
for income escaping assessment for the AY 2022-23 are pending.

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QUESTION - 10

State the cases where Form ITR 1 or ITR 4 cannot be used by a person.

Solution:

Form ITR 1 or ITR 4 cannot be used by a person who:

a) is an ordinarily resident and has, —
✓ assets (including financial interest in any entity) located outside India; or
✓ signing authority in any account located outside India; or
✓ income from any source outside India
b) has claimed any relief of tax u/s 90 or 90A or deduction of tax u/s 91
c) has agricultural income, exceeding Rs. 5,000;
d) has income of the nature referred to in sec. 115BBE.
e) is either Director in a company or
f) has invested in unlisted equity shares or
g) has any brought forward / carry forward loss under the head Income from House
Property.

QUESTION - 11

List the persons who should apply for allotment of Permanent Account Number

Solution:

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INCOME TAX AUTHORITIES

QUESTION - 1

The jurisdiction of an Assessing Officer cannot be objected by the Assessee. Discuss

Solution:

As per sec. 124(3), no person shall be entitled to call in question the jurisdiction of
an Assessing Officer:

a) where he has made a return u/s 139(1), after the expiry of 1 month from the date on
which he was served with a notice u/s 142(2) or 143(2) or after the completion of the
assessment, whichever is earlier.

b) where he has made no such return, after the expiry of the time allowed by the notice
u/s 142(1) or 148 for the making of the return or by the notice under the first proviso
to sec. 144 to show cause why the assessment should not be completed to the best
of the judgment of the Assessing Officer, whichever is earlier.

c) where an action has been taken u/s 132 or 132A, after the expiry of 1 month from
the date on which he was served with a notice u/s 153A or 153C or after the
completion of the assessment, whichever is earlier.

Where an Assessee calls in question the jurisdiction of an Assessing Officer, then the
Assessing Officer shall, if not satisfied with the correctness of the claim, refer the
matter for determination by the Principal Director General or Director General or the
Principal Chief Commissioner or Chief Commissioner or the Principal Commissioner or
Commissioner before the assessment is made.
QUESTION - 2

Write notes on provision relating to succession of income tax authority.

Solution:

Succession of income-tax authority [Sec. 129]

a) Whenever in respect of any proceeding under this Act an income-tax authority ceases
to exercise jurisdiction and another income tax authority exercises jurisdiction.

b) The income-tax authority so succeeding may continue the proceeding from the stage

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at which the proceeding was left by his predecessor.

Opportunity of being re-heard the Assessee may demand that before –

a) Such succeeding authority reopens previous proceeding or any part thereof; or

b) any order of assessment is passed against him,

- he must be given an opportunity of being re-heard.

QUESTION - 3

Who can appoint income-tax authorities?

Solution:

Appointment of income-tax authorities [Sec. 117]

1. The Central Government may appoint such persons as it thinks fit to be income-tax
authorities.

2. The Central Government may authorise the Board, or a Principal Director General or
Director-General, a Principal Chief Commissioner or Chief Commissioner or a Principal
Director or Director or a Principal Commissioner or Commissioner to appoint income-
tax authorities below the rank of an Assistant Commissioner or Deputy Commissioner.

3. An income-tax authority authorised in this behalf by the Board may appoint such
executive or ministerial staff as may be necessary to assist it in the execution of its
functions.

All these appointments can be made subject to the rules and orders of the Central
Government.
QUESTION - 4

Write notes on jurisdiction of income-tax authorities

Solution:

Jurisdiction of income-tax authorities [Sec. 120]

a) Income-tax authorities shall exercise all or any of the powers and perform all or any of
the functions assigned to such authorities in accordance with directions of the Board

b) The directions of the Board may authorise any other income-tax authority to issue
orders in writing for the exercise of the powers and performance of the functions by

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any of its subordinate.

c) The Board or other authorised income-tax authority may have regard to any one or
more of the following criteria:

• territorial area;
• persons or classes of persons;

• incomes or classes of income; and

• cases or classes of cases.

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ASSESSMENT PROCEDURES
QUESTION - 1

For facilitating expeditious resolution of disputes relating to international transactions

involving transfer pricing and foreign companies, the Income-tax Act, 1961, has provided
for "alternate dispute resolution mechanism". In this context, you are required to answer
the following:
a) What meanings have been assigned to "dispute resolution panel” and the "Eligible
Assessee" under this mechanism?
b) When can a grievance for resolution be filed by an Assessee?
c) What evidences are be i ng considered by the panel t o redress the grievance
of the Assessee?
Solution:
a) The term “Dispute Resolution Panel” has been defined to mean a collegium
comprising of three Principal Commissioners or Commissioners of Income-tax
constituted by the Board for this purpose. The term “Eligible Assessee” means any
person in whose case the variation referred to in section 144C (1) arises as a
consequence of the order of the Transfer Pricing Officer passed under section
92CA (3) and any non- corporate non-resident or any foreign company.
b) In case of an assessment of the eligible Assessee, the Assessing Officer shall forward
a draft of the proposed order of assessment. The eligible Assessee shall file his
objections to such variation within 30 days of receipt of such order, with the Dispute
Resolution Panel and with the Assessing Officer.
c) The Dispute Resolution Panel shall, in a case where any objections are received, take
into consideration:
a. the draft order

b. the objections filed by the Assessee

c. the evidence furnished by the Assessee

d. the report, if any, of the Assessing Officer, Valuation Officer or Transfer

Pricing Officer or any other authority

e. the records relating to the draft order

f. the evidence collected by, or caused to be collected by it

g. the result of any enquiry made by or caused to be made by it

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QUESTION - 2

The Assessing Officer has the power to make an assessment to the best of his judgment,
in certain situations. What are they?
Solution:
Under section 144, the Assessing Officer, after considering all relevant material which he
has gathered, is under an obligation to assess the total income or loss to the best of his
judgment and determine the sum payable by the Assessee in the following cases

(1) Where any person fails to make the return under section 139(1) and has not filed a
belated return under section 139(4) or a revised return under section139(5).
(2) Where any person fails to comply with all the terms of a notice issued under section
142(1) or fails to comply with a direction issued under section 142(2A) for getting
the accounts audited.
(3) Where any person, having made a return, fails to comply with all the terms of a notice
issued under section 143(2).
Further, section 145(3) of the Income-tax Act, 1961 permits the Assessing Officer to
make an assessment in the manner provided in section 144:

(1) Where the Assessing Officer is not satisfied about the correctness or completeness
of the accounts of the assessee; or
(2) Where the method of accounting under section 145(1) has not been regularly followed
by the assessee;
(3) Where the income has not been computed in accordance with “Income Computation
and Disclosure Standards” notified by the Central Government under section 145(2).

Faceless assessment as per section 144B shall be applicable to best judgement assessment
under section 144 i.e., the assessment proceedings shall be conducted electronically in e-
Proceeding facility through assesses registered account in designated portal. The faceless
assessment shall be made in respect of such territorial area, or persons or class of persons,
or incomes or class of incomes, or cases or class of cases, as may be specified by the Board.

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QUESTION - 3

Examine whether the Assessing Officer has the power to make any adjustment to income
disclosed by the Assessee in the return of income in course of processing the return under
section 143(1)?
Solution:
The procedure to be followed for summary assessment is contained in section 143(1). As
per section 143(1), the total income or loss of an Assessee shall be computed after making
the following adjustments to the returned income:

(i) any arithmetical error in the return; or

(ii) an incorrect claim, if such incorrect claim is apparent from any information in the
return.
(iii) disallowance of loss claimed, if return is filed beyond due date u/s 139(1)
(iv) disallowance of expenditure or increase in income indicated in the audit report but not
considered in computing the total income in the return
(v) disallowance of deduction claimed under section 10AA or under any of the provisions
of Chapter VI-A under the heading "C.—Deductions in respect of certain incomes", if
return is filed beyond due date u/s 139(1)

No such adjustment shall be made unless as intimation is given to the Assessee of such
adjustment either in writing or electronic mode. Further, Assessing Officer shall make any
adjustment after considering the response received from the Assessee, if any. Where no
response is received with 30 days of the issue of such notice, the above adjustment can be
made.

For the purpose of section 143(1), “an incorrect claim apparent from any information in the
return” means such claim on the basis of an entry, in the return of income:

(i) of an item, which is inconsistent with another entry of the same or some other item
in such return;
(ii) in respect of which, the information required to be furnished under the Income-tax
Act, 1961 to substantiate such entry, has not been so furnished;
(iii) in respect of a deduction, where such deduction exceeds specified statutory limit
which may be expressed as monetary amount or percentage or ratio or fraction.

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QUESTION - 4

Teach well Education is a trust approved under section 10(23C) (vi) which runs various
educational institutions. During the course of assessment under section 143(3), the
Assessing Officer finds that the trust has carried out its activities in contravention of the
section under which it was approved for exemption. Hence, the Assessing Officer wants to
pass an order without giving exemption under section 10, which the Assessee objects. You
are required to examine the following with respect to the provisions of Income-tax Act,
1961.
(a) Whether the Assessing Officer can pass an order without giving exemption under
section 10?
(b) Can the Assessing Officer get any additional time limit in completing this
assessment?
Solution:
a) As per second proviso to section 143(3), if any educational institution referred to in section
10(23C) (iv) has committed any “specified violation” as mentioned under section 10(23C), the
Assessing Officer shall send a reference to the Principal Commissioner or Commissioner to withdraw
the approval or registration, as the case may be. Specified violation inter alia includes a case
where income of the institution has been applied other than for the objects for which it is
established.
No order assessing the total income or loss of such educational institution shall be made by AO
without giving effect to the order passed by the Principal Commissioner or Commissioner either
cancelling the approval or refusing to cancel the approval of such educational institution.
Therefore, in the aforesaid case, the Assessing Officer can pass an assessment order without
giving exemption under section 10 to Teach well Education, which is an educational institution
approved under section 10(23C) (vi), if he has referred the matter to Principal Commissioner or
Commissioner and they have subsequently cancelled the approval of such educational institution
under clause (ii) of fifteenth proviso section 10(23C).
b) As per Explanation 1 to section 153, the period commencing from the date on which the Assessing
Officer makes a reference to the Principal Commissioner or Commissioner under section 143(3)5
and ending with the date on which the copy of the order either cancelling the approval or refusing
to cancel the approval under section 10(23C)6 is received by the Assessing Officer, shall be
excluded for computing the period of limitation for completing the assessment.
Further, in case the time limit available to the Assessing Officer for passing an assessment order,
after such exclusion is less than 60 days, such remaining period of assessment shall be deemed to
have been extended to 60 days. Therefore, the Assessing Officer will get the above-mentioned
additional time for completing the assessment of Teach well Education.

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QUESTION - 5

Mr. Sanskar is engaged in the business of retail trade and has been declaring income of 10
lakhs to ₹ 15 lakhs every year in the last 10 years. A search was conducted under section
132 in the business premises of Sanskar on 5th December, 2023. The search was concluded
21st
by executing last of authorisation for search on December, 2023. The A.O. has in his
possession documents which revealed that Mr. Sanskar has incurred ₹ 5 crores in May 2017
for the marriage of his daughter. The A.O intends to issue notice under section 148 to
Sanskar for the Assessment Year relevant to the previous year 2017-18. Can he do so?
Solution:
As per section 148, the Assessing Officer shall be deemed to have information which suggests that
the income chargeable to tax has escaped assessment in case of an Assessee where a search is
initiated under section 132 on or after 01.04.2021. Further, in case of search under section 132,
notice under section 148 need not be accompanied by order u/s 148A. Thus, the Assessing Officer
can issue a notice under section 148 for any of the relevant assessment years -
(a) if three years have not elapsed from the end of the relevant assessment year,
(b) if three years, but not more than ten years, have elapsed from the end of the relevant
assessment year and the Assessing Officer has in his possession books of account or other
documents or evidence which reveal that the income chargeable to tax, represented in the
form of
➢ asset: or
➢ expenditure in respect of a transaction or in relation to an event or
occasion; or
➢ an entry or entries in the books of account,
which has escaped assessment amounts to or is likely to amount to ₹ 50 lakhs or more for that
year.

Where the income chargeable to tax represented in the form of an asset or expenditure in relation
to an event or occasion of the value referred to in (b) above, has escaped the assessment and the
investment in such asset or expenditure in relation to such event or occasion has been made or
incurred, in more than one previous years relevant to the assessment years within the period referred
to in (b), a notice under section 148 shall be issued for every such assessment year for assessment,
reassessment or recomputation, as the case may be.
In this case, Mr. Sanskar has incurred expenditure of ₹ 5 crores in relation to marriage of his
daughter. Hence, the Assessing Officer can issue notice under section 148 for A.Y. 2018-19, since it
falls within the 10-year period.

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Note – As per section 153A, the Assessing Officer shall assess or reassess the total income of each
of the six assessment years immediately preceding the assessment year relevant to the previous year
in which the search was conducted under section 132 or requisition was made under section 132A.
Moreover, where the Assessing Officer has in his possession books of account or other documents
or evidence which reveal that the income, represented in the form of assets, which has escaped
assessment amounts to or is likely to amount to 50 lakhs or more in the relevant assessment year or
in aggregate in the relevant assessment years, notice under section 153A can be issued for beyond 6
assessment years but up to 10 assessment years prior to the assessment year relevant to the previous
year in which the search or requisition is conducted. In the present case, notice under section 153A
can be issued for A.Y. 2018-19, since it falls within the 6 A.Y. immediately preceding the A.Y. 2024-
25 relevant to the P.Y. 2023-24 in which search is conducted.
QUESTION - 6
Tai Ltd. filed its return of income for assessment year 2023-24 on 26th September, 2023.
The return is selected for regular assessment under section 143(3) for which notice under
section 143(2) is served on the company on 3rd July, 2024. The company responded to the
notice under section 143(2). Examine whether the service of the notice is within time and
if not, whether the assessment order can be challenged by the Assessee.
Solution:
The time limit for service of notice under section 143(2) is three months from the end of the financial
year in which the return of income was furnished by the Assessee. The return of income for
assessment year 2023-24 was filed by the Assessee on 26th September, 2023. Therefore, the notice
under section 143(2) has to be served by 30th June, 2024. However, the notice was served on the
Assessee only on 3rd. July, 2024. Hence, the notice issued under section 143(2) is time-barred.

However, as per section 292BB, where an assessee had appeared in any proceedings or co- operated
in any enquiry relating to an assessment or reassessment, it shall be deemed that any notice required
to be served upon him, has been duly served upon him in time in accordance with the provisions of the
Act and such assessee shall be precluded from raising any objection in any proceeding or enquiry that
the notice was
(a) not served upon him or
(b) not served upon him in time or
(c) served upon him in an improper manner.

The above provision shall not be applicable where the assessee has raised such objection before the
completion of such assessment or reassessment. Therefore, in the instant case, if the assessee, Tai

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Limited, had raised an objection to the proceeding, on the ground of non- service of the notice under
section 143(2) upon it on time, then, the validity of the assessment order can be challenged. In
absence of such objection, the assessment order cannot be challenged.
QUESTION - 7
Discuss the correctness or otherwise of the following proposition in the context of the
Income- tax Act, 1961:
“A fresh claim before the Assessing Officer can be made only by filing a revised return
and not otherwise”.
Solution:
This proposition is correct.

A return of income filed within the due date under section 139(1) or a belated return filed under
section 139(4) may be revised by filing a revised return under section 139(5) where the Assessee
finds any omission or wrong statement in the original return subject to satisfying other conditions.
There is no provision in the Income-tax Act, 1961, to make changes or modification in the return of
income by filing a letter before the Assessing Officer. The revised return can be filed at any time
before three months prior to the end of the relevant assessment year or before the completion of
assessment, whichever is earlier. In a case where a return of income has been filed within the due
date under section 139(1) or a belated return is filed under section 139(4), the only option available
to the Assessee to make an amendment to such return is by way of filing a revised return under
section 139(5). Therefore, a fresh claim can be made before the Assessing Officer only by filing a
revised return and not otherwise. The Supreme Court, in Goetze (India) Ltd. vs. CIT (2006) 284 ITR
323, has held that there is no power available under the provisions of the Income-tax Act, 1961
enabling the Assessing Officer to allow a claim made by the Assessee except by way of filing a revised
return.

Note – Section 139(8A), provides an option to an Assessee to file an updated return for an
assessment year, at any time within 24 months from the end of the relevant assessment year. But
such updated return should not be a return of a loss or have the effect of decreasing the total tax
liability determined on the basis of return furnished under section 139(1) or 139(4) or 139(5) or
result in refund or increases the refund due on the basis of return furnished under section 139(1) or
139(4) or 139(5). Hence, for making a fresh claim the only option available with the Assessee is to
file a revised return under section 139(5).

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QUESTION - 8
A notice under section 143(2) was served on Mr. Imaan for the assessment year 2024-25
on 05.05.2024. State the time limit with in, which the assessment would be completed in
his case.
Solution:
Section 153 provides time limit for completion of assessment under section 143 or section 144.

The Time limit is 9 months from the end of the assessment year in which the income was first
assessable.

Therefore, for the assessment year 2024-25, the time limit is available up to 31.12.2025.

QUESTION - 9
Can the Joint Commissioner issue directions to the Assessing Officer for completion of
assessment in a particular case? Is such direction binding on the Assessing Officer?
Solution:
Section 144A empowers the Joint Commissioner to issue guidance to the Assessing Officer for
completing the assessment.

Such guidance is binding on the Assessing Officer and the assessment has to be made in the light of
such guidelines only.

QUESTION - 10
Magnet Ltd. Has following issues with regard to its assessment and tax management. You
are to provide brief answer to the following:
The Assessing offer in order to invoke section 147 and to issue notice under section 148
has sought some information for the assessment year 2020-21. Briefly explain the scope
of power of the Assessing offer under section 148A.
Solution:
Sec 148A: AO has to follow the following steps before issue of notice u/s 148
a. Conduct any inquiry (if required).

b. Provide an opportunity of being heard to Assessee by serving Show Cause Notice [SCN] as to

why notice u/s 148 shouldn’t be issued. [Reply by Assessee should be within time specified in

notice being 7-30 days.]

c. Consider the reply of Assessee.

d. Decide by passing order whether it is a fit case to issue notice u/s 148.

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Non-Applicability of Section 148A

a) a search is initiated under section 132 or books of account, other documents or any assets

are requisitioned under section 132A, on or after 01.04.2021, in the case of the Assessee; or

b) a survey is conducted under section 133A, other than survey conducted for verifying tax is

deducted or collected at source under section 133A(2A), on or after 01.04.2021, in the case of

the Assessee; or

c) 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, books

of account or documents seized or requisitioned under section 132 or section 132A in case

of any other person on or after 01.04.2021, belongs to the Assessee; or

d) any information made available to the Assessing Officer under the scheme notified in respect

of faceless collection of information under section 135A;

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