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Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
Assessment.bose
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Assessment.bose

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  • 1. Common Mistakes in Assessments &Analysis of Various Reports and Notes of Auditor Shankar Bose, IIT MSTU, Puri
  • 2. Agenda Section A – Common Mistakes in Assessments Section B – Analysis of Various Reports and Notes of Auditors PricewaterhouseCoopers
  • 3. Agenda Section A – Common Mistakes in Assessments Section B – Analysis of Various Reports and Notes of Auditors PricewaterhouseCoopers
  • 4. Section A• Meaning of Assessment• Purpose of Assessment• Common Mistakes in Assessments• Constitutional Provisions with regard to taxation in India• Key Points PricewaterhouseCoopers
  • 5. Section A Meaning of Assessment PricewaterhouseCoopers
  • 6. Section A - Meaning of Assessment As per Macmillan dictionary, Assessment means - “the process of making a judgment or forming an opinion, after considering something or someone carefully” PricewaterhouseCoopers
  • 7. Section A Purpose of Assessment PricewaterhouseCoopers
  • 8. Section A - Purpose of Assessment Tax Officers are revenue administrators and revenue collectors of the Govt.; Purpose of Assessment is to assess the correct income: By analysing the facts , Applying correct accounting standards Applying appropriate legal provisions Passing speaking and legally sound assessment orders. To collect taxes due on assessed PricewaterhouseCoopers income;
  • 9. Section A Common Mistakes in Assessment PricewaterhouseCoopers
  • 10. Section A – Common Mistakesin Assessment Selection of Case for Scrutiny • Violation of Internal guidelines and Instructions; • Cases selected under CASS / AIR Information not dealt properly PricewaterhouseCoopers
  • 11. Section A – CommonMistakes in AssessmentIssuing Questionnaires• Non – verification of return of income and non application of mind while issuing questionnaires• Stereo typed questionnaires are issued without any focused approach PricewaterhouseCoopers
  • 12. Section A – CommonMistakes in Assessment• Assessments completed hastily and hurriedly without appreciation of facts of the case and application of mind;• Lack of in-depth inquiry carried out leading to increased litigation like 263 etc. PricewaterhouseCoopers
  • 13. Section A – CommonMistakes in Assessment • Technical breaches in carrying out the assessment resulting in High Court intervention and loss of revenue like not seeking approval for 148 / 153A etc. • Issuing summons / notices without jurisdiction leading to tax leakages PricewaterhouseCoopers
  • 14. Section A – CommonMistakes in Assessment• Inconsistent approach is followed in completing the assessments;• Deviation from last years stands• Not following the orders of appellate authority wherever decided in earlier years PricewaterhouseCoopers
  • 15. Section A – CommonMistakes in Assessment• Non compliances of CBDT Circulars / Notifications• Non compliance of directions issued like 144 A, 263 / 264 etc.• Disregard to the settled legal position like not following the Supreme Court decision resulting in unnecessary litigation PricewaterhouseCoopers
  • 16. Section A – CommonMistakes in Assessment• Timelines not adhered in several cases like 148 cases• Allowing set off losses against the exempt income• Incomes from other sources allowed deductions u/s 80 IB etc.• Items subject to depreciation allowed in full i.e. considered as revenue in nature PricewaterhouseCoopers
  • 17. Section A – CommonMistakes in AssessmentCommon Mistakes in Survey Operations• Conducting surveys without proper approvals;•Delay in submitting the preliminary survey reports;•Non verification of return filed subsequent to survey w.r.t.income disclosed in survey PricewaterhouseCoopers
  • 18. Section A – CommonMistakes in AssessmentCommon Mistakes in Search Operations• Disclosures not backed by seized material•Delay in sending the appraisal reports•Non appreciation and investigation of evidences seizedduring the search proceedings•Appraisal report not properly analysed and leads containedtherein not followed PricewaterhouseCoopers
  • 19. Section A Constitutional provisions with regard to Income Tax Act PricewaterhouseCoopers
  • 20. Section A – ConstitutionalProvisions• In India Cement Ltd. vs. State of Tamil Nadu [188 ITR 690] [SC], seven member bench of Apex Court held that “Constitution is the mechanism under which the laws are to be made and not merely an act whish declares what the law is to be”• Article 265 of the Constitution – No tax shall be levied or collected except by the authority of law• Article 14 must be adhered to PricewaterhouseCoopers
  • 21. Section A – ConstitutionalProvisions• “audi alteram partem” rule must be followed in true spirit – as held by Apex Court:• a person against whom an order to his prejudice may be passed should be informed of the charges against him;• Such person should be given an opportunity of submitting his explanation;• Witnesses who are to give evidence against him be examined in his persons with right to cross examine them; PricewaterhouseCoopers
  • 22. Section A Key Points PricewaterhouseCoopers
  • 23. Section A – Key points • Strict compliances of procedures laid down by Supreme Court in GKN Driveshafts case in 148 matters; • Give assessees reasonable opportunity of being heard; • Evidences to be used against the assessees must be put for cross examination; • Give proper reasoning for each disallowances; PricewaterhouseCoopers
  • 24. Section A – Key points • In case a ruling is relied by the assessee and the same is not followed, give proper reasoning for same; • Be specific in drafting the assessment orders – avoid vague language PricewaterhouseCoopers
  • 25. Section B – Analysis of VariousReports and Notes of Auditors PricewaterhouseCoopers
  • 26. Section B - Reports filed with the returnof income • Tax Audit Report u/s 44 AB • Auditor’s Report • Schedules forming part of Accounts • 3CEB Report - TP Report • Other Forms / Certificates PricewaterhouseCoopers
  • 27. Section B - Key points in Tax Audit Reportu/s 44 AB• Whether there is any change in the nature of business;• Books of accounts maintained by the assessee;• Any change in method of accounting during the year;• Method of valuation of closing stock;• Duty drawbacks claimed etc. PricewaterhouseCoopers
  • 28. Section B - Key points in Tax Audit Reportu/s 44 AB• Amounts debited to PL account being capital in nature;• Expenditure of personal nature;• Sum paid by way of penalty / infraction in law;• Other penalties / fines (if any)• Disallowances u/s 40(a) PricewaterhouseCoopers
  • 29. Section B - Key points in Tax Audit Reportu/s 44 AB• Disallowances under section 40 A (3);• Sum not allowable under section 40 A (7) / (9);• 14A expenditure if any paid;• Sum paid and claimed u/s 43B disallowances• Ratio Analysis – GP / NP / Stock / FG PricewaterhouseCoopers
  • 30. Section B - Key points in Tax Audit Reportu/s 44 AB• Whether there is any change in the nature of business;• Books of accounts maintained by the assessee;• Any change in method of accounting during the year;• Method of valuation of closing stock;• Duty drawbacks claimed etc. PricewaterhouseCoopers
  • 31. Section B - Key points in Tax Audit Reportu/s 44 AB• Whether there is any change in the nature of business;• Books of accounts maintained by the assessee;• Any change in method of accounting during the year;• Method of valuation of closing stock;• Duty drawbacks claimed etc. PricewaterhouseCoopers
  • 32. Section B - Key points in AuditorsReport / Schedules• Compliances of Accounting Standards and Guidance Notes;• Check if any qualifications made by the Auditor – Its impact and analysis on financial accounts;• Provisions and Contingencies note• Revenue recognition PricewaterhouseCoopers
  • 33. Section B - Key points in AuditorsReport / Schedules• Transactions with Related parties – whether domestic / international;• Any subsequent event having bearing on financials PricewaterhouseCoopers
  • 34. Section B - Key points in 3CEB – T PCertificate• Certificate contains list of all related party transactions;• Check all transactions are also captured in Auditor’s Report;• In case where the transaction limit exceeds the statutory limit, refer to Transfer Pricing Officer PricewaterhouseCoopers
  • 35. Section B - Other Forms / Certificates Form No. DescriptionForm 3 CE Applicable for foreign companies receiving income from royalty of FTSForm 10CCAD Audit Report in respect of assesses engaged in business of hotel / travel agents / tour operatorsForm 10 CCB/BB For assessees claiming deduction u/s 80 IA / 80 IB of the ActForm 10 CCBBA For assessees claiming deduction u/s 80 ID of the ActForm 15 CA / CB For assessees remitting money outside India u/s 195 of the ActForm 15 G Declaration u/s 197A of the Act PricewaterhouseCoopers
  • 36. Thank You PricewaterhouseCoopers

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