Problems in filing Incometax Returns in time this year.

I have been suffering like a traveller who tries to book a tatkal train ticket one day before the date of travel, when I was trying to file returns of income now a days

You all know that booking train ticket online during the morning between 10AM and 12 Noon is a very difficult job even for an experienced person. The irctc web site is always busy. Even if I get that website, my bank's ie FEDERAL BANK web site is always busy in the morning and I don't get the tickets but my money would be gone for sometime. 

One can understand that the railways have not increased the fares for a very long time and hence they do not have the funds for modernisation of the website of irctc. But how it is possible for the Incometax Department not to update the capacity of its servers as there is no funds constraint with the Incometax Department.

The Incometax Department wanted all the assessees including salaried class having more than Rs. 5 lacs income to file their incometax return on line. Last year, persons with less than Rs.5 lacs drawing salary income,were exempted from filing Incometax returns. That benefit was taken away this year and they were asked to file their return compulsorily this year. No reason for such a decision was given by the Ministry of Finance. In addition to the salaried class, all persons including businessmen have to file their return before 31st of July this year. (Except persons whose accounts are to be compulsorily audited).

The Incometax Department had changed the Incometax Returns formats and such formats and the schema for software were released very late.

All this led to the people engaging themselves with the website of the department during the last week of July, for registering with the department, then verifying the tax deducted at source details and finally filing the returns. Immagine lacs and lacs of software professionals filing returns on line in the last week of July. This led to non availability of the E filing Website of the department.

When these problems were pointed by the Institute of Chartered Accountants, the Incometax Department had extended the last date for filing of return of Incometax to 05th of August.
This is not enough. Even to-day, I found the department's website busy.

I have been filing the returns of my clients for the past week by waking up around 4 AM and filing the returns. I have tried even at around midnight but failed. But in the early morning I was able to file the returns.

As a professional with experience, I was able to do some justice to some of my clients. But immagine a new assessee with little experience in computer operations,filing returns in such circumstances?

Therefore my request to the Ministry of Finance is two fold. 
Increase the server capacity of the department manifold,
Design and publish the new return formats every year on 1st of April.

How shell companies turn black money of India Inc, politicians into white and vice versa

To day I have seen a news item regarding the use of shell companies for money laundering purposes. This practice had evolved from Kolkatta. From there we find lot of shell companies being floated , capital accumulated and later sold off.

One of my clients was approached by someone regarding this. After seeing the profit and Loss account and balancesheets, total income statements etc, I was dissatisfied and found such project very risky, unethical and immoral. I later dissuaded my client from such a project.

After that bitter experience I had an occasion to read this article in Economic Times and I would like to share this to my friends to make them aware of what is happening and also to make them know what some of our brothen's activities bring bad name to all of us.

Now please go through the following link to read the article, I spoke off.

http://economictimes.indiatimes.com/news/news-by-company/corporate-trends/how-shell-companies-turn-black-money-of-india-inc-politicians-into-white-and-vice-versa/articleshow/20947474.cms?curpg=5

Problems in filing Incometax Returns for this year before 31st July.

The Traces Website of the Incometax Department is not working or working intermittently. This website is the one which gives the details of Incometax deducted from the assessee's income. One has to verify the figures from this website before filing the return of income as many tax deductors like banks deduct tax, issue tds certificates in Form No:16A, but do not file the tds returns. In that case tds credit will not appear in the party's account, namely AS 26 of the incometax department's tds website. In such situations one can always ask the deductor to file the return immediately.

There are several cases, where the deductors quote wrong PAN numbers leading to credit not appearing in the Party's ledger of the Incometax website. If there is such mistakes then the assessee will not be able to get credit for the tax deducted. He has to ask the deductor to rectify the tds return by filing a revised tds return, correcting the mistake.

Therefore if the Incometax department's tds web site is not working well, all the assessees are affected and I hope that the Ministry of Finance, and Board of Direct Taxes take necessary steps to set right all the problems.

Earlier the tds related issues were handled by NSDL and the government created its own web site called TRACES. It is being managed by Infosys Ltd at present.

Infosys Ltd had lot of problems when it took over from TCS the web site of the Department of Company Law Affairs. Now even the TRACES is also having the same problems.

The issue become serious when we consider that the last date for filing return of income of non audit cases fall on July 31st. If the returns are filed later, the assessee had to pay penalty and also interest under section 234A,234B,234C.

A minor, his mother, a web of firms and hundreds of crores

A minor, his mother, a web of firms and hundreds of crores: Bogus contract payments scam in a PSU unearthed after tip-off from a suspicious transaction report


For detail news click here

This information is in continuation on earlier post regarding Income tax departments various sources of information.

System glitch deducts 40% amount as TDS from SBI depositors’ account!

System glitch deducts 40% amount as TDS from SBI depositors’ account! - Moneylife

Please go through the above article. This will reveal how SBI had deducted higher tds than the correct tax from the interest on deposits of its customers. It had deducted tax four times more than what is due as per the provisions of the Incometax Act. 

There are several cases where the banks deduct tax on interest on fixed deposits. But tds returns were not filed by the banks. 

I have found in several instances, where tds returns were filed but wrong PAN numbers quoted resulting in denial of refunds to the depositors.

These defaults by banks resulted in depositors not getting their correct tax refund. This is despite several reminders by the customers to the banks both orally and in person.

The bank managers welcome all the customers when the deposits are made, give them coffee, calendar etc. However when problems arise later in tds etc, the managers do not respond with the same courtesy. They treat you like an enemy and ask you to wait forever. You will not be even offered a seat in the Branch Manager's Cabin and be asked to meet the clerk who looks after the tds affairs.

Now I would like to give a specific case. One of my clients had some deposits with Corporation Bank, Erode. The bank had deducted tax at the rate of 20% of interest on deposit instead of 10%. 

The customer was not informed of the same. He came to know of the tds deduction after three years, when he went to renew the deposit. To his utter surprise, the amount renewed for the fresh deposit was less than the maturity amount quoted in the earlier deposit. Only when he enquired in to this discrepancy, he came to know of the fact of tax being deducted from the interest for the past three years. He was neither informed of the same, nor given the tds certificate as per law. Had tds certificate in Form No 16A been given, he could have either set off the tds deducted against his incometax dues or if his income is less than the taxable income, he could have got the refund from the Incometax department. The relevant tds certificate in Form no 16 A was not given to him for all three years.

 It transpired that the bank had wrongly deducted 20% tds on the interest, on the assumption that the depositor had not furnished his PAN No. The normal deduction of tax on the interest is 10% if the interest income from that deposit exceeds Rs.10000 every year. The penal rate of 20% is to be applied if the depositor fails to furnish his PAN number.

It was brought to the knowledge of the Manager that the PAN number is already available in the Customer Id of the depositor. The PAN number was given by the customer, when the deposit was made. The Manager initially denied the availability of PAN in the customer id. Since the Customer was having internet banking facility, he was able to prove that PAN is there in his customer id by taking a print out of this customer id details.

The mistake was committed by the person to whom the bank had given the job of preparing the tds return, which is normally outsourced externally. The staff of the bank had omitted to furnish the PAN number to such outsourced person, resulting in double deduction of tds. 

By the time customer came to know about the deduction of tds from his interest on maturity of the deposit after three years, he had already filed his returns of income for all three years by offering the full interest due and paid tax thereon from his pocket.

Now it is not possible to get any refund from the department as the refunds were time barred. You can file a revised return only for the current year and one year earlier.

The bank can easily solve the issue if the relevant tds return is revised by filing a revised return. The cost of such an effort is about Rs.100 only. If it files the revised return, then the credit for tds related to his PAN will appear in AS 26 of the depositor. Any person can view his tax credits in Form No: AS26 in the web site of the Incometax department after giving his PAN as his user id and correctly quoting his password. 

The customer can then, file a Rectification Petition under section 154 of the Act and attempt to get the refund.

Even now the Bank which is supposed to file a Revised Return of its tds return and later give a Form No 16A is not obliging the depositor despite several visits to the bank by him.

Such is the attitude of the bank officials. The growth in deposits had fallen during the last few years in India. The improper documentation and tds troubles are also some of the reasons for the fall in growth of deposits. How do you expect a lay man, especially a senior citizen to understand all these technicalities? 

You cannot fault the citizens when they go to chit fund companies and fly by night operators if the organised bank sector operates like this!

I will be giving you several instances where the faulty tds mechanism, the mistakes and defaults of the tds deductors, continuing problems with the Income Tax Department's Web site, "Traces", cause innumerable problems to the tax payers in my forth coming posts.

Incometax Departments new Strategy to lure new assessees and to catch evaders

Is it difficult to conceal any thing from Incometax Department?

The technological development and computerisation in the country for last two decades make it difficult to conceal any thing relating to monetary transactions from the prying eyes of the Incometax Department. 

Whenever you make any cash deposit of Rs50000 and above in any Bank, you have to furnish the PAN no issued to you.

 Similarly whenever you make a fixed deposit and the interest on such deposits exceed Rs.10000 in an year, you have to give the PAN to your bank either with without Form no 15H or Form no 15G.

Whenever you buy jewellery or get a credit card or open a new Saving Account, you have to give PAN. Again when ask for Locker with your local neighbourhood bank, he asks you for you PAN as KYC document.

 Now a days, even to make  mutual Fund investments or to buy new Insurance Policy, you have to give a copy of your PAN, as a know your customer document. The Government had slowly brought in these tools to catch hold of the tax evaders and now getting at them through data mining. 

Many of you may not know, that the Incometax department has a software called 360 degree profiling. Through this software, the department will be able to look into all the transactions that you have entered into, using the PAN nos.

The department is using this tool in big cases to get at the tax dodgers.

There are other ways of collecting information by the department. There is a wing called CIB. ie Collection of Information Bureau, working under the Director General of Incometax. This is the wing that conducts searches.

This branch collects information from various sources. I have come across the collection of information of about buyers of luxurious cars from the Dealers, flats from builders etc. It also collects information about the huge fees paid by the students of various self financing medical, dental and engineering colleges. This branch collects information about the huge expenditure incurred by the tax payers in various walks of like and later passes on those information to the Incometax Officers. This information will be used in selecting the cases for scrutiny and for making additions, if income commensurate with the expenditure incurred is not disclosed in the returns of income filed.

Simliarly there is another way of collection of information by the department. ie Annual Information Return. This is filed by the Sub Registrar who registers the transfer of properties when you buy or sell immovable assets with a guideline value exceeding Rs.30 lacs. From the bankers when cash deposits exceeding Rs. 10 lacs is made in a savings account. From credit card companies when expenditure exceeding Rs. 2 lacs is incurred through a credit card. From a Limited Company when you invest more than Rs one lac as share investment. From a Mutual Fund for any investment in any scheme of a sum exceeding Rs 2 lacs. From RBI for making any investment exceeding Rs. 5 lacs.

Many people relying on the advice document writers and unqualified professionals, show an amount, which is lower than Rs. 30 lacs as consideration for the property in the documents relating to the purchase or sale of immovable property. This is in correct. The figure of 30 lacs to be disclosed in the AIR by the Sub Registrar,is the value of the property as per the guideline value fixed by the State Government. When such lower consideration is disclosed by a person, in his return of income and ITO finds that AIR gives a higher figure, then his case will be taken for scrutiny. Or if the case relates to earlier returns the assessment will be reopened with severe consequences.

Again I have found that many bankers in the rural areas wrongly advice the customers to deposit cash exceeding Rs 10 lacs in an year stating that they will look after their welfare. However as almost all banks are on Core Banking Solutions, the AIR return by the Head Office, will reveal all these cash deposits to the Incometax Deposits leading to serious consequences to the depositors. 

To satisfy the KYC norms, these Managers obtain PAN number for agriculturists and get them into all these problems. You may question as to how an agriculturists get Rs 10 lacs to cash deposit. If he sells his turmeric produce of three years after keeping them in a godown, and if he gets a good, renumerative price for turmeric, such sums are possible. However it will be very difficult for him to appear before the Officers of the Department and to prove his agricultural income to such an extent.

These AIR returns filed annually by the above entities. This information becomes available to the Incometax Officers for selecting cases for scrutiny and for making additions after conducting further inquiry.

The department also have lot of data through the tds mechanism. Whoever had deducted tax on interest, commission, salary and rent etc would file tds returns every quarter giving the details of interest, commission, salary, rent etc paid and the amount of tds made. If you do disclose the above income, then the case will be selected for scrutiny and you are in for lot of difficulties. Similarly persons who have given Form no15 H and Form no 15G for non deduction of tds will be noted in the tds returns and these details also will be known to the department. About two years back, the department made it compulsory to quote PAN in these forms just get those who give these forms to the bank and later do not disclose the income to the department.

In addition to the above, the banks and financial institutions submit STRs ie suspicious transactions reports to the Financial Intelligence Unit from where the information is passed on to the Incometax Department. Huge cash deposits and huge cash withdrawals from bank would invite STRs.

According to some news paper reports, last year, I understand that, the department sent out 1 lakh tax notices to a list of 12 lakh persons identified as not filing their annual incometax returns, even though their expenditure patterns suggested the need to pay taxes.

 Based on data collected from a variety of sources — annual information returns or AIR in tax jargon — the department found, for instance, that 16 lakh persons made credit card payments of over Rs 2 lakh in FY13 and 52.4 lakh persons spent more than Rs 2 lakh buying mutual funds in that year. In response to these notices, however, the taxman has already got 1.25 lakh returns from people — some have added their spouses’ returns as well — and most have paid the taxes demanded.

The taxman’s new strategy is based on this recent success. The Incometax department now plans to send letters to all taxpayers every year in April-May, giving details of their PAN numbers, the taxes paid by them as well as various financial transactions captured by the AIR system during the year.

 A senior tax official said, “Though the letters sent to all the assesses and identified people outside the tax ambit will not be tax notices legally, the onus of acting on the information provided would certainly be on them.”

The department, however, will not stop at sending letters only to those who are already in the tax net; letters in the same format will also be sent to all those found to be making high-value transaction but not paying any tax and not filing returns.

With just 3.5 crore of the 11 crore who have PAN numbers filing tax returns, and the number of new ones more than halving between FY11 and FY12 — from 17.8 lakh in FY08, new assesses fell to 14.8 lakh in FY11 and to 7.2 lakh in FY12 — the disconnect between rising taxes and the number of taxpayers is getting stronger. In the last 10 years, direct tax collections have increased by more than 700%, while the number of taxpayers has grown by only about 35%. The personal income tax income slab of up to Rs 5 lakh comprises of 98.38% of total assesses, while the slab above Rs 20 lakh comprises a mere 0.38% of total assesses — 63% of the total income tax collected, though, comes from this bracket.

Personal income tax collection has grown from Rs 49,268 crore in FY05 to Rs 1,64,485 crore in FY12, the revised estimate for FY13 is Rs 1,99,930 crore, and the budget estimate for FY14 is pegged at Rs 2,40,919 crore.

The income tax department plans to roll out its new strategy quickly. “The architecture and design of the IT backbone for this is already in the works,” said the official, adding that it might happen in phases.

What do we learn from a reading of the above? We must keep record of all our  transactions and report the correct income through your CA to the Incometax Department.

 Don't ever think that the department cannot catch you. It will, in due course with severe consequences.

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