PAPER - III (Source : Previous Year Question Papers)

DRAWING & DISBURSING OFFICER (DDO)

As per central treasury rules ad payment rules, the head of office authorizes a junior officer to carry out the functions of drawal of money from govt and payments. Such an officer is called Drawing & Disbursing Officer. His main functions are to look after the regulation of receipt of govt money and incurring expenditure. Since DDO are responsible for payment of salaries, therefore sec 192 of IT act 1962 levies the power on him to deduct income tax. Sec 192 says “any person responsible for paying any income chargeable under the head ‘salaries’ shall, at the time of payment, deduct income tax on the amount payable at the average rate of income tax computed on the basis of the rates in force for the FY in which the payment is made, on the estimated income of the assessee under this head for that FY.”’ 

DUTIES OF DDO

DDO must ensure that proper and adequate tax is deducted from the disbursement to employees of not only additional pay and allowances but also of arrears payable. DDO are required to take into account the revised rates of surcharge while computing TDS. They should recomputed the correct tax liability of every employee and recover full tax liability thereon. Certificates of TDS should be given to each govt servant in whose case tax has been deducted during a FY. Where donations are being made to any trust, institution from salary of employee by employer the DDO may allow the benefit of 100% deduction on such donation. Every DDO is required to file an annual return of tax deduction in form no 24 by the end of may each year in respect of deductions made during the previous FY. Failure to furnish the return may lead to a penalty. 

FAILURE OF TDS BY DDO

 Section 201(1) states that where a person, including the principal officer of a company who is required to deduct any sum in accordance with the provisions of IT act does not deduct, or does not pay or after so deducting fails to pay the whole or any part of the tax as required by the rules, he shall be deemed to be an assessee in default u/s 201 and is liable to payment of appropriate tax so due, penalty u/s 221 which may be as high as the amount of tax in default, prosecution which may lead to rigorous imprisonment and also fine. According to sec 276B, if a person fails to pay the credit of the Central govt, the TDS as required by, he shall be punishable with rigorous imprisonment for a term which shall not be less than 3 months but which may extend to 7 years and with fine. Interest u/s 201(1A) @1% for every month or part of a month on the due tax for the period of default. The default runs from the date on which tax was deductible to the date on which tax deducted is actually paid. Failure to TDS also entails penalty u/s 271C, the amount of penalty shall be equal to the amount which he failed to deduct. 

SET OFF REFUND AGAINST DEMAND

Where under any of the provisions of the IT act a refund is found to be due to any person, the Assessing Officer, Dy. Commissioner(appeals), Commissioner(Appeals), Chief Commissioner may set off the amount to be refunded against any sum remaining payable under the act by the person to whom the refund is due. In such cases an intimation in writing should be given to the person concerned regarding the action proposed to be taken. It is necessary to intimate the assessee about the proposed set off of refund. 

PROCESSING OF RETURNS U/S 143(1) TILL SENDING INTIMATIONS 

Where a return has been made u/s 139 or in response to a notice u/s 142(1), the Assessing Officer will send an intimation to the assessee if any tax or interest is found due, after adjustment of any TDS, advance tax paid, any tax paid on self assessment and any amount paid otherwise than by way of tax or interest. Such intimation should specify the sum so payable and it shall be deemed to be a notice of demand issued u/s 156 and all the provisions of the IT act shall apply accordingly. If any refund is due on the basis of such return, it shall be granted to the assessee and intimation to this effect shall be sent to assessee. Where either no sum is payable by the assessee or no refund is due to him, the acknowledgment of the return shall be deemed to be an intimation u/s 143(1). No intimation u/s 143(1) shall be sent after expiry of 1 year from the end of FY in which return of income is made. 

PROCEDURE FOR REGULAR ASSTT

If the Assessing Officer considers it necessary to ensure that the assessee has not understand his income or has not computed excessive loss or has not under paid the tax in any manner. It is his duty to serve upon the assessee a notice u/s 143(2) requiring him to attend his office or to produce or cause to be produced, any evidence on which he may rely in support of the return. This notice can be issued irrespective or any intimation having been sent by the Assessing Officer u/s 143(1) or not. The Assessing Officer may also order u/s 142(1), the production of such account, documents and information as he may require and may gather other evidence and information in exercise of his powers u/s 131 to 133B and section 142(2).

INTIMATION U/S 143(1) 

This section provides that where a return has been filed u/s 139, or in response to a notice issued u/s 142(1), and any tax or interest is found due on the basis of such return, after adjustment of prepaid taxes or interest, then an intimation has to be sent to the assessee specifying the sum so payable. This intimation shall be deemed to be a notice of demand u/s 156. Similarly, if any refund is due on the basis of such return, it shall be granted to the assessee and an intimation to that effect will be sent to the assessee. If no intimation is required to be sent u/s 143(1), the acknowledgement of the return shall be deemed to be an intimation.

IMP STATISTICAL REPORTS

1.QUARTERLY PROGRESS REPORT-This is a report which every Assessing Officer is required to submit quarterly in the prescribed form. It contains complete information regarding all aspects of Assessing Officer’s work in the preceding quarter. It shows the work pending with him at the beginning of the preceding quarter, institutions during the quarter and his disposals during the quarter. It also reflects demand and collection and budgetary position at the end of each quarter.The form is divided into 17 parts. Part A shows the deployment of officers on assessment work of total no of assessee on record and the additions to or subtraction therefrom. It also indicates the no of assessee who have filed returns voluntarily and in whose cases notices are issued for filing the return. Part B reflects workload and disposal of IT assess, arrears. This part contains analysis of workload, disposal and balance. Part C contains information regarding wealth tax assessment which includes assessee on record, workload of assessment, analysis of workload. Part D contains info regarding gift tax assessment under different stats. Part E,F,G,H,I are meant for recording info of the type mentioned in part C in regard to workload and disposal of Estate Duty, Super Profit Tax and Surtax, interest tax, expenditure tax and hotel receipt tax. Part J reflects work relating to deduction of TDS from various payments. Part K reflects info of the type mentioned in part J in respect of TCS. Part L reflects demand and collection of advance tax and penalties imposed on defaulters. Part M is meant for showing progressive demand of collection, both arrear and current, after accounting for the variation on account of different reasons. Part N reflects statistics about progressive demand and collection of estate duty, hotel receipt tax, super profit tax and surtax. Part O reflects work load and disposal of penalty proceedings under IT,WT,GT,ET. Part P is meant for reporting info with regard to miscellaneous work under different direct tax laws handled by Assessing Officer. Part Q contains summary of net collection upto the end of the quarter under different enactments. The QPR is first prepared by the Assessing Officer who submits it to the Jt. Commissioner or Commissioner of Income Tax. The Jt. Commissioner prepares a consolidated progress report in respect of his range and submits it to CIT. The CIT then prepares a consolidated report in respect of his charge and submits it to Chief Commissioner who will furnish a consolidated QPR. 

2. CAP-I = This is a monthly report to be sent by the Chief Commissioner of IT to director (DOMS), New Delhi. It has to reach DOMS on or before 10^th day of the month following. This report reflects collection / reduction achieved out of current and arrear demand of IT (including corporation tax). The position of demand outstanding with clear indication of un-realisable demand, including demand not fallen due and demand stayed by various authorities or courts. Net collectable demad is also reported in this report. On the basis of these reports, a statement is compiled in DOMS which is used by various authorities, including the concerned members of board, to monitor the performance of various charges of C in the field of collection of taxes. 

3. CAP-II = This is also a monthly statement which is compiled by DOMS (income tax) on the basis of reports received from the CC of IT. This is compiled by CC and DGs(inv) wise. The statement reflects progressive work load and category wise disposal of IT assessment up to the end of a particular month. These figures are to be indicated separately for companies and non companies and scrutiny and non scrutiny. Statistics regarding search and seizure block assessment, new assessee and audit objections dealt with have also to be indicated. This statement has been prescribed to obtain feedback regarding disposal, actual workload and expected workload of each CCs charge. This serves a very good purpose for monitoring the performance of the officers in the field of assessing Officer and helps the authorities to augment the disposal by making suitable distribution / redistribution amongst Assessing Officer.

4. REVENUE BUDGET ESTIMATES= Revenue Budget Estimates in the Income Tax Department are prepared in two parts:0020-Corporation Tax. 0021-Taxes on income other than corporation tax. (1)the budget estimates serves as a guide to estimation of the nation’s financial resources for the current year and also the ensuing year. It is of the utmost importance that the estimates are prepared with due care and attention. Over budgeting is as bad as under budgeting  The revenue budgets in particular are to be prepared on the basis of the approx available data and not by way of guess work. (2)the budget heads and sub heads are printed in the first col of the form ITNS 71. The next col gives the actual collection and refunds of the preceding year while col 3 gives the estimate finally adopted for the circle or ward for the current year. Columns 4 & 5 resp record the actual for the current year and the preceding year up to the date of reporting. These two columns enable keeping a watch over the trends of revenue in the current year for suitable remedial action. (3)besides the two parts in the main form ITNS 71, there is summary on the last page. This summary exhibits the estimates under arrear demand collection, advance tax etc. (4)the budget estimates are to be sent thrice in a FY-they are referred to as the 4-monthly, 6-monthly, 9-monthly estimates. These estimates are due to be submitted by the Assessing Officer latest by 5^th Sept, 5^th Nov, 21^st Jan of each FY. The exact dates are fixed by each CIT of his charge. 

5. EXPENDITURE BUDGET ESTIMATES = Expenditure Budget Estimates is an annual financial statement of the estimated annual revenue expenditure of the central govt prepared and presented by the FM before both the houses of the parliament before the beginning of every FY. Article 112 of the constitution of India provides for the presentation of the budget. Expenditure budget estimates have to be submitted by the various Assessing Officer, in respect of estimated expenditure under various heads. They are to be submitted in the form of 5 monthly, 10 monthly and 11 monthly statements. The information to be furnished in the statement relates to pay of officers, pay of establishment, allowances. Reasons for variation between the actual expenditure and the scale of anticipated expenditure have to be indicated. In preparing these estimates care should be taken to make the estimates as accurate as possible so that savings or excess are avoided or reduced to the minimum.

GRANT OF REFUND 

If the applicant is resident in India, the amount of refund arising out of excess payment of tax is ordinarily given by issuing refund voucher on the RBI or SBI. If the resident’s refund is small and he finds it convenient to get it by money order, it will be sent accordingly at govt expenses. Refund should be granted without an application from assessee, where the assessee had made excess payment of advance tax u/s 210 or self assessment u/s 140A. 

Following person are entitled to apply for refunds:

      1. The person in whose hands the income is assessed or assessable is entitled to apply for refund. Where one person’s income is included in the total income of another person and taxed as such in the later’s hand under the provisions of the IT act, it is the latter who will be entitled to claim refund. 

       2.The executor, administrator or other legal representative of a deceased person or the trustee or the receiver in insolvency or the liquidator of the company or the legal guardian of a minor, lunatic or idiot will be entitled to claim refund. 

    3. An agent can apply for refund on behalf of a non-resident person provided he is duly authorized in proper legal form. 

     4. Where the tax payable by an unregistered firm is recovered from its partners, the tax should be treated as paid by the firm and consequently an application for refund should be made by the firm and not by an individual partner. 

       5. An ex-partner of a dissolved unregistered firm is entitled for refund on behalf of the firm, if he obtains a letter of authority from all Ex-partner of the firm. If the applicant is resident in India, the application for refund should be made to the Assessing Officer who has jurisdiction over him. If the application is non-resident, the application should be made to the AO, non resident refund circle, Mumbai. 

Any application for refund should be made in the prescribed Form No 30 duly filled in, signed and verified in the prescribed manner. The application should be accompanied by return of total income in the prescribed form, certificate of TDS in original from the persons responsible for making deductions, original dividend warrants issued by the companies. Where the original certificates of TDS or dividends warrants are lost, their duplicates may be filed. Such duplicates must be accompanied by an indemnity bond. Full particulars relating to the loss of original certificates should also be furnished. 

A claim for refund can be made within one year from the end of the AY. For Example-Income accruing of arising in the FY 2012-13 will be assessable in the AY 2013-14 and refund in respect of excess deduction on such income can be claimed at any time before 31.3.15. If it is found that amount of tax has actually been paid in excess of what was required to be paid, the amount paid in excess is refunded to the assessee after making necessary entries in the assessment form and registers maintained in ITO.

ASSESSEE ENTITLED TO REFUND

An assessee is entitled to refund :-

1. When the Tax Collected at Source (TCS) exceeds tax actually chargeable.

 2. Where advance tax paid is more than tax determined on regular assessment or on determination of income u/s 143(1). 

3. Where Tax Deducted at Source (TDS) from salary, interest on securities and debentures, dividends or any other payment is higher than tax determined on regular assessment. 

4. Relief u/s 89, 90,91. 

5. Reduction of tax on account of rectification of mistake u/s 154/155. 

6. Relief on capital gains u/s 54E & 54F. 

7. Where tax paid on self assessment u/s 140A exceeds tax actually chargeable from the assessee. 

WITHHOLDING OF REFUND U/S 241

Refund can be withheld where a notice has been issued or is likely to be issued u/s 143(2) in respect of the return of income giving rise to the refund or where the order passed by the Assessing Officer is the subject matter of an appeal or further proceedings or where any other proceedings under the act is pending and the Assessing Officer is of the opinion that the grant of refund is likely to adversely affect the revenue, he may with the previous approval of the Chief Commissioner or Commissioner, withhold the fund till such time as the Chief Commissioner or Commissioner may determine.

PROCEDURE FOR ISSUE OF REFUND

In the Income Tax Department, refund arising on account of excess payment of tax is issued on a specially printed refund voucher. This is issued by the Assessing Officer to the RBI or SBI to pay to the person named therein the specified amount. The refund voucher is issued to the assessee and advice note is sent to the bank directly. The advice is sent only in cases where the amount of refund exceeds Rs 9999. So far as the refund arising on account of assessment order, appellate order, rectification order, revision order, order of High Court & Supreme Court is concerned, the assessee need not file an application therefor. 

The refund has to be issued by the Assessing Officer along with the prescribed notice of demand. In cases of direct refunds, the assessee has to make an application in the prescribed form along with the return of income and proof in respect of payment/deduction of tax which is refundable. 

Precautions need to be taken while refunding:-

1. All refunds are issued on the special forms which are on security paper and printed by security press. Each order contains three certificates. 

    a) certified that with reference to the assessment records of _______ for the year _____ no _____ a refund of Rs. _____ is due to _______ .

    b) certified that the tax concerning which the refund is given has been credited in the bank. 

    c) certified that no refund regarding the sum has previously  been granted and this order of refund has been entered in the original file of assessment under my signature. 

These certificates will be recorded after meeting the following requirements for each certificate:

1. The 1^st certificate requires a reference to the assessment records to see that the refund is due. 

2. The 2^nd certificate is given after referring to entries in Arrear Demand Collection Register (DCR), the certificate u/s 203 and annual return u/s 206 so as to verify that tax concerning refund had been deposited. 

3. The 3^rd certificate involves an examination of the cage containing the record of each refund in the assessment form or intimation slip to see that the amount in question has not been refunded previously.

2. Along with the refund order for Rs. 1000 and above, an advice note is also issued to the bank on which refund order is drawn. 

3. The particulars, such as refund order no, date of issue, name of the payee and amount of refund have to be correctly noted. 

4. The refund voucher book is kept in personal custody of the Assessing Officer. 

5. As soon as a refund order is issued, the appropriate entry should be made by the Assessing Officer in the cage for ‘record of refunds’ in the original assessment form or the intimation slip, as the case may be. 

6. Certificates for Tax Deducted at Source (TDS) etc. should be duly cancelled under Assessing Officer’s sign. 

7. As an additional precaution, all vouchers are required to be crossed and marked as ‘account payee only’. 

8. The refund voucher, as well as the advice note must invariably bear the office seal of the Assessing Officer and the AOs sign. Instructions have been issued to the banks that voucher should not be entertained unless they are crossed. Where any voucher is not crossed, the bank should invariably insist on the identification of the payee and should verify that the Assessing Officer has in fact sent a separate advice note indicating that the voucher is not crossed. 

9. After refund voucher is prepared care should be taken to see that the refund vouchers are properly issued. 

10. Refund vouchers should be sent by registered post or delivered personally to the assessee. 

11. No advice is to be sent, where the amount of refund does not exceed Rs. 9999. 

12. Two refund voucher books which are just like cheque books, have been prescribed-one for refunds up to Rs 9999 and the other for refunds of Rs 10000 and above with separate advice note book for the latter. 

13. Refund vouchers beyond Rs 2500 should be sent by registered post.   

14. Refund up to Rs 2500 are ordinarily to be sent through notice server unless the assessee expresses his desire to get it by registered post. 

15. When a new refund voucher books is started, an intimation to this effect is sent to the bank. Similarly, when there is change of the Assessing Officer, the specimen sign of the successor, duly attested by the predecessor should be sent to the bank. 

16. Another precaution which has been provided through administrative instructions is that in cases where amount of refunds exceeds certain limit, the Assessing Officer is required to seek approval of his next higher authority. The limit is prescribed by the board from time to time. Besides refunds exceeding certain amounts are required to be checked by the Dy. Commissioner and in some cases by the Commissioner.

DISCHARGE OF REFUND VOUCHER

In cities of Kolkata, Chennai, Delhi and Mumbai where MICR refund voucher order are issued in form of a cheque, there is no necessity of obtaining discharge by the payee on the reverse of the cheque. However, in cases where refund orders are issued in the old conventional manner, prevailing system of discharge by payee i.e, claimant’s sign on the reverse of the refund only will continue.

STEPS TAKEN TO SPEED UP THE REFUND PROCESS

Delay in issue of refund has been a major grievance area of taxpayers. On an analysis made by the Income Tax Department (ITD), it was revealed that out of total grievance received, about 75% relate to delay or non issuance of refunds. To improve its image, the ITD has taken many initiatives with a view to issue speedy refunds to the taxpayers. Some of the initiative taken by the deptt are:

1. The procedure of issue of refund is reviewed and simplified from time to time to remove bottlenecks which result in refund. 

2. The particulars of bank account etc of the assessee are captured in the form of return itself in case the return result is refund. 

3. At many stations, refunds are prepared with the help of computer on running computer stationery so that no time is lost in preparing refunds.     4. The returns are being processed on computer to enable the department to issue refunds timely. 

5. To move one step further, centres are being created for centralized processing of returns with the help of technology to make the process of issue of refund faster. 

6. From time to time, the department issues instruction to the filed formations to process returns on priority with the sole intention to issue refunds promptly. 

7. The Refund Banker Scheme is a major initiative adopted by the department with a view to ensure prompt issue of refunds. Presently this scheme is operational in Delhi, Mumbai, Chennai, Bangalore etc. covering all assessee except corporate and exemption charges. This scheme is very successful in prompt issue of refunds and the same is intended to be extended in other station also.

REFUND BANKER SCHEME

The pilot scheme for sending IT refunds through a bank was inaugurated by the then Finance Minister Sh. P Chidambaram. This scheme is running in salary charge and other assessment charges except corporate charges. In this scheme, the IT refunds due to taxpayer will be sent by State Bank of India (SBI) directly from their Cash Management Product (CMP) branch in Mumbai. The scheme of refund banker is based on the concept of refund bankers for IPOs. In this scheme, the Assessing Officer will process the ITR on his computer. If a refund is due to the taxpayer, the data will be picked up automatically and transmitted to the bank. The bank will then send the funds as indicated by the Assessing Officer either through ECS discipline or by a banker’s cheque on the tax payers address as indicated on the return of income. An advice will also be sent to all tax payers regarding the funds deposited in their account by ECS mode. The bank will dispatch refund cheques within 3 working days of receipt of data.

REFUNDS DUE TO EXCESS DEDUCTION OF TDS U/S 237

Refunds on account of excess deduction of tax at source u/s 192 to 195 of the act are allowed u/s 237 of the IT act. Under this section, if the amount of tax actually paid by the assessee or on his behalf or treated as paid on his behalf for any Assessment Year exceeds the amount with which he is properly chargeable under the act for that year, he is entitled to a refund of the excess amount so paid on an application being made by him in Form No. 30 and verified in the prescribed manner. The claim has to be made within 1 year from the end of the Assessment Year to which the claim relates. For Example - Refund claims for AY 2008-09 must be filed on or before 31^st mar 2010.

INTEREST ON DELAYED PAYMENT OF REFUND

Where the refund is out of TCS or TDS or out of advance tax paid during the Financial Year immediately preceeding the Assessment Year, the interest will be calculated @0.5% for every month or part of month from the 1^st day of April of assessment to the date on which refund is granted. 

No interest is payable if the amount of refund is less than 10% of the tax as determined u/s 143(1) or on regular assessment and u/s 244A; where the refund is not out of advance tax or treated as tax paid, interest shall be calculated @ 0.5% for every month of a part of month comprised in the period or periods from the dates of payment of the tax or penalty to the date on which refund is granted. 

The amount on which interest is to be calculated shall be refunded off to the nearest 100 rupees and for this purpose any part of a 100 rupee shall be ignored. 

Where any person makes an application for refund u/s 237 to the Assessing Officer and on scrutiny of the evidence produced by the claimant, the Assessing Officer finds that there will be a demand and not a refund, the Assessing Officer should pass an order refusing the refund. A written order is necessary as an appeal lies against such refusal of refund. 

For calculation of interest u/s 234A, 234B, 244A any fraction of a month should be deemed to be full month. The amount on which interest is to be calculated shall be rounded off to the nearest multiple of 100 rupee.