corporate and professional update february 13, 2016

CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 13, 2016

STAY OF DEMAND UNDER THE INCOME TAX ACT 1961, PRACTICAL APPROACH, JUDICIAL CASES &  DEPARTMENTAL CIRCULARS/INSTRUCTIONS:-

It is quite common for the Assessing Officers to make high-pitched assessments determining taxable incomes many times more than those returned by the assessees.

When this is done, the assessees are put to considerable hardship as demands beyond the capacity of the assessee to pay are pressed for payment. In such situations, the only course open to the taxpayers is to seek a stay of disputed demands.

LEGAL NITTY-GRITTY OF SECTION 14A r.w.r 8D OF THE INCOME-TAX RULES’ 1962 :

It is quite common for the Assessing Officers to mechanically apply  Section 14A r.w.r 8D of the Income Tax Rules, 1962 during the assessment proceedings and make huge additions irrespective of the fact as to whether there is any exempt income or not.

The introduction of Section 14A (2) & (3) and further Rule 8D as prescribed by CBDT has complicated the calculation of the amount related to exempt income. It has given birth to a lot of anomalies and a handle for the Assessing Officer to make unwanted additions.

NEW ICAI PRESIDENT WANTS PANEL FOR BANK AUDIT APPOINTMENTS:

The Institute of Chartered Accountants of India (ICAI) is recommending a revamp of the auditor appointment system for banks, both for central statutory and branch-level audits, its new President, M Devaraja Reddy, said.

Reddy, who assumed office on Friday after emerging victorious in the institute’s intensely fought annual elections, said the current system, wherein the management of a bank directly selects and appoints the auditor from a list provided by the Reserve Bank of India (RBI), could have indirectly caused the current non-performing assets (NPAs) crisis.

NPAs reported by public sector banks have ballooned after RBI tightened provisioning norms in December. According to a recent news report in The Indian Express, 29 state-owned banks wrote off a total of Rs 1.14 lakh crore of bad debt between financial years 2013 and 2015, much more than they had done in the preceding nine years.

“There is a concern that independence of auditors is eroding. It is a delicate issue. Everybody is not virtuous,” Reddy said. A fellow member of the institute, Reddy has 28 years of professional experience and has held several positions in the ICAI hierarchy. He was vice-president for 2015-16.

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