EFFECTIVE TAX RECOVERY BY - PowerPoint Presentation

Slide1

EFFECTIVE TAX RECOVERY

BY

S. MOHD. MUSTAFA, IRS

JCIT, TPO, CHENNAI

(

FORMERLY

TRI & TRO)

Slide2

MODES OF RECOVERY AVAILABLE TO TRO

A. U/S

222(1) & U/R 4 OF

SECOND SCHEDULE:

1. ATTACHMENT & SALE OF MOVABLE PROPERTY

2. ATTACHMENT & SALE OF IMMOVABLE PROPERTY

3. ARREST & DETENTION

4. APPOINTMENT OF RECEIVER

B. U/S 226(1A):

1. ATTACHMENT OF SALARY – 226(2)

2. ATTACHMENT OF DEBT – 226(3)

3. ATTACHMENT OF MONEY IN THE CUSTODY OF COURT – 226(4)

4. ATTACHMENT & SALE OF MOVABLE PROPERTY (IF AUTHORISED BY PCCIT/CCIT/PCIT/CIT) – 226(5)

C. U/S 228A(2):

IF PROPERTY IS

OUTSIDE INDIA

Slide3

ATTACHMENT & SALE OF MOVABLE PROPERTY

SPEEDY & EFFECTIVE FORM OF RECOVERY

DO IT UNDER SECOND SCHEDULE, NOT UNDER 226(5)

VERIFY ARREARS BEFORE ISSUE OF ITCP-2

EVEN DURING PENDENCY OF FIRST APPEAL

EVEN BEFORE EXPIRY OF 15 DAYS OF SERVICE OF ITCP-1, IF TRO IS SATISFIED THAT DEFAULTER IS LIKELY TO CONCEAL, REMOVE OR DISPOSE OF WHOLE/PART OF ATTACHABLE MOVABLE PROPERTY – IN WHICH CASE:

1. REASONS TO BE RECORDED IN WRITING

2. IF SECURITY IS FURNISHED TO THE SATISFACTION OF TRO,

SUCH ATTACHMENT SHALL BE CANCELLED FROM THE

DATE OF ACCEPTANCE

Slide4

EFFECTIVE ATTACHMENT OF MOVABLE PROPERTY

MOVABLES IN A POSH HOUSE AT KILPAUK

STOCK-IN-TRADE IN JEWELLERY SHOP

& CAR AT

ROYAPURAM

C

ASH FROM-

FMCG SHOWROOM AT ANNA SALAI

THEATRE AT ANNA SALAI

MOVABLES IN LEATHER OFFICES AT VEPERY

Slide5

ATTACHMENT & SALE OF IMMOVABLE PROPERTY

MOST IMPORTANT MODE OF RECOVERY

TO BE ATTACHED IMMEDIATELY AFTER 15 DAYS OF SERVICE OF ITCP-1 IF DUES ARE NOT PAID

PREPARATIONS TO BEGIN IMMEDIATELY AFTER SERVICE OF ITCP-1. NOT TO WAIT FOR 15 DAYS

ATTACHMENTS TO BE PROPORTIONATE TO THE DUES (WITH RULE 5 INTEREST & COSTS)

Slide6

ATTACHMENT & SALE OF IMMOVABLE PROPERTY (CONTD.)

NOT TO BE SOLD DURING PENDENCY OF FIRST APPEAL – UOI Vs. NAWN BC 84 ITR 526 (CAL.)

IF DEFAULTER

HAS

PROPERTY

WITHIN THE

JURISDICTION

OF MORE THAN ONE TRO

& IF TRO –

A. IS NOT ABLE TO RECOVER ENTIRE DUES BY SALE OF

MOVABLE/IMMOVABLE PROPERTY IN HIS

JURISDICTION; OR

B. OPINES THAT FOR EXPEDITIOUS RECOVERY OF

WHOLE OR PART OF DUES IT IS NECESSARY,

HE MAY SEND TRC (COPY OF TRC IF ONLY PART DUES TO BE

RECOVERED) TO THE OTHER TRO.

Slide7

RULE 68B OF SECOND SCHEDULE

MOST IMPORTANT PROVISION FOR TRO

ATTACHED

IMMOVABLES

CANNOT BE SOLD AFTER 3* YEARS FROM END OF F.Y. IN WHICH DEMAND BECOMES

CONCLUSIVE

*

EXTENDED TO

4 YEARS

VIDE NOTIFICATION, WHICH

WAS DECLARED INVALID IN 270 ITR 433 (AP).

THEREFORE 3 YEARS

IS THE CORRECT LIMIT

FIRST

PROVISO TO SEC.68B PERMITS EXTENSION

OF ONE YEAR UNDER

CERTAIN

CONDITIONS.

IF NOT SOLD, ATTACHMENT ORDER DEEMED TO HAVE BEEN VACATED.

Slide8

WHEN DEMAND BECOMES CONCLUSIVE ?

IN THE CASE OF THAKURDAS HOODA Vs. M.L. PERUMAL, TRO, MADRAS HC HELD THAT WHEN A FURTHER APPEAL HAS NOT BEEN FILED WITHIN THE TIME-LIMIT FOR FILING OF APPEAL, THE ORDER IS SAID TO BECOME CONCLUSIVE.

Slide9

HOW TO ASCERTAIN LIMITATION U/R 68B

GO THROUGH REGISTER OF IMMOVABLE PROPERTIES ATTACHED. (IF NOT AVAILABLE, CREATE ONE BY GOING THROUGH ALL FILES)

FOR EACH A.Y. COVERED IN TRC FOR WHICH ATTACHED (OR FOR EACH TYPE OF DEMAND FOR AN A.Y. IF COVERED IN DIFFERENT TRCs. e.g. TAX, PENALTY) FIND OUT CURRENT STATUS FROM-

1. FILE OF A.O. (MAY NOT BE ACCURATE)

2. AST/ITBA (MAY NOT BE ACCURATE)

3. DEFAULTER/A.R. (MAY BE MISLEADING)

4. O/O CIT(A), WEBSITE OF ITAT/HC/SC, NJRS, JUDICIAL

OFFICERS

Slide10

HOW TO RECOVER FROM TIME-BARRED PROPERTIES

IF ALREADY TIME-BARRED-

1. FRESH ATTACHMENT TO BE MADE IF OTHER

DEMAND (UNCERTIFIED/UNATTACHED) EXISTS

2. RENTAL INCOME MAY BE ATTACHED

3. RECEIVER MAY BE APPOINTED (IF PROPERTY

CONSISTSW OF BUSINESS)

4. ASK A.O. TO INVOKE SEC.232 – FILING OF

CIVIL

SUIT – LIMITATION 30 YEARS

Slide11

PRIVATE SALE OF IMMOVABLE PROPERTIES?

U/R 16(1) OF S.S., AFTER SERVICE OF ITCP-1, ASSESSEE CANNOT DEAL* WITH PROPERTY WITHOUT PERMISSION OF TRO.

*MORTAGE, CHARGE, LEASE, ETC

SINCE TRO’S PERMISSION IS IMPLIED, THERE ARE INSTANCES OF PRIVATE SALE, WITH PRIOR PERMISSION OF TRO.

Slide12

PRACTICAL CONDITIONS FOR PRIVATE SALE

AGREEMENT OF SALE/DRAFT SALE DEED SHOULD RECORD TAX ARREARS & ATTACHMENT

CONSIDERATION (OR TAX DUES, IF LESS) TO BE AGREED TO BE PAID BY WAY OF DD IN THE NAME OF TRO

IF CONSIDERATION IS LESS THAN DUES, GET MARKET VALUE FROM SRO/VALUATION CELL

ADMINISTRATIVE APPROVAL OF PCIT TO BE OBTAINED

ORDER LIFTING ATTACHMENT TO BE EXCHANGED FOR D.D. BEFORE SRO

Slide13

ESSENTIAL REQUIREMENTS FOR ATTACHMENT OF IMMOVABLES

ESSENTIAL REQUIREMENTS U/R 48-50 OF SECOND SCHEDULE:

SERVING THE ORDER, WITH CORRECT ARREAR POSITION, ON DEFAULTER

IN THE PRESENCE OF ATLEAST 2 WITNESSES, TRI TO-

A. AFFIX A COPY ON THE PROPERTY

B. GET THE DRUM BEATEN

C. PROCLAIM IN LOCAL LANGUAGE & ENGLISH

D. GET PANCHANAMA PREPARED BY WITNESSES

3. ON RETURN, TRI TO AFFIX COPY ON NOTICE BOARD &

RECORD ENDORSEMENT

4. TRI TO GIVE A REPORT ENCLOSING PANCHANAMA

Slide14

PRACTICAL ADDITIONAL REQUIREMENTS FOR EFFECTIVE ATTACHMENT OF IMMOVABLES

SERVE A COPY OF ORDER ON SRO

OBTAIN E.C. FROM SRO TO ENSURE HIS RECORDING OF ATTACHMENT

ISSUE ADVERTISEMENTS IN ENGLISH & LOCAL LANGUAGE NEWSPAPERS GIVING NAME OF DEFAULTER & PROPERTY ATTACHED – INS.1785 IN F.NO.405/23/87-ITCC DT.25-2-1988.

EFFORTS TO BE MADE TO OBTAIN TITLE DEEDS OF ATTACHED PROPERTY - INS.1866

IN

F.NO.404/173/90-ITCC DT.21-11-1990.

Slide15

APPOINTMENT OF RECEIVER

TWO KINDS OF APPOINTMENT OF RECEIVER

:

1.

APPOINTMENT FOR BUSINESS U/R 69:

IF PROPERTY CONSISTS OF A BUSINESS,TRO TO ATTACH THE BUSINESS & APPOINT A RECEIVER TO MANAGE THE BUSINESS

2.

APPOINTMENT FOR IMMOVABLE PROPERTY U/R 70

:

AFTER ATTACHMENT, INSTEAD OF SALE, RECEIVER CAN BE APPOINTED TO MANAGE.

Slide16

WHEN RECEIVER CAN BE CONSIDERED

WHEN IT IS APPREHENDED, ON REASONABLE GROUNDS, THAT DEFAULTER IS LIKELY TO DISSIPATE THE PROPERTY OR CAUSE IRREPAIRABLE MISCHIEF TO IT – 108 IC 348

WHEN DEFAULTER IS WITHDRAWING LARGE FUNDS FROM BUSINESS WITHOUT ANY NECESSITY – 213 IC 234

WHEN VALUE OF PROPERTY IS VERY LARGE COMPARED TO THE DUES & IT CAN BE RECOVERED FROM THE INCOME

WHEN DEFAULTER HAS ONLY A RIGHT TO RECEIVE THE INCOME WITHOUT POWER TO ALIENATE

Slide17

WHERE RECEIVERS CAN BE APPOINTED

LODGING HOUSES

CINEMA THEATRES

AMUSEMENT PARKS

MARRIAGE HALLS

TOLL TAX COLLECTION CENTERS

SHOPPING MALLS (RENT COLLECTION)

VEGETABLE OR OTHER MARKETS

PARKING CENTERS

JOB WORK MILLS (e.g. RICE HAULERS, FLOUR MILLS, GROUNDNUT DECORTICATING MILLS,ETC)

Slide18

ARREST & DETENTION

NO OTHER AUTHORITY IN DEPT. HAS THIS POWER.

IT IS AN INVASION OF HUMAN LIBERTY. NOT TO BE FREQUENTLY OR ROUTINELY RESORTED TO

POWER TO BE USED IN A JUDICIOUS MANNER WITH PROPER JUSTIFICATION

TRO WILL BE PERSONALLY LIABLE FOR DAMAGE WHERE ILLEGAL ARREST & DETENTION WAS DONE – 78 ITR 352 (ALL.)

AN ILLEGAL OR IRREGULAR ARREST CAN BE RESISTED BY THE PERSON (BY USING VIOLENCE, IF NECESSARY) TO BE ARRESTED

Slide19

WHO CANNOT BE ARRESTED?

WOMEN, MINORS & PERSONS OF UNSOUND MIND – U/R 81

LEGAL REPRESENTATIVES OF DECEASED DEFAULTER -

U/R

85 – UNLESS HELD PERSONALLY LIABLE U/S 159(4) & THEIR NAME APPEARS IN TRC

MEMBERS OF HUF (FOR ARREARS OF HUF)

-U/R 73

PARTNERS (FOR ARREARS OF FIRM) UNLESS THEIR NAMES APPEAR IN TRC – INS.517 DT.28-2-73

LIQUIDATORS & DIRECTORS OF PVT. COMPANIES IN LIQUIDATION (FOR ARREARS OF CO.) UNLESS THEY ARE PERSONALLY HELD RESPONSIBLE U/S 178/179

DIRECTORS OF PUBLIC LTD. CO.

AS PER CPC

:

NO JUDGE, MAGISTRATE OR OTHER JUDICIAL OFFICER SHALL BE ARRESTED UNDER CIVIL PROCESS WHILE GOING TO, PRESIDING IN OR RETURNING FROM COURT

NO

PERSON WHO IS

GOING

TO & RETURNING

FROM ANY TRIBUNAL IN CONNECTION WITH LITIGATION PENDING BEFORE SUCH

TRIBUNAL

SHALL BE ARRESTED UNDER CIVIL PROCESS

Slide20

WHO CAN BE ARRESTED?

ONLY NATURAL PERSONS CAN BE ARRESTED. e.g.

1. INDIVIDUALS

2. KARTHA – IF HUF IS THE DEFAULTER

3. PARTNER – IF FIRM IS DEFAULTER & IF HIS

NAME APPEARS IN TRC

4.

LIQUIDATORS & DIRECTORS OF PVT.

COMPANIES

IN LIQUIDATION (FOR ARREARS

OF

CO

.)

IF

THEY ARE

HELD PERSONALLY LIABLE

U/S 178/179

Slide21

WHEN ARREST CAN BE MADE?

1. U/R 73(1), TRO CAN ORDER ARREST & DETENTION IF HE IS SATISFIED THAT-

(a) AFTER DRAWING UP OF TRC, DEFAULTER HAS, WITH THE OBJECT OR EFFECT OF OBSTRUCTING THE EXECUTION OF TRC, DISHONESTLY TRANSFERRED, CONCEALED OR REMOVED ANY PART OF HIS PROPERTY; OR

(b) DEFAULTER HAS, OR HAS HAD SINCE THE DRAWING UP OF TRC, MEANS TO PAY THE ARREARS OR SOME SUBSTANTIAL PART THEREOF AND REFUSES OR NEGLECTS OR HAS REFUSED OR NEGLECTED TO PAY

2. U/R 73(2), IF TRO IS SATISFIED, BY AFFIDAVIT OR OTHERWISE, THAT

WITH THE OBJECT OR EFFECT OF

DELAYING THE

EXECUTION OF TRC,

DEFAULTER IS LIKELY TO ABSCOND OR LEAVE THE LOCAL LIMITS OF JURISDICTION OF TRO.

Slide22

ADDITIONAL REQUIREMENT IN CASE OF ARREST

APART FROM THE REQUIREMENTS RECORDED IN TRO’S MANUAL, AN ADDITIONAL REQUIREMENT WOULD BE TO COMPLY WITH THE DIRECTIONS OF HON’BLE SC IN THE CASE OF D.K. BASU, ASHOK K. JOHRI VS STATE OF WEST BENGAL, STATE OF U.P ON 18-12-1996,

EVEN THOUGH THE DECISION WAS IN CONNECTION WITH POLICE CUSTODY.

Slide23

RECOVERY SURVEY

PURPOSE IS TO COLLECT INFO. USEFUL FOR RECOVERY.

e

.g.

1. BANK ACCOUNTS (PASS BOOK, CHEQUE BOOK/LEAVES,

ACCOUNT STATEMENT, COUNTERFOILS OF PAY-IN-SLIPS, DD

APPLICATION)

2. FD, NSC, SHARES, DEBENTURES, R.C. BOOK, INSURANCE

POLICY, MUTUAL FUND, ETC

3. RECENT CREDIT SALES BILLS & ADDRESSES OF PURCHASERS

4. ADDRESSES OF TRADE & LOAN DEBTORS AS ON 31

ST

MARCH

BEFORE SURVEY

5. ADDRESSES OF GODOWNS WHERE STOCK-IN-TRADE IS KEPT

Slide24

RECOVERY SURVEY (CONTD.)

6.

D

ETAILS

OF SECURITY OFFERED FOR OD/CC ACCOUNTS

7.

ADDRESSES

OF PREMISES WHERE CASH IS KEPT

8

.

ADDRESSES

OF PREMISES WHERE

ACCOUNT BOOKS ARE

KEPT

9.

ADDRESSES

OF PERSONS FROM WHOM DEFAULTER IS

RECEIVING DIFFERENT

ITEMS OF

INCOME e.g.

RENT,

COMMISSION

, ETC.

EVIDENCE

TO PROVE THAT DEFAULTER IS HAVING MEANS BUT

STILL NEGLECT/REFUSES

TO PAY.

e.g. FOREIGN/INLAND TRAVEL, CLUB EXPENSES, PURCHASE BILLS OF EXPENSIVE FMCG ITEMS, ETC.

11.

CREDIT

CARD STATEMENTS WHICH WILL SHOW DETAILS AT

SL.NO.10

Slide25

RECOVERY SURVEY (CONTD.)

PROVISIONS OF RECOVERY SURVEY ARE SAME AS DONE BY A.O. SINCE BOTH ARE U/S 133A.

e.g.

1. PRIOR APPROVAL OF RANGE-HEAD

2. PLACE & TIME OF ENTRY

3. PLACING MARKS OF IDENTIFICATION & MAKING COPIES

4. IMPOUNDING OF DOCUMENTS

5. MAKING AN INVENTORY OF CASH, STOCK OR VALUABLES

6. RECORDING STATEMENT

7. INVOKING SEC.131(1) IN CASE OF NON-COOPERATION

BUT FOCUS IS NOT TO TAKE INVENTORY TO FIND OUT EXCESS STOCK. FOCUS IS TO GET INFO. NEEDED FOR RECOVERY

Slide26

RECOVERY SURVEY (CONTD.)

WHAT TO DO IF HUGE CASH OR VALUABLES

FOUND DURING SURVEY

?

SINCE CASH/VALUABLES CANNOT BE SEIZED U/S 133A, TRO CAN ISSUE ITCP-2 AUTHORISING TRI TO ATTACH MOVABLE PROPERTY. WHILE TRO TO CONTINUE WITH SURVEY, TRI CAN SEPARATELY EXECUTE ITCP-2 AND, IF DEFAULTER DOES NOT MAKE PAYMENT, ATTACH CASH & VALUABLES. CARE TO BE TAKEN TO KEEP THE TWO PROCEEDINGS INDEPENDENT OF EACH OTHER .

Slide27

ROLE OF TRO IN WRITE-OFF

WHETHER TRO CAN WRITE-OFF

?

TRO CANNOT WRITE-OFF ANY DEMAND SINCE ONLY AO, WHO CREATED THE DEMAND, CAN WRITE-OFF, WITH APPROVAL OF COMPETENT AUTHORITIES ACCORDING TO MONETARY LIMITS. TRO IS ONLY A RECOVERY AGENT OF AO. DEMANDS ARE STANDING IN THE NAME (BOOKS) OF AO IN GOVT. OF INDIA ACCOUNT, FROM WHERE ONLY IT CAN BE WRITTEN-OFF.

REFERENCE TO TRO, ALONGWITH ITO, IN INS.7/2004 DT.19-8-2004, APPEARS TO BE INADVERTENT. NEVER BEFORE TRO WAS EMPOWERED.

Slide28

ROLE OF TRO IN WRITE-OFF (CONTD.)

WHAT IS THE ROLE OF TRO IN WRITE-OFF?

AS PER CBDT O.M. IN F.NO.375/01/2015-IT(B) DT.10-8-2017, IRRECOVERABILITY CERTIFICATE (IRC) IS NOT NECESSARY FOR ARREARS UPTO RS.10,000. THEREFORE WHEREVER CERTIFIED ARREARS (BALANCE) EXCEED RS.10,000, TRO HAS TO ISSUE IRC TO ENABLE AO TO PROCESS THE CASE FOR WRITE-OFF.

Slide29

ROLE OF TRO IN WRITE-OFF (CONTD.)

ARREAR MAY BECOME IRRECOVERABLE DUE TO NON-AVAILABILITY OF ASSETS ON ACCOUNT OF:-

1. ASSESSEE HAS DIED (WITHOUT LEAVING ANY ESTATE)

2. ASSESSEE HAD BECOME INSOLVENT

3. ASSESSEE IS NOT TRACEABLE

4. ASSESSEE HAS LEFT INDIA

5. COMPANY HAS GONE INTO LIQUIDATION

6. FIRM DISSOLVED/BUSINESS DISCONTINUED

7. ASSESSEE HAS NO ATTACHABLE ASSETS

8. WHEN ALL THE FOUR MODES OF RECOVERY ARE

EXHAUSTED. IF ANY MODE COULD NOT BE RESORTED TO,

REASONS TO BE RECORDED WHILE PROPOSING WRITE-OFF.

Slide30

ROLE OF TRO IN WRITE-OFF (CONTD.)

OTHER PROVISIONS TO BE LOOKED INTO BEFORE PROPOSING WRITE-OFF:

SEC.65 (CLUBBING OF INCOME)

SEC.159 (LEGAL REPRESENTATIVE)

SEC.167 (REPRESENTATIVE ASSESSEE)

SEC.170 (SUCCESSION TO BUSINESS)

SEC.171 (PARTITION OF HUF)

SEC.173 (NON-RESIDENT)

SEC.176 (DISCONTINUED BUSINESS)

SEC.177 (AOP DISSOLVED/BUSINESS DISCONTINUED)

Slide31

ROLE OF TRO IN WRITE-OFF (CONTD.)

ENQUIRIES RELATING TO ISSUE OF IRC

:

FOCUS ON ASCERTAINING THE CAPACITY OF DEFAULTER TO PAY THE ARREARS. DEPENDS ON:-

1.AVAILABILITY OF READY CASH

2. DISCLOSED ASSETS/INVESTMENTS SUCH AS LAND, BUILDINGS, FD, SHARES, INTEREST IN PROPERTY, INTEREST IN BUSINESS, ETC

3. UNDISCLOSED ASSETS & ALIENATED ASSETS

MODE OF ENQUIRY

:

ASSESSMENT RECORDS

LOCAL ENQUIRY (NEAR RESIDENCE, BUSINESS, BLOOD-RELATIVES, IN-LAWS, TRUSTED EMPLOYEES)

3. CUSTOMER INDEX FOLIO (CIF) WITH BANK

4. INVESTIGATION WING (360 DEGREE PROFILE)

5.

CIBIL