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All Indian citizens aren’t required to obtain Income-tax Clearance Certificate before leaving Country: CBDT
Section 230(1A) of the Income Tax Act, 1961, relates to obtaining a tax clearance certificate by persons domiciled in India. The Finance (No. 2) Act 2024 has amended Section 230(1A) to include a reference to the Black Money(Undisclosed Foreign Income and Assets) and the Imposition of Tax Act 2015.
It was noticed that there was a mis-information about the said amendment emanating from incorrect interpretation of the amendment. It was being erroneously reported that all Indian citizens must obtain income-tax clearance certificate (ITCC) before leaving the country.
The Central Board of Direct Taxes (CBDT) has clarified that this position is factually incorrect. As per section 230 of the Act, every person is not required to obtain a tax clearance certificate. Only certain persons, in respect of whom circumstances exist, make it necessary to obtain ITCC.
The CBDT, vide its Instruction No. 1/2004, dated 05.02.2004, has specified that ITCC under Section 230(1A), may be required to be obtained by persons domiciled in India only in the following circumstances only after recording the reasons for the same and after taking approval from the Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax:
a) where the person is involved in serious financial irregularities and his presence is necessary for the investigation of cases under the Income-tax Act or the Wealth-tax Act, and it is likely that a tax demand will be raised against him, or
b) where the person has direct tax arrears exceeding Rs. 10 lakh outstanding against him, which have not been stayed by any authority.
Accordingly, the CBDT stated that the ITCC, under Section 230(1A) of the Act, is needed by residents domiciled in India only in rare cases, such as
a) where a person is involved in serious financial irregularities or
b) where a tax demand of more than Rs. 10 lakh is pending, which is not stayed by any authority.
ITAT upheld penalty levied on employee who habitually claimed refunds by overstating deduction under Chapter VI-A
The assessee, an individual, filed his return of income for the relevant assessment year. Subsequently, a survey was conducted, and based on information from the Investigation Wing, the case was reopened by issue of notice under section 148.
In response, the assessee filed a return of income wherein he claimed lesser deductions under Chapter VI-A than claimed in the original return. Further, the assessee offered no explanation as to why the gross total income was understated, causing the misreporting of income in the original return. Consequently, the Assessing Officer (AO) initiated penalty proceedings.
During the penalty proceedings, the assessee requested a grant of immunity under section 270AA. The AO rejected such a request, and a penalty at the rate of 200% was levied on misreporting of income.
The aggrieved-assessee filed an appeal to the National Faceless Appeal Centre (NFAC), Delhi. The NFAC confirmed the penalty imposed by AO, and the matter reached before the Pune Tribunal.
The Tribunal held that the assessee was specifically asked to explain the reasons for the differences between the original return filed and the return filed in response to notice under section 148. However, the assessee responded that he had nothing further to state in respect of the difference between the figures of gross total income and Chapter VI-A deduction between the original return and the later return.
The assessee, who had a history of habitually claiming fraudulent refunds by increasing deductions and reducing his taxable income since A.Y. 2016-17 onwards, could not justify why he had continuously misreported his income and what was the legal basis for such action. No plausible legal explanations were submitted as to why the assessee did such misreporting.
The scheme of the provisions of section 270A provides that if it is a case of under-reporting, it attracts a penalty of 50% with certain exclusions. However, if it is a case of misreporting, it attracts a higher penalty of 200%.
The assessee admittedly declared a lower salary than that reported by his employer in Form 16 and further had yet to disclose the basis for such misreporting. This is a clear case of misrepresentation or suppression of facts. Similarly, the assessee had inflated his claim of deduction under Chapter VI-A of the Act and again had not revealed the basis for such a higher claim of deduction. It was evident that this was a fraud committed to evade tax.
Accordingly, the Tribunal upheld the levy of penalty by the AO.
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