1. INTRODUCTION

   In this article an attempt is made to explain the proposed amendments vide clauses related to this topic in the Finance Bill, 2005. Amendments are stated in clauses 40, 46 and 47. Proposed amendments related to Fringe Benefits under this topic are dealt in the article "Salary & Fringe Benefits".
    

2. Section 139 : RETURN OF INCOME (Clause 40)

   1. Under the existing provisions of section 139(1)(a) it is mandatory for the Company to furnish the return of income on or before the due date for the respective financial year in the prescribed form. It is proposed to amend this section by making it mandatory for the Partnership Firm also vide clause 40 of the Finance Bill, 2005. Hence to state that with effect from the assessment year 2006-07, it will be mandatory for the Company and the Firm to file the return of income on or before the due date for the respective financial year irrespective of whether there is any taxable income.

   2. Presently the first proviso to section 139 states that any person fulfilling any one of the six conditions (generally called as of One by Six Scheme) he is required to file the return of income for the respective financial year. Amongst the six conditions, one of the conditions as stated in clause (iii) is "subscriber to a cellular phone not being a wireless in local loop telephone". It has been proposed to amend the aforesaid proviso by deleting the condition as mentioned under clause (iii) and inserting new condition which states that if a person incurs an expenditure of Rs. 50,000/– or more on electricity, he will be required to file the return of income.

   3. Under this section 4th proviso is proposed to be inserted which states that any person other than companies or firms will also be required to file the return of income, if their income, without giving effect to exemption under section 10A/10B/10BA or deduction under Chapter VIA exceeds the maximum amount not chargeable to tax.

   4. Under the existing provisions of clause (c)(i) of Explanation to section 139(9) the proof of the tax, if any, claimed to have been deducted at source is to be accompanied with the return of income. In case the aforesaid proof of tax is not furnished along with the return of income, such return would be treated as the defective return. This requirement was proposed to be deleted by the Finance (No. 2) Act, 2004 w.e.f. A.Y. 2005-06. The Finance Bill, 2005 has proposed to postpone this deletion to A.Y. 2006-07. Accordingly, non accompanying of the proof of tax deduction at source would make the return of income defective up to the A.Y. 2005-06, and the return would cease to be defective even in the absence of the proof of TDS for the A.Y. 2006-07 onwards.

3. Section 153 B : TIME LIMIT FOR COMPLETION OF Assessment in Case of Search or Requisition (Clause 46)

   1. Under the existing provisions of section 153 B, the time limit for completion of assessment in respect of the assessment or reassessment of other person referred to in section 153C, is two years from the end of the financial year in which the last of the authorizations for search under section 132 or the requisition under section 132A was executed at the premises of the person from whom such documents were found.

   2. It is proposed to insert a proviso, in sub-section (1) after clause (b) and before the explanation and shall be deemed to have been inserted with effect from 1st June, 2003, that the period of limitation for making the assessment or reassessment shall be the period as mentioned in clause (a) or clause (b) of this section; i.e., two years OR one year from the end of the financial year in which the books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction of such other person, whichever is later.

4. Section 153C : Assessment of other Person : (Clause 47)

   1. At present it is provided that all pending assessment proceedings on the date of search shall abate. The
      existing section 153C shall be numbered as sub-section (1) of section 153C and in sub-section (1), a proviso shall be inserted and shall be deemed to have been inserted with effect from 1st June, 2003 so as to provide that pending assessment proceedings in case of other person shall abate on the date on which Assessing Officer receives intimation of findings of search.

   2. Further it is proposed to insert new sub-section (2) in section 153C aiming at removing difficulties likely to arise and effective from 1st June, 2003. It states that where the books of account or documents or assets seized or have been received by the Assessing Officer having jurisdiction of such other person after the due date for furnishing the return of income for the assessment year in which the search is conducted under section 132 or requisition made under section 132A and in case no return of income has been furnished under the assessing officer shall issue the notice and assess or reassess the total income of such other person of such assessment in the manner provided in section 153A.

"Do not fear to step into the unknown

For where there is risk, there is also reward."