Annual Information Returns
Many people are getting notices from the Income Tax Department asking them to give pan card number for specified high value transactions they have entered into.
Example
Anurag purchased a luxury car and made payment of Rs. 11 lakhs. He also invested last week about Rs. 6 lakhs in the savings bonds issued by the Reserve Bank of India. Similarly, he invested Rs. 2,40,000 in the units of a mutual fund. He is worried because he feels that he would be required to submit the annual information return in respect of all these financial transactions which have taken place during the financial year 2004-05. Good news for Anurag : he is not required to furnish the annual information return even though he has entered into a number of financial transactions during the year. All individuals would be happy to note that the provisions relating to the filing of annual information return does not apply to a person who had spent money during the financial year for a particular financial transaction. As per the provisions contained in the Income-tax Act, 1961 it is only certain classes of persons who are required to submit the annual information return in respect of certain designated financial transactions only. So the happy news is that a person like Anurag who would continue spending substantial amounts in making certain big monetary payments or acquiring certain assets would not be required within the framework of the law to submit any annual information return. This is more so because there is no obligation cast on the individual incurring expenditure or spending money on a particular financial transaction to submit the said annual information return. It may be recalled here that the obligation to furnish the annual information return has been introduced by the Government with the basic aim of widening the tax base and to check evasion of income-tax.
For the first time the obligation to file an annual information return was introduced by the Finance Act, 2003 by insertion of a new section 285BA in the Income-tax Act, 1961. However, during the whole financial year 2003-04 the Government did not prescribe any rules for the submission of annual information returns. Hence for all practical purposes there was no obligation on taxpayers to file the said annual information return in respect of financial transactions pertaining to the said financial year 2003-04. The Finance (No. 2) Act, 2004 has substituted the existing section 285BA by a completely new section. The said new section does not cast an obligation on all assessees to submit annual information return entering into prescribed financial transactions. For ready reference the relevant extract of the substituted new section 285BA is reproduced below :
"285BA. Obligation to furnish annual information return.-(1) Any person, being-(a) an assessee ; or
(b) the prescribed person in the case of an office of Government ; or
(c) a local authority or other public body or association ; or
(d) the Registrar or Sub-Registrar appointed under section 6 of the Registration Act, 1908 (16 of 1908) ; or
(e) the registering authority empowered to register motor vehicles under chapter IV of the Motor Vehicles Act, 1988 (15 of 1988) ; or
(f) the Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898) ; or
(g) the Collector referred to in clause (c) of section 3 of the Land Acquisition Act, 1894 ; or
(h) the recognised stock exchange referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) ; or
(i) an officer of the Reserve Bank of India, constituted under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934) ; or
(j) a depository referred to in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of 1996),
who is responsible for registering, or maintaining books of account or other documents containing a record of any specified financial transaction, under any law for the time being in force, shall furnish an annual information return, in respect of such specified financial transaction which is registered or recorded by him during any financial year beginning on or after the 1st day of April, 2004 and information relating to which is relevant and required for the purposes of this Act, to the prescribed income-tax authority or such other authority or agency as may be prescribed."
A careful reading of the abovementioned section will make it crystal clear that the obligation to submit annual information return is not applicable to all persons who have entered into selected financial transactions, rather as per the new section the responsibility of submitting annual information return is only on the designated persons mentioned in the said section who are responsible for registering or maintaining documents containing a record of selected specified financial transactions. Initially when the above said section was introduced through the Finance Bill there was a feeling amongst the taxpayers that all categories of taxpayers would be called upon to file annual information returns in respect of the specified transactions which they entered into during the whole of the financial year. This notion of the taxpayers was wrong, especially in view of the fact that the substituted section makes it clear that the submission of annual information return will be the responsibility of only those persons whose names have been identified specifically in the substituted new section 285BA and the connected rules made thereunder.
Recently the Central Board of Direct Taxes has amended the Income-tax Rules thereby specifying clearly the nature of the specified financial transactions which would be relevant for submission of the annual information return. A new rule 114E has been added to the Income-tax Rules, 1962. This new rule is contained in the Income-tax (17th Amendment) Rules, 2004 which have been introduced vide Notification No. 1316(E), dated December 1, 2004 (see [2004] 271 ITR (St.) 38). The new rule 114E clearly lays down a Table in respect of the financial transaction together with the nature and value in respect of which the annual information return is to be submitted.
The following is the Table as contained in new rule 114E (page 40) :
S. No.
Class of person
Nature and value of transaction
(1)
(2)
(3)
1.
A banking company to which the Banking Regulation Act, 1949, (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act).
Cash deposits aggregating to ten lakh rupees or more in a year in any savings account of a person maintained in that bank.
2
A banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) or any other company or institution issuing credit card.
Payments made by any person against bills raised in respect of a credit card issued to that person, aggregating to two lakh rupees or more in the year.
3
A trustee of a mutual fund or such other person managing the affairs of the Mutual Fund as may be duly authorised by the trustee in this behalf.
Receipt from any person of an amount of two lakh rupees or more for acquiring units of that Fund.
4.
A company or institution issuing bonds or debentures.
Receipt from any person of an amount of five lakh rupees or more for acquiring bonds or debentures issued by the company or institution.
(1)
(2)
(3)
5.
A company issuing shares through a public or rights issue.
Receipt from any person of an amount of one lakh rupees or more for acquiring shares issued by the company.
6.
Registrar or Sub-Registrar appointed under section 6 of the Registration Act, 1908.
Purchase or sale by any person of immovable property valued at thirty lakh rupees or more.
7.
A person being an officer of the Reserve Bank of India, constituted under section 3 of the Reserve Bank of India Act, 1934, who is duly authorized by the Reserve Bank of India in this behalf.
Receipt from any person of an amount or amounts aggregating to five lakh rupees or more in a year for bonds issued by the Reserve Bank of India.
Now to understand the provisions of annual information return we have to read new section 285BA as contained in the Income-tax Act, 1961 together with new rule 114E. After reading the provisions contained in the Act and Rules together we find that presently only the following seven categories of transactions are covered for the purpose of submission of annual information returns :1. Companies to inform Income-tax Department about receipts of Rs. 1 lakh or more for shares issued.
2. Banks to inform Income-tax Department about annual cash deposits of Rs. 10 lakhs or more in any savings account.
3. Companies to notify Income-tax Department about receipts of Rs. 5 lakhs or more for bonds/debentures issued.
4. Credit card issuers to inform Income-tax Department about payments of Rs. 2 lakhs or more.
5. RBI to inform Income-tax Department about payments of Rs. 5 lakhs or more for bonds issued.
6. Sub-registrars to inform Income-tax Department about immovable property purchases/sales by any person for Rs. 30 lakhs or more.
7. Mutual funds to inform Department about investments of Rs. 2 lakhs or more.
The provisions as are contained in section 285BA are very exhaustive, but presently the obligation to submit annual information returns has been limited only to the above mentioned seven categories of transactions. As per the said section 285BA specified financial transaction means any-(a) transaction of purchase, sale or exchange of goods or property or right or interest in a property ; or
(b) transaction for rendering any service ; or
(c) transaction under a works contract ; or
(d) transaction by way of an investment made or an expenditure incurred ; or
(e) transaction for taking or accepting any loan or deposit,
which may be prescribed. For each of the transactions the Central Board of Direct Taxes have been empowered to prescribe the class of person as also the nature of the transaction for which the annual information return is to be filed. Similarly, the aggregate value of such transactions during the financial year shall also be prescribed from time to time by the Central Board of Direct Taxes.
Presently, the registering authority under the Motor Vehicles Act, the Postmaster General, as also the Collector under the Land Acquisition, have been exempted from submission of annual information return. Although their names figure in the same section 285BA no rule has yet been made casting the obligation on them to submit the annual information return. However, it is expected that in the near future the Central Board of Direct Taxes may further amend the Income-tax Rules to specify the value of the transaction for which these persons may be required to submit the annual information return.
As per the abovementioned new rule the annual information return is to be furnished to the Commissioner of Income-tax (Central Information Branch). It is further provided that if the Board has authorised an agency to receive such return on behalf of the Commissioner of Income-tax (Central Information Branch) the returns have to be furnished to that agency. A new Form No. 65 has been prescribed for submission of annual information return which shall be furnished on computer readable media or on CD-Rom or Digital Video Disc. Part A of the said annual information return shall be submitted on paper. This annual information return shall be furnished on or before August 31, after the close of the financial year. In case the return is defective then as per proviso 4 to section 285BA, the income-tax authority may intimate the defect in the said annual information return to the person who has furnished such return and give him an opportunity to rectify the defect within a period of one month of such intimation or within such period as the income-tax authority in its discretion may allow. It is also provided that if the defect is not rectified within the said period of one month or such extended period then the defective annual information return so filed shall be treated as an invalid return. It is therefore recommended that all those persons upon whom the responsibility of filing the annual information return has been cast should file the return in time. If a person who is required to submit an annual information return has not furnished the same within the prescribed time the income-tax authority may serve upon such person a notice requiring him to furnish the annual information return within a period not exceeding 60 days from the date of service of such notice.
Form No. 65 being the annual information return comprises two parts. Part A contains general details of the person submitting the annual information return while Part B contains full details with reference to the total number as well as the total value of all transactions reported in the annual information return. The important columns to be filled up in the annual information return are the date of transaction, name of the transacting party, PAN of the transacting party, full address, mode of transaction, amount and transaction code. Each of the transactions has been allotted a different transaction code which must be mentioned in the annual information return. The Income-tax Department after receiving the first annual information return would allot a random computer generated number (folio number). This number shall be quoted in all the subsequent annual information returns filed by the person.
If we go very carefully through the class of persons and the nature and value of transactions in respect of which the annual information return has to be submitted then we find that the transaction in respect of cash deposit in a bank aggregating to Rs. 10 lakhs or more during the financial year are applicable only in respect of deposit in a savings bank account. Thus all those transactions which are in respect of current bank accounts of an assessee will not come within the purview of details of transactions which are to be reported in the annual information return. Similarly, if a person has spent one lakh rupees or more for acquiring shares issued by the company, the details would be required to be submitted in the annual information return. But such details are to be submitted only in respect of shares which are issued by a company through a public issue or a rights issue. Thus, in respect of shares issued by a private limited company there is no obligation on such private limited company to submit annual information return in respect of shares issued to persons of an amount exceeding Rs. 1 lakh or more. Similarly, the annual information return is not required to be submitted in respect of shares which are issued under the scheme of shares issued by a company to its employees. In respect of immovable property the transactions which are to be intimated to the Income-tax Department by the Registrar or Sub-Registrar are in respect of purchase or sale of immovable property valued at Rs. 30 lakhs or more. Thus, the transactions concerning gift of immovable property would not be covered within the purview of the annual information return. Similarly, the transactions relating to agreements to sell and power of attorney of property deals, so also collaboration deals of builders would be outside the purview of transactions which are to be reported in the annual information return. This is because of the fact that the new rule specifically states that the transactions which are covered for annual information return are, only the transactions concerning purchase or sale by any person of immovable property valued at Rs. 30 lakhs or more.
Although the new rule specifying the class of persons and the nature and value of the transactions in respect of which the annual information return has to be submitted have been introduced by the amendment of the Income-tax Rules, 1962, vide Notification dated December 1, 2004, nevertheless the provisions relating to submission of annual information return would be applicable in respect of all transactions mentioned above during the whole of the financial year 2004-05. It would be better, if the Reserve Bank of India in particular were to issue letters to all those investors who had invested in RBI bonds prior to December 1, 2004, to submit the details of their Permanent Account Number (PAN) so that in the annual information return the details concerning the transactions completed even before December 1, 2004 are recorded in such annual information return with the permanent account number of the assessee. If this theme is implemented by the Government, then it would be better for the taxpayers as well as for the Income-tax Department. The annual information return so submitted shall be signed and verified by the assessee like any other tax return. In case the annual information return is submitted by a person other than an assessee namely persons referred to in column (2) then such return would be signed and verified by the persons so referred to in column (2) of the above table.
If the annual information return is not submitted in time then as per the new section 271FA the income-tax authority may direct such person who has failed to submit the return in time to pay by way of penalty a sum of Rs. 100 for every day during which the failure continues. If the person filing the annual information return submits a false statement in the verification or delivers an account or statement which is false and which he either knows or believes to be false or does not believe to be true, then such person shall be punishable in terms of section 277 of the Income-tax Act, 1961. The punishment shall be by way of rigorous imprisonment which shall not be less than three months but which may extend upto three years. As mentioned above the main objective of introduction of the concept of filing annual information returns is to check tax evasion and for widening of the tax base. It is likely that after receiving the annual information return the Income-tax Department may issue letters to certain taxpayers to find out about the source of investment made by them in respect of the abovementioned financial transactions. The taxpayers after receiving such a notice from the Income-tax Department should mention in the reply the source of the funds for effecting the financial transaction. Sometimes, it may even happen that the Tax Department may presume that looking to the income-tax file of the assessee the transactions have been effected at a substantial higher figure and that they would like to have the details thereof. In such situation also the assessee should not worry at all and submit the details of the source of investment with an explanation.
In conclusion we can say that most of the taxpayers of India need not worry at all as a result of introduction of the obligation to submit an annual information return. The worry should be only to those persons who are making investment or entering into financial transactions without proved sources of funds. It is therefore the right time to adopt tax planning and avoid tax evasion tactics which will bring for you happiness and will take away all your troubles and problems concerning the Income-tax Department.
There is no obligation on the assessee to file a return under the new provision, if his transaction or transactions falls or fall within the purview of section 285BA. The annual information return is to be filed only by certain designated persons as per the new rule as mentioned above.
Example
Anurag purchased a luxury car and made payment of Rs. 11 lakhs. He also invested last week about Rs. 6 lakhs in the savings bonds issued by the Reserve Bank of India. Similarly, he invested Rs. 2,40,000 in the units of a mutual fund. He is worried because he feels that he would be required to submit the annual information return in respect of all these financial transactions which have taken place during the financial year 2004-05. Good news for Anurag : he is not required to furnish the annual information return even though he has entered into a number of financial transactions during the year. All individuals would be happy to note that the provisions relating to the filing of annual information return does not apply to a person who had spent money during the financial year for a particular financial transaction. As per the provisions contained in the Income-tax Act, 1961 it is only certain classes of persons who are required to submit the annual information return in respect of certain designated financial transactions only. So the happy news is that a person like Anurag who would continue spending substantial amounts in making certain big monetary payments or acquiring certain assets would not be required within the framework of the law to submit any annual information return. This is more so because there is no obligation cast on the individual incurring expenditure or spending money on a particular financial transaction to submit the said annual information return. It may be recalled here that the obligation to furnish the annual information return has been introduced by the Government with the basic aim of widening the tax base and to check evasion of income-tax.
For the first time the obligation to file an annual information return was introduced by the Finance Act, 2003 by insertion of a new section 285BA in the Income-tax Act, 1961. However, during the whole financial year 2003-04 the Government did not prescribe any rules for the submission of annual information returns. Hence for all practical purposes there was no obligation on taxpayers to file the said annual information return in respect of financial transactions pertaining to the said financial year 2003-04. The Finance (No. 2) Act, 2004 has substituted the existing section 285BA by a completely new section. The said new section does not cast an obligation on all assessees to submit annual information return entering into prescribed financial transactions. For ready reference the relevant extract of the substituted new section 285BA is reproduced below :
"285BA. Obligation to furnish annual information return.-(1) Any person, being-(a) an assessee ; or
(b) the prescribed person in the case of an office of Government ; or
(c) a local authority or other public body or association ; or
(d) the Registrar or Sub-Registrar appointed under section 6 of the Registration Act, 1908 (16 of 1908) ; or
(e) the registering authority empowered to register motor vehicles under chapter IV of the Motor Vehicles Act, 1988 (15 of 1988) ; or
(f) the Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898) ; or
(g) the Collector referred to in clause (c) of section 3 of the Land Acquisition Act, 1894 ; or
(h) the recognised stock exchange referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) ; or
(i) an officer of the Reserve Bank of India, constituted under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934) ; or
(j) a depository referred to in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of 1996),
who is responsible for registering, or maintaining books of account or other documents containing a record of any specified financial transaction, under any law for the time being in force, shall furnish an annual information return, in respect of such specified financial transaction which is registered or recorded by him during any financial year beginning on or after the 1st day of April, 2004 and information relating to which is relevant and required for the purposes of this Act, to the prescribed income-tax authority or such other authority or agency as may be prescribed."
A careful reading of the abovementioned section will make it crystal clear that the obligation to submit annual information return is not applicable to all persons who have entered into selected financial transactions, rather as per the new section the responsibility of submitting annual information return is only on the designated persons mentioned in the said section who are responsible for registering or maintaining documents containing a record of selected specified financial transactions. Initially when the above said section was introduced through the Finance Bill there was a feeling amongst the taxpayers that all categories of taxpayers would be called upon to file annual information returns in respect of the specified transactions which they entered into during the whole of the financial year. This notion of the taxpayers was wrong, especially in view of the fact that the substituted section makes it clear that the submission of annual information return will be the responsibility of only those persons whose names have been identified specifically in the substituted new section 285BA and the connected rules made thereunder.
Recently the Central Board of Direct Taxes has amended the Income-tax Rules thereby specifying clearly the nature of the specified financial transactions which would be relevant for submission of the annual information return. A new rule 114E has been added to the Income-tax Rules, 1962. This new rule is contained in the Income-tax (17th Amendment) Rules, 2004 which have been introduced vide Notification No. 1316(E), dated December 1, 2004 (see [2004] 271 ITR (St.) 38). The new rule 114E clearly lays down a Table in respect of the financial transaction together with the nature and value in respect of which the annual information return is to be submitted.
The following is the Table as contained in new rule 114E (page 40) :
S. No.
Class of person
Nature and value of transaction
(1)
(2)
(3)
1.
A banking company to which the Banking Regulation Act, 1949, (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act).
Cash deposits aggregating to ten lakh rupees or more in a year in any savings account of a person maintained in that bank.
2
A banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) or any other company or institution issuing credit card.
Payments made by any person against bills raised in respect of a credit card issued to that person, aggregating to two lakh rupees or more in the year.
3
A trustee of a mutual fund or such other person managing the affairs of the Mutual Fund as may be duly authorised by the trustee in this behalf.
Receipt from any person of an amount of two lakh rupees or more for acquiring units of that Fund.
4.
A company or institution issuing bonds or debentures.
Receipt from any person of an amount of five lakh rupees or more for acquiring bonds or debentures issued by the company or institution.
(1)
(2)
(3)
5.
A company issuing shares through a public or rights issue.
Receipt from any person of an amount of one lakh rupees or more for acquiring shares issued by the company.
6.
Registrar or Sub-Registrar appointed under section 6 of the Registration Act, 1908.
Purchase or sale by any person of immovable property valued at thirty lakh rupees or more.
7.
A person being an officer of the Reserve Bank of India, constituted under section 3 of the Reserve Bank of India Act, 1934, who is duly authorized by the Reserve Bank of India in this behalf.
Receipt from any person of an amount or amounts aggregating to five lakh rupees or more in a year for bonds issued by the Reserve Bank of India.
Now to understand the provisions of annual information return we have to read new section 285BA as contained in the Income-tax Act, 1961 together with new rule 114E. After reading the provisions contained in the Act and Rules together we find that presently only the following seven categories of transactions are covered for the purpose of submission of annual information returns :1. Companies to inform Income-tax Department about receipts of Rs. 1 lakh or more for shares issued.
2. Banks to inform Income-tax Department about annual cash deposits of Rs. 10 lakhs or more in any savings account.
3. Companies to notify Income-tax Department about receipts of Rs. 5 lakhs or more for bonds/debentures issued.
4. Credit card issuers to inform Income-tax Department about payments of Rs. 2 lakhs or more.
5. RBI to inform Income-tax Department about payments of Rs. 5 lakhs or more for bonds issued.
6. Sub-registrars to inform Income-tax Department about immovable property purchases/sales by any person for Rs. 30 lakhs or more.
7. Mutual funds to inform Department about investments of Rs. 2 lakhs or more.
The provisions as are contained in section 285BA are very exhaustive, but presently the obligation to submit annual information returns has been limited only to the above mentioned seven categories of transactions. As per the said section 285BA specified financial transaction means any-(a) transaction of purchase, sale or exchange of goods or property or right or interest in a property ; or
(b) transaction for rendering any service ; or
(c) transaction under a works contract ; or
(d) transaction by way of an investment made or an expenditure incurred ; or
(e) transaction for taking or accepting any loan or deposit,
which may be prescribed. For each of the transactions the Central Board of Direct Taxes have been empowered to prescribe the class of person as also the nature of the transaction for which the annual information return is to be filed. Similarly, the aggregate value of such transactions during the financial year shall also be prescribed from time to time by the Central Board of Direct Taxes.
Presently, the registering authority under the Motor Vehicles Act, the Postmaster General, as also the Collector under the Land Acquisition, have been exempted from submission of annual information return. Although their names figure in the same section 285BA no rule has yet been made casting the obligation on them to submit the annual information return. However, it is expected that in the near future the Central Board of Direct Taxes may further amend the Income-tax Rules to specify the value of the transaction for which these persons may be required to submit the annual information return.
As per the abovementioned new rule the annual information return is to be furnished to the Commissioner of Income-tax (Central Information Branch). It is further provided that if the Board has authorised an agency to receive such return on behalf of the Commissioner of Income-tax (Central Information Branch) the returns have to be furnished to that agency. A new Form No. 65 has been prescribed for submission of annual information return which shall be furnished on computer readable media or on CD-Rom or Digital Video Disc. Part A of the said annual information return shall be submitted on paper. This annual information return shall be furnished on or before August 31, after the close of the financial year. In case the return is defective then as per proviso 4 to section 285BA, the income-tax authority may intimate the defect in the said annual information return to the person who has furnished such return and give him an opportunity to rectify the defect within a period of one month of such intimation or within such period as the income-tax authority in its discretion may allow. It is also provided that if the defect is not rectified within the said period of one month or such extended period then the defective annual information return so filed shall be treated as an invalid return. It is therefore recommended that all those persons upon whom the responsibility of filing the annual information return has been cast should file the return in time. If a person who is required to submit an annual information return has not furnished the same within the prescribed time the income-tax authority may serve upon such person a notice requiring him to furnish the annual information return within a period not exceeding 60 days from the date of service of such notice.
Form No. 65 being the annual information return comprises two parts. Part A contains general details of the person submitting the annual information return while Part B contains full details with reference to the total number as well as the total value of all transactions reported in the annual information return. The important columns to be filled up in the annual information return are the date of transaction, name of the transacting party, PAN of the transacting party, full address, mode of transaction, amount and transaction code. Each of the transactions has been allotted a different transaction code which must be mentioned in the annual information return. The Income-tax Department after receiving the first annual information return would allot a random computer generated number (folio number). This number shall be quoted in all the subsequent annual information returns filed by the person.
If we go very carefully through the class of persons and the nature and value of transactions in respect of which the annual information return has to be submitted then we find that the transaction in respect of cash deposit in a bank aggregating to Rs. 10 lakhs or more during the financial year are applicable only in respect of deposit in a savings bank account. Thus all those transactions which are in respect of current bank accounts of an assessee will not come within the purview of details of transactions which are to be reported in the annual information return. Similarly, if a person has spent one lakh rupees or more for acquiring shares issued by the company, the details would be required to be submitted in the annual information return. But such details are to be submitted only in respect of shares which are issued by a company through a public issue or a rights issue. Thus, in respect of shares issued by a private limited company there is no obligation on such private limited company to submit annual information return in respect of shares issued to persons of an amount exceeding Rs. 1 lakh or more. Similarly, the annual information return is not required to be submitted in respect of shares which are issued under the scheme of shares issued by a company to its employees. In respect of immovable property the transactions which are to be intimated to the Income-tax Department by the Registrar or Sub-Registrar are in respect of purchase or sale of immovable property valued at Rs. 30 lakhs or more. Thus, the transactions concerning gift of immovable property would not be covered within the purview of the annual information return. Similarly, the transactions relating to agreements to sell and power of attorney of property deals, so also collaboration deals of builders would be outside the purview of transactions which are to be reported in the annual information return. This is because of the fact that the new rule specifically states that the transactions which are covered for annual information return are, only the transactions concerning purchase or sale by any person of immovable property valued at Rs. 30 lakhs or more.
Although the new rule specifying the class of persons and the nature and value of the transactions in respect of which the annual information return has to be submitted have been introduced by the amendment of the Income-tax Rules, 1962, vide Notification dated December 1, 2004, nevertheless the provisions relating to submission of annual information return would be applicable in respect of all transactions mentioned above during the whole of the financial year 2004-05. It would be better, if the Reserve Bank of India in particular were to issue letters to all those investors who had invested in RBI bonds prior to December 1, 2004, to submit the details of their Permanent Account Number (PAN) so that in the annual information return the details concerning the transactions completed even before December 1, 2004 are recorded in such annual information return with the permanent account number of the assessee. If this theme is implemented by the Government, then it would be better for the taxpayers as well as for the Income-tax Department. The annual information return so submitted shall be signed and verified by the assessee like any other tax return. In case the annual information return is submitted by a person other than an assessee namely persons referred to in column (2) then such return would be signed and verified by the persons so referred to in column (2) of the above table.
If the annual information return is not submitted in time then as per the new section 271FA the income-tax authority may direct such person who has failed to submit the return in time to pay by way of penalty a sum of Rs. 100 for every day during which the failure continues. If the person filing the annual information return submits a false statement in the verification or delivers an account or statement which is false and which he either knows or believes to be false or does not believe to be true, then such person shall be punishable in terms of section 277 of the Income-tax Act, 1961. The punishment shall be by way of rigorous imprisonment which shall not be less than three months but which may extend upto three years. As mentioned above the main objective of introduction of the concept of filing annual information returns is to check tax evasion and for widening of the tax base. It is likely that after receiving the annual information return the Income-tax Department may issue letters to certain taxpayers to find out about the source of investment made by them in respect of the abovementioned financial transactions. The taxpayers after receiving such a notice from the Income-tax Department should mention in the reply the source of the funds for effecting the financial transaction. Sometimes, it may even happen that the Tax Department may presume that looking to the income-tax file of the assessee the transactions have been effected at a substantial higher figure and that they would like to have the details thereof. In such situation also the assessee should not worry at all and submit the details of the source of investment with an explanation.
In conclusion we can say that most of the taxpayers of India need not worry at all as a result of introduction of the obligation to submit an annual information return. The worry should be only to those persons who are making investment or entering into financial transactions without proved sources of funds. It is therefore the right time to adopt tax planning and avoid tax evasion tactics which will bring for you happiness and will take away all your troubles and problems concerning the Income-tax Department.
There is no obligation on the assessee to file a return under the new provision, if his transaction or transactions falls or fall within the purview of section 285BA. The annual information return is to be filed only by certain designated persons as per the new rule as mentioned above.
