References have been received by the Board regarding issuance of guidelines for granting of prior permission u/s 281 of the IT Act, 1961 to transfer or create a charge on the assets of the assessee. The Board has considered the matter and in order to have uniformity on the issue, it has been decided that:
1. The taxpayers should apply in the prescribed form annexed hereto titled “Application u/s 281 of the IT Act, 1961” which would be available on the departmental website, as well as with the Assessing Officers.
2. The taxpayer would have to file the form at least thirty days prior to the proposed date of transaction.
3. The circumstances under which prior permission u/s 281 should be granted by the Assessing Officers are as follows:
- If there is no demand outstanding and there is no likelihood of demand arising in the next six months, then the permission should be granted.
- If undisputed demand is outstanding and there is no likelihood of demand arising in next 6 months, then the taxpayer should pay the same along with interest due thereon and then permission should be granted.
- If there is disputed demand outstanding, then the taxpayer should obtain stay for the same and indemnify the outstanding demand by way of bank guarantee or sufficient assets or by Department retaining the first charge on the assets proposed to be transferred or on which such charge is being created, to the extent of such demand. Thereafter, the permission u/s 281 would be granted by the A.O.
- If demand is likely to arise in the next six month, then the A.O. should explore the possibility of action prescribed u/s 281B.
4. There would be only one level of intervention i.e., at the level of the range head for granting permission. The cases in which A.O. would require such approval would be where
- value of assets being transferred or on which charge is being created, or
- The amount of charge being created is Rs. Ten crores or more.
5. The timelines for granting/refusing permission u/s 281 by the A.O. are as follows:
- If there is no demand outstanding and there is no likelihood of demand arising in the next six months, then the A.O. should grant the permission within ten working days of the receipt of the application.
- If undisputed demand is outstanding and there is no likelihood of demand arising in next 6 months, then the A.O. should grant permission within ten working days of payment as in para 3(ii) above.
- If there is disputed demand outstanding and the taxpayer has obtained stay and indemnified the demand, then the A.O. should grant the permission within ten working days of the indemnification of the demand.
- If demand is likely to arise in the next six months and the A.O. is considering actions prescribed u/s 281B for the assets excluding the asset under consideration, then the A.O. should grant the permission within fifteen working days of the receipt of the application.
- If the taxpayer does not pay the undisputed outstanding demand or his application for stay of disputed demand is rejected or he is unable to indemnify the outstanding demand, the application shall be disposed of within a period of ten working days. In case the permission is not being granted, a speaking and reasoned order conveying refusal would be issued with the approval of the Range head within ten working days of expiry of time given to the taxpayer to pay the undisputed demand or rejection of his stay application, as the case may be.
These time limits should be followed scrupulously by the A.Os.
6 The validity of the letter granting permission u/s 281 would be:
- One hundred and eighty days from the date of issue of approval, or
- Service of order of attachment u/s 281B whichever is earlier.
7. Once the asset is transferred or charge is created, the taxpayer should submit the documents, in this regard, to the A.O. for his record.
8. This circular shall come into force with immediate effect.
Form I.T.N.S. 281
Application u/s 281 of IT Act, 1961
DATE OF APPLICATION
The Assessing Officer,
I/M/S ……………………………………………………………………. (name of the assessee in block letters) son/daughter of …………………….do, hereby, request that permission may be granted under clause (ii) of the proviso to section 281 creating a charge on, or to part with the possession (by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever) of asset(s) given in D4 of Part D below in favour of person(s) to be mentioned in D1 of Part D below.
PART A – GENERAL PARTICULARS
A1 First Name
A2 Middle Name
A3 Last Name
A5 Date of Birth/Date of Incorporation
A6 Designation of Assessing officer (Ward/Circle)
A7 Flat/Door/Block No
A8 Name of Premises/Building/Village
A9 Road/Street/Post Office
A13 Pin code
A14 E-mail Address
A15 Residential/Office Phone No. with STD Code
A16 Mobile No. With Country Code
A17 Fill only one Resident Non-Resident Resident but not ordinarily resident
A18 Fill Status (Only one) Individual HUF FIRM AOP/BOI Company Others
PART B – POSITION OF OUTSTANDING DEMAND AS ON THE DATE OF APPLICATION
Outstanding Demand (In Rs.)
Particulars of stay of demand, if any
PART C – Particulars of land, building, machinery, plant, shares, securities and fixed deposits in banks, to the extent to which any of the assets aforesaid does not form part of the stock-in-trade of the business of the assessee as on the date of application
Description of the Asset
Particulars of Place where Situated
Value of the Asset as Shown in the Books of Account as on the Date of Application (In Rs.)
Whether any Charge Exists in Part or Full on the Asset
Remarks [Please Indicate the Amount (in Rs.) of Charge Existing On the Asset]
PART D – The particulars of the proposed transaction(s) transferring the assets/creating charge for which permission is sought
Name of the Party/Parties with Whom Transaction is Proposed
Address of the Party/Parties with Whom Transaction is Proposed
PAN of the Party/Parties with Whom Transaction is Proposed
The Complete Particulars of the Assets Proposed to be Transferred or for which a Charge is to be Created
Expected Date of Transfer or Creation of Charge (DD/MM/YYYY)
The Period For Which Charge is being Created (If Applicable)
Any Other Information Considered Relevant by the Assessee
Nature of Transaction Creation of Charge Transfer
How the assessee proposes to pay or indemnify the Income Tax Department for outstanding demand disclosed?
Whether Credit Information Report (CIR) from Credit Information Bureau (India) Ltd. (CIBIL) is available
Yes No (if yes, attach a copy)
I, ………………………………………………………………. son/daughter of ……………………………………………………. holding permanent account number …………………………………………………………… solemnly declare that to the best of my knowledge and belief, the information given in the proforma above is correct and complete. I further declare that I am submitting this application in my capacity as …………………………….. and I am also competent to make the return of income and verify the return of income.
APPLICATION U/S 281- INSTRUCTIONS
Instructions for Application u/s 281 of the IT Act, 1961
1. This form needs to be used by the taxpayer to seek permission from the Assessing Officer before creating a charge or parting with the possession of an asset. According to section 281, no taxpayer shall make a sale or mortgage or gift or exchange or any other mode of transfer of any asset in favor of any other person, during the pendency of any proceedings or after the completion of proceedings, but before service of notice under rule 2 of the Second Schedule. However, the following exceptions are provided in the Act:
The transfer is made for adequate consideration and without any notice of proceedings or pendency of tax
The previous permission of the Assessing Officer is obtained
The tax payable does not exceed Rs. 5000/- and the value of the asset does not exceed Rs. 10000/-
2. Asset means land, building, plant, machinery, shares, securities and fixed deposits in bank (other than Stock-in-trade)
3. ” Previous Year” is the financial year (1st April to the following 31st March) during which the income in question has been earned. “Assessment Year” is the financial year immediately following the previous year.
4. Scheme of the Form
The form has been divided into four parts, the details of the same are provided below:
- Part A seeks general information requiring identificatory and other data
- Part B seeks the position of outstanding demand as on the date of Application
- Part C seeks particulars of assets as on the date of application
- Part D seeks the particulars of the proposed transaction(s) transferring the assets/creating charge for which permission is sought
5. Item by Item Instructions
A1-A3: In case of Individual, fill your First name, Middle name and Last name in A1, A2 & A3 as per details entered in PAN Card. In any other case, use the space given in A1-A3 to fill the name of the person
A4: In case of Individual, indicate the Date of birth. In others, indicate the date of incorporation. The format should always be in DD-MM-YYYY
A5-A11: Fill in the communication Address. A11 -PIN CODE is mandatory to enable faster communications from/with the department
A12: Indicate your e-mail address
A13: Fill the STD code in the first five digits and then the telephone No. in the next eight digits. No Special Characters or Alphabets are allowed in A13
A14: Fill the Country code in the first two digits and then fill the 10 digit mobile number in the next ten digits. No special characters or Alphabets are allowed in A16
A15: Shade the appropriate circle
A16: Shade the appropriate circle
A17: Fill in the Ward/Circle. Example: Ward 15(1), Circle 14(1)
Indicate the Assessment Year in which the demand was raised in Column i. This should be of the format 2010-11, 2011-12.
Indicate the section under which Demand was raised in Column ii. A detailed list of various demand section is given below:
Demands under various sections
Tax on distributed profits of domestic companies
Interest payable for non-payment of tax by domestic companies.
Tax on distributed income to unit holders.
Interest payable for non-payment of tax u/s 115R
Summary Assessment-Fringe Benefits Tax
Regular Assessment-Fringe Benefit Tax
Best judgment assessment-FBT
Fringe benefits escaping assessment
Interest for default in furnishing return of fringe benefits
Best judgment assessment
Income escaping assessment
Issue of notice where income has escaped assessment
Rectification of mistake
Time-Limit for filing the Return
Inquiry before assessment
Assessment in case of search
Assessment of income of any other person
Assessment of undisclosed income as a result of search
Levy of interest and penalty in certain cases .
Assessment of persons leaving India
Assessment of association of persons or body of individuals or artificial juridical person formed for a particular event or purpose
Assessment of persons likely to transfer property to avoid tax
Assessment as a firm
Consequences of failure to deduct or pay
Interest in case demand not paid within 30 days from the date of service
Interest in case demand not paid within 30 days from the date of service
Penalty payable when tax in default
Orders of Appellate Tribunal
Revision of orders prejudicial to revenue passes by Commissioner
Revision of other orders by Commissioner
Failure to furnish returns comply with notices concealment of income, etc.
Failure to comply with a notice under sub-section (2) of section 115WD or under sub-section (2) of section 115WE or under sub-section (1) of section 142 or sub-section (2) of section 143 or fails to comply with a direction issued under sub-section (2A) of section 142
Concealment of the particulars of income, or furnishing inaccurate particulars thereof
has concealed the particulars of the fringe benefits or furnished inaccurate particulars of such fringe benefits
Failure to keep, maintain or retain books of account, documents, etc.
Penalty for failure to keep and maintain information and document in respect of international transaction
Penalty where search has been initiated
Failure to get accounts audited
Penalty for failure to furnish report under section 92E
Failure to subscribe to the eligible issue of capital
Penalty for failure to deduct tax at source
Penalty for failure to collect tax at source
Penalty for failure to comply with the provisions of section 269SS
Penalty for failure to comply with the provisions of section 269T
Penalty for failure to furnish return of income
Penalty for failure to furnish annual information return
Penalty for failure to furnish return of fringe benefits
Penalty for failure to furnish information or document under section 92D
Penalty for failure to answer questions, sign statements, furnish information, returns or statements, allow inspections, etc.
Penalty for failure to comply with the provisions of section 133B
Penalty for failure to comply with the provisions of section 139A
Penalty for failure to comply with the provisions of section 203A
Penalty for failure to comply with the provisions of section 206CA
False estimate of, or failure to pay, advance tax
Contravention of order made under sub-section (3) of section 132
Failure to comply with the provisions of clause (iib) of sub-section (1) of section 132
Removal, concealment, transfer or delivery of property to thwart tax recovery
Failure to comply with the provisions of sub-sections (1) and (3) of section 178
Failure to comply with the provisions of sections 269UC, 269UE and 269UL
Failure to pay tax to the credit of Central Government under Chapter XII-D or XVII-B
Failure to pay the tax collected at source
Wilful attempt to evade tax, etc.
Failure to furnish returns of income
Failure to furnish return of income in search cases
Failure to produce accounts and documents
False statement in verification, etc.
Falsification of books of account or document, etc.
Abetment of false return, etc.
Punishment for second and subsequent offences
Offences by companies
Offences by Hindu undivided families
- Indicate the value of the Outstanding Demand in Column iii
- Indicate the details of stay of demand in Column iv
Indicate the type of asset in column i. The following types of assets can be indicated
- Plant and Machinery
- Shares and Securities
- Fixed Deposits in Bank
The above assets should not form part of the Stock-in-Trade
Indicate the particulars of place where the asset is situated in column ii. Complete Address where the Assets are situated needs to be furnished
D1: Indicate the name of the party/parties with whom the transaction is proposed
D2: Give the complete Address of the party/parties with whom the transaction is proposed
D3: Give the PAN of the Party/Parties with whom the transaction is proposed. If there are multiple PAN’s, then indicate in the space after the boxes provided for writing PAN
D4: Indicate the details of all the Assets proposed to be transferred or for which a charge is to be created
D5: Fill the expected date of transfer or creation of charge
D6: If applicable, fill the period for which the charge is being created
D7: Fill any other information considered relevant by the taxpayer
D8: Fill the appropriate circle
D9: Explain in detail, how the taxpayer proposes to pay or indemnify the Income Tax Department for outstanding demand disclosed. The taxpayer should submit his latest asset/liability statement including the guarantees given by him.
Reference: Section 281 of the income Tax Act, 1961
Certain transfers to be void
(1) Where, during the pendency of any proceeding under this Act or after the completion thereof, but before the service of notice under rule 2 of the Second Schedule, any assessee creates a charge on, or parts with the possession (by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever) of, any of his assets in favour of any other person, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the assessee as a result of the completion of the said proceeding or otherwise :
Provided that such charge or transfer shall not be void if it is made—
(i) for adequate consideration and without notice of the pendency of such proceeding or, as the case may be, without notice of such tax or other sum payable by the assessee ; or
(ii) with the previous permission of the Assessing Officer.
(2) This section applies to cases where the amount of tax or other sum payable or likely to be payable exceeds five thousand rupees and the assets charged or transferred exceed ten thousand rupees in value.
Explanation.—In this section, “assets” means land, building, machinery, plant, shares, securities and fixed deposits in banks, to the extent to which any of the assets aforesaid does not form part of the stock-in-trade of the business of the assessee.