Government of India

Principal Chief Commissioner of

Income Tax, Pune
Aaykar Bhawan, 12, Sadhu Vaswani Road,
Pune - 411001 Tel: 020-26125898
A.C.Shukla Fax: 020-26129306
I. R. S.

FOREWORD

This is the revised and updated version of “Sharpening the Cutting Edge” – a hand book for
the Assessing Officers which was brought out for the first time in 2008 at the initiative of Shri M.
Narasimhappa, the then CCIT(CCA), Pune. This publication was very well received and found to be a
useful work aid by the officers in the field.

After taking over as Pr. CCIT, I decided to get it updated so as to incorporate certain new
topics such as GAAR and ‘Income Computation and Disclosure Standards’. Accordingly, a team of
Commissioners was formed and the updated draft was circulated on Whatsapp inviting suggestions
from the officers in Pune region. Suggestions received were examined and those suggestions which
make this compilation useful have been incorporated in the final draft. I place on record my appreciation
for the time and energy devoted by Commissioners Sarva Shri Hareshwar Sharma, Narendra Kumar,
Ajit Korde, Adarsh Kumar Modi, Sandip Garg and Shri K.K. Mishra in updating this publication. This
handbook is meant to be a work aid and not a scholarly treatise. Also, this handbook does not represent
Department’s view point. Accordingly, while taking a decision, A.O. has to take into account the relevant
legal provisions and the Board’s instructions/circulars on the subject. The purpose of this handbook
is to equip the A.Os with basic input so that he may build up on this input by in-depth study of the
relevant material. The recent changes have effected a paradigm shift in the process of pre-assessment
investigation sharpening the tools of the A.O. and bringing in precision and direction. But investigation
by its nature remains an unwieldy exercise requiring imagination, ingenuity, dexterity and perseverance
on the part of the A.O. Collection of material from an amorphous and infinite area and judicious
evaluation thereof will ever remain a daunting task. The test of the Department’s functioning lies in
framing of sound and sustainable assessment orders that ensures taxing of unreported income and
this creates deterrence and results in garnering of resources for the nation building.
 In view of the above, an effort has been made to incorporate certain practical tips to help the
A.O. prioritise his work so as to give optimum results with economy of time and resources at his
disposal. An attempt has been made to identify the thrust-areas in each segment of the statute and
present a summary up-to date legal position along with administrative interpretation as elicited in the
Board’s circulars/ instructions. Hopefully, this will help more focussed approach on the part of the A.O.
and obviate frittering away of his time and energy.

I trust that A.Os will make optimum use of the material herein and endeavour to make the
publication serve its purpose.

Being administrative head for this region and having approved the final draft, I own the mistakes/
omissions if any. Suggestions for improvement of this handbook are welcome and may be sent to
pune.pccit@incometax.gov.in. At the end, I complement the efforts of the officers who have made this
up-dation possible and wish that the A.Os make use of it in their day to day working.

Amaresh Chandra Shukla

01-01-2018 Principal Chief Commissioner of Income Tax, Pune
 INDEX OF CONTENTS

S.No. Content Page Nos.

1 SCHEME OF TAXATION

2 MAKING AN ASSESSMENT

3 METHOD OF ACCOUNTING

4 INCOME COMPUTATION AND DISCLOSURE STANDARDS (ICDS)

5 BURDEN OF PROOF

6 REOPENING AN ASSESSMENT

7 DRAFTING AN ASSESSMENT ORDER

8 MODEL QUESTIONNAIRE

9 PENALTIES

10 STRUCTURE OF A PENALTY ORDER U/S.271(1)(C)

11 ISSUE AND SERVICE OF NOTICES

12 COMMON AUDIT OBJECTIONS

13 IMPORTANT CIRCULARS/ INSTRUCTION OF CBDT ON

ASSESSMENT/ PENALTY ORDER

14 SUMMARY OF CBDT CIRCULARS ON REDUCING LITIGATION

15 OFFENCES AND PROSECUTIONS

16 TRANSFER PRICING

17 GENERAL ANTI-AVOIDANCE RULES (GAAR)