Bonus reserve deduction: only admitted or adjudicated bonus liabilities, not mere reserve credits, are deductible for tax purposes.
Deduction is limited to admitted or adjudicated bonus liability under the mercantile system; fair estimates may be allowed when quantum is disputed and provided in the books. Amounts credited to a bonus reserve as carried forward surplus under the Bonus Act are not deductible until the employees' claim materializes as an admitted liability.

Diversification of survey activities to identify new tax assessees by using insurance and commercial information sources.
Direct field units to broaden survey activities to identify new Income-tax and Wealth-tax assessees by surveying life insurance policies with a sum assured of one lakh and above, especially where premium is paid annually in a single installment, and by collecting information from petrol pump dealers and other untapped commercial sources to generate leads for assessment and compliance.

Penalty proceedings recordkeeping requirement: officers must log register entries with serial and page references and file periodic reports.
I.T. Officers must maintain the Register of penalties and record on the order sheet at initiation and completion that entries have been made, including the register serial number and page number; Commissioners must monitor penalty progress via quarterly reviews and submit half-yearly reports on penalties initiated, completed and pending to the Board by prescribed dates.

Rectification under section 154 is narrowly confined; choose remedial measures carefully to protect revenue and invoke section 263 where appropriate.
Rectification under section 154 is confined to mistakes apparent from the record and must not be used where the error relies on extraneous evidence or extensive reasoning. Reopening under section 147(b) is susceptible if based only on change of opinion; audit scrutiny notes as "information" are legally contested. Intervention under section 263 is recommended where assessments are unappealed and significant tax is involved. ITOs should assess remedial options carefully, consult IACs, and avoid measures that risk loss of revenue.

Recording reasons for non-initiation of penalty preserves reasonable exercise of discretion and shields officers from audit scrutiny.
Income-tax Officers exercising discretion to refrain from initiating penalty proceedings under section 271(1)(a) should record contemporaneous reasons for such non-initiation. Except where the Board issues a general order to the contrary, officers must document the factual and legal basis for declining to initiate penalty; properly recorded and reasonably exercised discretion will not be questioned in audit.

Prohibition on self-appeal: Assistant Commissioners must not hear appeals from their own orders; appeals must be transferred.
An Assistant Commissioner must not hear an appeal against an order he passed as Income tax Officer; in such cases the Appellate Assistant Commissioner must notify the Commissioner, who shall have the appeal transferred to another Appellate Assistant Commissioner. The Board directs strict compliance with this Office Manual instruction to prevent self-appeal and ensure impartial appellate procedure.

Condonation of delay: Registrar to accept delayed liquidation filings on fees and assess need for court application.
Registrars must accept delayed liquidation statements on payment of the prescribed fee and any additional late fee, then assess each case to decide whether to advise the Liquidator to seek court condonation; very short or excusable delays need not prompt advice to apply for condonation or prosecution.

Withdrawal of recognition for approved employee funds following detection of rule breaches and required investigative steps.
The Board mandates immediate steps to detect contraventions by recognised provident, approved superannuation and gratuity funds and to withdraw recognition where conditions of the Fourth Schedule or Income-tax Rules are breached. Authorities must prepare and forward lists of such funds, assign them to Income-tax Officers in trust circles for methodical scrutiny of accounts, initiate assessment proceedings by issuing statutory notices for the current year, and take appropriate proceedings for any infringements discovered, informing the Board of withdrawals of recognition.

Deduction for technical know how requires Central Board approval and audit verified accounts before net deduction is quantified by tax officer.
Deduction for technical know how must be quantified by the Income tax Officer at assessment on the net amount after deducting expenses attributable to earning such receipts. Approval of agreements must be granted by the Central Board of Direct Taxes; approvals by Ministries after the transfer of power are invalid and must be referred to the Board. For composite agreements the Board will specify excluded portions and the Income tax Officer shall bifurcate income. Non company claimants must furnish an audit report as a condition for the deduction.

Exemption of gratuity fund income was limited to post-amendment law; prior exemptions must be reviewed and corrective recovery pursued.
Exemption for income of approved gratuity funds was introduced effective 1 April 1973; prior to that such income was not exempt and earlier exemptions by analogy with other funds were not legally justified. The Board requires a review of cases up to assessment year 1972-73 to identify funds whose interest or other income was improperly exempted and mandates submission of a list of those funds and actions taken to recover revenue by 25 August 1973.

Capital gains computation: shift from average-rate rebate to straight deduction under section 80T requires reassessment of affected returns.
Finance Act, 1968 replaced the Section 114 rebate regime with Section 80T, converting relief on capital gains from an average-rate rebate to a straight deduction; capital gains reduced by the Section 80T deduction are to be included in total income.

Depreciation limit: aggregate depreciation cannot exceed actual cost; excess sale proceeds treated as capital gains.
Aggregate depreciation, including initial depreciation, must not exceed the asset's actual cost; initial depreciation must be counted when determining exhaustion of cost. Under Section 41(2) profit on sale equals sale price less written down value to the extent of actual cost, and any sale proceeds exceeding actual cost are taxable as capital gains. Officers must maintain depreciation charts, audit depreciation calculations in important cases, review prior assessments for similar irregularities, and submit a compliance report detailing mistakes found and corrective action taken.

Company registration reporting requires collection of registration, record-status and tax-assessment data with specified compliance deadlines.
Departmental officers are directed to obtain from the Regional Director of the Company Law Board the names and addresses of companies registered in 1970-71 and 1971-72, whether those companies have been entered on the Income Tax Department's records with reasons for any omissions, and, where assessments were completed, the incomes returned and demands raised; similar information for companies registered in 1968-69 and 1969-70 must also be collected for submission to the Public Accounts Committee by the prescribed August deadlines.

Public sector undertakings tax assessment: report assessed and paid tax, and reasons for non assessment, by prescribed deadline.
Directives to report particulars of public sector undertakings assessed to tax as companies for 1971-72: provide the prescribed proforma entries-assessment year, PAN, income returned, demand raised, tax realized (including advance/self-assessment)-and identify undertakings within jurisdiction not assessed with reasons; obtain similar information for state-sponsored enterprises and submit consolidated returns to the Board for onward transmission to the Public Accounts Committee by the specified deadline.

Unrealistic over-assessments must be avoided; assessing officers must make reasonable, evidence-based tax assessments and supervisors must monitor compliance.
Commissioners must instruct assessing officers to eschew unrealistic over-assessments and instead make reasonable, fair assessments grounded in the facts; assessors should not rely mechanically on past figures, must weigh available information even in ex parte cases, formulate proper estimates in exercise of best judgment, and supervisors must monitor compliance and correct errant officials to prevent exaggerated demands and inflated arrears.

Collection of surtax arrears requires departmental break-up and explanation submitted to the Board by the specified deadline.
Departments must furnish a detailed break-up of surtax arrear demand as at the ends of the two financial years and state reasons for the sharp rise in arrears, in addition to the reports required under the earlier instruction; the comparative break-up and explanations must be sent to the Board by the specified deadline to facilitate scrutiny by the Public Accounts Committee.

Chapter VIA deduction limit: deductions cannot exceed gross total income and are disallowed where income is a loss.
Deductions under Chapter VIA are limited by Section 80A(2) to the taxpayer's gross total income; consequently, where the assessment results in a loss no Chapter VIA deduction may be allowed. Income-tax officers must review finalized loss assessments and withdraw any deductions that exceed gross total income, and submit a compliance report on rectificatory action and tax effect.

Loans during exemption counted: must be included when computing statutory ceiling under section 370 provisions.
Loans advanced while a company was exempted under sub section (2) of section 370 are to be taken into account when computing the ceiling prescribed in the second proviso to sub section (1) of section 370; loans made during the exempted period are not excluded from the ceiling calculation.

Penalty proceedings under 1922 Act: completion mandated by deadline with quarterly reporting and Commissioners' personal oversight.
Commissioners must prescribe time-limits and exercise personal supervision to eliminate pendency of penalty proceedings under the 1922 Act; no such proceeding should remain pending beyond 31.3.1974 unless stayed by judicial authorities. To ensure compliance, Commissioners are required to submit quarterly reports in the prescribed proforma to the Board on specified dates so the Board can monitor progress and implement the Public Accounts Committee's direction.

Failure to deduct tax from salary requires precise complaint drafting and counsel consultation to limit offences per complaint.
Careful drafting of complaint petitions in prosecutions for failures to deduct tax from salary is required, with drafts prepared in consultation with departmental prosecution counsel and using sample complaints as guidance; because liability for tax deduction arises monthly, complaints alleging continuing failures must be limited to offences for a restricted consecutive-month period per petition to conform with the Criminal Procedure limitation on complaint periods.