Tax treatment of ex gratia payments: government ex gratia to heirs or injured employees is not taxable under income tax law.
Lump sum ex gratia payments paid by the Central Government, State Government, Local Authority or Government Public Sector Undertakings to the widow, legal heirs, or to a person injured (or dependants) consequent upon death or injury sustained while on duty are not includible as taxable income under the Income tax Act, following prior circular guidance that treated ex gratia to heirs of employees who die in service as exempt from income tax.

TDS defaults: penalty applies for failure to deduct; prosecution may follow for false verification or non-payment of deducted tax.
Penalty for failure to deduct tax at source is imposed where whole or part of tax required to be deducted is not deducted, subject to affording the assessee a reasonable opportunity of being heard and consideration of conditions for waiver or reduction. Prosecution for false verification of TDS returns is to be examined based on voluntariness of any revised return and payment of tax with penal interest. Prosecution for failure to pay deducted tax to the Government may be initiated for non-payment of collected TDS, subject to applicable procedural safeguards.

Selection for scrutiny under section 143(3) requires credible information and joint supervisory approval to target revenue risk.
Selection for assessment under section 143(3) must be based on specific credible information with application of mind at two levels: joint written reasons by the Assessing Officer and his next superior. Chief Commissioners/Directors General will determine the number of 143(3) assessments per Assessing Officer based on case nature and workload, ensure even distribution, and may lay down objective parameters (e.g., concealment or revenue potential) to justify selection and ensure accountability. Designated categories (search and seizure, survey, reassessment, set aside, court mandated cases) shall continue to be assessed under section 143(3).

Removal of prima facie adjustment requirement under section 143(1)(a) applies to returns filed and pending from June first.
The Finance Act, 1999 removed the prima facie adjustment requirement under section 143(1)(a), changing the acceptance procedure for income tax returns. The amendment is effective from 1 June 1999 and applies to returns filed on or after that date as well as to returns filed earlier but pending on that date.

Compounding of tax offences: fee computed on finally revised tax and compounding rates reduced and standardized.
The compounding fee must be computed on the tax as finally determined after appeal, revision or rectification. A rate of 2% per month or part thereof of that revised tax is prescribed for calculation purposes. For wilful attempts to evade tax under Section 276C(1), the compounding fee is fixed at 50% of the amount sought to be evaded irrespective of quantum. These changes apply to future and pending cases, exclude already compounded offences, and extend mutatis mutandis to other Direct Tax Laws.

Deduction for handicapped dependent expenses: government hospital certificate and claimant declaration suffice for TDS verification.
Verification for the deduction on account of medical treatment, nursing, training and rehabilitation of a handicapped dependant requires a government hospital medical certificate, a signed claimant declaration certifying the actual expenditure, and receipts/acknowledgements for amounts paid or deposited in specified insurance or trust schemes; DDOs need not demand individual medical vouchers or bills when allowing the deduction for TDS from salaries from the stated financial year onwards.

Implementation of appellate orders must occur within thirty days of receipt by the assessing officer, mandated by departmental instruction.
Instructions require that orders of the CIT(A) and the ITAT be given effect within thirty days of receipt by the Assessing Officer, reflecting the Citizens Charter expectation of timely implementation; the Board directs circulation of this requirement to all officers in the region.

Certificate for reduced tax deduction limited to credits or payments on or after certificate date; late applications not accepted.
A certificate for reduced or nil tax deduction is effective only for credits or payments subject to tax deduction at source made on or after the certificate date; certificates must not be issued after the amounts have been credited or paid, and applications submitted after credit/payment should not be acted upon, though genuine hardship may be referred for condonation of delay.

Capital gains treatment of self generated intangible assets depends on asset classification and legislative amendment timing.
Determination of capital gains on transfer of self generated assets depends on whether the asset is goodwill or a right to manufacture, produce or process; the special cost of acquisition rule in clause (a) of s.55(2) applies from distinct assessment years for goodwill and for rights to manufacture, and intangible assets not constituting goodwill must be tested as acquired for consideration or self generated, since self generated intangibles are not chargeable to capital gains until the amendment bringing them within clause (a).

Promoter capital gains must be examined and taxed where disinvestment occurs amid company defaults on government dues.
Promoter sales in telecom companies facing defaults on Government dues must be examined for capital gains tax liability; licence-fee deductions claimed by the company are admissible only if actually paid and may be disallowed where unpaid, with Assessing Officers directed to take appropriate action to bring the income to tax.

Discharge of payee on account-payee refund cheques removed where MICR mechanised processing is used, conventional forms unchanged.
Requirement for the payee's signature as discharge on the reverse of account-payee income-tax refund cheques is removed where refund cheques are issued after introduction of MICR mechanised processing; conventional non-MICR refund orders remain subject to the existing discharge requirement under the prevailing system.

Jurisdiction of Settlement Commission: block-period assessments from search proceedings fall within its scope, prompting withdrawal of challenges.
The instruction clarifies that the statutory definition of case in section 245A(b) includes block-period assessments made in search cases under Chapter XIV-B, thereby placing such block assessments within the jurisdiction of the Settlement Commission; pending special leave petitions challenging that jurisdiction are to be withdrawn and officers instructed to notify staff.

Credit card data collection required: city wise submission to tax investigators for targeted scheme implementation and limited disclosure.
Credit card issuers must centrally supply city wise names, addresses and PAN/GIR numbers to designated tax investigators on a periodic basis; those investigators will disseminate city wise returns to regional investigation units, individual account particulars may be requested separately, and data collection serves implementation of the one by six scheme with communications that do not disclose identification as credit card holders.

Jurisdiction of Income Tax Officer maintained in rural stations to avoid transfer and file movement when income threshold changes.
The Board directed that where moffusil stations have no Assistant Commissioner/Deputy Commissioner, the Income Tax Officer will continue to exercise jurisdiction over cases already under his charge even if the returned or last assessed income rises into the higher bracket that would otherwise bring the matter within an Assistant Commissioner/Deputy Commissioner's work area; the instruction is administrative, limited to cases already under ITO jurisdiction, and takes effect from 1.4.99.

Release of seized assets permitted where declared in books or secured by unconditional bank guarantee, subject to assessment and prosecution.
Seized assets shown in regular books may be released subject to recovery of arrears. Jewellery and perishable stocks can be released if an unconditional irrevocable bank guarantee for the full value, as valued by the Income-tax Department, is furnished; the guarantee must remain valid until completion of assessment proceedings and tax collection and may be enforced by the Department at any time. Assets with specific evidentiary value shall not be released until prosecution proceedings conclude.

Audit report compliance: verify obligations, link reports to returns, impose penalties, and conduct supervisory reviews.
Enforce section 44AB by verifying audit-report obligations at processing, initiating section 271B penalties for delays or failures, and examining each audit report at section 143(1)(a) processing and at completion under section 143(3) to identify adjustments or additions to income. Report incomplete or non-committal audit reports to the CIT for possible professional negligence and disciplinary action under section 288, maintain a register linking separately filed audit reports to returns, and undertake supervisory reviews to ensure proper utilisation of audit information.

Approval under 10(23G) enables tax exemption for infrastructure finance and requires CCIT monitoring with annual reports.
Approval under 10(23G) exempts dividend, interest on long term loans and long term capital gains for investments in enterprises wholly engaged in infrastructure activity, subject to Central Government approval and Rule 2E guidelines. The CCIT must monitor approved cases, send annual reports to the Board, and propose withdrawal of approval where sub rule (8) of Rule 2E applies; for new companies the CCIT may advise Assessing Officers to undertake closer monitoring to ensure compliance.