Provisional assessment required to prevent avoidable interest; prompt scrutiny, registers, six month limit and immediate refunds mandated.
Provisional assessments must be made promptly where regular assessments will be delayed to avoid avoidable interest; Category I returns should be scrutinised immediately, cases attracting provisional assessment entered in a separate register under the ITO's custody, and where regular assessment cannot be completed within six months a provisional assessment should be made forthwith, refunds granted immediately, and reasons for delay noted in the file. Supervisory officers will require half-yearly statements of interest paid by the Government exceeding the stipulated threshold to ensure such payments were unavoidable.

Taxability of freshwater fish farming: department orders survey to identify assessees and report to the Board
Income from fresh water fish farming does not qualify for exemption as agricultural income under Section 10(1) nor as income from a business of livestock brooding or poultry or dairy farming under Section 10(27) of the Income-tax Act, 1961. The Board directed Commissioners to conduct an intensive survey in all charges to identify assessees engaged in fresh water fish farming and to report the survey results to the Board.

Registration of charitable trusts requires formal acknowledgement, recordation and periodic reporting to central tax authorities.
Trusts seeking income tax exemption must file registration applications with the Commissioner in the prescribed manner. The Commissioner must issue a formal acknowledgement of receipt, record the application in a serially numbered register and endorse the register number on the acknowledgement. Where applications are belated, the Commissioner's discretionary admission or rejection must be a recorded act. Commissioners must send six monthly reports of registration applications to the Board to permit compilation of national statistics.

Prior approval for tax refunds required, with Inspecting Assistant Commissioner to review and consider withholding under Section 241.
Tax officers must obtain prior approval of the Inspecting Assistant Commissioner before giving effect to appellate orders causing substantial tax effects or before issuing refunds under statutory refund provisions or demanding refunds; the Inspecting Assistant Commissioner must also consider use of the statutory withholding power when granting or withholding approval.

Cash handling procedures: strict compliance, monthly verification and surprise checks required for tax recovery collections.
Tax Recovery Officers and Inspectors may collect cash from defaulters but must strictly follow the Compilation of the Treasury Rules for receipt, accounting and remission of Government monies. Commissioners must ensure TROs call in Form T.R. 5 Receipt Books, reconcile receipts with cashbooks, record a verification certificate, and perform monthly verifications and surprise checks; T.R. 5 books must be counted and the count recorded before use. In case of defalcation, Chapter 2 of the General Financial Rules applies.

Palace annual value exemption: reassess tax and wealth-tax claims for former rulers' let palaces and take corrective action.
Section 10(19A) limits the income-tax exemption to the annual value of one palace occupied by a Ruler only if that palace's annual value had been exempt before the Constitution (Twenty-sixth Amendment) Act, 1971; a corresponding restriction applies under the Wealth Tax provisions. The Board instructs Income-tax officers to examine cases from the 1971-72 assessment year onwards where such palaces were let and exemptions claimed, and to take rectificatory action where exemptions were improperly allowed.

Retrospective remedial orders risk avoidable use; prompt reporting of application difficulties required to prevent retroactivity.
The Board directs that instances of difficulty in applying any Act, Order or Regulation - where the Central Government or the Board has power to remove such difficulty - must be reported promptly so remedial action can be taken immediately and retrospective orders avoided.

Section 263 review: Commissioners must verify pending appeals and complete reviews expeditiously to prevent revenue loss.
Commissioners must, when examining cases for action under Section 263, verify whether an appeal against the ITO's order is pending with the Appellate Assistant Commissioner and, if pendency is found, prioritise and complete the revision proceedings expeditiously; where necessary the Commissioner may direct the ITO to request adjournment of the appellate hearing until the contemplated action under Section 263 is completed.

Mandatory director retirement and appointment rules prevent articles granting another company power to appoint directors and create a subsidiary.
Amendments purporting to let another company appoint directors to make a company its subsidiary conflict with sections 255(1), 256(1) and 257, which mandate that at least two thirds of directors be subject to retirement by rotation, be appointed by members at the general meeting, and that one third retire at each annual general meeting; section 257 is mandatory and such articles or special resolutions are invalid under section 9.

Limitation periods for reference applications clarified for wealth, gift and estate duty laws, requiring adherence to statutory filing windows.
Clarifies that officers must apply the specific limitation periods prescribed by the Wealth-tax Act, Gift-tax Act and Estate Duty Act when seeking Board authorisation to file reference applications, rather than the longer time limit under the Income-tax Act, and directs that those statutory filing windows be observed to avoid defective proposals.

Penalty rectification permitted where estate duty is reduced on appeal, subject to proportional adjustment and statutory time limits.
Where estate duty is reduced on appeal, a penalty originally imposed as a proportionate percentage of duty may be reduced correspondingly; in other cases rectification may reduce the penalty only to the maximum permissible amount calculated on the reduced duty and not below that amount, and any rectification must be made within the statutory time limit.

Functional Scheme discontinuance prompts reversion to unitary system, phased with earlier implementation where practicable as planned.
Decision to discontinue the Functional Scheme and revert to the previous unitary system because the Functional Scheme failed to cure and worsened the underlying malady; partial separation of assessment and collection was rejected as administratively and legally impracticable. The reversion is to be phased to avoid temporary administrative dislocation and protect the overall Action Plan, with uniform reversion required at the end of the phase-in and allowance for earlier reversion in charges where targets will not be disturbed.

Auditor reliance on trustee certification permits using the trustee's list for Form 10B annexure certification.
An auditor preparing Form No. 10B may accept the managing trustee's list of persons covered by section 13(3) as correct and base the Annexure certification on that certificate until further instructions. Applications for registration under section 12A(a) should ordinarily be made to the CC/CIT, except that where a trust claims specified exemptions and is assessed by authorities headquartered in the four metropolitan cities, applications must be made to the Directors of Income-tax (Exemptions); discretion to admit belated applications remains with the CC/CIT.

Refund reporting requirements expanded to include adverse appeal and rectification reductions, with a new monthly statement obligation.
Instruction adds a serially numbered Part C to the monthly refund-return proforma to report arrears of tax reduced by adverse appeal/revision orders and rectification claims that do not result directly in cash refunds; this Part C information must be furnished with the September report due in October, while Parts A and B remain applicable to cash refunds and their figures must strictly tally with the revised proforma.

Disallowance rule under tax law: totalisator dividends not disallowed; therefore bookmaker payments subject to disallowance.
The tax authority, following advice from the Ministry of Law, advises that the disallowance provision in section 40A(3) does not apply to totalisator dividends paid by race clubs to holders of winning tickets, but the provision does apply to payments made by bookmakers; instructions should be issued to Income Tax Officers to apply this distinction in assessments.

Deemed dividend treatment requires assessing officers to report closely held company loans to shareholders' assessing officers.
Loans or advances by closely held companies to shareholders with substantial interest are treated as deemed dividends to the extent of accumulated profits; ITOs assessing companies must scrutinize such advances, determine amounts attributable to accumulated profits, and intimate full details to the ITOs assessing the shareholders.

Contingent liability exclusion: provision for gratuity not treated as liability when valuing unquoted shares under wealth tax rules.
Contingent liabilities are excluded when determining the market value of unquoted equity shares under Rule 1D; a provision for gratuity is a contingent obligation arising only on determination of employment and does not qualify as a present debt, and therefore cannot be treated as a liability for share valuation purposes, a position which assessing officers should apply.

Estate duty relief for closely spaced deaths requires sanction; lower officials must report via proper channel.
The instruction clarifies that relief under Explanation 2 to Section 31-treating closely spaced deaths as one death for estate duty-is not grantable by the Assistant Controller without the Board's satisfaction; Assistant Controllers must report such cases to the Board through the Controller of Estate Duty so the Board may grant the necessary relief.

Tax on concealed income deemed a new liability, limiting deductibility for wealth valuation and prompting departmental review.
The Gujarat High Court held that tax paid under section 68 of the Finance Act, 1965 is a new liability in respect of a particular item of income and thus cannot be deducted as a debt owed by the assessee on the last day of the relevant accounting year for computing net wealth. In consequence, the Board's Instruction No. 659, which allowed deduction of such tax where spread-over of income was accepted, is under review; officers are instructed to keep adverse cases alive by filing reference applications or leave petitions for valuation dates prior to 1-3-1965.

Additional wealth-tax: require assessment orders to state total urban asset value to ensure correct levy and compliance.
Wealth-tax Officers must indicate in the assessment order the total value of urban assets on which additional Wealth-tax is leviable, so that the basis for charging additional Wealth-tax is clear and omissions or incorrect levies are prevented.