The Finance Ministry has introduced a benign assessment procedure for income-tax assessees engaged in diamond manufacturing and trading business.
Income-tax assessing officers would now be required to accept the trading results of an assessee in diamond business if the declared income under the head profits and gains from business or profession was equal to or higher than six per cent of the total turnover from such a business.
Official sources said that instructions to this effect have been issued by the Central Board of Direct Taxes (CBDT) to its field formations. In Budget 2007-08, the Finance Minister had announced that a benign assessment procedure would be introduced for assessees in diamond business who declare profits from such activities at eight per cent or more of the turnover.
As per the latest instructions, an assessee looking to avail himself of the benign assessment procedure would have to maintain separate books of accounts of such business. Moreover, acceptance of profit at six per cent or above for a particular assessment year would not be a precedent for that assessee or for any other assessee.
The benign assessment procedure would not be available if the assessment is made on account of search and seizure action or survey action or where there is information regarding escapement of income.
It would also not be available if 50 per cent or more of the income from such business is claimed as deduction under Chapter VI A or Chapter III of the Income-Tax Act.
The CBDT would review the rate of profit as a percentage of turnover annually on the basis of revenue generation and results of scrutiny assessments, searches and surveys made during the year.
The CBDT instructions would be applicable for assessments made during financial year 2008-09, sources added.