Budget 2016:The existing provisions of section 133C empower the prescribed income-tax authority to issue notice calling for information and documents for the purpose of verification of information in its possession.

In order to expedite verification and analysis of the information and documents so received, it is proposed to amend section 133C to provide adequate legislative backing for processing of information and documents so obtained and making the outcome thereof available to the Assessing Officer for necessary action, if any.

It is also proposed to amend Explanation 2 to section 147 to provide for reopening of cases by the AO on the basis of the information so received.

Clause (a) of sub-section (1) of section 143 provides that, a return filed is to be processed and total income or loss is to be computed after making the adjustments on account of any arithmetical error in the return or on account of an incorrect claim, if such incorrect claim is apparent from any information in the return.

In order to expeditiously remove the mismatch between the return and the information available with the Department, it is proposed to expand the scope of adjustments that can be made at the time of processing of returns under sub-section (1) of section 143. It is proposed that such adjustments can be made based on the data available with the Department in the form of audit report filed by the assessee, returns of earlier years of the assessee, 26AS statement, Form 16, and Form 16A. However, before making any such adjustments, in the interest of natural justice, an intimation shall be given to the assessee either in writing or through electronic mode requiring him to respond to such adjustments. The response received, if any, will be duly considered before making any adjustment. However, if no response is received within thirty days of issue of such intimation, the processing shall be carried out incorporating the adjustments.

These amendments will take effect from the 1st day of June, 2016.

Clause 64 of Finance Bill 2016

Clause 64 of the Bill seeks to amend section 1 33C of the Income-tax Act relating to power to call for information by prescribed income-tax authority.

The existing provisions of the said section empowers the prescribed income-tax authority to issue notices calling for information and documents for the purpose of verification of information in its possession.

It is proposed to amend the said section so as to further provide that the information and documents so obtained by the prescribed income-tax authority may be processed and the outcome of such processing may be made available to the Assessing Officer for further necessary action, if any.

This amendment will take effect from 1st June, 2016.

Clause 67 of Finance Bill 2016

Clause 67 of the Bill seeks to amend section 147 of the Income-tax Act relating to income escaping assessment.

Under the existing provisions of the aforesaid section, if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment, he may assess or reassess such income or re-compute the loss or any other allowance. Explanation 2 to the said section provides certain situations which shall also be deemed to be the cases where income chargeable to tax has escaped assessment.

It is proposed to amend the said Explanation 2 so as to provide that a case shall be deemed to be a case where income chargeable to tax has escaped assessment where on the basis of information or document received from the prescribed income-tax authority it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return.

This amendment will take effect from 1st June, 2016.

Clause 66 of Finance Bill 2016

Clause 66 of the Bill seeks to amend section 143 of the Income-tax Act relating to assessment.

Sub-clause (a) of the said clause seeks to amend clause (a) of sub-section (1) of said section.

Clause (a) of sub-section (1) of the aforesaid section provides that a return filed is to be processed and total income or loss is computed after making the adjustments on account of any arithmetical error in the return or on account of an incorrect claim, if such incorrect claim is apparent from any information in the return.

It is proposed to expand the scope of adjustments that can be made at the time of processing under sub-section (1) of the said section to further include adjustments as under:–

(ix) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed is furnished beyond the due date specified under sub-section (1) of section 139;

(x) disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return;

(xi) disallowance of deduction claimed under sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or section 80-IE, if the return is furnished beyond the due date specified under sub-section (1) of section 139; or

(xii) addition of income appearing in Form 26AS or Form 1 6A or Form 16 but not included in computing the total income in the

It is further proposed to provide an opportunity to the assessee, before making any adjustment under clause (a) of sub-section (1) of section 143 to explain and rectify the same within thirty days of issuance of such intimation and the response so received be considered before making such adjustments. In case no response is received within such time, the adjustment of the amount indicated in the intimation be made.

Under the existing provision of sub-section (1D) of the said section 143, processing of a return is not necessary where a notice has been issued to the assessee under sub-section (2) of that section.

It is proposed to amend sub-section (1D) of the said section so as to provide that before making an assessment under sub-section (3) of that section, a return shall be processed under sub-section

(5) of section 143.

These amendments will take effect from the 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017- 2018 and subsequent years.

Sub-clause (b) of the said clause seeks to substitute sub-section

(6) of the said section. The existing provisions of sub-section (2) of the aforesaid section provide that, if the Assessing Officer under the circumstances specified therein shall serve on the assessee a notice requiring him to produce, or cause to be produced on a specified date, any evidence on which the assessee may rely in support of the return.

It is proposed to substitute the said sub-section (2) so as to provide that notice under the said sub-section may be served on the assessee by the Assessing Officer or, as the case may be, the prescribed income-tax authority under the circumstances specified therein requiring him to produce or caused to be produced on a specified date before the Assessing Officer any evidence on which the assessee may rely in support of the return.

This amendment will take effect from 1st June, 2016.

[Clause 64, 67 & 66]

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