Union Budget 2016: It is proposed to amend the relevant provisions of the Act so as to provide adequate legal framework for paperless assessment in order to enhance efficiency and reduce the burden of compliance. A series of changes are proposed to achieve this end.

Sub-section (1) of section 282A provides that where a notice or other document is required to be issued by any income-tax authority under the Act, such notice or document should be signed by that authority in manuscript.

It is proposed to amend sub-section (1) of section 282A so as to provide that notices and documents required to be issued by income-tax authority under the Act shall be issued by such authority either in paper form or in electronic form in accordance with such procedure as may be prescribed.

Sub-section (2) of section 143 provides that, if the Assessing Officer considers it necessary and expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, he 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.

In order to ensure timely service of notice issued under sub-section (2) of section 143, it is proposed to amend sub-section (2) of section 143 to provide that notice under the said sub-section may be served on the assessee by the Assessing Officer or the prescribed income-tax authority, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return.

It is also proposed to amend the existing provision of section 2 by inserting new clause (23C) to define the term “hearing” to include communication of data and documents through electronic mode.

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

Clause 3 of Finance Bill 2016

Clause 3 of the Bill seeks to amend section 2 of the Income-tax Act relating to definitions.

Sub-clause (a) of the said clause seeks to amend clause (14) of the aforesaid section which defines “capital asset” and item (vi) of the said clause (14) excludes from the definition of capital asset, inter alia, Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 notified by the Central Government. It is proposed to amend item (vi) of the said clause (14) so as to also exclude the deposit certificates issued under the Gold Monetisation Scheme, 2015 from the definition of capital asset.

This amendment will take effect retrospectively from 1st April, 2016 and will, accordingly, apply in relation to assessment year 2016-2017 and subsequent years.

Sub-clause (b) of the said clause proposes to insert a new clause (23C) to define the term “hearing” so as to include communication of data and documents through electronic mode.

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

Sub-clause (c) of the said clause proposes to amend clause (24) relating to the definition of income.

Sub-clause (xviii) of clause (24) of the aforesaid section, inter alia, provides that any assistance in the form of a subsidy or grant or cash incentives, etc., by the Central or a State Government to any assessee other than the subsidy or grant or reimbursement which is taken into account for determination of the actual cost of the asset, in accordance with Explanation 10 to clause (1) of section 43, shall be included in the definition of income.

It is proposed to amend the said sub-clause (xviii) so as to provide that subsidy or grant by the Central Government for the purpose of the corpus of a trust or institution established by the Central Government or a State Government, as the case may be, shall also not form part of income.

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

Sub-clause (d) of the said clause seeks to amend clause (37A) of the said section so as to provide that for the purposes of deduction of tax under section 194LBB, or section 194LBC the “rates in force” in relation to an assessment year or financial year shall mean the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year or rate or rates of income-tax specified in an agreement entered into by the Central Government under section 90 or notified by the Central Government under section 90A, whichever is applicable.

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:–

(i) 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;

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

(iii) 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

(iv) 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

(1) 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

(2) 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 109 of Finance Bill 2016

Clause 109 of the Bill seeks to amend section 282A of the Income-tax Act relating to authentication of notices and other documents.

Sub-section (1) of the aforesaid section provides that where a notice or other document is required to be issued by any income-tax authority under the Act, such notice or document should be signed by that authority in manuscript.

It is proposed to amend the said sub-section (1) so as to provide that notices and documents required to be issued by income-tax authority under the Act shall be issued by such authority either in paper form or in electronic form in accordance with such procedure as may be prescribed.

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

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