To,
All the Luminaries on Board of the Special Committee
Set up for Simplifying Income Tax Law.
Most Honourable Gentlemen,
The Jurisdictional Commissioners of Income Tax are unable to understand specific applicability of Rule 55 of Income Tax Rules, 1962 in connection/relation with each & every Clause of Subsection (2) of Section 288 of the Income Tax Act, 1961,and are blindly rejecting the applications of aspirants opting to become & be “Registered Income Tax Practitioners”, under a pretext that “though the applicant possess the educational qualifications specified u/s 288(2)(v)/(vi), the applicant has not practiced before the Income Tax Authorities for not less than one year on the date of application”. In fact, such condition is not applicable to the applicants under Clauses (v) and (vi) of Subsection (2) of Section 288 of the Income Tax Act, 1961. Many of the aspirant youth are deprived from becoming Registered Income Tax Practitioners.
I submit that the scope provided to act as an “Income Tax Practitioner (ITP)” under Income Tax Law, is a self-employment opportunity, and thus, the earnings of the Practitioner will be based only on his/her abilities, efforts & even luck. There will not be any salary, remuneration, honorarium or commission, etc., from the Government to the Income Tax Practitioners. Yet, there will be a complete satisfaction that they are engaged in an activity that helps the Government to mobilize funds by way of taxes from assessees, and even motivate & encourage new assessees to pay taxes due.
I submit that there is no financial burden on Government in encouraging/allowing/introducing more & more Income Tax Practitioners. If the Legal-Hitch or Mesh in Rule 55 of the Income Tax Rules, 1962 is removed, more & more graduates will become Registered Income Tax Practitioners, and then automatically the number of assessees or taxpayers could be improved without any burden on exchequer. Where is the need to introduce the Tax Return Preparers (TRPs)? Is it not improper that the Government is particularly spending much on making Tax Return Preparers (TRPs)? Why such a difference between TRP & ITP? Why such a bias on Income Tax Practitioners?
I submit that the Rule 55 of the Income Tax Rules, 1962, relates to —
(1) “Enlistment” as an Authorized Income Tax Practitioner in the Register of Income Tax Practitioners maintained in Form No.38 by the Jurisdictional Commissioners of Income Tax, and
(2) Issuing of “Certificate of Registration” to the applicants, who have applied in Form No.39 to the Jurisdictional Commissioners of Income Tax as per Rule 54(1) of the Income Tax Rules, 1962 and have opted/preferred to be “Enlisted” in the Form No.38 as Authorized Income Tax Practitioners.
I submit that the Rule 54(1) of the Income Tax Rules, 1962 clearly conveying to submit the Form No.39 to the Jurisdictional CIT, in whose Jurisdiction the Applicant has commenced his/her Profession of Practicing of Income Tax. The mandate implied in this Rule 54(1) of the Income Tax Rules, 1962 is also insisting to have commenced the practice before making application, which is applicable to the applicants belonging to or hailing from four clauses [i.e., Clause (v), Clause (vi), Clause (via) and Clause (vii)] of Section 288(2) of Income Tax Act, 1961.
I submit that in the present Rule 55 of the Income Tax Rules, 1962, there is a condition that the aspirant applicant is to have been “practicing before the Income Tax Authorities for not less than one year on the date of application” in the aspect of “Registration as an Authorized Income Tax Practitioner”, but this condition is not applicable to the applicants belonging to or hailing from Clause (v) and Clause (vi) of Section 288(2) of Income Tax Act, 1961.
I submit that there is a legal hitch in the Rule 55, which has been either causing confusion to the authorities due to its clumsy drafting trying to make it in a short & brief form to cover specially all the three (3) clauses of Section 288(2) [i.e., Clause (v), Clause (vi) and Clause (vii) of the Section 288(2)] or the IT Authorities are ignoring the fact that “the right given by the Act is neither diluted by the Rules nor can be restricted by Rules” in interpreting this Rule 55.
I submit that the ill-drafted Rule 55 is inconsistent with Section/s 288(2)(v)/(vi), and thus, the same is ultra-virus. The problem is with IT Authorities, who misunderstood this Rule 55 as well as the purpose of the condition laid therein or misinterpret or take undue advantage of it as per their fancy or need. This has become the main hurdle being encountered by the first generation applicants aspiring for Enlistment as Authorized Income Tax Practitioners.
I submit that to understand clearly about the exact applicability of that condition, we need to peruse the clause/s of Section 288(2) and Rule 55 very carefully.
I submit that as per present Sub-section (2) of Section 288 of the Income Tax Act, 1961, there are eight (8) clauses [including “Clause (via)”], each clause stating the category of person/s to be eligible to get authorized by the Income Tax Assessees, for representing the assessees before the Income Tax Authorities and even before the Hon’ble ITAT. The present Rule 55 of the Income Tax Rules, 1962, is to cover only four (4) clauses [including “Clause (via)”] of the present Sub-section (2) of Section 288 of the Income Tax Act, 1961. The “Clause (via)” was inserted in Sub-section (2) of Section 288 of the Income Tax Act, 1961, by the Taxation Laws (Extension to Union Territories) Regulation, 1963 with effect from 01-04-1963. However, the “Clause (via)” was inserted in Rule 55 by the IT (Fourth Amendment) Rules, 1979 with effect from 21-07-1979. Thus, to arrive at the original statute of Rule 55 (as it might be prior to 21-07-1979), one has to keep aside the “Clause (via)”, and then, read & understand the original rule position. Prior to 21-07-1979, the Rule 55 statute, if appropriated, may read as follows:
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“If the Commissioner is satisfied that the Applicant fulfills the requirement of – (a) Clause (v) of Sub-section (2) of Section 288 of IT Act, OR (b) Clause (vi) of Sub-section (2) of Section 288 of IT Act, OR (c) Clause (vii) of Sub-section (2) of Section 288 of IT Act, 1961 and has been practicing before the Income Tax Authorities for not less than one year on the date of application, the Commissioner shall enter the name of the Applicant in the Register and issue him a Certificate of Registration in Form No.40.” |
From the above original statute of Rule 55, it is evident that the condition of “and has been practicing before the Income Tax Authorities for not less than one year on the date of application” is applicable to Clause (vii) only, and not applicable for the remaining two clauses [i.e., Clauses (v) and (vi)]. Thus, it is an open fact that such condition is not applicable to Clauses (v) and (vi), which is being intentionally ignored by the IT Authorities just to force their decision on those applicants in Form No.39 for satisfying their ulterior motives best known to them only.
I further submit that there is another way for clearly understanding the specific applicability of the condition of “and has been practicing before the Income Tax Authorities for not less than one year on the date of application” laid in the Rule 55, as explained below:
Whereas imposing other than the ‘prescribed in Act’ is ultra-virus, the following statement clearly stands to show the applicability of the “and has been practicing before the Income Tax Authorities for not less than one year on the date of application” in the Rule 55 statute, prior to 21-07-1979, quite in accordance with the definitions laid under the Clauses (v), (vi) and (vii) of Sub-section (2) of Section 288 of the Income Tax Act, 1961, as follows:
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Clause No. of the Section 288(2) of Income Tax Act |
Clear eligibility criteria stated in the Clause & Section of the IT Act |
Extent of Rule 55 Application
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| Clause (v) of Sub-Section (2) of Section 288 of Income Tax Act, 1961. | any person who has passed any accountancy examination recognized in this behalf by the Board | As per Clause (v) of Sub-Section (2) of Section 288 of Income Tax Act, 1961. |
| Clause (vi) of Sub-Section (2) of Section 288 of Income Tax Act, 1961. | any person who has acquired such educational qualifications as the Board may prescribe for this purpose, i.e., Degree in Commerce or Law | As per Clause (vi) of Sub-Section (2) of Section 288 of Income Tax Act, 1961. |
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Clause (vii) of Sub-Section (2) of Section 288 of Income Tax Act, 1961. |
any other person who, immediately before the commencement of this Act, was an income tax practitioner within the meaning of clause (iv) of sub-section (2) of section 61 of the Indian Income-Tax Act, 1922 (11 of 1922), and was actually practicing as such.
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As per Clause (vii) of Sub-Section (2) of Section 288 of Income Tax Act, 1961 and has been practicing before the Income Tax Authorities for not less than one year* on the date of application. [*Whereas Section 288(2)(vii)is insisting to have been “Practicing”, the Rule 55 insists a least the period of one year to reckon for the purpose of eligibility]. |
The above statement clearly exhibits the fact pertaining to the applicability of the “and has been practicing before the Income Tax Authorities for not less than one year on the date of application” to Clause (vii) only.
I further submit that while inserting Clause (via) in Section 288(2) and Rule 55, even the placing position of Clause (via) provides an iota for clearly understanding the partial applicability of the subjected “condition”. The “Clause (via)” was inserted in Sub-section (2) of Section 288 of the Income Tax Act, 1961, by the Taxation Laws (Extension to Union Territories) Regulation, 1963 with effect from 01-04-1963. However, the “Clause (via)” was inserted in Rule 55 by the IT (Fourth Amendment) Rules, 1979 with effect from 21-07-1979. When there are already One to Seven [i.e., (i) to (vii)] Clauses under Subsection (2) of Section 288, any addition of a New Clause has to be added with the next number Eight [i.e., (viii)] to the existing, but addition of new clause has been inserted as “(via)” Why? Because, the new clause is also has a prerequisite of/as “to have attended before an IT Authority”, and in lieu of this aspect, to avoid repeating the “prerequisite or condition of prior practice” the authors of Section 288 and Rule 55 might have planned to place it under Rule 55 before the Clause (vii) to which already there is a suffix of “and was actually practicing as such.” it has been numbered as “(via)” for simplifying or making Rule 55 in a brief form. And, this brief form has been causing lengthy & long-lasting problem. However, it is an open fact that such condition “and has been practicing before the Income Tax Authorities for not less than one year on the date of application” laid in the Rule 55, is applicable only to Clauses (via) & (vii), but not to Clauses (v) and (vi), which is being intentionally ignored by the IT Authorities just to force their decision on those applicants in Form No.39 for satisfying their ulterior motives best known to them only.
I submit that a look at the Format of Form No.39 (meant for Application for Registration as an Authorized Income Tax Practitioner), with special care & attention for the asterisk (*) marked parts/area for finding out “clause-wise” applicability, would also stands for justifying the view that there is no need of having/proving the “earlier practice before the income tax authorities for not less than one year on the date of application” in the cases of candidates hailing under Clauses (v) and (vi) of Subsection (2) of Section 288 of the Income Tax Act, 1961. Whereas such condition “and has been practicing before the Income Tax Authorities for not less than one year on the date of the application” is not applicable to the Clauses (v) and (vi) (even as per the format of Form No.39), where is the need for submitting the particulars, such as: (1) Name and Address of Assessee, (2) Assessment Year, and (3) Designation of Income Tax Authority before whom appeared? That portion of the Form No.39 pertains to Clause (vii) only.
I submit that a look into the Format of Form No.38 (i.e., Register of Income Tax Practitioners) will enable to understand that there is no column for entering either the “earlier practice or experience” or “the date of commencing the practice”, but there are columns for entering Qualification & Date of Entry in Register only. This also stands to prove that there is no need/scope at all for insistence of earlier practice.
I submit that to understand clearly the legal-hitch prevailing in Rule 55 of the Income Tax Rules, 1962, read the following example:
The sentence “Leave him not hang him” generates two different messages/meanings – (1) “Leave him not, hang him”, and (2) Leave him, not hang him”. So, one could easily understand that a comma (,) can kill or could save a life.
Thus, the ill-drafted Rule 55 of the Income Tax Rules, 1962 has one such hitch or glitch in it, causing confusion to one & all. With proper application of mind only, one could arrive at a best decision.
I submit that in the phrase of words “… practicing before Income Tax Authorities …”, the meaning of the word “practicing” is working or doing a thing “repeatedly” or “regularly”. However, in the context of Income Tax “… practicing before Income Tax Authorities …” means nothing but “… representing IT Assessees before Income Tax Authorities …”, and the word of “representing” too has two ways – (1) in person, and (2) by correspondence/mail. In Income Tax Law, there is neither compulsion to represent the assessees only “in person” nor any barrier is there not to represent the assessees “by correspondence”. Thus, insisting for proof of physical appearance before IT Authorities is meaningless, particularly when the Officials are subjected to frequent transfers from one place to another within a short span of period (i.e., a year or two).
Unless the Rule 55 of the Income Tax Rules, 1962 is cleared of the anomaly, aspirants of Income Tax Practice will continue to suffer. Thus, there is utmost need for modifying the Rule 55 of the Income Tax Rules, 1962.
Hello wannabe Income Tax Practitioners, here-in make Open Submission of your Grievances by utilizing “COMMENT BOX” below this Article, enabling the Committee (set up by the CBDT to simplify Income Tax Law) to Read, Understand & Resolve the issue:
1. As per Section 288(2) of the Indian Income – Tax Act, 1961, Legal Practitioners, Chartered Accountants & Income – Tax practitioners are the three categories of persons authorized to represent the assessees before the Income – Tax authorities. Tax practitoners, Advoctes,Cost Accountants and Company Secretaries come under the category of Income – Tax Practitioners. The process of representation involves preparation & filing of Income – Tax returns for and on behalf of the assessees.In the recent past the government and CBDT is more and more depedning on the CAs and creating a very bad and worst situation for the country’s revenue and bad management of the Income Tax Act.
Report of the Comptroller and Auditor General of India- Appreciation of Third Party (Chartered Accountant) Report in Assessment Proceedings- for the year ended March 2014 is a very important document in support of the above claims of the Association. In its first page the CAG mentions: –
to quote “we found cases (a) where the CAs failed to report full and correct information in 367 cases leading to short levy of taxes of Rs.2813.11 Crore and (b) where the AOs failed to utilize the information available in 102 reports/certificates submitted to them leading to short levy of taxes of Rs1,310.025 crore. Some of the important audit findings are as follows:-
a. Tax auditors failed to give correct information relating to allowance of depreciation in 66 cases involving short levy of tax of Rs.457.79 crore. (Paragraph 2.3).
b. Tax auditors did not report correct information regarding brought forward loss/deprecation resulting in irregular brought forward loss/depreciation allowance in 46 cases involving short levy of tax Rs.557.79 crore (paragraph 2.4).
c. In 42 cases personal/capital expenditure was incorrectly allowed as the tax auditors did not report the amount in their tax audit reports which resulted in short levy of tax of Rs.477.89 crore (paragraph 2.5)
d. CAs have certified wrong information/claims for various exemptions and deductions in 74 cases having tax effect of Rs.259.72 crore (Paragraph 2.7).
e. CAs gave incorrect/incomplete information in TARs/Certificates in 132 cases having a revenue impact of Rs.1,037.61 crore (paragraph 2.8)
…….the audit findings on non-adherence to various provisions of the Act by CAs led to deny proper dues to the Government” unquote.
This CAG report to the government has never been discussed in the parliament
(as per our knowledge) and no action has been taken by the government to plug the loopholes of the 44AB audit specially for non corporate assesses. The 44AB audit may be scraped for non corporate assesses as it is of waste of money and time. Even in the prosposed GST also the CAs are the ONLY class of Tax Professionals allowed for the certification of the forms we are are 100% doubtful about the sucess of the GST in case if the State Governments failed to utilise the servies of the existing State TAx Practitioners and Income Tax Practitioners specially for the non corporate assesses.
cbdt may ask deductors to pay intt. to tax paees for intervening perid between deduction and deposite into gvt.a/c
CBDT SHOULD SERIOUSLY THINK TO ABOLISH TDS ON INTEREST INCOME OR DEVISE SOME ALTERNATE METHOD TO COLLECT TDS.TAX DEDUCTORS DEDUCT TAX ,MISUSE MONEY FOR PERSONAL USE AND DEPOSITE IN IT A/C VERY LATE.BANKS LIKE HDFC ARE MAIN CULPRITS WHO HAVE CHANGED RULES AND DEDUCT TDS FROM SAVING FUND A/C THEREBY FORCING THEIR A/C HOLDERS TO MAKE PROVISION OF HIGHER FUNDS STACKING IN SAVING ACCOUNTS INSTEAD OF TDS COLLECTION FROM ACCRUED INTTT.
CBDT MUST MAINTAIN A/C IN ALL DEDUCTOR BANKS AND FORCE THEM TO DEPOSITE TDS IN GOVT A/C IMMEDIATELY IN THESE DAYS OF COMPUTERISATION.
(01) As per Section 288(2) of Income-Tax Act, 1961 eight class of persons are authorized to represent the assesses. Among them only following five class of persons are authorized to prepare return on behalf of assesses under Rule 12A of Income-Tax Rules, 1962:-
(1)Legal Practitioners
(2)Chartered Accountants
(3)Cost & Management Accountants
(4)Company Secretaries
(5)Licensed Income-Tax & VAT Practitioners
(02)Audit means “verification”. person who conduct audit need to be a knowledgeable in the matter he under takes to Audit. Ex:- Energy Audit, Environment Audit, Product Audit, Process Audit, Cost Audit, Legal Audit in USA & Tax Audit in Indian Income-Tax Act. Hence, the word “Audit” demand varied type of knowledge & it can not be restricted to single professionals like Chartered Accountants, that too in taxation laws. In conclusion, person specialized in Income-Tax law should issue Certificates/Reports in Income-Tax Act. On careful study of Section 288(2) of Income-Tax Act read with Rule 12A of Income-Tax Rules, it has to be presumed that all five class of persons possess knowledge of Section 145 read with Income Computation & Disclosure Standards of CBDT, required for Income-Tax Practice. Because certain qualification has been fixed in Income-Tax Act for these five class of persons. Accounting standards are only clarificatory in nature & can not override Accounting Concepts & Principles. Further, Accounting Standards framed by ICAI & IFRS not required for Income-Tax Practice. Here the question is, when such other four class of Non-CA Tax Professionals Viz. Legal Practitioners, Cost & Management Accountants, Company Secretaries and Income-Tax Practitioners are authorized to prepare return under Rule 12A of Income-Tax Rules, there is no justification to prohibit them for issue of Certificates/Reports in Income-Tax Act, it works contradictory to the spirit & intention of law framers.
(03) It is right time to have unified control & regulation of all players practicing taxation laws in India, Tax Practitioners Law need of the hour to enhance genuine tax base in India. There are professional bodies passed by the Acts of Parliament, to protect the interest of their members only, but there is no professional body on date to generate tax professionals to protect the interest of Govt. revenue. Among Legal Practitioners, Cost & Management Accountants, Company Secretaries, Chartered Accountants and Income-Tax Practitioners, who wants to practice tax law in India, should mandatorily seek registration under Tax Practitioners Law. Whatever their parent body says is immaterial and Tax Practitioners Law should mention the qualification & experience required to be possessed by all the five class of tax professionals. On date ample tax compliance work is there, but there is no required Tax Professionals to support voluntary compliance in Indian taxation laws. On the other hand, Non-CA Tax Professionals should roam around in search of empty slots of CA Signature for giving compliance under Indian taxation laws. Is it not a strange situation prevailing in India only !
(04)Further, “More persons in the line of tax practice leads to improvement in quantum of compliance & more revenue to the Government”. Tax Practitioners Law in the lines of US Treasury Circular No.230 is well suited to India, required for India to widen genuine tax base of assesses by increasing Tax Professionals base in India.