Request to cancel Section 143(1) intimations Levying Double Tax

Request To Cancel or Withdraw Notices / Reissue Amended Intimations Issued Under Section 143(1) of The Income Tax Act, 1961, Which Are Creating Unnecessary Hardship And Levying Double Tax on The Taxpayers

Dated: 20.07.2022

To,
The Hon’ble Finance Minister,
Smt. Nirmala Sitharaman,
Department Of Revenue,
Ministry Of Finance,
Room No. 134,
North Block,
New Delhi-110001

Hon’ble Madam,

Re : Request To Cancel Or Withdraw Notices / Reissue Amended Intimations Issued Under Section 143(1) Of The Income Tax Act, 1961, Which Are Creating Unnecessary Hardship And Levying Double Tax On The Taxpayers

With reference to the above mentioned subject, most humbly and respectfully, I would like to draw your honour’s kind attention to the above mentioned issue as under :

01. That recently, notices / Intimations U/s 143(1) of the Income Tax Act, 1961 have been issued by CPC (Income Tax Department) to the large no. of taxpayers, wherein an adjustment / addition has been made regarding income reported by auditor in clause 16(d) of form No. 3CD of tax audit report (Mainly for Assessment Year 2021-22). Consequently, an additional demand for tax, interest etc. has been raised on the concerned tax payers.

02. That in almost all the cases, a common reason has been mentioned in the above notices / Intimations that there is some mismatch between the tax audit report and the income tax return regarding income reported in above clause 16(d) of tax audit report.

03. That in this regard, it is most humbly and respectfully submitted that generally in almost all the cases, the above clause 16(d) income has already been suo moto duly included in the income tax returns (i.e., considered for determining the due taxes etc. payable) and there may not be tax evasion. Rather, due to above adjustment made by the Income Tax Department, the tax, interest etc. have been levied twice on the same income (i.e., firstly paid by the tax payer alongwith the return and secondly, again levied by the Income Tax Department through above Intimations U/s. 143(1)).

04. That mostly, the income reported in above clause 16(d) are actually and mainly, some non business incomes (e.g., salary from other concerns, interest from deposits, rental income etc.) which have been credited by the tax payers in their capital accounts in the book of account of business under audit.

05. That since the above incomes are non business incomes, the same are not represented as business income in the income tax returns. They are shown in the income tax returns directly in the respective non business income schedules i.e., salary in “Income from salary” schedule, interest income in “Income from other sources” schedule, rent in “Income from house property” schedule etc.

06. That the above practice for reporting clause 16(d) income is conventionally being adopted from last many decades and no objection has been ever raised by the Department or any other authority, regarding this method of reporting these incomes.

07. That now, suddenly the Income Tax Department, through its computer system, has started searching above clause 16(d) income in Point No. 23 of Schedule BP (Business Profession) as a business income (which is actually non business income in most of the cases).

08. That since in most of the cases, the above income were reported in non business income schedules, the same might not have been found by the Departmental computer system at above Point No. 23 of Business Profession schedule. Consequently, notices were issued to the tax payers for explanations.

09. That in most of the cases, in response to the notices, it was duly explained by the tax payers that the above clause 16(d) income has been reported in respective ITR schedules, but despite that Intimation U/s. 143(1) have been issued, by again levying tax, interest etc. on the clause 16(d) income, which was already paid by the tax payers alongwith the return.

10. That in the above situation, the large no. of tax payers are required to file rectification application U/s. 154 wherein they have to first include above clause 16(d) income in Point No. 23 Schedule BP and then to deduct the same simultaneously in any other point in the same Schedule BP. Many tax payers may also have to file appeal also before the Commissioner (Appeals).

11. That there may be an another probable reason behind searching clause 16(d) income in Schedule BP. The Department may be of the view that only business income are reportable under above clause 16(d). But taking a broad view, if it is considered that even if non business incomes are reported in above clause 16(d) and the same have been included in non business income schedules of the return, there is no loss to the revenue. If this is the view of the Department, then a clarification may also please be issued by CBDT in this regard, so that in future the above problem may not arise to the public at large.

12. That even in such a situation, if the broad view is not taken and the double taxation is not removed, then in large no. of cases, the audit reports will have to be revised for removing non business income from above clause 16(d). This exercise may also not give any additional benefit to the revenue. Further, in such cases, alongwith the tax payers, the auditors may also have to bear unnecessary hardship and work burden. At the same time unnecessary burden on Departmental system may also occur.

13. That due to all these notices / intimations, (i) an unnecessary hardship is being faced by the tax payers without having any fault of them. (ii) Further, there will be no additional revenue generation to the Department due to this entire exercise. (iii) Similarly, the filing of rectification applications and appeals in bulk / revision of tax audit report etc. from all over India will also put lot of burden on already burdened system.

14. PRAYER : In these circumstances, it is requested that (i) the above unnecessary notices may please be cancelled / withdrawn ; and (ii) now while processing the return the processing system which is searching clause 16(d) income in Schedule BP may please be relaxed ; and (iii) rectified intimations U/s. 143(1) without adding the above income twice may please issued to the tax payer ; and (iv) clarification may please be issued regarding reporting of above clause  16 (d) income in tax audit as well as in return.

These steps are very much necessary to save the tax payers and the entire system from unnecessary hardship and burden which is being caused without any revenue gain.

Thanks and Regards

CA Sharad Jain, Ujjain (Res.)