Tax Bar Association, Guwahat has made a representation on Compliance of Income Tax Laws Regarding CPC, Regarding TDS/TCS, Regarding CIT (Appeals), Settlement of Past Disputes (TDS), Regarding ITR and Other Forms, Exempted income specially in context of N E Region & Agricultural Income, E-assessments, Compliance, Special tax incentives for NE States, Deduction u/s 80DD/ 80U, Harmonisation of due dates, Due date of return filing u/s Sec139(1) for AY 2019-20, No Late fee for filing return up to 31st December u/s 234F, Income Computation and Disclosure Standards and Revision in Income Tax Rates to Smt. Nirmala Sitaraman, Hon’ble Finance Minister of India, during her visit to Guwahati on 29th August 21019. Text of the same is as follows:-
Tax Bar Association
(Registered under the Societies Registration Act, 1860)
Sreeram Market, 2nd Floor
Chatribari, Guwahati 781001 (Assam)
Date: 29th August, 2019
Smt. Nirmala Sitaraman
Hon’ble Finance Minister of India
Sub : Issues and Suggestions in Implementation and Compliance with Income Tax Laws
Formed in the year 1977, Tax Bar Association, Guwahati is a prestigious professional association having membership strength of 429 members consisting of Chartered Accountants, Company Secretaries, Cost Accountants, Advocates and Tax Consultants.
With reference to the subject cited above, we would like to bring to your kind notice the following issues:
a) The CPC processes the returns and sends intimations u/s. 143(1)(a). In numerous cases demands have been raised, when full tax was paid and such tax is reported in 26AS, but CPC has not given full credit of such tax (advance tax as well as self assessment tax). The similar situation is also with TDS. As per law, any tax demand arising on account of TDS mismatch could not be recovered from assessee, where assessee has considered the corresponding income in its return. Such demands have been adjusted from the refunds of other periods. It is proposed that against each pan tax ledger should be created and all tax should get reflected there and at the time of filing of return the necessary amount of tax gets debited to such ledger. Return should not be linked to refunds. Separate online form should be introduced to claim refund; otherwise the assessee can use the balance lying in his account for subsequent years. Refunds of large amount of past and current years have been blocked for more than 3 years now.
b) The CPC is disallowing deduction u/s. 80-IE for non submission of from 10CCB. AS per IT rules 10CCB is only applicable to sec.80-I(7)/80IA(7)/80IB/80IC under Rule 18BBB. When no rule and form prescribed under the law, how the assessee will upload form meant for different section for claiming deduction under another section, i.e., 80-IE. Either form should be prescribed or necessary clarification should be issued to ease undue hardship/ false tax demands and subsequent remedial litigations.
c) We suggest that attachments should be allowed in any submission against issues/143(1)(a) adjustment /154 petition. At present except the comment option against adjustment under section 143(1)(a), no attachment is allowed. Under section 154, only revised or rectified return is allowed to be submitted and nothing else.
Attaching any submission is not possible as such assessee is unable to highlight the problem and reason for rectification request. For example: In case of Audit cases under section 44AB, audit report is required to be uploaded before filing of return. On the date of upload of Audit, the assessee couldn’t deposit the VAT/GST dues related to the Previous Financial Year and the auditor highlighted the same in his Audit report. But as per requirement of section 43B, the assessee deposited tax before filing of the return (there is no column to highlight the same in return) and also before due date of return, the return was filed.
The CPC sent the notice for adjustment of such taxes not paid as per Audit report and after ignoring the assessee reply, added the amount to the income and demand was made. Since no attachment is allowed to CPC notice, the assessee could not attach tax paid challans. The assessee was not left with any other option but to go to CIT (Appeals) for redressal, which results in unnecessary litigation, resulting into no revenue gain for department and harassment for assessee. Further not giving the assessee, opportunity of being heard before addition is made is violation of law of natural justice.
d) With returns being processed at CPC, large numbers of defective return notices are being received by assessees. The points raised in the notice needs to be studied and discussed by the assessses with their tax consultants, and then only response can be given. Most of the tax practitioners are nowadays bogged down due to multiple compliance requirements under Income Tax, GST and Companies Act. Hence, the time to understand and respond to such notices within 15 days is too short. Hence, request is being made to increase the period to respond notice u/s Sec 139(9) from 15 days to 30 days.
a) The TDS/TCS is the major source of tax collection. This onerous task puts several liabilities on the assessee acting on behalf of the government. The consequence of some fault acts as triple whammy for the assessee ( disallowance of expense+ interest for late payment+ late fee for filing of TDS return+ prosecution u/s.276 for violating the provisions).The quarterly return compliance burdens very small assessee’s with timely filing of returns. We request you to kindly issue such challan wherein the details of deductee are filled at the time of payment and no further TDS return is required. For procedural difficulty, the number of persons in a challan can be restricted to 5 to 10. Similar process is there in case of deduction made against payment made for buying property.
b) The Lower/no tax deduction certificate issued u/s.197 has been made online. However, the officers block the issue if some demand is pending, which is in dispute/appeal. The certificate is for future payments and cases covered by sec 10 should be considered differently. Instructions should be issued to field officers to issue lower/non deduction certificate for cases falling u/s. 10 without delay.
c) The late fee charged u/s. 234E for delay in submission of Quarterly TDS return should be modified. There should not be any late filing fee for q1/q2/q3 even the returns have been filed late as the uploaded data do not serve any purpose of deductor. However delay in Q4 return should attract late fees and such delay will automatically invite penalty for delayed submission of other quarterly returns. Similarly the late filing fees in case of ITR should be relaxed for the current year and no late fees should be charged till submission of returns till Dec 2019. The interest may be levied as per norms. The concept of automatic penalty (in new avatar of late filing fees) defeats the canon of equity. There may be genuine reasons for delayed compliance and the provisions should not be made such water tight and should have a humane angle built in it.
d) In many cases, the govt departments deduct income tax on work Value + GST. As such the amount including GST is reflected in form 26As, though the assessee has offered only work value as turnover in his return of income, resulting into mismatch in turnover as per 26AS and IT return and un-necessary demand, as CPC adds the difference to the income. Further in this regard, we suggest you to please organize TDS workshops at Govt departments to educate them about correct procedure. Circular from the department may be issued to all such departments.
With the CBDT Central Action Plan to reward Commissioner of Appeals for taking decisions favourable to revenue being struck down by the Hon’ble Bombay High Court , in The Chamber of Tax Consultants Vs. CBDT (Bombay High Court case), there is now a general perception among the assessee’s that the Commissioner of Appeals , are not acting judiciously but taking decisions in favour of revenue.This view has been strengthened due to large number of cases being disposed of, without giving opportunity of being heard, fixing hearings during busy tax season time like September or in December, when AR’s are busy filing returns or completing scrutiny assessments.
In order to remove such perception, we suggest that the Commissioner Appeals should not be under the administrative jurisdiction of the Principal CCIT of that region. Rather 5 (Five) number of Principal CCIT(Appeals) should be created for five zones-North,West,South , East and North-East. This will improve the appeal process and it will also show just justice must not only be done, it must be shown that it is being done.
The government should introduce some scheme in line with the settlement scheme introduced in this budget for indirect taxes for bringing down disputed demands and infructuous litigation. It is proposed that in case of TDS Return filing defaults, the late fee levied for past years upto 2009-10 should be waived and for cases relating to later years the disputes should be resolved on payment of 25% of outstanding demand. Further Section 200A was amended wef 1st June, 2015 to charge late fee u/s 234E. So, all outstanding demands for late fee raised upto 31st May, 2015 should be dropped by the department to reduce unnecessary litigation.
The ITR forms (other than 1 & 2) have been made too detailed and clumsy. One has to arrange and sit with too much of details to fill in these forms. The information gathered through such a measure may not have any link and effect on income computation and assessments. ITR should not be made a tool of social engineering and made simple to fill and should have one dedicated space where assessee can fill in any information voluntarily (say 500/1000 words). For example: A started business on 20/3 and tlll 31/3 turnover touched 75L and profit 5.5L. The system determines interest u/s. 234 B & C on tax payable on such income, whereas as per law no advance tax stands payable on it as there was no income during the significant part of the year. Similarly in case of large capital gain arising in the fag end of the year creates such issues. These are not equitable situations and such events could be mentioned by the assessee in the designated space.
Further, all Income Tax Return Forms should be made available on 1st April. Thereafter, no changes should be made .This will allow the system to be stable.
There are many types of income which are exempt u/s. 10. There are provisions in law for entitlement of such exemption; return has to be filed by the assessee. For all other sub sections a threshold (say 10 lakh) should be prescribed, beyond which the exemption will not be available if ITR is not filed.
However such persons have to pay GST and comply with GST laws. In case of large assessees, the GST portal requires audited financial statements. But such persons do not get their accounts audited as they do not file ITR. This is creating compliance obstacle in NE states. So suitable changes should be made in GST form by the technical team to take care of similar situations.
At present most of the states in North Eastern Region is covered by section 10(26) and very few people file their income tax return. The section is also misused and power of attorney business module is operating within the region. In this regard, we suggest that the blanket exemption under section 10(26) should be removed. A maximum exemption amount say 10 Lakhs should be fixed in all such cases. Further, to claim exemption under section 10(26), return filing should be made compulsory.
As per our view, Total Income of such persons to be computed as per normal Income tax rules and there should be deduction column for exemption u/s. 10(26) similar to deduction for section 10AA in ITR form.
We also suggest similar changes to be made in respect of agricultural income. These changes will enhance the tax payers’ base significantly and will also restrict the misuse of provisions of the law.
For e-assessments, the notices sent by AO require too much information, which is not connected to the main issue under scrutiny. This leads to logistic issues of uploading large information under limited file size and file number constraints. Further the AO requires hard copies of such uploaded documents and the notices issued require personal attendance of assessee. The old formats of notices need to be changed in light of the changed proceedings. This defeats the whole purpose of e assessment/ faceless assessment.
Presently the assessee has been made to follow timely self compliance regime. In case of delays there is automatic penalty (in form of late fees) and interest. Similar provisions should be brought on the other side to ensure adherence to timely compliance. Especially in cases of giving appeal effects, rectifications etc. Though there is a compliance charter in all offices, but in reality these are not followed in true spirit.
The special incentive for promotion of Industries in NE states should be continued under new tax law also.
The list of diseases eligible for deduction u/s. 80DD/80U and other similar provisions do not include pulmonary diseases like Interstitial Lung Disease, pulmonary fibrosis and other similar conditions which is result of rapid modernization and urban pollution.
The Differential compliance dates, which existed about a decade ago should be reintroduced to ease the burden of compliances on intermediaries like CA, CS, CMA, Advocates and other tax practitioners. To broaden the tax base in small towns, such intermediaries play a significant role. So more confidence should be reposed on them in the path of broadening the tax base. The following timeline is suggested for filing of income tax returns:
|Assessee Type||Due date of Filing Returns|
|Salaried and non audit cases||30th September|
|Audit cases||30th November|
It should also be ensured that return filing dates for Direct Tax, GST and Company law should not clash because small tax payers depend upon small tax practitioners to meet their compliance burden. Therefore, before setting due dates mutual consultation between departments should be done.
The time for filing non audit cases has been extended to 31st August, 2019 which should be extended further to 30th September, 2019 in view of mass destruction all over the country due to heavy floods.
The due date of filing returns of audit cases should be extended to 31st December, 2019 from 30th September, 2019 at present. This will ensure enough time to the tax payers and auditors to complete the audits within due date. Moerover, while preparing the tax audit report, GST audit considerations must also be taken, so that the Income Tax audit Report is consistent with the GST audit reports. Also, it is taking time to educate the accountants about changing account heads after implementation of GST. This will also solve the problem of mismatch with GST data.
No late fee shall be imposed for returns filed up to 31st December. Further, there shall not be late fees in case of senior citizens who at many times are unable to comply with the law in time.
We suggest that the ICDS shall be made applicable only in case of assessees having turnover of more than Rs. 25 crores. Disclosure and calculation of figures for filing details of Income Disclosure and Computation standards is causing great deal of compliance problems to small assessee’s and small practitioners. Many of the accounting standards issued by ICAI are also not applicable to small companies.
A person earning upto Rs 10 lacs is a middle class person only. After, maintaining his family and providing for his children education, he can save around Rs 2 lacs, for his health and old age time. Therefore, the slab of Tax should be:
|Income slab||Tax Rate|
|Upto Rs 5,00,000||Nil|
|5,00,000 to Rs 10,00,000||10%|
|10,00,000 to 25,00,000||20%|
|25,00,000 and above||30%|
These rates will lead to higher compliance level. Also, there will be more disposable income in the hands of the tax payers, which will lead to higher spending, thereby boosting the economy.
Thanking you, we remain.
For Tax Bar Association
(CA. Gopal Singhania)
Tax Bar Association
Cell: +919864095646; 9365009126
(CA. Somesh Bose)
Chairman, Direct Tax Committee
Tax Bar Association