BCAS Representation to CPC on Difficulties faced by the taxpayers

•  There are clarificatory circulars from CBDT that when the tax has been deducted by an employer, the assessee cannot be asked to pay for it. Such clarificatory circulars must be considered and the system must be upgraded accordingly and demands if raised must suo motto be automatically stayed in such circumstances.
• To ensure appropriate credit as per provisions of section 199 read with Rule 37BA wherein the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or any part of the tax deducted at source, as the case may be, shall be given to the other person and not to the deductee subject to appropriate declarations being filed. The certificates issued by the deductor and the appropriate details provided in the return of income by all parties concerned must be considered. Accordingly, appropriate TDS credit must be provided to other than the deductee in whose hands the income is assessed.

Also, many times incorrect solution is being provided without considering facts of case even after complete details being provided by the assessee.

•  We are all working in today’s scenario under the computer environment, wherein the figures are punched in manually. There are possibilities where certain typographic / human errors occur in feeding the data such as deduction under section 54/54E/54F/54EC, etc. not punched in correctly by mistake, which results in increase in gross total income as compared to the actual income. Hence, due to system error some figures are linked and do not reflect the correct details of the assessee.

•  Where rectification applications for the above aforesaid cases are filed with CPC the response
  received from CPC is that the income cannot be reduced below the Gross Total Income and hence, the demand remains outstanding, and assesse has no option but to go in appeal. And there too the
  authorities take a view that if the amount was incorrectly claimed under a particular section, the same should be disallowed.

• The processing of income tax returns is being carried out mechanically.
• The response filed by the taxpayer to the proposed adjustment is neither considered nor any response is provided for not accepting the contention of the taxpayer.

• The processing of income tax returns electronically is definitely a good initiative, but in many cases, it is leading to unnecessary adjustments.
• If the objection filed by the taxpayer is not accepted by the CPC system, the reasons for objection should be clearly intimated to the taxpayer.

• In quite a few cases, adjustment is proposed u/s 143(1)(a) where employees PF is deducted and deposited late but before the due date u/s 139(1).

• Even after objecting to the proposed adjustment, the return is processed with adjustment. The said issue is a legal issue and covered by various court decisions and should not subject to adjustment u/s 143(1) It is leading to unnecessary litigation.

• The CPC system should be updated so that such adjustments are not made u/s 143(1)(a).

• In many cases, assessees are in receipt of notice u/s 143(1)(a) pertaining to reconciling TDS and corresponding income appearing in 26AS. Corresponding income is proposed to be added even if the assessee has offered the income as per the provisions of the Income Tax Act and method of accounting followed. These scenarios are peculiar in cases where-

a) Cash system of accounting is followed by the assessee.

b) Assessee is a builder following project completion method.

• The CPC system should be updated so that such adjustments are not made u/s 143(1)(a).

Besides, disallowance of deduction u/s 80P should not be done u/s 143(1).

• Assesses are not able to view refund status of prior assessment years.
•  Refund challans/ refunds adjustment against demand of other years not reflecting in the new ITBA system: Income Tax department’s internal software has been upgraded, but in many cases, it does not show proper refunds issued to assessee / refunds adjusted with demands of other years, etc. Due to this operational issue, various orders like Rectification Orders, Order giving effects, are unable to process. This leads to unnecessary delay in clearing pending orders.
•  DDT demand raised due to not granting credit for the same gets adjusted against refund as per assessment u/s 143(1). On rectification for credit of DDT, the DDT demand is cancelled, but refund of adjusted demand is not granted.
•  In certain cases, the demand paid against the orders
  (assessment orders etc.) does not get reflected on the webpage of ‘Status of outstanding demand’ on the IT website.
•  While submitting online response on Income Tax portal against any notices / intimations, there are space constraints / constraints relating to size of attachments. Due to this, the assessee is unable to file proper online replies to notices.
•  The Income tax website crashes very often at the time
  of compliance deadlines.
• Interest u/s 234F charged inadvertently in ITR of
  partners due to non-linkage of filling partner’s ITR with filling of ITR of firm.
• As per Section 40 (a) (ia) the amount of disallowance for non-deduction of tax is restricted to 30% of the expenditure; hence the assessee must report 100% amount in audit report and 30% amount in Income tax return as disallowance. But as per the intimation u/s 143(1)(a) the 100% expenditure is disallowed.
•  Carry forward of losses is not being considered.
•  Employees Contribution to PF paid after the due date but before the end of the year. Such contribution is allowed as a deduction However, CPC is making disallowance in intimations issued u/s 143(1).
•  139(9) defective return notices are sent indiscriminately by CPC. Section 139(9) specifies
  situations when a return can be treated as defective. CPC is sending defective return notices if the income as shown in 26AS is more than then income shown in the return of income. The income shown in the return can be less then what is reflected in Form 26AS due to various legitimate reasons. Income tax Department may select the case for scrutiny to verify the correct income, but the return cannot be treated as defective on this ground.
•  CPC Software does not give marginal relief on
  surcharge as provided in Part 1 of Chapter II of the Finance Act.
•  Where the profession tax deduction claimed under the head ‘Income from Salaries’ exceeds Rs. 2500/- on account of the assessee working under more than one employer, CPC Software restricts the deduction to Rs. 2500/- whereas in section 16(iii) of the Act there is no such monetary limit provided. Such a situation would arise when an assessee changes his jobs, and in the month of change, such tax is deducted by both old and new employers.
• In the case of inter head set off of losses, where there are no specific restrictions in the Income Tax Act, 1961, the assessee is entitled to set off of losses against various source / heads of income in the manner which is most beneficial to him. However, the CPC software does not recognise this right of assessee and it sets off the losses in the manner which is least beneficial to the assessee. This results in avoidable tax demands / litigations.

· Improvisation is required in E-assessment process which should help in improving transparency, accountability and effectiveness of the tax administration.

Also, appropriate rights must be provided to the AO in order to provide due relief to the assessee.

• The taxpayer’s refund of a particular assessment year is adjusted by issuing notice u/s 245 by CPC when the AO has submitted details of pending
  assessments/cases where demand is determined.
• This causes the taxpayer to lose the refund, and also interest on the same. The taxpayer has to chase the income tax office to first cancel the demand specially in case it is wrongly determined to be pending by applying for rectification. After the demand is cancelled, only then the refund will be issued after following up with the Income Tax Department.

• Separate machinery should be developed by the Income Tax Department where in adjustment under section 245 should not be proceeded with when the demand is being challenged.
• Also, in case the taxpayer has applied for rectification no demand should be set to be adjusted against the pending refund.
• The Income Tax department should not upload pending demands for CPC to get it uploaded under the tab of outstanding demands. Even if it has to, no adjustment u/s 245 should be carried out.

•  Taxpayers are allowed to use e-nirvana or public
  grievance portal to lodge a complaint for wrong demand issued to them and/or non-issuance or wrong adjustment of refunds.
• The response from assessing officer is usually quite dissatisfactory leading the taxpayers to take harsh steps like filing application under Right to Information Act.

• Assessing officer/ PCIT who is monitoring these issues must call the mobile number registered with CPC/PG Portal to understand the complaint and then take action.
• An opportunity must be given to send details on email within 3 working days so the details can be understood from both the sides.

• Interest on refund u/s 244A is not issued in cases where demand was adjusted against refunds and then due to rectification the demand was considered wrong.
• While processing refund u/s 143(1a) CPC does not consider the interest calculation as per the law.

• Since taxpayer is asked to follow the law and make 20% payment against a demand still not judged to be correct or not, CPC must at least issue interest from date of processing of intimation till the refund is issued when it was wrongly adjusted.

•  Bank accounts those are not enlisted in the CPC list cannot receive refund from the ITD.
•  This is clear harassment as this causes further burden on the taxpayer to open bank accounts which are on the CPC List.
•  This causes the refund to bounce in case the taxpayer filed his income tax return when he had no such enlisted bank account.

•  Refund should be credited to any Indian bank accounts.
•  NRIs not having any Indian bank account should also get timely credit in their foreign bank account.

•   Schedule PTI requires to report “pass through income”
  from investments in AIFs. In Intimation u/s 143(1) for AY 2017-18 the income reported as ‘Exempt” in Schedule PTI has been added u/s 143(1)(a)(vi) by CPC in ‘Other Sources’ just because TDS has been deducted u/s 194LBB. Repeated rectification requests and
  Grievances filed for these with detailed explanation are being routinely rejected/replied without application of mind. Assessee would now be forced to file appeal and to pay 20% tax for applying for ‘stay’

•  Law allows intra head and inter head adjustments during the same year or about carried forward losses. But, CPC does not consider this especially when option to select the priority to set off is allowed to the assessee.
•  Especially in case of Capital Gains, CPC issues
  intimations according to its own priority, ignoring the legal chronology to set off chosen by the assessee. This creates unnecessary demands and harassments to the assessee.

• There must a mechanism to monitor carry forward and set off of such losses in a manner desired by the tax payer and permitted by law.

•   TAS is deducted on basis value without GST, whereas the TURNOVER may or may not include the GST.

• The “Mismatch of TURNOVER” criteria for adjustment by the CPC may be removed.

OR

•  A tolerance limit should be internally decided say 30% or higher for throwing out a case of Mismatch.

• In case of persons maintaining accounts on CASH BASIS, the criteria should not be made applicable.

• TAS is deducted on the gross value, whereas later the value is at variation because of addition/ deduction of discount, reduction of value because of Goods Return etc.
• In case of PROFESSIONALS, the books of account are kept and maintained as per CASH system of accounting, whereas the TDS is deducted on Accrual basis by the deductor. On this count there is bound to be mismatch in the turnover.

a) Rectification in Return Data (XML)

b) Only Reprocess the Return

In the process, when one selects the first option i.e. “Rectification in RETURN DATA”, several options on the basis of schedules of the ITR along with residuary option of “OTHERS” is displayed. On selection of any of the option, a space is provided with 250 words limitation for writing about the issue.

However, in case the assessee has some other issues, which do not affect the RECTIFICATION in RETURN DATA or REPROCESSING of the RETURN, then there is no option available to the assessee. Such issues may be

i) Allowing Short or NO interest u/s 244A on refunds.

ii) Non-adjustment of LOSS for technical reasons like that of F&O.

iii) Not allowing full credit of TDS, though claimed properly in ITR.

iv) Change of “DUE DATE” by CPC and charge of Interest u/s 234A, 234B in case of AUDIT / NON-AUDIT case.

•  A separate third option as “OTHER ISSUES” with a space capacity of
  1000 words should be provided under the RECTIFICATION TAB

In this case the assessee had filed ITR claiming business income u/s 44AD, where the limit of Turnover is Rs 2 crores.

The CPC is still on the old limit of Rs 1 crore u/s 44AD, though the limit under 44AB is still Rs 1 crore. This requires updation

It is suggested the TEMPLATES of ERROR may be reviewed and UPDATED from time to time and specially after the UNION BUDGET every year.

Section 70 gives an entitlement (i.e. rights) to the assessee which he may or may not exercise.