CBDT December excellent moves shall have a morale boosting effect on Tax Practice

CA Amresh Vashisht, Meerut

In the month of December, CBDT has shown some excellent moves towards a flow less tax assessment regime. The moves are encouraging and laudable. It clearly establishes that CBDT has finally decided to take on the obstacles in the field of assessment proceedings. This is also adorable at the part of the Finance Ministry to roll down the announcements as and where is basis rather than waiting for the coming budget to announce the measures for tax reforms.

ONE: GOVT DIRECTS AO TO QUOTE EMAIL, PHONE NUMBER IN E-NOTICE

In an attempt to bring authenticity to e-mail based communication to taxpayers, the Finance Ministry has asked Income Tax department officials to mandatorily mention their email and official phone numbers in such letters and notices.

An official order, accessed by PTI, in this regard was issued by the Ministry sometime back on the directions of Revenue Secretary Hasmukh Adhia. “Henceforth any notice, letter, communication issued by any officer under Department of Revenue, including CBDT, its directorates and field formations to the taxpayers, members of public should invariably contain mention of email address and office phone numbers, of the officers signing such, communications, notice, letters for facilitating tax payers’ electronic interface with the department.

“All are requested to kindly ensure that the above directions are strictly followed,” the order said. A senior official explained the step had been taken to lend the required “authenticity” to electronic communications which at times are fraught with the danger of being fake or a phishing attempt on the taxpayer.

“In case of doubt, the recipient or taxpayer could check the authenticity of the notice or letter sent by the Assessing Officer or the IT officer. The attempt is to make e-communication by IT department safe, secure and reliable,” the official said.

The department has recently launched a first-ever pilot project to begin an email based scrutiny assessment of taxpayers in select cities.

The Central Board of Direct Taxes, the policy-making body of the IT department, had recently also notified use of emails as the new mode of communication between the taxman and taxpayers, as part of the government’s e-initiative to reduce human interface and complaints of harassment and corruption in conducting tax-related jobs.

Henceforth, the taxman can now send official communication to “email address available in the income-tax return furnished by the addressee to which the communication relates or the email address available in the last income tax return furnished by the addressee or in the case of addressee being a company, email address of the company as available on the website of ministry of corporate affairs”.

The department, in order to reduce the taxpayers’ visit to the IT office, had launched the ‘pilot’ project and the first set of e-communications have been decided to be mailed to 100 chosen people each in Delhi, Mumbai, Bengaluru, Ahmedabad, and Chennai regions.

The CBDT had recently asked the department to “initiate the concept of using email for corresponding with taxpayers and sending through emails the questionnaire, notice etc. at the time of scrutiny proceedings and getting responses from them.”

“This would eliminate the necessity of visiting the Income Tax offices by the taxpayers, particularly in smaller cases, involving limited issues and where taxpayer is able to provide details required by the Assessing Officer (AO) without necessitating his physical presence,” the order had said.

TWO: CBDT frowns on hardship to taxpayers and wastage of time by issue of vague s. 143(2) scrutiny notices by AO

The CBDT has issued Instruction No. 19/2015 dated 29.12.2015 stating that instances have come to the notice of the Board that in cases selected under scrutiny, while issuing the first notice, Assessing Officers do not convey the specific compliance requirements like production of accounts, furnishing of documents, information, evidences, submission of other requisite particulars etc. Since the taxpayers or their authorized representatives are required to comply with the statutory notice issued by the Assessing Officer, they remain clueless about the information required to be submitted and their appearance before the Assessing Officer does not serve any fruitful purpose except recording of their presence. This causes undue hardship to the taxpayers and unnecessary wastage of their time. The CBDT has directed that Assessing Officers should first go through the returns of income which have been selected for scrutiny and identify the issues which require examination. The initial notice issued under section 143(2) of the Income-tax Act, 1961 should itself be accompanied with the questionnaire containing details of specific documents/information/evidences etc. that are required to be furnished by the taxpayer in connection with scrutiny assessment proceeding in their respective case.

This is in furtherance of Central Board of Direr Taxes vide instruction no. 7/2014 dated 26.09.2014, by virtue of its powers under section 119 of the Act, in suppression of earlier instructions/ guidelines  on this subject, hereby directs that tile cases selected for scrutiny during the Financial Year 2014-2015 under CASS, on the basis of Either AIR data or CIB information or for non reconciliation with 26AS Data, the scope of enquiry should be limited to verification of these particular aspects only.  Therefore, in such cases,  an Assessing Officer shall confine the questionnaire and subsequent enquiry or verification only to the specific point(s) on the basis of which the particular return has been selected few scrutiny.

THREE : CBDT issued clarifications on several issues in order to facilitate the conduct of scrutiny of cases under CASS

CBDT has issued Instruction No. 20/2015 dated 29.12.2015 in which it has issued clarifications on several issues in order to facilitate the conduct of scrutiny assessments in cases selected through Computer Aided Scrutiny Selection (‘CASS’).

The CBDT has also stated that as far as the returns selected for scrutiny through CASS-2015 are concerned, two type of cases have been selected for scrutiny in the current Financial Year – one is ‘Limited Scrutiny’ and other is Complete Scrutiny’.

The assessees concerned have duly been intimated about their cases falling either in ‘Limited Scrutiny’ or ‘Complete Scrutiny’ through notices issued under section 143(2) of the Income-tax Act, 1961 (‘Act’). The procedure for handling ‘Limited Scrutiny’ cases has been explained in detail by the CBDT.

Key points:

1. States that the said Instruction is applicable only to cases selected for scrutiny under CASS and only on the parameter(s) of AIR/CIB/26AS data;

2. Indicates that scope of enquiry to be “Specific issue based” and directs AO to confine the questionnaire only to the specific issues pertaining to AIR/CIB/26AS data after giving reason for selection of the case for scrutiny to the assessee;

3. Also outlines the procedure for handling ‘Limited Scrutiny’ and ‘Complete Scrutiny’ cases in relation to cases selected through CASS-2015;

4. Highlights that during the course of assessment proceedings in ‘Limited Scrutiny’ cases, if ‘potential escapement of income’ found exceeding Rs 5 lakhs (Rs 10 lakhs for metro charges) requiring substantial verification of other issues, the case may be taken up for ‘Complete Scrutiny’, subject to written approval of Pr. CIT/CIT ;

5. In all cases where AO proposes to make additions or disallowances, directs AO to (i) give fair opportunity of hearing to the assessee, (ii) issue show-cause notice duly indicating reasons for proposed additions/disallowances along with necessary evidences/reasons forming its basis and (iii) consider assessee’s submissions in response to the show-cause notice before passing the final order

FOUR : Electronic filing of first appeal before CIT (Appeals) mandatory for persons required to file the return of income electronically-CBDT, 30th December, 2015

CBDT introduces mandatory e-filing of first appeal i.e. before CIT (A) for persons who are required to file e-returns;

A. E-filing also expected to facilitate fixation of hearing of appeals electronically;

B. E-filing of CIT(A) appeals (along with the documents relied upon) expected to “remove human interface, reduce paperwork and decrease the transaction cost for the taxpayer”;

C. CBDT anticipates that this step shall result in fewer deficient appeals as validations will be inbuilt which would ensure consistent and error free service;

D. Current form for filing of CIT(A) appeal i.e. Form No. 35 to be replaced by a new form; CBDT press release states that “The new format for filing of appeals is more structured, objective, systematic, and aligned with the current provisions of the Income-tax Act”;

E. CBDT recognizes this as another significant step in Income tax Department’s endeavor to digitize various functions of the Department for providing efficient taxpayer services and will reduce taxpayers’ compliance burden in appellate proceedings.