Representation on Erroneous Intimations Issued U/S 143(1)(A) of Income Tax Act, 1961

KARNATAKA STATE CHARTERED ACCOUNTANTS ASSOCIATION (R)

7th October, 2021′

To,

Shri. J B Mohapatra
The Chairman
Central Board of Direct Taxes
New Delhi

SUB: ERRONEOUS INTIMATIONS ISSUED U/S 143(1)(a) of INCOME TAX ACT, 1961.

Respected Sir,

The Karnataka State Chartered Accountants Association (R) (in short ‘KSCAA’) is an Association of Chartered Accountants, registered under the Karnataka Societies Registration Act, in the year 1957. KSCAA is primarily formed for the welfare of Chartered Accountants and represents before various regulatory authorities to resolve the problems/hardships faced by Chartered Accountants and the business community.

We appreciate the sweeping steps taken by the Income Tax Department to revamp the Income Tax website by launching the much-awaited the e-filing portal 2.0. While such upgradation is aimed at making e-filing process smoother, simpler and smarter, it is well known that the portal is facing a few teething troubles, which are inescapable in the beginning when any new upgrade is launched.

At this juncture, we would like to bring to your kind notice few of the hardships that assesses are facing regarding adjustments being proposed u/s 143(1)(a) of the Income-tax Act, 1961 (the Act). We humbly request your good selves to take cognizance of these issues and hardships and appeal to your good selves to provide amicable resolutions on the same.

Background and Facts:

Section 143(1)(a) of the Act provides that where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed after making specific adjustments as mentioned under clauses (i) to (v) of 143(1)(a) to the compute of the total income or loss. An adjustment shall be made only after giving intimation and providing an opportunity to the assessee to respond within thirty days of issue of such intimation.

We would like to bring to your kind attention few of the issues related to the intimations being issued under section 143(1)(a), which are elaborated as below. The same warrant immediate measures to resolve and address them.

a) Amounts not credited to profit and loss account are reported under clause 16 of Form 3CD, and the same is reflected under clause 5 of Part A – OI (Other Information) of ITR-6. In such cases, though the assessee has correctly offered those amounts under other heads of income. However, the intimation issued u/s 143(1) of the Act proposes to add such amounts to total income, which would result in doubly offering the same income and also in reducing the total loss to be carried forward, in case where there is loss.

b) Statutory dues paid and allowable upon payment u/s 43B of the Act are reported under clause 26 of Form 3CD, and the same is reflected under clause 10 of Part A – OI (Other Information) of ITR-6. In such cases, though the amounts have been reported as “paid on or before the due date for furnishing the return of income of the previous year u/s 139(1)”, the intimation issued u/s 143(1) of the Act proposes to disallow the expenses by erroneously considering that the dues have not been paid before the due date for furnishing the return of income. This would again result in invalid addition to income offered and also in reducing the total loss to be carried forward, in case where there is loss.

While such adjustments are being intimated to the assesses through the intimations u/s 143(1), the glitches in the Income Tax portal are causing hindrances in responding to those intimations, which would ultimately result in automatic adjustment of the invalid demands proposed against future refund amounts.

This would lead to a situation where multiple adjustments proposed u/s 143(1) would be processed without any response from assessees due to the bottleneck in the IT portal and thereby creating confusion and chaos in the minds of the assessees and the Tax professionals alike.

Section 143(1) intends to provide a line of communication between the assessing officer and the assessee to provide clarification and agree on the accurate computation of total income. However, such erroneous intimations would defy the purpose of the section by proposing invalid adjustments. The issue is further amplified on account of assessees not being able to disagree with the adjustments made due to technical problems in the new website.

We appreciate the efforts of the Government and Tax Authorities in reduction of litigation by introducing schemes like Vivad-se-Vishwas, increase in monetary limits for filing department appeals, etc. However, erroneous intimations as described above results in defeating the purpose of reducing tax litigations and also hits out at bolstering simplification of tax procedures.

While we appreciate the Government’s efforts in unveiling the much-acclaimed and much-anticipated enhanced technical capabilities in the new e-filing portal to process returns and to generate refunds within 1-day of filing, at the same time on the other side the unguided and uncanalized return processing practice and the mechanism as followed at present u/s 143(1) of the Act without taking cognizance of responses to intimations would regrettably be leading towards violation cardinal principle of natural justice, equity and good conscience, by the tax administration, which may be avoided with necessary measures being taken.

Our Representations:

We at KSCAA besiege to your good selves to kindly take cognizance of the transactional issues and difficulties which we have cited above and to give effect to our following suggestions to mitigate the issues being faced by the taxpayers –

a) The Income Tax returns undergo proper and correct validation to compute total income or loss in accordance with provisions contained in sub-clause (i) to (v) of section 143(1)(a) before issuing intimations under proviso to section 143(1)(a) the Act.

b) The patent defects in the new IT e-filing portal be rectified to enable and facilitate taxpayers to submit their responses to proposed adjustments covered in intimations being received u/s 143(1)(a).

c) Until the representation request cited in point b) as above is completely resolved, no adverse notices prejudicial to the interest of taxpayers be issued on account of non-receipt of response within the statutory time limit of 30 days.

Yours sincerely,

For Karnataka State Chartered Accountants Association ®

Chandan Kumar Hegde A. 
President   

CA. Sujatha G.
Secretary

CA. Ganesh V Shandage
Chairman
Representation Committee

Copy to –

1. Nirmala Sitharaman, Hon’ble Union Minister for Finance, Government of India

2. Bhagwat Karad, Hon’ble Union Minister of State for Finance, Government of India

3. Shri Pankaj Chaudhary, Hon’ble Union Minister of State for Finance, Government of India

4. Tarun Bajaj, Revenue Secretary, Department of Revenue, Ministry of Finance, Government of India

5. Dinesh Chandra Patwari, Principal Chief Commissioner of Income Tax, Karnataka