Processing of Return of AY 2017-18 and Issue of notice for prima facie adjustment under 143(1)(a) (PFA notice)

ITBA-ITR Processing Instruction No. 6

DIRECTORATE OF INCOME TAX (SYSTEM)
ARA Center, Ground Floor, E-2, Jhandewalan Extension,
New Delhi – 110055

F.No. System/ITBA/Instruction/ITR Processing/112/16-17/

Dated: 20.02.2019

To

All Principal Chief Commissioners of Income-tax/CCsIT
All Principal Director Generals of Income Tax /DGsIT
All Principal Commissioners of Income-tax/CsIT/CsIT(Admin & TPS)
All Principal Directors of Income Tax/DsIT

Madam/Sir,

Subject: Processing of Return of AY 2017-18 and Issue of notice for prima facie adjustment under 143(1)(a) (PFA notice) Regarding

With effect from AY 2017-18 amendments have been done in the Act with regard to processing of cases under 143(1). Provision of section 143(1D) has been amended, as per which all the returns are required to be processed. Section 241A allowing withholding of refund determined under 143(1) in cases where notice u/s 143(2) is issued is also introduced. ITBA functionality accordingly has been modified/enhanced and intimated to field formation vide ITBA Processing Instruction No 5 dated 14.12.2018.

2. Further, provision of 143(1)(a) was amended w.e.f 01.04.2017 as per which certain adjustments on income of loss submitted by assessee in ITR are allowed. As per the proviso to the section, no such adjustment is allowed unless notice for such adjustment is given to the assessee. The assessee is allowed to submit response within a period of 30 days of issue of notice. The functionality for the same is provided in System, the details of which are given in following para.

3. (i) Notice for adjustment under 143(1)(a) in e-filed returns

All E-filed ITRs pushed by CPC to AO for processing either due to the fact that

a. the case was selected for scrutiny or

b. where taxpayer has claimed Foreign Tax Credit

are required to be submitted to CPC with necessary data entries in respect of specified fields as described in ITBA Processing Instruction No 3 dated 08/11/2017. Such cases will be examined by CPC and notice to assessee for the purpose of prima facie adjustment, if any, will be given by CPC centrally in all such cases. The AO is not required issue notice of adjustment in such cases. The taxpayer will submit their reply electronically through the e-filing portal which will be considered by CPC before final processing u/s 143(1)(a).

(ii) Since the returns of AY 2017-18 filed in FY 2017-18 are required to be processed by 31.03.2019, therefore it is requested that any action pending with AO for E-filed ITRs may be disposed off on priority preferably before 28th Feb 2019 so that CPC has sufficient time to process the cases under 143(1)(a).

(iii) Notice for adjustment under 143(1)(a) in paper returns.

a. As per the process described in ITBA Processing Instruction No 1 dated 30.03.2017, the data of paper ITR cases is required to be entered in ITBA through ITR module and submitted by AO to CPC.

b. Paper Returns for AY 2017-18 were allowed only for certain categories of assessee as per Rule 12. Non-Disclosure of salary Income /Any other Income for which TDS is coming in 26AS in such paper returns are primarily coming under the scope of adjustments.

c. The CPC will analyse the data for the purpose of adjustment under 143(1)(a) and issue notice to assessee intimating him nature of adjustment to be made and the notice of any prima facie adjustment to taxpayer will contain the detail of jurisdictional AO to which the assessee is required to submit his response. The notice to assessee will also be sent through email, if the same is available. Sample of the PFA notice is at Annexure on Page 5 of this Instruction.

d. The CPC will send an email to AOs on their designation based email id to inform that PFA notice has been issued along with copy of the PFA notice in each case so that AO is aware of the nature of adjustment/discrepancy in the ITR..

e. The complete details of such notices issued by CPC is also available in ITBA in MIS – ITR – PFA notice issued path:

ITBA → ITR Processing ModuleMIS → Dashboard→ Time Barring Paper Returns Pending for Response on 143(1)(a).

f. The return is caught under PFA will be visible to AO in view RRR screen under the return type as PFA for necessary action.

g. The description of the adjustment under PFA are also available in view RRR – PFA reasons by clicking relevant buttons.

h. The 26AS details will be available to AO in 360 profile for analysis of case.

(iii) Action to be taken by AO after response of taxpayer is received

Once the response of assessee is received, the same is to be analysed by AO and following actions can be taken.

A) E-filed Return

a. Taxpayer Agrees or Partially Agrees for Adjustment at e-filing and submits revised return. This is treated as a fresh ITR and same rules will apply as far as PFA is concerned and AO will follow same procedure for processing u/s 143(1),

b. Taxpayer disagrees for Adjustment at e-filing. Response will be verified by CPC and accordingly return will be processed with or without adjustment as mentioned in Para 3(i) above.

c. No response received within 30 days from date of issue of notice. CPC will carry out the adjustment and process the return as mentioned in Para 3(i) above.

d. Return filed u/s 142(1) cannot be revised and therefore, CPC will decide based on response submitted by taxpayer as mentioned in Para 3(i) above.

B) Paper Return

a. Response of PFA notice can be submitted either with or without Revised Return. Where justification given by taxpayer, the AO can either do correction of data entry in ITR and ITR data resubmitted to CPC on the basis of response submitted by taxpayer to AO. Where revised return is furnished within the time limit under the Income Tax Act, the same may be entered and submitted for processing to CPC. The Original paper ITR will be treated as closed in view of the revised ITR filed. AO should consider the data in the revised ITR and assure that the taxpayer has included the income proposed for prima facie adjustment or has provided an acceptable explanation for partial or non-inclusion. On the basis of modified data or the revised return submitted by AO the ITR will be processed. Intimation to taxpayer will be issued by CPC as per the extant procedure.

b. If the assessing officer comes to conclusion that no adjustment in the case is warranted, he can click on the button “No PFA” in Part A General and submit the data to CPC. Based on AO’s request, the CPC will not apply any rule for Prima Facie Adjustment and return will be processed. The process described in (a) & (b) can be carried out simultaneously.

c. Issue PFA notice: If AO wishes to issue the PFA notice the same can be done by pressing the button “Issue PFA notice” which is available at the bottom of screen along with other buttons. As per provision of Act, assessee is required to respond to notice within 30 days of the date of issue of notice, therefore, 30 days period will come by default as period of compliance by assessee. The AO is required to submit the modified data or the revised return to CPC again after obtaining the response from the taxpayer as per process in para (a) & (b).

d. If AO does not submit modified data or the revised return as a consequence of non-responsiveness of the taxpayer within 30 days of issue of notice, the return will be processed with adjustments as provided under s. 143(1)(a) by CPC on the basis of PFA notice issued.

4. As all the returns of AY 2017-18 are required to be processed by 31.03.2019, therefore,

a. All data of paper returns should be submitted to CPC for processing by 28.02.2019 so that CPC can apply the rules to identify cases for any PFA before processing ITR.

b. The response of assessee to AO on the notices issued under PFA should be submitted to CPC expeditiously well before time barring date.

c. If any paper ITR is not submitted to CPC as on 28.02.2019, it will be the responsibility of AO to issue PFA notice. For all such cases CPC will process the ITR as if the AO has completed the PFA notice process and the data submitted is final without the requirement of any adjustment.

Training material including user manual, help content and frequently asked questions (FAQs) are available on the ITR Module Home Page and on ITBA Portal → Online Training on ITBA. Users can refer these in case of any issues.

5. Users are advised to contact helpdesk in case of any issues in respect of the ITBA.

a. URL of helpdesk –  http://itbahelpdesk.incometax.net

b. Help desk number – 0120-2811200

c. Email ID – helpdesk_messaging@incometax.gov.in

d. Help desk Timings – 8.30 A.M. – 7.30 P.M. (Monday to Friday)

6. This is issued with prior approval of Pr DGIT(Systems).

Yours sincerely,

(Ramesh Krishnamurthi)

Addl DG (S)-3, New Delhi

Annexure- Sample Prima Facie Adjustment Issued by CPC on behalf of AO in PAPER ITR submitted in ITBA

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