BACKGROUND: Presently, in India, a large number of income tax assesses are required to get their accounts audited under section 44AB of the Income Tax Act, 1961. The report of audit (TAR) is required to be e-filed by the tax auditor (alongwith subsequent approval by the assessee) to the income tax department. Thereafter, the income tax return (ITR) is required to be prepared and e-filed by the assessee. The relevant ITRs are ITR-4, 5 & 6. In the present article, efforts have been made to analyse the drawbacks in the present system and to suggest some measures to eliminate them.
DRAWBACKS IN PRESENT SYSTEM: The various drawbacks in the present system are summarized as under:
DUPLICATE SUBMISSION OF SAME INFORMATION : In the ITR, almost all the bulky information as contained in the TAR are again required to be furnished e.g., profit and loss account, balance sheet, quantitative details, detailed depreciation chart, details of disallowable expenses under various sections as reported by the tax auditor, details of various incomes not credited to the profit and loss account and other deemed incomes as reported by the tax auditor, method of accounting and of valuation of stock and changes therein and their impact, carry forward of losses and unabsorbed depreciation, business details (name, code etc.),details of auditor, date of signing & furnishing of audit report and many other information.
This duplicate task takes much time and efforts on the part of the assesses, without any additional benefit to the income tax department.
DIFFERENT FORMAT FOR FILING SAME INFORMATION IN TAR AND ITR: For furnishing of various similar information, the format in the TAR and ITR are different e.g., in case of TAR, the profit and loss account and balance sheet and schedules are required to be furnished in pdf format whereas in the case of ITR, the same are required to be furnished in XML format in the ITR form itself. Further, no specific heads of income, expenditure, assets, liabilities etc. have been prescribed for furnishing profit and loss account and balance sheet alongwith the TAR, whereas in the ITR the above information is to be furnished only in the specific format. Due to this, there may be chances of mistakes and inconsistencies in similar information in TAR and ITR.
UNNECESSARY LITIGATION WITH THE DEPARTMENT : In many cases, it is practically seen that the information as filed in the ITR is compared at the end of the department with that of similar information in the TAR and due to mismatch between them (merely due to different format in TAR and ITR and not due to any actual mismatch) notices for limited scrutiny have been issued to the assesses. Thus, practically and in reality, the present procedure of e-filing of TAR and ITR is also a reason for unnecessary litigation between the department and the assessee.
SUGGESTIONS: To overcome with the above problems, some practical suggestions are as under:
CONCLUSION: Thus, the rationalisation of TAR and ITR may on one hand reduce the work burden and compliances on part of the assesses and on other hands may also be helpful for the department for smooth tax administration, reduction in errors, speedy work and minimization of litigations.