Chartered Accountants Association, Ahmedabad has made a representation to Pr. Chief Commissioner of Income tax, Gujarat on proposed insertion of new rule 39A in the Income tax Rules,1962. It submitted that apparently proposal for introduction of a new Rule 39A in the Income-tax Rules, 1962 is not found to be fair. The implementation of the new rule will further increase the already existing heavy compliance burden on tax payers. Even the Form effectively requires periodic computation of income and expects tax payers to give reasons for less payment of advance tax compared to the earlier year. Full Text of the representation is as follows :-
Date:- 28/09/2017

To,
The Pr. Chief Commissioner of Income tax, Gujarat,
Ahmedabad

Respected Sir,

Ref:- No. PCCIT/ABD/HQ-Coord/Inser. Rule 39A/2017-18, dated 20/09/2017

Sub:- Comments and Suggestions – Draft Notification for insertion of new rule 39A in the Income tax Rules,1962.

Brief Background

We refer to the notification (F.No. 370142/27/2017-TPL) dated 19/09/2017 seeking comments and suggestions from the public on the proposed Rule 39A. We write to you for and on behalf of our members in this regards

Comments on the insertion of the new Rule 39A

In our opinion, the insertion of the new Rule 39A is not justified or befitted on the following grounds:

1. Increased unnecessary compliance burden

In our considered opinion, it appears that the proposal for introduction of a new Rule 39A in the Income-tax Rules, 1962 is not found to be fair. The implementation of the new rule will further increase the already existing heavy compliance burden on tax payers. Even the Form effectively requires periodic computation of income and expects tax payers to give reasons for less payment of advance tax compared to the earlier year

Apart from the above, interestingly, this rule is sought to be made applicable to assessees covered by any of the Clauses of Sec 44AB. Accordingly, will apply to small assessees also if they do not declare income on presumptive basis as provided in Sec.44BB,44AD, 44ADA etc. Again, it seems that all foreign companies, being assessees, may also get covered by the proposed Rule 39A(1).

2. Tax payers are already aware of their obligations

Tax Payers in our country are already aware of the provisions of the Advance Tax and even the Department has been pro-active in this regards by sending timely notices as well as communicating over the call reminding the assesses about their obligations for payment of advance taxes. Introduction of a new rule may affect the tax payers since it would amount to commencement of the assessment proceedings even before the furnishing of the return- of income.

3. Might be used as a tool for high handedness

Though the requirement looks simple and straight forward, it might become a handy tool for those few bureaucrats who may misuse their powers to harass the tax paying community

It also ignores the very object of the scheme of advance tax introduced from A.Y. 1988-89. Such a rule, in practice, is likely to become a source of arm twisting exercise and harassment for meeting unrealistic collection targets, more so for tax compliant community of assessees, as is evident from recent newspapers reports.

4. Taxpayers already paying interest for deferment of advance tax

The moot question is whether a businessman who is already suffering because of the current economic slowdown and a lot of compliance, should keep on explaining his misery to the taxmen during the year or should he be allowed/encouraged to concentrate on improving the performance? No prudent tax payer would like to defer payment of advance tax at the huge cost of interest that is levied u/s. 234B and 234C of the Act.

It should also be appreciated that ultimately, it is a question of making estimate of current business profit which will be based on so many uncertain factors and the perception of businessman which will vary from person to person, business to business and case to case. How can Government expect a businessman to earn every year minimum 90% of profit compared to the earlier year or otherwise, explain his misery of Taxman during the year itself?

5. The rule seems to be impracticable

The rule proposed to be inserted also seems to be impracticable since it would require the assessees to draw up their books of accounts an a regular basis, provide for depreciation, account for other statutory adjustments etc. This exercise at regular intervals puts up unwarranted compliance burden on the tax payers.

6. Difference between the action and words of the Government’s principles

We strongly believe that the present government is committed to reduce corruption and eliminate fox-terrorism. However, the proposal for introducing Rule 39A is diametrically opposite to this commitment. The long-term impact of such a provision, in the context of the existing environment in our tax-administration should be openly and publicly discussed and debated before conceiving such a provision for achieving a short-term goal of collecting some extra advance-tax, which in any case needs to be refunded with interest in later years.

Recently the Hon. Prime Minister had mentioned, while addressing senior tax-officials, that a major part of the tax collection is received by the Government by way of advance tax and TDS and enactment of such a rule will serve as a punishment for the tax payers of the country in light of the huge voluntary compliance burden. In fact, in the some address, the PM also pointed out the existing wide gap of trust deficit between the tax-payers and the tax-department. Such a move is only going to further widen this gap.

7. Punish the evaders and not the honest taxpayers

Tax evaders, in any case, do not pay advance tax and such community should be dealt with differently in the strictest possible manner, but all assessees cannot and should not be placed in such category.

Conclusion

Therefore, on behalf of the tax paying community and on behalf of the lox professionals who assist the tax payers in honestly complying with the tax laws of the country, we strongly urge you to drop the proposal of introducing Rule 39A into the Income-tax Rules, 1962

Assuring you and the Government of India our fullest support in the massive nation building exercise that is in progress.

Thanking You,

Yours Sincerely,

For Chartered Accountants’ Association, Ahmedabad
CA Kunal A. Shah

President

CA Rajni M. Shah

Chairman, Legal & Representation Committee of Direct Tax

Download official copy of Above Representation in PDF Format

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12 responses to “Proposed Rule 39A to Increase unnecessary compliance burden: CAA Ahmedabad”

  1. MK venkatraman says:

    Why not we go back in time by another 5-10
    Yrs and expect the assessing officer to issue a notice for advance tax and raise a demand?

  2. JADHWANI C P says:

    dear sir ,
    my business is export ..
    not steady at all…

    business many times comes in 3rd / 4 th quarters i.e october to march period

    how do i pay right amount advance tax – not knowing volume of business profits i can make after 6 months activity ??

    thanks

  3. CA. S.C.Podder says:

    Frequent changes in Income Tax and other laws to
    will make the maters more complicated . Plz. catch hold corrupt persons , it’s better to Investigate the financial statements of POLITICIANS ( MPs. MLAs etc ) Public servants , Promoters . pleaders , Physicians , ( Not all )

  4. HAREENDRA KHIRA says:

    AAJ BHI HUM LOG INCOMETAX OFFICER KI DEMAND PAR RISHWAT DENI PADTI HAI ANYATHA WOH KISI BHI RULE KE TAHAT AAP KO DAL KAR RUPIY KAISE JYADA BHARWAYA JAYE YEHI DEKHTE HAI (JO RISHWAT NAHI DETA UNKO SIRF) IF U SETTLE WITH OFFICER YOU CAN PAY TO LESS PENALTY AND LESS INCOME SOME TIME TOO……….

  5. Prakash says:

    Does the income tax authority guarantee the quantum of business and profit margins as well as timely receipt of all dues from all buyers and authorities?
    Does it guarantee the life also?
    Are we travelling to era as described in the book titled 1984 by George Orwell.
    How many Big Brothers are going to be there?
    Who will bear the increased compliance cost?
    Has any body including the Big Brothers ever worked out the compliance cost of all tax related submissions and compliances as a % of total turnover (sales) in case of a business?
    Does it remain fixed irrespective of the market situation?
    Ultimately after complying with all applicable rules and acts are we there to get crushed on Elphistone bridge and loose 27+ lives and admits many in the KEM hospital.
    How many politicians with disproportionate assets are behind bars?
    There are many more questions needed to be answered by the Bureaucrats and their masters.
    Enough for the moment.
    Prakash

  6. YATENDRA GOYAL says:

    send you observations to dirtpl4@nic.in

  7. Krishna Kumaran Nair.T.R says:

    In an attempt to squeeze more and more tax out of assessees, the people at the helm of affairs are actually killing the goose that lays gold eggs. One should not wonder, if they ask us to file Income Tax Return on a monthly basis. This is another example of lack of practical knowledge of such people.

  8. GANDHI MOHAN BHARATI says:

    The Govt is bent upon increasing work burden so that they can earn penal revenue for default or harass to increase perks of the so called people’s representatives and declare them to be non taxable.

    They are bent upon liquidating the assets of common man

  9. Shyam Lal Naik says:

    The Finance Minister should look into the compliance harassment.
    Unfortunately, he is a lawyer and not a finance expert.
    Also he is not answerable to the public, as he is not a elected representative.

  10. H A Vakharia says:

    Instead of squeezing out maximum from who is honestly paying taxes, better concentrate on those who are liable to pay taxes but not even filing Returns.
    And – also look at language : You have paid … Tax in previous assessment year. Pay advance tax or we will take action … Such language & policies keep tax payers away.
    The language should be : Thanks for contributing for nation. We will appreciate if you carry out your tax liability by advance tax, which will save you interest too.

  11. S Gupta says:

    These kind of unwanted steps increase the discomfort of general public. Govt. should take steps to regain the lost confidence f honest tax payers and use the technology to broaden the tax base rather than harass and unnecessarily burden them. There is a growing dissent among the masses against Govt. immediate positive actions are required to mitigate damages

  12. prasanna says:

    Remove cash in the economy and charge only BCTT. No compliance required. Bull shit whether individuals can follow these steps. First try to catch their on MLA and MP accounts. Later they can come to us.

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