Rule No. 132 of the Income Tax Rules, 1962 – Application for Re-computation of Income under sub-section (18) of section 155 of Income Tax Act, 1961.
1. CBDT on 28th September, 2022 vide Notification No. 111/2022 – Income Tax has inserted rule no. 132 in the Income Tax Rules, 1962 (hereinafter referred to as the principal rules), after rule no. 131, namely – “Application for recomputation of Income under sub-section 18 of section 155 of the Act.”
2. As per sub-section 18 of the section 155 of the Act inserted by the Finance Act, 2022, Assessing Officer (AO) is provided with the power to re-compute the total income of the assessee and amend the assessment order of prior previous years on account of retrospective amendment u/s 40(a)(ii) of the Act which disallows deduction of surcharge or cess. Such retrospective amendment will take effect from 01st April, 2005 and will apply in relation to the Assessment Year (AY) 2005-06 and subsequent AY(s) thereafter. Also, the provisions of section 154 shall, so far as may be, apply thereto, for the period of four years specified in section 154(7) of the Act being reckoned from the end of the previous year commencing on the 01st day of April, 2021.
3. Further, as per sub-section of 18 of section 155 of the Act, where any surcharge or cess is claimed as deduction and allowed in the case of an assessee in any prior previous years, which is now not allowable as deduction u/s 40(a)(ii) of the Act due to retrospective amendment in section 40 of the Act, such claim shall be deemed to be the case of underreporting of the income of the assessee for such previous year for the purpose of sub-section (3) of section 270A of the Act, notwithstanding anything contained in sub-section (6) of section 270A of the Act.
4. It is also provided in sub-section 18 of the section 155 of the Act that in a case where the assessee makes an application to the AO in the prescribed form and within the prescribed time, requesting for re-computation of the total income of the previous year without allowing the claim for deduction of surcharge or cess claimed as deduction in previous years and pays the amount due thereon within the specified time, such claim shall not be deemed to be under-reporting of income for the purpose of sub-section 3 of section 270A of the Act.
5. Key take aways from the notification as published by the CBDT are listed here as under:
a. Rule no.132 shall come into force from the 1st day of October, 2022.
b. An application requesting for re-computation of total income of the previous year without allowing the claim for deduction of surcharge or cess, which was claimed and allowed as deduction u/s 40 of the Act in the said previous year as stood before such retrospective amendment, shall be made in Form No.69.
c. An application in Form No.69 shall be made on or before the 31st day of March, 2023.
d. Form No.69 shall be furnished electronically to the PDGIT (Systems) or DGIT (Systems) or the person authorized by the PDGIT (Systems) or DGIT (Systems).
e. Such application furnished in Form No.69 to the PDGIT (Systems) or DGIT (Systems) shall be forwarded to the Assessing Officer (AO) for re-computing the total income of the assessee for prior previous years.
f. PDGIT (Systems) or DGIT (Systems) shall lay down the procedures and standards for furnishing and verification of Form No.69 and to forward the application received in Form No.69 to the AO.
g. Thereafter, the AO shall, on receipt of the application in Form No.69, re-compute the total income by amending the relevant assessment order and shall issue notice u/s 156 specifying the time period within which amount of tax payable, if any, is to be credited to the account of Government-
i. for the assessment year relevant to the previous year referred to in sub-rule (1): and
ii. for the assessment years subsequent to the assessment year referred to in clause (i), if the order for such assessment year results in variation in carry forward of loss or allowance for unabsorbed depreciation or credit for tax under section 115JAA or section 115JD.
h. The assessee shall, after making the payment of the tax as determined under sub-rule (4), furnish the details of payment of tax in Form No.70 to the AO within thirty days from the date of making the payment.
6. Analysis of the Subject Matter: In simple words, if the assessee makes an application in Form No.69 to PDGIT (Systems) or DGIT (Systems) and they further forward such application to the AO to re-compute the total income of the previous year without allowing the claim for deduction of surcharge or cess and assessee pays the amount due thereon within the time period as specified in demand notice issued u/s 156 of the Act, then no such claim shall be deemed to be under-reporting of income of the assessee for such previous year for the purpose of sub-section (3) of section 270A of the Act.
However, if the assessee, has claimed deduction in respect of any surcharge or cess in the prior previous years does not make any application in Form No.69 to the PDGIT (Systems) or DGIT (Systems) to give the effect of retrospective amendment as introduced by the Finance Act, 2022, then in such cases, deduction claimed in respect of any surcharge or cess shall be deemed to be under-reporting of income of the assessee for such previous year in pursuance of sub-section 18 of section 155 of the Act and the penal provisions of section 270A of the Act would be attracted.