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E-Assessments and E-Appeals - Understanding the nuts and bolts

Learn about the different types of notices you can receive under section 143(1) of the Income Tax Act, how to respond to them, and the consequences of not responding within 30 days.

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E-Assessments and E-Appeals - Understanding the nuts and bolts

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  1. E-Assessments and E-Appeals -Understanding the nuts and bolts By CA SUNIL H. TALATI M.COM., L.L.B., FCA., PAST PRESIDENT ICAI

  2. Types of notices you can receive under section 143(1) • 3 types of notices can be sent to you u/s 143(1) by the Income Tax Department • Intimation where the notice is to be simply considered as preliminary assessment of your returns since the AO has found the return filed by you to be matching with his computation under section 143(1). • A refund notice where the Assessment Officer’s(AO) computation shows excessive tax paid by you. • A demand notice where the AO’s analysis shows shortfall in your tax payment. The notice will ask you to pay up the tax due within 30 days. • Time limit for the notice to be served is up to 1 year after completion of relevant Assessment Year. Notice is sent after the expiry of one year from the end of the Financial Year in which the return is filed.

  3. Consequences of not responding to notice within 30 Days • If you do not respond to this notice, it may delay your tax refund or tax department may send you a notice of demand u/s. 156 and may also initiate recovery proceeding after 30 days if any additional taxes is payable by you. How to respond to notice received under section 143(1) ? • If details provided by you in your tax return are verified by the Income Tax department and no discrepancies are found then the notice will serve as final assessment of the return. All you need to do is to take a print out of the notice and keep it safely with your tax related documents. • If you are getting a refund, wait for the cheque or direct transfer of cash into your account. However, if you do not receive a return due to wrong information being furnished at the time of filing return then you need to send a request for reissue of refund. • If there is a tax demand then this intimation becomes notice of demand u/s 156. Accordingly, you are requested to pay the entire within 30 days.

  4. Points to be taken care while dealing Intimation u/s. 143(1) of the Act. • As a first step, review certain things in Section 143(1) intimation to ensure document pertains to your return itself and data provided pertains to the same financial year as mentioned in Section 143(1) intimation. Check name, PAN, address, assessment year for which notice has been sent, e-filing acknowledgement number. • In case you are able to identify the mistakes, you have made while filing your return from the 143(1) intimation, and they can be rectified by filing a revised return, please do so by logging into income tax efiling website. • However, if no mistakes have been made and you do not agree with the adjustments made by CPC/computerised system, you can file an online rectification application u/s 154(1) intimating the correction of mistake appearing in the Section 143(1) intimation. • In case you are not satisfied with the processing of your rectification return by CPC, you can also file online grievances or contact your assessing officer. In case of no satisfactory action from CPC/assessing officer, you can file a complaint to income tax ombudsman. • However, if taxpayer agrees to the tax demand raised by income tax department after carrying out adjustments as above, taxpayer is required to pay such taxes.

  5. What is notice u/s 143(1)(a) of Income Tax Act? • In the AY 2017-18, several taxpayers have received this notice. The income Tax department sends this notice seeking a response to the errors/ incorrect claims/ inconsistencies which attract adjustment(s) under Section 143(1)(a) of the I-T Act. • A number of taxpayers who had filed their returns for AY 2017-18 have received emails from the Central Processing Centre (CPC) seeking clarification under section 143(1)(a) of the I-T Act to the mismatch between the income and deduction when compared to Form 16, Form 16A or Form 26AS. • Recipient of the mail is given a time period of 30 days from the date of receiving the intimation to send a response. If the recipient fails to respond, the return is processed after making necessary adjustment(s) u/s 143(1)(a), without providing any further opportunities in this matter. • After expiry of 30 Days, Jurisdictional A.O. may accept the manual application / reply. However as notice u/s. 143(1)(a) of the Act is received from CPC, A.O. has to call for Rights from CPC for dealing manual application / reply.

  6. Various Reasons for Receiving the Notice u/s/ 143(1)(a) • Let’s look at some of the most common reason why tax payers are getting this notice • Example 1: If you have claimed investments under section 80C or HRA that are not mentioned in your Form 16, you are likely to receive an email from the department asking you to explain the mismatch. The mismatch is due to an extra deduction of Rs.1,01,000 that’s not in the Form 16.

  7. Various Reasons for Receiving the Notice u/s/ 143(1)(a) • Other Examples : • Inconsistency in Total amount of Disallowance under Section 37, 40A(7), 43B etc as disallowance shown in Audit Report but not taken into Account in Computing total Income in the Return by entering into appropriate column Adjustment as per Section 143(1)(a)(iv). • Mismatch in Depreciation- 50% of Additional Depreciation (i.e. 10%) of last year claimed in C.Y. • Mismatch in Salary as per Form 26AS vis-à-vis ITR. • Inconsistency in MAT –Computation of Book Profit from amounts mentioned in Part A- P & L Account. • OTHER EXAMPLES / ILLUSTRATIONS

  8. Probable Solutions • Ensure to File appropriate data in respective fields. • Example: Disallowances mentioned in Tax Audit vis-à-vis Income Tax Return Form. Ensure to fill correctly every particulars of ITR Form. • Don’t club every items of Expenses under “OTHER EXPENSES” where you have option to fill respective particulars of expenditure separately in ITR. • Respond appropriately to the intimation and Notice u/s. 143(1) or 143(1)(a) respectively as well as in time so as to have handy solution to future avoidable inquiries from Department. • Keep record either in soft copy or hard copy of the compliance / response made to CPC alongwith record of acknowledgement receipt. This can help you in future as proof of compliance.

  9. Probable Challenges • If Reply to CPC is made by AGREEING the default and thereby revising the Return, then exposure of giving extra time limit of 1 year to the department for getting the case selected for scrutiny arises. • If reply is given by DISAGREEING the default, than whether CPC which appears to have been made the mechanism of finding such defaults through Computer Aided Software will accept the response ? We all know that CPC do not have human touch to every processes/ Functions. • Probability of getting case selected for Limited Scrutiny. Again PERSONAL or by E-MAILS ? • NON-REMUNERATIVE- Decide the Fees- Challenges for Practising CA. • Shall we start Billing Time-wise ? Need to Change the Culture.

  10. Understanding Nuts & Bolts

  11. E-Assessment proceeding – Call of digital era The whole world is transforming itself to digital world. India is no exception to this. Our Government is taking significant steps to transform India into Digital India. In this digital march, Income Tax Department has made a way forward by making amendments in the act and starting facility of e-proceedings Such steps will certainly prove boon to transform traditional taxation system in the country. Initiatives of income tax department are elaborated below. CBDT Has issued instruction dated 12th February 2018 to conduct assessment proceedings in scrutiny cases electronically. Section 2 (23C)of ITA provides that “hearing” includes communication of data and documents through electronic mode (applicable from 01.06.2016 ).

  12. Salient features of ‘E – proceedings’ • E-proceeding will facilitate seamless flow of communication between AO and Assessee. • Assesse would be able to submit the response along with attachments by uploading the same on e-filing portal. • AO would view submissions electronically through Income Tax Business Application (ITBA).

  13. Salient features of ‘E – proceedings’ • Complete information of all e-submissions made will be available on E-filing portal. • Environment friendly as assessment is paperless. • E – proceeding will save time of assessee as well as department.

  14. Important procedural aspects while conducting assessment proceedings through ‘E-Proceeding’

  15. Complianceto Notice u/s. 142(1) Notices u/s 142(1)(ii) shall be issued & delivered electronically to e-filing account of assesse. While replying to these notices assessee shall verify details as prescribed under Rule 14. Rule 14 prescribes the information furnished by assessee shall be verified in following manner “I declare that to the best of my knowledge and belief, the information furnished in the statement / statements is correct and complete and other particulars shown therein are truly stated” Use of digital signature by AO- Orders, notices & communications from AO will be digitally signed.

  16. Time for compliance Online submissions may be filed till the office hours on the date stipulated for compliance. Availability of facility for electronic submission of documents in time barring situation– -Electronic submission facility shall automatically close 7 days before time barring date. -In other situations, upon completion of proceedings, before passing the final order, concerned AO, on his volition, shall close the e-submission facility after mentioning in electronic order sheet that ‘hearing has been concluded’. However, if required, in exceptional circumstances, the concerned AO may enable further filing of submissions electronically under intimation to the Range Head in ITBA.

  17. In assessment proceedings being carried out through the ‘E-Proceeding’ facility, a particular proceeding may take place manually in certain situation(s):

  18. In assessment proceedings being carried out through the ‘E-Proceeding’ facility, a particular proceeding may take place manually in following situation(s): • -where manual books of accounts or original documents have to be examined • -where AO invokes provisions of section 131 of ITA or a notice is issued for carrying out third party enquiries/investigations • -where examination of witness is required to be made by the concerned assessee or the department • -where a show-cause notice contemplating any adverse view is issued by the AO and assesse requests for personal hearing to explain the matter

  19. Maintenance of ‘Record’ in E-Proceeding • In E-Proceeding document and notes sheet will be recorded in electronic Mode. • Assessment Orders will be processed by CPC.

  20. Nutshell: New System of E-Assessment will.. Identities of taxpayer and his A.O. will be kept as confidential 5 Deals with all kinds of tax related matters as filing of returns, Scrutiny etc. Minimize Interaction between the taxpayer and A.O 4 1 3 2 Ensure a transparent and no-harassment culture Curb Corrupt Practice in the Dept.

  21. Some Suggestions for Improvement • The space limit for uploading documents needs to be increased. Currently it is only 10MB. • On change of Tax Officers, login access to the system has to be granted to the new officers immediately. • Tax officers need to be given adequate training regarding trade practices and procedures in different industries and for different transactions. Ideally they need to be deputed for a year or two in a public sector entity to understand commercial realities.

  22. Understanding the Nuts and Bolts of E - APPEALS

  23. Background The CBDT has vide press release dated 30.12.2015 made announcement regarding electronic filing of appeal before the Commissioner of Income Tax (CIT (A)). Thereafter, vide notification no. 11/2016 dated 01/03/2016, the concerned rule (i.e., new rule 45 substituted for old rule 45) has been notified.

  24. Object Behind Introducing Electronic Filing: • The e-filing of appeal has been introduced with the aim of reducing paper work, reducing burden of compliances on tax payers, reducing transaction cost to the tax payers, increasing digitization of Departmental functions, removing human interface, providing efficient and error free services to the taxpayers etc and also to facilitate fixation of hearing of appeal electronically.

  25. ElectronicFiling Is Applicable To Whom • Electronic filing of appeal is mandatory for the persons who are required to file the return of income electronically. The other persons have an option to voluntarily file the appeal electronically or in the paper form.

  26. Liability For Electronic Filing Of Return Is To Be Seen For Which Year Liability For Electronic Filing Of Return Is To Be Seen For Which Year : It has not been specifically mentioned in the rules that the mandatory requirement for electronic filing of return is to be seen for the assessment year for which the appeal is to be filed or for the assessment year in which the appeal is being filed. However, from the language of the concerned new rules, it can be logically inferred that the requirement for electronic filing of return for the year for which the appeal is being filed is to be seen. For example, if an appeal for the assessment year 2012-13 is to be filed in the assessment year 2018-19 then the liability for electronic filing of return is to be seen for the assessment year 2012-13.

  27. Requisites For E-Filing Of Appeal (a) Duly filled in Form No. 35. The grounds of appeal and statement of facts are to be filled in relevant columns in form no. 35 itself. The statement of facts should not exceed 1000 words. Each ground of appeal should not be of more than 100 words. (b) Scanned copies of order appealed against, Notice of demand and challan for appeal fees are to be attached. These attachments should be in pdf / zip format. All the attachments in total should not exceed 50Mb in size.

  28. Other requirements in Form 35 (a) The column for filing name and address of appellant have been made more structured. (b) Now e mail address is also to be given. (c) Now option has been give to select that whether notices / communication may be send to the appellant on e mail. (d) Now TAN No. is to be given (if available). (e) Now financial year is to be mentioned where assessment year is not relevant. (f) In case appeal for any other assessment year / financial year is pending with the CIT(A),now appeal no. and date of filing of that appeal is also to be mentioned. (g) Where the appeal relates to any assessment, now the specific details of assessed income, addition made to income, disallowance of losses, amount of addition / disallowance of losses disputed and disputed demand amount etc. are to be mentioned.

  29. ….Other requirements in Form 35 (h) Where appeal relates to any penalty, now the amount of penalty levied and penalty disputed is to be mentioned. (i) In cases where return has been filed, now the details of date of filing of return and acknowledgement no. are also to be given. (j) Where no return has been filed, now the details of BSR Code and Sr. No. are to be given additionally in respect of tax paid equivalent to advance tax amount. (k) Where appeal relates to tax deductible U/s. 195 borne by deductor, now the BSR Code, Amount, Sr. No. etc. are to be additionally given in respect of tax deposited U/s. 195(1). (l) Now the list of documentary evidences relied upon is to be given. (m) Now the list of additional documentary evidences as per Rule 46A, if any, is to be given. (n) Now the delay in filing of appeal, if any, is to be specifically mentioned. (o) In case of delay, now the grounds for condonation of delay are to be mentioned. (p) now the BSR Code, Date of Payment, Sr. No. and amount are to be given in respect of appeal fees paid.

  30. Requirement Of Digital Signatures (a) If the return form has been furnished electronically under the Digital Signatures, then form no. 35 will also have to be filed electronically under Digital Signatures. (b) If the return has been furnished electronically without Digital Signatures, then form no. 35 will have to filed electronically through the electronic verification code. (c) Where the e filing of form no. 35 is not mandatory, but is being e filed optionally, then it can be filed either under Digital Signatures or through Electronic Verification Code (as per convenience).

  31. Conclusion • The e filing of appeals before the CIT(A) is a good step towards digitization, removal of human interface and related problems. It will also surely save time and resources of the tax payers. • It should further be extended towards appeal before Hon’ble ITAT.

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