An assessee can revise its return of income under section 139(5) on discovery of any omission or wrong statement therein. The revised return replaces and substitutes the original return. Since revised returns takes place of original return, the A.O is bound to take cognizance of the revised return.

The return can be revised at any time before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. As such, if the omission or wrong statement is discovered before the time to revise return is over, assessee can definitely be benefitted by this provision. However, where it is discovered after the expiry of the time to revise the return, there is no provision in the act to set the omission or error right.

During scrutiny assessment, when assessee comes across such omission or wrong statement, they generally claim the expenditure or the benefit right at the stage of assessment proceedings. However, there is no provision in the act, which authorizes the assessing officer to entertain additional claim which were not claimed in the return. Therefore, the claim is rejected by the assessing officer.

The question which arises is, whether assessee can raise the question of claiming such unclaimed deduction during assessment or appellate proceedings.

The issue came before the Hon’ble Supreme Court in the case of Goetze (India) Ltd. v. Commissioner of Income-tax [2006] 157 Taxman 1 (SC). In this case, the return was filed on 30-11-1995 by the company. On 12-1-1998, company sought to claim a deduction by way of a letter before the Assessing Officer. The deduction was disallowed by the Assessing Officer on the ground that there was no provision under the Income-tax Act to make amendment in the return of income by moving an application at the assessment stage without revising the return. Commissioner (Appeals) decided in favour of the assessee, whereas ITAT decided in favour of the revenue.

Before Supreme Court, the question raised was whether the assessee could make a claim for deduction other than by filing a revised return. Court held in favour of revenue holding that to claim any deduction, revision of the return is required.

Similar issue was raised earlier before the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383. The issue in the case was that the assessee company had deposited its funds in short-term deposits with banks. Interest received on such deposits was offered by the assessee for tax assessment and the assessment was completed on that basis. Before the Commissioner (Appeals), number of grounds were taken by the assessee challenging the assessment. However, the inclusion of the interest amount was neither challenged by assessee nor considered by the Commissioner (Appeals). The inclusion of aforesaid amount was not challenged in the grounds of appeal as originally filed before the Tribunal. However, the assessee challenged the same in a forwarding letter. The Tribunal declined to entertain the additional grounds.

The question reframed by the Hon’ble Supreme Court was as below:

“Where on the facts found by the authorities below a question of law arises (though not raised before the authorities) which bears on the tax liability of the assessee, whether the Tribunal has jurisdiction to examine the same?”

Court decided in favour of the assessee holding that “The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law……… we do not see any reason why the assessee should be prevented from raising a question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised…………………… But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. The reframed question, therefore, is answered in the affirmative, i.e., the Tribunal has jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the assessee.

Decision in National Thermal Power Co. Ltd. and Goetze (India) Ltd. distinguished

The facts of both the cases were almost similar. However, in National Thermal Power Co. Ltd. the decision was in favour of assessee, whereas in other it was in favour of revenue.

In National Thermal Power Co. Ltd., the question raised was “whether the Tribunal has jurisdiction to examine an issue raised before it for the first time”. The decision was affirmative.

In Goetze (India) Ltd., the question was whether the assessee could make a claim for deduction before the assessing officer other than by filing a revised return. The decision was negative and was restricted to the examination of the authority of the assessing officer. The question of examination of the issue was not at all raised before the court.

Hon’ble Delhi High Court dealt with a similar submission in CIT v. Jai Parabolic Springs Ltd. [2008] 306 ITR 42. The court, held that the Supreme Court dismissed the appeal in Goetze India Limited, making it clear that the decision was limited to the power of the assessing authority to entertain a claim for deduction otherwise than by a revised return and did not impinge on the powers of the Tribunal. It was also held that there was no prohibition on the powers of the Tribunal to entertain an additional ground which, according to the Tribunal, arises in the matter and for the just decision of the case.

Conclusion:

Though the assessing officer has not been conferred with any power to entertain any deduction or benefit which has not been claimed by the assessee in its income tax return but if these deduction or benefit arising out of the facts on records are claimed at appellate level these claim can be entertained.

Hon’ble Supreme Court in the case of Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688, while dealing with the powers of the Appellate Assistant Commissioner observed that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income-tax Officer. This court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The Appellate Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Appellate Assistant Commissioner should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also.

 

1. Preamble

   • The Hon’ble PM Shri Narendra Modi dreamed of corruption free India taking help of Information and Technology and conceived the idea of Digital India. In a national Conclave of Tax officials, he desired to introduce a faceless assessment scheme with a view to help honest taxpayers and impart greater efficiency, transparency & accountability in the assessment process. To make his dreams come true, the Central Government in the last few years has taken various steps to reduce human interface between the Taxpayer and the Tax Administration to ensure consistency, transparency and increase efficiency in the ability of Tax Administration with the help of information and technology.

   • The The E-assessment Scheme, 2019 (Scheme) (also called Faceless/ Nameless/ Paperless/Jurisdictionless and hopefully corruptionless Assessment or Group assessment/ team base assessment), is the latest development in this direction. This is indeed a complete paradigm shift from the traditional assessment to the new way of making assessment. It is going to be the new face of Income-tax Department as this scheme is likely to be expanded substantially as time goes by.

   • The concept of e-assessment is not new and rather, is successful being used in a number of countries, both developed & developing, like Singapore (‘Leveraging Analytics Design & Digitalisation’ aka LEAD), UK (Advanced Digitised Approval based Assessment), Brazil (2 SPED), Mexico (Servicio de Administracion Tributataria aka SAT), Korea (Big Data and Artificial Intelligence System) Japan, Germany etc.

   • The Scheme was first introduced in the year 2015 on pilot basis in five cities viz. Ahmedabad, Bangalore, Chennai, Delhi and Mumbai, which was extended to two more metros in year 2016. It made a significant beginning by undertaking assessment of 58,322 cases of limited and unlimited scrutiny, consisting of cases of individual, firm, companies etc.

2. Historical Development

   2.1 The use of technology by the Income Tax department in assessments proceedings can be seen from the following:

   • E-filing of ITRs :

     1. In India, e-filing of income tax was introduced in September, 2004, initially on a voluntary usage basis for all categories of income tax assessee. In

     2. In 2006, it was made mandatory for all corporate firms
        to e-file their income tax returns.

     3. Taking this process further, from assessment year 2007 to 2008, e-filing of income tax return was made mandatory for all companies.

     4. From 2013, the mandatory e-filing of ITR was further extended to Individuals, HUFs and even trusts satisfying the prescribed conditions.

   • Implementation of Computer Assisted Scrutiny Selection (CASS) (based on a detailed analysis of risk parameters and 360-degree data profiling of the taxpayers) which substantially reduced the manual intervention in the selection process of the cases for scrutiny assessment (except a few cases based on the predetermined revenue potential-base parameters).

   • The CBDT to avoid undue harassment and to ensure proper Tax Administration, in suppression of earlier instructions / guidelines for the selection of scrutiny cases during F.Y. 2014-15, instructed the AOs to confine their questionnaires, enquiry /verifications only to the specific points on the basis of which, the particular return was selected for scrutiny (called as Limited Scrutiny Cases).

   • Service of notice electronically via Email: Taking another step toward digitalizing the working of Income Tax Department, Section 282 was substituted vide Finance Act, 2009 to include service and delivery of notices, summons etc. via electronic mode viz email id, portal etc.

   • Introduction of “Annual Information Statement” (Section 285BB) – Initially Form 26AS was an account statement of tax paid by or on behalf of the assessee, being TDS, TCS, Advance Tax, Self-assessment tax, etc. However, now with a view to enlarge the scope of Form 26AS, the Government in the latest amendments vide Finance Act, 2020, has introduced S. 285BB (thereby omitted S. 203AA), as also new Rule 114-I has been inserted (vide Notification No. 30/2020 dated 28.05.2020), to cover additional information relating to:

     1. specified financial transaction (i.e purchase or sale of immovable property, shares and mutual fund transactions),

     2. Payment of taxes,

     3. Demand and refund,

     4. Pending proceedings and even completed proceedings,

     5. The dept. can also upload information received from any officer, authority or body performing any function under any law,

     6. Lastly, any information received DTAA or from any other person to the extent as it may deem fit in the interest of the Revenue,

   which shall become part of the new Form 26AS, officially known as the “Annual Information Statement” (AIS). Importantly, this new statement works on real time basis.

   This new statement, on one hand will be helpful for the AO to cross check the details with the return of income furnished by the AO and on the other hand, will help the assessee (and his tax consultants) in computing and filing their returns properly, as all the information would be pre-filled on the basis of Form 26AS.

   2.2. E-Assessment Proceedings / Paperless Environment

   • The Department rolled out with e-assessment proceeding where the conduct of enquiry is compulsorily made through the e-mails only.

   • A new Rule u/s 127 was inserted by the Income Tax (Eighteenth Amendment) Rules, 2015 w.e.f. 2-12-2015, providing the frame work for issue of notices and other communication with the assessee.

   • The rule prescribed addresses to be the actual physical address, including the addresses of electronic or electronic mail messages on which notices and other communication could be delivered.

   • During the period from 2016 to 2018 the CBDT progressively amended the rules, notified various procedures and issued the required guidelines to increase the scope of e-proceedings.

   • “Concept of Hearing” was also introduced vide insertion of S.2(23C) in the Act by the finance Act, 2016 (w.e.f 1-4-2016), providing that the term “hearing” includes communication of data and documents through electronic mode. Consequently, the CBDT issued a revised format of the notice u/s 143(2) of the Act.

   • In the year 2017, the Income-tax Department had developed an integrated platform, i.e., Income Tax Business Application (ITBA) for electronic conduct of various functions/proceedings including assessments.

   • Scope of e-proceedings assessment was extended vide instruction no. 08/2017 dated 29-9-2017 for all the cases getting time barred during F.Y. 2017-18 with option to the assessee to voluntarily opt-out from e-proceedings.

   • Instruction No. 01/2018 dated 12-2-2018 issued to cover all the pending scrutiny assessment under the e-proceeding scheme with the exception of some cases like search and seizure, re-assessment etc.

   • Instruction

    No. 03/2018 dated 20-8-2018 was issued carving out the way for all cases required to be framed u/s 143(3) during F.Y. 2018-19, which were to be compulsorily (mandatorily) completed through e-proceeding only.

3. E-proceedings vs. E-Assessment

S. No.	Particulars	Assessment u/s 143(3) through e-Proceedings utility	Faceless E-assessment 2019
1.	Who is AO.	AO is well known with name and face	It is completely faceless and nameless
2.	Applicability	Assessments u/s 143(3), Assessments u/s 147	Assessment u/s 143(3) and 144.
3.	Assessment Year	Till AY 2017-18 and partial cases for AY 2018-19	58,322 cases for AY 2018-19 on Pilot basis
4.	Assessing Authority	Jurisdictional Assessing Officer	National E-assessment Centre (NeAC)
5.	Notice u/s 143(2) Issuing Authority	Jurisdictional Assessing Officer	NeAC, New Delhi
6.	Reply Period of Notice u/s 143(2) & 142(1)	As specified in the Notice u/s 143(2)	Within 15 days from the date of receipt of such Notice u/s 143(2)/142(1)
7.	Assignment of Case	Jurisdictional Assessing Officer	The NeAC assigns the case to a specific assessment unit in any one Regional E-assessment Centre through an automated allocation system, based on artificial intelligence and machine learning.
8.	Inquiries during the course of assessment proceedings	Jurisdictional Assessing Officer Issues Notices/ Questionnaires u/s 142(1) of the Act, for seeking further information, documents or records, from the assessee.	The NeAC may issue appropriate notice or requisition u/s 142(1) to the assessee for obtaining any further information, documents or evidence as required by the assessment unit in the Regional E-assessment Centre, to which the case has been assigned by the NeAC.
9.	Mode of Interface between the Assessee and the Assessing Authority	Electronic Mode via the ‘e-Proceedings’ functionality in the ITBA Module. However, after serving the Show Cause Notice, an opportunity of Personal Hearing to the assessee involving physical interface between the assessee and the jurisdictional AO is to be provided.	Electronic Mode via the ‘e-Proceedings’ functionality in the ITBA Module. However, after serving the Show Cause Notice, an opportunity of Personal Hearing to the assessee via video telephony only and without involving any physical interface between the assessee and the NeAC is to be provided.

4. Assessment through E-proceeding – Recent Past:

   4.1 The Scheme was based on the recommendations made by the Tax Administration Reform Commission (TARC), with the objective to enhance the effectiveness and efficiency of the Tax Administration. The relevant extract of the TARC are as under:

   “Currently, the general perception among taxpayer is that the tax administration is focused on only one dimension that of revenue generation. This perception gains strength from the manner in which goals, in turn, drive the performance of individual tax officials. Therefore, the whole system of goal setting, performance assessment, incentivisation and promotion appears to be focused on only this dimension. This single minded revenue focus can never meet the criteria of the mission and values mentioned above. What is required is a robust framework that is holistic in its approach to issues of performance management.”

   4.2 Accordingly, the Finance Minister Late Shri Arun Jately introduced the concept of E-assessment in the Union Budget Speech for F.Y. 2018-19 [401 ITR 1 (St) (at 29)]. The relevant extract is as under:

   “E-assessment –

   We had introduced E-assessment in 2016 on a pilot basis and in 2017 extended it to 102 cities with the objective of reducing the interface between the department and the taxpayers. With the experience gained so far, we are now ready to roll out the E-assessment across the country which will transform the age-old assessment procedure of the income tax department and the manner in which they interact with taxpayers and other stakeholders. Accordingly, I propose to amend the Income-tax Act to notify a new scheme for assessment where the assessment will be done in electronic mode which will almost eliminate person to person contact leading to greater efficiency and transparency.”

   4.3 Consequently, by the Finance Act, 2018, two new sub sections (3A) and (3B) were inserted in S.143(3) w.e.f. 1-4-2018, which enabled the Central Government to come up with a Scheme for Faceless-Electronical Assessment.

   • Section 143(3A): The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of making assessment of total income or loss of the assessee under sub-section (3) so as to impart greater efficiency, transparency and accountability by—

     1. eliminating the interface between the Assessing Officer and the assessee in the course of proceedings to the extent technologically feasible;

     2. optimising utilisation of the resources through economies of scale and functional specialisation;

     3. introducing a team-based assessmentwith dynamic jurisdiction.

   • Section 143(3B): The Central Government may, for the purpose of giving effect to the scheme made under sub-section (3A), by notification in the Official Gazette, direct that any of the provisions of this Act relating to assessment of total income or loss shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification: Provided that no direction shall be issued after the 31st day of March, 2020 (now extended upto 31.3.2022 by The Finance Act 2020).

   4.4 This was further continued by the Finance Minister Nirmala Sitaraman in her Budget speech on this aspect is worth noting and reproduce here under:

   Faceless e-assessment

124. “The existing system of scrutiny assessments in the Income-tax Department involves a high level of personal interaction between the taxpayer and the Department, which leads to certain undesirable practices on the part of tax officials. To eliminate such instances, and to give shape to the vision of the Hon’ble Prime Minister, a scheme of faceless assessment in electronic mode involving no human interface is being launched this year in a phased manner. To start with, such e-assessments shall be carried out in cases requiring verification of certain specified transactions or discrepancies.

125. Cases selected for scrutiny shall be allocated to assessment units in a random manner and notices shall be issued electronically by a Central Cell, without disclosing the name, designation or location of the Assessing Officer. The Central Cell shall be the single point of contact between the taxpayer and the Department. This new scheme of assessment will represent a paradigm shift in the functioning of the Income Tax Department.”

5. The E-Assessment Scheme – Introduction

   5.1 Finally, the Government notified a Scheme names as “E-Assessment Scheme, 2019” u/s 143(3A) vide Notification No. 61/2019 dated 12.09.2019 (further supplemented by the direction u/s 143(3B) vide Notification No.62/2019 dated 12.09.2019) to conduct e-Assessments proceedings w.e.f. 12.09.2019.

   5.2 E-assessment scheme is a code by itself with respect to assessment specified in the scheme, comprising of 24 definitions and 12 clauses. The said scheme provided the framework to carry out e-assessments with the intention to bring about a 360-degree change in the way; the tax assessments are being made hitherto. However, the Scheme does not apply to Wealth-tax Act.

   5.3 Scope of the scheme (Clause 3): The scope of the Scheme, has been defined in Clause 3, to be made in respect of such territorial area, or persons or class of persons, or incomes or class of incomes, or cases or class of cases, as may be specified by the CBDT(Board).

   5.4 “E-assessment” [Clause 2(xiii)] – means

   • the assessment proceedings

   • conducted electronically

   • in ‘e-Proceeding’ facility

   • through assessee’s registered account

   • in designated portal (incometaxindiaefiling.gov.in)

   5.5 Assessment:

   5.5.1 Covered: The term Assessment [Clause 2(iii)] means “the assessment of total income/loss u/s 143(3) of the Act.”

   5.5.2 Not Covered: Impliedly therefore, the following types of assessments are not included in this Scheme: – [Refer Circular no. 27/2019 for exclusions from e-proceedings]

   • Best Judgment Assessment made u/s 144: However, The Finance Act, 2020 now covered such assessments also w.e.f A.Y. 2020-21.

   • Assessment of Escaped income u/s 147.

   • Search Assessment u/s 153A or u/s 153C.

   • Set-aside Assessments

6.1 The E-Assessment Scheme – Prime Objective :

• To reduce the human interface between the taxpayer and the tax officer to the extent technologically feasible.

• Ensuring transparency in the assessment proceedings

• A team based assessment with dynamic jurisdictions.

• Increase the efficiency of the tax administration.

• To ensure that the assessments are technically sound,

• Taking a consistent view on various issues.

• To avoid prolonged and unwanted litigations.

6.2 Expected Benefits:

• Ease of compliance for taxpayers – with the comfort of sitting at home or office.

• Transparency and efficiency – of the Department

• Improvement in Quality of Assessment

• Will avoid humiliation to the Assessee/ AR

• Saving of time, money an arising being wasted by the assessee/ AR in big cities. Also, chances of harassments shall be minimal

7. Organizational Structure:

    

8. Role of various Agencies such as NeAC, ReAC, AU, VU, TU, RU:

   

   

   

9. Features of E-assessment

   • Electronic exchange of information [Clause (viii)]

     1. All the communication, whether internal between the various centres and units or externally with the taxpayer, shall be carried out only by electronic mode.

     2. The electronic modes include emails, upload of documents on e-filing portal, mobile app, real time alerts and messages to taxpayers, etc.

   • Taxpayers or its authorize representative shall not remain physically present before the AO during assessment proceedings.

   • No personal appearance in the Centres or Units however such communication shall be conducted through video conferencing only if demanded. (Clause 11)

   • The video conferencing (VC) shall be only in accordance with the procedure laid down by the Board. However, there appears no separate VC procedure notified by board.

10. Procedure for E-Assessment

    

    1. The National E-Assessment centre shall serve notice to the taxpayer under section 143(2) mentioning the issues in respect of which his case is selected for assessment [Clause 5 (i)]

    2. The Taxpayer should respond to the notice within 15 days. [Clause 5 (ii)]

    3. The National E-assessment centre shall assign the case to a specific assessment unit in any one of the 8 Regional e-assessment Centre through Automated Allocation System (AAS). [Clause 5 (iii)]

    4. The assessment unit may request the National E-assessment centre for:

       • information, documents, evidences as required; and /or

       • conducting enquiry or verification by verification unit; and /or

       • seeking technical assistance from technical unit. [Clause 5 (iv)

       

5.1 The National E-assessment centre shall communicate to:

• Taxpayer for information / documents and evidence; and /or

• Verification Unit for conducting enquiry or verification through AAS; and /or

• Technical Unit for technical assistance through AAS

5.2 And will pass on the response received, to the assessment unit. [Clause 5 (v), (vi), (vii)

6. Assessment Unit, after taking into account all relevant available material on record

   • shall prepare DRAFT assessment order in writing,

   • either accepting or modifying the returned income of the taxpayer and send it to National E-assessment Centre

   • along with the details of penalty proceedings to be initiated if any . [Clause 5 (viii),(ix)]

7. 7.1 On receipt of draft asst. order, the National E-assessment centre shall, based on Risk Management Strategy (RMS) and Automated Examination Tool (AET),:

   • Finalize the assessment as per draft asst. order

   • Serve a copy of such order to the Taxpayer

   • and notice for initiate penalty proceedings if any;

   • along with the demand notice specifying the some payable by / refundable OR [Clause 5(xii)]

   

   7.2 Issue a show cause notice to the assessee (as to why the suggestion of assessment Unit in Draft order be not accepted.) or [Clause 5(xiii)]

   

   7.3 Instead of sending to assessee, assign the draft asst. order to any one Review Unit (out of any 8 ReAC) through AAS.

8. Review Unit will review the draft assessment order and intimate the National E-assessment Centre

   • Of its concurrence with it or

   • Suggest suitable modification to NeAC. [Clause 5 (xi)]

9. On receipt of concurrence, the National E-assessment Centre will

   • Finalize the order and serve on the tax payer, or

   • Issue show cause notice to the taxpayer. [Clause 5 (xii)] or

10. On receipt of modifications, the National E-assessment Centre shall send the modifications suggested by the review unit to the assessment unit. [Clause 5 (xiii)]

11. The Assessment unit shall prepare the FINAL DRAFT Assessment order and send to National E-assessment Centre. [Clause 5 (xiv)]

12. On receipt of Final Draft Assessment order, the National E-assessment Centre shall:

    • Finalize the order and serve on the assessee (as per the preceding paras); or

    • Issue a show cause notice to the taxpayer (as to why the Final Draft Assessment order should not be accepted). [Clause 5 (xv)]

    

13. Where show cause notices is issued by National E-assessment Centre as mentioned in the clause 5(x)- (as to why the final draft assessment order should not be accepted),

    • the assessee must responds within the stipulated time to the NEC [Clause 5 (xvi)]

    • Accepting or objecting to the suggestions with its own clarification / explanation in support

14. National E-assessment Centre, shall

    • If no response is received from the assessee, finalize such draft assessment order and served upon the taxpayer as per clause 5(xa) or,

    • Send the response received, if any, to the assessment unit. [Clause 5 (xvii)]

    • The response received from the assessee shall be dealt with as per procedures (send to assessment unit) laid in clauses 5(xvi, xviii)

15. The assessment unit, after taking into account response so received make a Revised Draft Assessment Order and send it to NeAC. (Clause 5(xviii))

16. The NeAC, upon receiving the REVISED Draft Assessment order, shall:

    • v In case no modification is made prejudicial to the interest of assessee, finalize the assessment order and serve upon the assessee as per clause 5(x)(a); or

    • v If any modification prejudicial to the interest of assessee is proposed, shall issue show cause notice to the assessee as per the procedure prescribed (Clause 5(x)(b))

    • v and deal with the response received from the assessee as per the procedure mentioned above, shall be dealt as per Clause 5(xvi), (xvii), (xviii). (Clause 5(xix))

       
    

17. The National E-assessment Centre, after completion of assessment order shall transfer all the electronic records to the jurisdictional Assessing officer for various purposes, discussed in the next page.   

11. Powers of Jurisdictional Assessing Officer: Once the electronic record has been transferred to the Assessing officer, he would have powers only for the following:

    • imposition of penalty;

    • collection and recovery of demand;

    • rectification of mistake;

    • giving effect to appellate orders;

    • submission of remand report, or any other report to be furnished, or any representation to be made, or any record to be produced before the commissioner (Appeals), Appellate Tribunal or Courts, as the case may be; proposal seeking sanction for launch of prosecution and filing of complaint before the Court;

12. Faceless appeals:

    • E-filing of appeals before CIT (Appeals) has already been enabled through e-Filling portal. However, the process that follows after filling of appeal is neither electronic nor faceless. In order to further harness, the power technology and to achieve the motto of faceless assessment at CIT(A) level, an appellate system, with dynamic jurisdiction in which appeal shall be disposed of by one or more Commissioner (Appeals), has been introduced.

    • Applicable from Assessment Year 2020-21, in Sec. 250 new Ss. (6B), (6C) and (6D) have been inserted to provide for a scheme, by notification, for the disposal of appeal u/s 250 so as to impart greater efficiency, transparency and accountability by

      1. eliminating the interface between the CIT(A) and the appellant to the extent feasible technologically;

      2. optimizing the utilization of the resources through economies of scale and functional specialization;

      3. Introducing an appellate system with dynamic jurisdiction in which appeal shall be disposed of by one or more CIT(Appeals).

    • v Necessary directions are required to be made by the Central Government by 31-03-2022, specifying that any of the provisions of this Act relation to jurisdiction and procedure of disposal of appeal shall not apply or shall apply with such exceptions, modifications and adaptions.

    • Every notification to be issued u/s 250(6B) or 250(6C) is required to laid before each house of parliament.

    • The Hon’ble President of Income Tax Appellate Tribunal (ITAT), Shri P.P. Bhatt, recently announced that the E-filing portal for the Hon’ble ITATs has been developed and ready for launch post compliance of mandatory scrutiny audit in accordance with the Government of India’s guidelines.

13. Faceless Penalty:

    Consequent to the E-Assessment Scheme, changes have been made u/s 274 to provide for a scheme, by notification, for imposing penalty so as to impart greater efficiency, transparency and accountability on the lines of e-assessment scheme and faceless appeals. Necessary direction to be made by the Central Government by 31-03-2022.

14. The authentication of electronic record (clause 9):

    • If the originator is NeAC and ReAC, they shall be affixing digital signature as per Section 3(2) of the Information Technology Act, 2000

    • If the originator is an assessee or any other person

      1. by the digital signature or

      2. by way of electronic signature or

      3. Electronic authentication technique as per Section 3A(2) of the Information Technology Act, 2000.

15. Delivery of Electronic Record (Notice, Order etc.) (Clause 10):

15.1 Clause 2(1) does not define service or delivery. However, clause 2(2) refers to the definitions provided under the Act.

15.2 Clause 10 of this Scheme provides that every notice or order or any other electronic communication under this Scheme shall be delivered to the addressee, being the assessee, by way of-

• placing an authenticated copy thereof in the assessee’s registered account; or

• sending an authenticated copy thereof to the registered email address of the assessee or his authorized representative; or

• Uploading an authenticated copy on the assessee’s Mobile App; and followed by a real time alert.

15.3 The assessee shall also file his response through his registered accounts only and once acknowledgment is sent by the NeAC, containing hash result, the response shall be deemed to be authenticated.

15.4 Interestingly, the notification in its definition Clause 2(xvi) r/w 2(xx) expands the scope so as to include even ‘message on WhatsApp’ as a real time alert.

15.5 Section 282 of the Act r/w Rule 127 specifically provides that notice can be served in the form of any electronic record as provided in chapter IV of the Information Technology Act, 2000.

15.6 Explanation to section 282(2) provides that the expressions “Electronic Mail” and “Electronic Mail Message” are assigned the meaning as in Explanation to section 66A of the Information Technology Act, 2000.

16. General Issues and suggestions

16.1 The Scheme, no doubt is a welcoming step, yet however the observance of the principal natural justice must be kept into mind. Such principal is deep rooted in our Constitution and Indian Jurisprudence. As per Article 21, every proceeding/ procedural must be reasonable, fair and equitable. Hence those principals have to be kept in mind while implementing the scheme.

Although the effort of the government to make the assessment and now also the penalties and appeals to be faceless, is certainly laudable when read with its objective yet however, there is some reservation to such steps being taken, more particularly when e-assessment itself is very cumbersome.

Virtual hearing: This may violate the settled doctrine of Audi Alteram Partem which inherently requires personal/face to face hearing for the simple reason that words have got their own limitations and even a thesis may not make the reader understand what the author wants to convey. The Scheme appears to have taken care of such a situation vide Clause 11(2), providing personal hearing if demanded (only through video conferencing, including use of any telecommunication application) but we have yet to see the effectiveness of VC, particular when no elaborate procedure is prescribed.

Senior Adv. Shri K. Shivram, in his recent article namely “The Silver Lining During Lockdown” has stated as under :

“ All lot of tax professionals are asking out of concern whether the virtual hearing will be future litigation practice of our country. One school of thought is virtual hearing cannot be the effective alternative for actual court hearings. Hon’ble Justice Mr. B. N. Srikrishna, former Judge of Supreme Court of India, at the inaugural speech during one of the seminars addressing the AIFTP has stated that technology will help the lawyers to make better representation, however a lawyer develops his reputation by appearing before the courts over the years which cannot be substituted by the technology. Hon’ble Justice Dr. D. Y. Chandrachud, Judge of Supreme Court of India, while addressing the laws students, in a Webinar organized by the Nyaya Forum – The National Academy of Legal Studies and Research, Hyderabad, on the topic ‘Future of Virtual Courts and access to Justice in India’ on 24th May, 2020 stated that

“I want to dissuade people from idea that virtual court hearing are some sort of a panacea. They will not be able to replace court hearings.”

One will appreciate that the young lawyers learns the values, ethics and conventions of the profession by attending the courts and watching performance of the seniors who argue before the Courts and Tribunals. It may not be possible in virtual courts. Accordingly, we are of the strong view the virtual courts may not be substitute for actual court hearings. ”

16.2. Suggestion of other units not binding: The scheme provides for the suggestions by other units viz. Verification Unit, Review Unit and Technical Unit, however, their suggestions have not been made binding on the Assessment unit/ NeAC, as the procedure adopted in the case of Transfer pricing u/s 92CA. Thus, it leaves the entire discretion to the Assessment Unit/NeAC. Hence, such assessment cannot be a team based assessment.

The probable reason behind this may be that AO/ Assessment unit must have some amount of discussion as ultimately he is the quasi-judicial authority. Its functioning is similar to that of a judicial court and thus, should not be made binding. Matters like Report by the Valuation officer or remand report by the officer i.r.t creditor etc. though may be negative but then ultimately the AO has to exercise his judicial discretion in the larger interest.

16.3. Constitutions validity of the Power conferred upon the CBDT:

• The Central Government has been empowered u/s 143(3B) of the Act, to come out with Notifications till 31.03.2020, which are necessary to give effect to the E-Assessment Scheme by making exceptions, modifications and adaptations to any provision of the Act.

• A serious question arises is it not excess delegation of power upon the government in as much as power the make the Law is sole prerogative of the Parliament and it is only the implementation of such law to be carried out by the Government. Thus, the Government is allowed to make changes in the Act merely by way of notification. Although the intention behind such provision is to ensure smooth implementation of the scheme, yet one cannot deny the fact that there is a possibility of abuse of power.

• Section 143 (3C) although requires such the notifications to be tabled before both the House of Parliaments, but neither any specific time-frame is prescribed to do so nor it is clear whether the notification necessitates discussion in the Parliament.

16.4. Direction by Jt. Commissioner u/s 144A: Under the traditional assessment procedure, an opportunity is given to the assessee to approach the Jt. Commissioner u/s 144A on a particular issue and seek his binding direction to be given to the AO to complete the assessment. However, there appears no such specific provision in the said Scheme. No doubt, in such team based assessment, the specified Income Tax Authorities includes Jt. Commissioner, holding concurrent charge to perform the function of an Assessing Officer, yet however, it may result into violation of principal of natural justice for want of opportunity of being heard before such higher authority.

16.5. Scope of Assessment Scheme-Limited Scrutiny

• The language of the Scheme and the CBDT Notification No. 61 & 62 /2019 suggest that every notice issued u/s 143(2) must specify the issues for which that particular case has been selected for scrutiny. However, the notices issued u/s 143(2) till now are not specific (rather mention broader issue only), being against the legislative intent behind bringing the Scheme.

• Further, it is also not clear as to how the scope of limited scrutiny will be converted into complete scrutiny during the course of assessment proceedings by taking approval of the Commissioner under this new E-assessments regime.

16.6. Applicability of S. 136 of the Income-tax Act:

Section 136 provides that any proceedings before an income-tax authority shall be deemed to be a Judicial proceeding within the meaning of provisions of Indian Penal Code and every income-tax Authority shall be deemed to be a Civil Court.

Whether the authorities and NeAC would be regarded as falling within the parameters of section 136.

To what extent, these proceedings are deemed to be judicial proceedings within the meaning of sections 193, 228 and 196 of Indian Penal Code, as the notification only prescribes the mechanism and the modality more particularly the procedure is prescribed.

16.6. How satisfaction as required u/s 14A, 68 to 69C etc will be recorded? Will it be recorded by Assessment Unit or can also be directed by Review Unit or National E-assessment Center?

16.7. Access to the video recordings submissions filed:

From the Scheme it does not transpires whether the written submissions / documents / material placed by the assessee or the video recordings done shall be made available to the assessee for its record and for future reference and use as an evidence before higher authorities or the courts if need arise.

16.8. Time consuming process:

The entire Scheme envisages the communication between the assessment unit and the assessee to route through NeAC only. Similarly, the inter unit communications are also to be routed through NeAC only. This will comprise many rounds and will continue till the final assessment order is passed. Such procedure may prove to be time consuming and sometime thereby prolonging the duration and hence requires to be addressed suitably.

16.9. Notice u/s 143(2) – 15 days

The Scheme [under clause 5 (ii)] has provided for only 15 days’ time within which the assessee essentially has to make his submissions. Thus, there appears no further provision or clarification that the assessee would be able to get this time extended however, if challenged, the Hon₹ble courts may read in between the line. But the Scheme ought to suitably provide flexibility and may also set a limitation on the number of adjournments to ensure timely completion of the assessment proceedings.

Further, when the Statute itself does not speak of any such time limit whether the Government can override the Statute through the notifications only.

16.10. National E-Assessment Centre to assign cases to specific assessment units [Clause 5(iii)]:

The Scheme gives wide powers to the NeAC viz. selection of the cases and assignment thereof to various assessment units. Since sole power has been provided to the NeAC, where no check would be there, it may result in arbitrariness. This becomes much more problematic as the composition of NeAC has not been specified.

16.11. Risk Management Strategy [Clause 5(x)]:

The Scheme also talks about a Risk Management Strategy and however the same has not been defined in the notification. Surprisingly, no indication is given anywhere in the notification as to what is the objective of Risk Management Strategy, The Scheme in Clause 5(x) simply states ‘the National e-assessment Centre shall examine the draft assessment order in accordance with the risk management strategy specified by the Board, including by way of an automated examination tool’.

16.12. Revision and Reassessment

Since, there are several units including a verification unit and a review unit, working on every assessment. It can be construed that a thorough and fair perusal of documents have been carried out by the units.

In such a situation, it becomes imperative to curtail the powers of the Department with regards to reassessment proceedings under section 147 of the Act and revision proceedings under section 263 of the Act.

16.13. Transfer of Case by NeAC : [Clause 5 (xxi)]

Clause 5(xxi) provides that NeAC may at any stage of the assessment, if considered necessary, transfer the case to the Jurisdictional Assessing Officer, notwithstanding anything contained in Clause (5xx). This appears to be a case where unbidden power and discretion has been bestowed upon the NeAC who, at any stage of proceeding, may transfer the case to the Jurisdictional AO instead of getting it done as a faceless assessment. There appears no elaboration under what circumstances the NeAC may consider it necessary to do so. Prima Facie there may be chances of abuse of the power.

16.15. Initiation of Penalty Proceedings during E-Assessment Proceedings :

Clause 6(i) provides that any unit may, in the course of assessment proceedings, for non-compliance of any notice, direction or order issued under this scheme on the part of assessee / any other person, send recommendation to the NeAC for initiation of penalty proceeding under chapter -xxi of the Act. This perhaps means that it is not any or every penalty prescribed under chapter-XXI, which may be considered. The intention may be to initiate only those proceedings which are towards the non-compliance of any notice, direction or order issued under this scheme but not the other penal clauses. Probably S.271 to 271G and 272A to 272BBB may be relevant provisions contemplated under clause 6(1) of the Scheme. In any case there appears no clarity on this aspect.

17. Practical Issues & Suggestions

17.1. The first and foremost issue arising as to how the entire scheme will work. As of now, there is a doubt on the successful of its implementation unless one sees the scheme happening. For that reason, it might prove to be quite time consuming, irritating and complicated for assessee and ARs, not only in the small towns even in the metro cities, particularly when there are lot of queries and the volume of the evidences being submitted is very large. No doubt, the selection of the cases and the preparation of the initial notices 143(2) specifying the issues based on which the case was selected, which are to be replied, may be a fast process because it will be all auto generated due to use artificial intelligence, etc, yet however, once the human intervention is involved like the various units and NeAC, it may seriously hamper the speed. Assuming selection of 2 lakh cases to be done in a given time frame, make a doubt on its successful completion. Therefore, to ensure strong and adequate infrastructure is a must.

There may be many types of practical issues which may be faced by the Assessment Units. Just to take an example, the assessee is a color chemical industry situated at Pali. Now the question may relate to excess consumption of raw material while preparing a particular colour. The assessment is allotted to an Assessment Units situated at Hyderabad and they are not at all aware of the technical aspect of the colour industry. Although that assessment units may refer the matter to the Technical Unit through NeAC, and the Technical Unit may reply back, yet however, there are all the chances of lack of effective communication between the assessee to explain the excess consumption etc. which is the point of dispute and the same may not be properly appreciated by the Technical Unit and also consequently by the assessment unit. This may result in undue harassment and unwarranted additions are likely to be made.

17.2. Another issue is that the portal allows an assessee to attach only 10 documents, with 1 attachment been not more than 10 MB. Now taking the situation of a client, having a Bank statement of 500 pages which is very usual,

1. Then firstly how will we upload the same?

2. Secondly, at the time of argument, it was a usual habit of opening the relevant page and show it to the authority and thereby discuss the issue. But how that will be possible is another issue. The only solution to this is that since dept. is using software and technology for its work, we also as Tax practitioners have to use new software and technology for better representation. For Example – using hyperlink in your submission to, linking the attachments with it, add comment to the attachment file.

17.3 It is suggested that such faceless Scheme may also be extended to E-revision as well. This will completely eliminate face to face interaction between the assessee/authorized representatives with the Department.

17.4 However, during the initial period of e-appeals and e-assessment, to avoid any administrative inconvenience, an option may be granted to the parties to opt in or opt out of the scheme.

18. Tips

18.1 A useful reference can be made to a recent judgment of Hon’ble Madras High court in the case of Salem Sree Ramavilas Chit Company (P.) Ltd. vs DCIT [2020] 114 taxmann.com 492 (Madras), wherein it was opined that :

“15. The Government of India has introduced E-Governance for conduct of assessment proceedings electronically. It is a laudable steps taken by the Income-tax Department to pave way for an objective assessment without human interaction. At the same time, such proceedings can lead to erroneous assessment if officers are not able to understand the transactions and statement of accounts of an assessee without a personal hearing. The respondent should have to be therefore at least called for an explanation in writing before proceeding to conclude that the amount collected by the petitioner was unusual.

17. Since the assessment proceedings no longer involve human interaction and is based on records alone, the assessment proceeding should have commenced much earlier so that before passing assessment order, the respondent assessing officer could have come to a definite conclusion on facts after fully understanding the nature of business of the petitioner. It appears that the return of income was filed by the petitioner on 02-11-2017. However, the assessment proceeding commenced much later towards the end of the period prescribed under section 153 of the Income-tax Act, 1961. In my view, assessment proceeding under the changed scenario would require proper determination of facts by proper exchange and flow of correspondence between the petitioner and the respondent Assessing Officer.

18. ……. Since the Government of India has done away with the human interaction during the assessment proceedings, it is expected that the petitioner will clearly explain its stand in writing so that the respondent assessing officer can come to an objective conclusion on facts based on the records alone….”

18.2 Drafting:

• Utmost care to be taken in absence of discussion.

• To make him understand through effective communication – mere writing letter will not suffice.

• pointedly refer to the query raised – provide all relevant facts- then your explanation – refer and rely suitable supporting evidences – cite relevant case laws, CBDT instructions etc.

• Ensure a complete reply – may include past history-as also expected query trading addition

• Take legal objection wherever needed.

• Must ask for third party information or material relied upon by department.

• Where statement recorded and relied – must ask for copy as also opportunity for cross examination- ref Andaman Timber 281 CTR 241(SC)

  1. Make Para Wise Reply

  2. Give Detailed reference to the evidence

  3. Divide Submission into suitable paras

  4. Evidence to be submitted as annexures in Paper Book form

  5. Request for summon u/s 131.

  6. Take care not to admit/confess an income or a fact adversial

  7. Check if notices had been issued/ served properly and within time (in limited situations)

  8. Be aware of the related provision and the existing judicial pronouncement, circular etc.

  9. Repetition should be avoided

18.3 Reply of the assessee must always be filed from his registered account/email id only, registered with the department in the PAN hence to ensure the same Email id everywhere.

18.4. Information Technology Act, 2000 and E-Assessment Scheme: Section 81 of the Information Technology Act, reads as under:

“The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force:

Provided that nothing contained in this Act shall restrict any person from exercising any right conferred under the Copyright Act, 1957 (14 of 1957) or the Patents Act, 1970 (39 of 1970).”

Accordingly, if there is any conflict between the provision under the Income-tax Act and Information Technology Act, the Information Technology Act, being the latter provision, it will provide for the earlier provision. The definitions of the e-assessment scheme, a number of definitions refer to the Information Technology Act, 2000. Accordingly, the understanding of the provisions of the Information Technology Act is very essential to make better representation in the e-assessment proceedings.

Important Note: Some of the relevant provisions of Information & Technology Act, 2000 referred in the Scheme are also annexed herein below. (Annexure – 1)

18.5 One must ensure that the correct and registered email id (with the Dept.) is filled in and uploaded every time, at each place where ever required, which is being regularly seen and checked by the assessee, to avoid non-receipt or missing of the mail sent by the Dept. inviting severe consequences.

18.6 In this changed scenario it has now become most essential for assessee/AR to ensure filling of the return correctly, fully and truly containing all relevant details and thus no relevant column should be left blank. For reference, refer FAQ in circular no. 26/2019 dated 26.09.2019.

18.7 The Name of the designated portal incometaxindiafilling.gov.in should now be replaced by incometaxindia.gov.in.

18.8 Document Identification Number (DIN):

• Ensure that all sort of the communication issued by any IT authorities, on or after 01.10.2019 must bear a computer-generated DIN.

• If it is not so, the communication shall be treated as invalid and deemed to have never been issued, unless there are exceptional circumstances. For detailed procedure refer Circular No. 19/ 2019
   [F. No. 225/95/2019], dated 14.08.2019).

• Interestingly however, the statutory provision being S. 282B which provided for DIN is no more in the statute book as was omitted by Finance Act, 2011 w.e.f. 1.4.2011. Thus, it is pointed out that the erstwhile section 282B needs to be revived/reintroduced.

19. Conclusion

• The Scheme has been launched by the Government on 07.10.2019 and 58322 cases have already been selected for assessment under it in the first phase by issue of e-notices on taxpayers for the cases related to tax returns filed u/s 139 of the Act after 01.04.2018 onwards.

• There is no doubt that the Scheme has conceptualized a complete paradigm shift in the way assessments will be carried out in future. The assessments have been centralized and made faceless. Exchange of communication between taxpayers and the tax department as well as amongst the income tax authorities in the tax department has been centralized. The allocation of cases by the NEC would be based on the automated allocation system. Thus, it goes without saying that both the taxpayers and the tax department will need to gear up their systems to adapt to the Scheme.

“THE POTENTIAL BENEFITS OF ARTIFICIAL INTELLIGENCE ARE HUGE, SO ARE THE DANGERS.”

—DAVE WATERS

Annexure – 1

Provisions of Information & Technology Act, 2000

1. Section 2 (1)(b)

   1. “addressee” means a person who is intended by the originator to receive the electronic record but does not include any intermediary;

2. Section 2 (1)(k)

   “Computer resource” means computer, computer system, computer network, data, computer data base or software;

3. Section 2 (1)(l)

   “computer system” means a device or collection of devices, including input and output support devices and excluding calculators which are not programmable and capable of being used in conjunction with external files, which contain computer programmes, electronic instructions, input data and output data, that performs logic, arithmetic, data storage and retrieval, communication control and other functions

4. Section 2 (1)(t)

   “Electronic record” means data, record or data generated, image or sound stored, received or sent in an electronic form or micro film or computer generated micro fiche;

5. Section 2 (1)(ta)

   “Electronic signature” means authentication of any electronic record by a subscriber by means of the electronic technique specified in the Second Schedule and includes digital signature;

6. Section 3 (2)

   “hash function” means an algorithm mapping or translation of one sequence of bits into another, generally smaller, set known as “hash result” such that an electronic record yields the same hash result every time the algorithm is executed with the same electronic record as its input making it computationally infeasible

7. Section 3A –Electronic signature

   1. Notwithstanding anything contained in section 3, but subject to the provisions of sub-section (2), a subscriber may authenticate any electronic record by such electronic signature or electronic authentication technique which–

      1. is considered reliable; and

      2. may be specified in the Second Schedule.

   2. For the purposes of this section any electronic signature or electronic authentication technique shall be considered reliable if–

      1. the signature creation data or the authentication data are, within the context in which they are used, linked to the signatory’ or, as (the case may be, the authenticator and to no other person;

8. Section 2 (1)(za)

   “originator” means a person who sends, generates, stores or transmits any electronic message; or causes any electronic message to be sent, generated, stored or transmitted to any other person but does not include an intermediary;

9. Section 13 – Time and place of dispatch and receipt of electronic record

   1. Save as otherwise agreed to between the originator and the addressee, the dispatch of an electronic record occurs when it enters a computer resource outside the control of the originator.

   2. Save as otherwise agreed between the originator and the addressee, the time of receipt of an electronic record shall be determined as follows, namely:–

      1. if the addressee has designated a computer resource for the purpose of receiving electronic records,–

         1. receipt occurs at the time when the electronic record enters the designated computer resource; or

         2. if the electronic record is sent to a computer resource of the addressee that is not the designated computer resource, receipt occurs at the time when the electronic record is retrieved by the addressee;

         if the addressee has not designated a computer resource along with specified timings, if any, receipt occurs when the electronic record enters the computer resource of the addressee.

   3. Save as otherwise agreed to between the originator and the addressee, an electronic record is deemed to be dispatched at the place where the originator has his place of business, and is deemed to be received at the place where the addressee has his place of business.

   4. The provisions of sub-section (2) shall apply notwithstanding that the place where the computer resource is located may be different from the place where the electronic record is deemed to have been received under sub-section (3).

   5. For the purposes of this section,–

      1. if the originator or the addressee has more than one place of business, the principal place of business, shall be the place of business;

      2. if the originator or the addressee does not have a place of business, his usual place of residence shall be deemed to be the place of business;

      3. “usual place of residence”, in relation to a body corporate, means the place where it is registered.

Annexure – 2

Notifications/ Circulars related to the Scheme:

S. No.	Notification / circulars Number	Subject
1.	61/2019	E-Assessment Scheme, 2019
2.	62/2019	Directions u/s 143(3B)
3.	65/2019	Prescribed authority to issue notices
4.	72/2019	National E-assessment centre, Delhi
5.	77/2019	Regional E-assessment centres and units

• Sections/chapter covered by directions issued u/s 143(3B) vide Notification No. 62/2019.

Section	Subject matter
2(7A)	Meaning of AO
92CA	TP Officer
120	Jurisdiction of IT Authorities
124	Jurisdiction of AO
127	Power to transfer cases
129	Change of incumbent
131	Power regarding discovery, production of evidence
133	Power to call for information
133A	Power of survey
133C	Power to call for information by prescribed income tax authorities
134	Power to inspect register of companies
142	Inquiry before assessment
142A	Estimate of value of assets by Valuation officer
143	Assessment
144A	Power of JCIT to issue directions on certain cases
144BA	Power of PCIT or CIT in certain cases
144C	DRP
246A	Appealable Orders
Chapter XXI	Penalties Imposable

Important Changes and Additional Requirements for Filing ITR for Assessment Year 2020-21

E-Filing of the Income Tax Returns commenced from Assessment Year 2006-07 making it mandatory for Companies to file the same online. It was a biggest challenge for the Government and also for the Professionals to accept the revolutionary change of shifting to the Digitised filing. Gradually the scope of filing expanded to cover all types of assesses, step by step from Assessment Year 2007-08 and now almost we are in the fourteenth year of it’s successful implementation. Special thanks to the efforts of Technology and the services of software providers including the professionals who are working day in and out for it.

All Assessees are now required to file their Returns online except Super Senior Citizens are given option to submit Return in paper mode provided the Computation does not have any income chargeable under head of Profits and Gains from Business or Profession.

For filing the Return of Income, the Department releases the utility for filing each year. Based on the Nature of Income, Status and other criteria set for filing vide rules framed under the Income Tax Act, the assesse is required to select the correct applicable ITR utility, fill up the same with all the mandatory information required and upload the same within the time limit specified under Section 139(1) of the Income Tax Act, 1961 or such extended period, if any. The ITD Portal accepts any XML generated from any ITR utility specified for filing for Individual and HUF and there is no option on the Webportal to reject the XML on account of non-inclusion of any head of income. Proper care has to be taken that correct applicable ITR form is selected. This casts more responsibility on the part of the professionals to ensure that the information filled up and provided is correct and not to blindly rely on the work done by the Assistants and Articles, which may create problems at the time of assessments. Any incorrect or incomplete submission of information or incorrect selection of ITR may result in concealment of details and attract any of the penal provisions under Section 276C, Section 276CC, Section 277A etc. of the Income Tax Act, 1961.

Changes in the ITR Requirements

The New ITR Forms have been notified vide Notification No. G.S.R. 338(E) on May 29, 2020 in exercise of the powers conferred by section 139 read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes and have made the rules further to amend the Income-tax Rules, 1962. These rules may be called the Income-tax (12th Amendment) Rules, 2020 and can be downloaded from the website of the Income Tax Department www.incometaxindia.gov.in under the head Notifications.

There are no changes in the number of forms and it’s applicability and it continues to be the same as earlier Assessment Year.

The Finance (No. 2) Act, 2019 inserted sub-section (5E) to Section 139A to allow the interchangeability of Aadhaar with PAN. The same has been implemented in the ITR’s notified. Now, the Individual person not having the PAN Number but having Aadhar Number will be able to file the Return of Income based on his Aadhar Number. The Department shall allot the PAN Number to such person in the manner prescribed. The person having Adhar Number can now apply for PAN online and the Real Time PAN Allotment by the Department has been implemented. The website of the ITD needs to update their software to enable the filing of ITR with Adhar Number. This revolutionary change in the filing is supposed to be for the Notices issued by the Income Tax Department to various non-filers who have entered into high value transactions in Demonitisation period and also in other cases wherein the non-filers have been identified and are not having PAN. As a result of this change, the Department will now be able to take actions against such Individual defaulters to file the Return in response to the Notices issued on account of un-accounted and un-reported transactions and may be able to take further action. Slowly and gradually, the country is moving towards Single Identification Number for each Individual person and the Government will be able to track all the earnings and spending to ensure that the income has been disclosed correctly.

Changes in the Procedure of generation of Acknowledgement

The Acknowledgement ITR-V was generated on uploading whether the Return was e-verified or not. The Assessee is required to complete the e-verifcation process either by sending the ITR-V generated signed and verification physically signed to CPC-Bengaluru or through other e-verification mode specified. On completion of the required e-verification procedure, the Digitised Acknowledgement was re-generated. From this Assessment Year, the provisional Acknowledgement will be generated in non-verified Returns filed in Form ITR-1 (SAHAJ), ITR-2, ITR3, ITR-4 (SUGAM), ITR-5, ITR-7. The provisional Acknowledgement so generated will not contain any data relating to income, deductions, taxes paid etc. and is termed as ITR V ‘Indian Income Tax Return Verification Form’. This Acknowledgement will state that Return is filed but NOT verified electronically. This Acknowledgement is required to be signed physically and sent to CPC-Bengaluru. Such Returns filed can also be e-verified through other specified modes but the e-verification process needs to be completed within the specified time limit.

Final Acknowledgement will be generated after completion of e-verification formalities and will be sent on the e-mail id of the assesse registered on the ITD Portal and also e-mail id specified in the ITR. The same is also available for downloading on the e-filing account of the assesse.

Mandatory filing of Return of Income for certain classes of Assessees

Finance Act, 2019 has introduced the mandatory filing of Return of Income by the following assesses and amended the filing of Return of Income under Seventh provisio to Section 139(1) and were otherwise not required to file Return of Income. The following additional details have to be furnished while filing ITR-1, ITR-2, ITR-3 or ITR-4.

The following categories of persons are now required to file the Return of Income

1. Cash Deposit in Current Account:

   It has been made compulsory, in all ITR forms to declare the amount of cash deposited in one or more current accounts with a bank, if such amount or aggregate of such amount exceeds ₹ 1 crore during the financial year 2019-20. The total amount deposited in cash is also required to be mentioned in the clause specified.

2. Expenditure on Foreign Travel:

   The person incurring expenditure of an amount or aggregate of amount or aggregate of amount exceeding ₹ 2 lakh for travel to foreign country for himself of for other person is required to be selected as “Yes” or “NO”. The total of such amount spent on foreign travel is required to be reported.

   Based on the wordings in the said clause, it is presumed that the information is to be submitted by the person who has actually spent the amount and not by the person who has actually travelled. Further, if the amount is spent for travel is actually reimbursed to the spender by the person who is actually traveling then it has to be reporting requirements will be of the traveller and not by the spender.

   There may be an instance where the amount has been spent by a person on behalf of other person in such cases may trigger scrutiny if the amount spent is significantly high on behalf of other person and accordingly proper care to be taken for reporting under such cases.

   The better option for reporting here could have been as under:

   1. Whether you have spent an amount or aggregate of amount or aggregate of amount exceeding ₹ 2 lakh for travel to foreign country for himself of for other person;

      1. Whether for self – Yes/No – If yes, amount of expenses

      2. For other person – Yes/No – If yes, provide the details like Name of the person, Relationship, PAN/Addhar and the actual amount spent, Purpose of travel;

   This could have given much clarity of the information sought by the Department and asking for only the required further information, in case any further clarification is required. In many cases, the travelling expenses are incurred by the main person of the family on all other person’s behalf.

   The information so submitted will be readily available and reflected in Form 26AS, as the provisions of TCS has been introduced by the Finance Act, 2020 on travel agents, though it’s implementation has been shifted to October 1, 2020, in lieu of COVID-19 the relaxations granted by The Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020.

3. Expenditure on Consumption of Electricity:

   Lastly if the person has incurred expenditure of amount or aggregate of amount exceeding  ₹ 1 lakh on consumption of electricity during the year 2019-20 will have to disclose the actual amount so paid.

   If any of the above (3) conditions specified, are trigged, then the assessee needs to select the option ‘Yes” or “No”, stated in the ITR. If “Yes” option is selected, then other mandatory requirements field sought in the form get activated and if the required information is not filled, then the assesse will not be able to generate the validated XML for uploading Return.

   The foreign travel or electricity expenditure information sought in the Return, the clarification to report the amount whether it is required to be reported is only for personal purpose or not etc. is not given. If the absence of necessary clarification, the filings may end up creating genuine problems for the assessee at the time of assessment as there may be cases where the expenses may be for business purpose etc. or amount spent for assets like immovable property given on rent and the electricity expenses paid by the Tenant. Necessary representation needs to be made for getting the said clarification from CBDT as to what is the intention of such reporting or to modify the reporting only for the personal purposes etc.

Reporting of Income or Loss through Pass Through Entities (SCH-PTI)

Pass through Entities (PTI) like alia, Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (In VITs), Category I and Category II Alternative Investment Funds (AIFs) are allowed to pass its income to its investors without paying taxes and accordingly such investors are liable to pay tax on such income as if they have directly made the investments. Tax is payable by the investor and not by PTI as it is treated as income of the Investor. Further AIFs can pass any income which also includes losses (other than income from business or profession) to its investors, as per amended Section 115UB the Finance Act, 2020

The new ITR forms incorporated the above changes by introducing SCH-PTI, which needs to be filled up and the necessary income or loss, including the TDS Credit claimed is required to be reported in the said schedule. If the carried forward losses of earlier years of such PTI’s are adjusted against the current year’s income, then the provision for claiming such losses to be mentioned in the required SCH-CFL

Additional requirements of information sought for various classes of income.

Income from Salary

The details under Nature of Employment, Government employees have been bifurcated as Central Govt. and State Govt. employees. Also, a new option “NA” has been added to the list. This option will be beneficial for the individuals claiming Family Pension, etc. in ITR-1, and ITR-4, It is an welcome move as it was long pending requirement sought which has been addressed.

Income from House Property

Joint House Ownership:

Individual taxpayers who are joint owners of house property can now file their Annual Income tax Return using the simple ITR-1 (Sahaj) or ITR-4 (Sugam) forms. Earlier, they were not eligible to use these ITR to report their incomes if they are joint owners in a house property. ITR-1 and ITR-4 are the simple Returns which do not require any additional information as is required by ITR-2 and ITR-3. This seems to have been done to for giving effect by The Income Tax (First Amendment) Rules, 2020 w.e.f. 01.04.2020 to avoid unusual hardship to the individual taxpayers.

Further, in case of let-out property, instead of PAN and TAN details of the Tenant, Aadhaar Number of the Tenant can now be provided, if the tenant is an Individual.

Profits and Gains of Business or Profession

For Income from Profits and Gains of Business in ITR-3, ITR-5 or ITR-6, certain additional details have been sought under Audit Information. These are as follows:

1. Whether assessee is declaring income only under Section 44AE/44B/44BB/44AD/44ADA/ 44BBA/44BBB?

2. If No, whether during the year Total sales/turnover/gross receipts of business exceeds ₹ 1 crore but does not exceed ₹ 5 crores?

If the answer to point II above is Yes, then additionally need to inform whether aggregate of all amounts received in for sales, turnover or gross receipts or on capital account like capital contributions, loans etc. during the previous year, in cash, does not exceed five per cent of said amount?

Also, if the answer to point II above is Yes, then assesse further needs to inform whether aggregate of all payments made including amount incurred for expenditure or on capital account such as asset acquisition, repayment of loans etc., in cash, during the previous year does not exceed five per cent of the said payment?

In ITR-4, under “Schedule BP”, while calculating the Gross Turnover or Gross Receipts under Section 44AD, amounts received through prescribed electronic modes has been incorporated in addition to amounts received through account payee cheque, account payee bank draft and bank electronic clearing system. In ITR-4, while calculating presumptive income from goods carriages under Section 44AE, the celling of maximum 10 rows has been removed.

A new entry of 45% Depreciation is added in the block of Plant & Machinery to claim an additional depreciation of 15% on motor vehicles purchased between 23rd August, 2019 and 31st March, 2020. It is for giving effect to the announcements made as part of a stimulus package granted to vehicle industries on
 23-08-2019. The new depreciation rates have been notified by the CBDT vide Notification No. 69/2019, dated 20-09-2019 effective from date 23rd August, 2019.

Life Insurance Business

Person earning income from Life Insurance Business (ITR-5 and ITR-6), now requires following additional reporting in Schedule- BP

1. Net profit or loss from insurance business referred to in section 115B;

2. Additions in accordance with section 30 to section 43B;

3. Deductions in accordance with section 30 to section 43B; and

4. Income from life insurance business under section 115B.

The required changes have been made in other schedules and accordingly in the Schedule CFL (Details of losses to be carried forward to future years), a separate information is required for income from the life insurance business.

Capital Gains

1. Capital Gains Sale of Shares ITR

   The Assessee reporting income from capital gains on sale of shares are now required to give the full information and details as under

   1. ISIN Code (Scrip Code with Stock Exchange)

   2. Name of the Share/Unit

   3. No. of Shares/Unit

   4. Sale Price Per Share/Unit

   5. Full Value of Consideration (Total Sales Value)

   6. Cost of Acquisition without Indexation

   7. Cost of Acquisition

   8. If the Long Term Capital Asset was acquired prior to 1.2.2018, then FMV as on 31.1.2018;

   9. FMV per share/unit as at 31.1.2018;

   10. Total FMV of the Capital Asset as per Section 55(2)(ac)

   11. Expenditure incurred wholly and exclusively for the purpose of transfer

   12. Total Deduction

   13. Balance Long Term Capital Gains

   The information sought in the ITR will make it very difficult especially for the persons who are having multiple such transactions and are reporting income under this head. The Department needs to provide pre-filled utilities in time capturing all such information, other than cost of acquisition. Stock Exchanges have been providing details of the transactions done on the basis of PAN on regular basis through AIR. This will not only save the time and effort of the assesse but they will have an opportunity to verify the transactions captured are correct or not before uploading the Return of Income. Any mismatch in providing incorrect or incomplete information may call for harsh penal provisions under Section 276C, Section 276CC, Section 277A etc. of the Income Tax Act, 1961.

   It is recommended that the professionals advise such clients to maintain and update the records regularly so that the correct information is given in the Return of Income and they get the required information in time.

2. Short Term Capital Gains on Sale of Immovable Property

   In case of Sale of Property, the Seller now has the option of giving Aadhar Number of the Purchaser, if the PAN is not available. This will enable the Department to check on the high value transactions entered by non-tax complying assesses, which is one of the welcome move to increase the tax return filers.

Income from Other Sources

Deductions under Chapter VIA

Schedule DI- Details of Investment” has been amended to incorporate in all the ITR Forms, as per the COVID-19 Notification guidelines issued and accordingly the additional statement giving the information for any investment/ deposit/ payments made during the period 01.04.2020 to 30.06.2020 for the purpose of claiming any deduction under Chapter VIA. The details of the investments made during the specified extended period is required to be reported in the column specified. It has to be ensured that the amount claimed in the Assessment Year 2020-21 is not claimed again in the subsequent Assessment Year on the basis of deposit. Any incorrect claim may invite disallowance and penal provisions for submission of incorrect information.

Insertion of Schedule 80D for claiming mediclaim premium

A new schedule 80D has been inserted to calculate total eligible deduction under Section 80D for mediclaim premium with various sub heads. Earlier 80D deduction was part of the Schedule “Part C-Deduction & Taxable Income”. Under the new schedule assessees will now have to answer the questions like:

1. Whether you or any of your family members (excluding parents) is a senior citizen?

2. Whether any of your parents is a senior citizen? and then details of premium paid under sub heads like health insurance and preventive health check-up are separately asked and finally total eligible claim under Section 80D calculated.

This was required as at the time of processing of Return of Income, the actual eligible amount of deduction is not correctly granted by the system, resulting in additional tax liability.

Changes relating to uploading of specified ITR’s

ITR-6

1. Reporting of Income received from foreign company as per Section 115BD of the Income Tax Act, which is chargeable at a concessional rate, the necessary field for reporting has been incorporated in SCH-OS in ITR-6;

2. Schedule SH-1 not applicable in the case of Section 8 companies and companies limited by guarantee. Start-ups are exempted from levy of Angel Tax if the conditions mentioned in DPIIT’s Notification No. GSR 127 (E) [F.NO.5 (4)/2018-SI], Dated 19-02-2019 are satisfied.

ITR Form-6 uploaded on the e-filing web portal of ITD will now be required to be verified by using a digital signature only and not through other options. Further now, the Verifier of the Income Tax Return will now be additionally required to mention the Residential Address and the DIN Number, issued by MCA (in case of a Director).

ITR-7

In Part A- General, in the information relating to identity of assessee, the details of any project or institution run by the assessee during the year, section under which return is filed and section under which exemption has been claimed etc. is required to be given. Further certain schedules to this return form are mandatorily required to be filled up by assessees claiming exemption under specific provisions, as per the following list:-

Schedule required to be filled up	Exemption claimed under section
Schedule LA	Political party claiming exemption u/s 13A
Schedule ET	Electoral Trust claiming exemption u/s 13B
Schedule AI	Trust/institution claiming exemption u/s 11 and/or 10(23C)(iv) or 10(23C)(v) or 10(23C)(vi) or 10(23C) (via)
Schedule IE-1	Assessee claiming exemption under any of the clauses of section 10(21), 10(22B), 10(23AAA), 10(23B), 10(23FB), 10(23D), 10(23DA), 10(23EC), 10(23ED), 10(23EE), 10(29A), 10(46), 10(47) and persons whose income is unconditionally exempt under various clauses of section 10
Schedule IE-2	Assessee claiming exemption under sections 10(23A), 10(24)
Schedule IE-3	Assessee claiming exemption under sections 10(23C)(iiiab) or 10(23C)(iiiac)
Schedule IE-4	Assessee claiming exemption under sections 10(23C)(iiiad) or 10(23C)(iiiae)

Other Disclosures

1. Re-Registration of the Trust as per Finance Act, 2020, the details will be required to be given, if the Trust has done the same;

2. Donation from part of Corpus etc the disclosure requirements have been enhanced;

Other Changes

1. Income like interest chargeable at a concessional rate on account of DTAA, the reporting of such residuary income can be mentioned in the SCH-OS in the specified field to enable system to compute tax accordingly;

2. Foreign Companies reporting income from royalty or FTS are chargeable at a concessional rate. Accordingly a filed for reporting such income has been added in SCH-OS in ITR-6;

3. Secondary Adjustments on account of Section 92CE, to increase or decrease the Total Income of the Assesesee, the Schedule for such reporting has been modified accordingly in the ITR-3, ITR-5 and ITR-6;

4. If the Return is filed in response to the Notice issued by the Department, then UDIN Number is required to be quoted in the respective field. This is in line with DIN mechanism was developed to maintain a proper audit trail of all the communications of the department with the taxpayer;

5. Companies opting for alternate Tax Regimes i.e. concessional rate announced from time to time by inserting Section 115BAA and Section 115BAB. in Part-A of General Schedule, the company is required to choose whether it is opting for any of the alternative tax regimes of sections 115BA, 115BAA or 115BAB;

6. Section 115AB relating to taxing of units of mutual fund purchased in foreign currency by Offshore Fund at a concessional rate of 10%, the necessary filed for reporting such income has been incorporated in SCH-OS in ITR-6;

7. Option to select “SOP” added in ITR-5 and ITR-6 to report the property value as “NIL” if it consists of any building or land appurtenant thereto is held as stock-in-trade and the property or any part of the property is not let-out during the whole or any part of the previous year, provided 2 years from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority;

8. Reporting of disallowance under Section 40(ba) for AOP filed has been incorporated [ITR-3 & ITR-6];

9. Assessse can now give more than one bank account number for crediting the Refund. This will now benefit the assesse to get the refund in the other bank account, if the first bank account is not operational or refund cannot be credited. It is recommended that the bank accounts maintained by the assesse to be pre-validated on the ITD Portal to ensure that the refund gets credited faster;

Different Due Dates for filing of Audit Reports and Returns

Further in case the Company is required to furnish a report of audit under Sections 10AA, 44AB, 44DA, 50B, 80-IA, 80-IB, 80-IC, 80-ID, 80JJAA, 80LA, 92E, 115JB or 115JC of the Income Tax Act, the Company shall file such report electronically at least one month before the due date of filing the return of income.

As per the recommendations in the Finance Act, 2020, the Department is gearing up to give prefilled utility capturing all the mandatory reported allowances/disallowances from the Audit Reports filed online. At present, most of the Notices for defaults are generated on account of mismatch of information in Audit Report and in ITR. Though this is a welcome move, but it is required to have a field either in the Return of Income or in the Audit Report to be filed to mention the contentions of the assesseee in such mismatch cases. If this window of informing the contentions are given, the same will ease the processing and also be helpful at the assessment stage. This matter requires proper representation by various forums.

Option to either give Aadhar instead or PAN interchangeably.

While furnishing audit information in ITR-3, ITR-5 and ITR-6, now there is an option to give either the PAN or the Aadhaar Number of the Auditor. Further also while providing information of Key Persons in ITR-6 PAN
 and Aadhaar Number can be used interchangeably.

Also in case the Return of Income is being filed by a representative assessee, now there is an option to give either the PAN or the Aadhaar Number of such person.

Hence, slowly and gradually the country is moving towards single Identity Number, to capture all the earnings and spending of a person to ensure that the tax filers are increased which is the main intention of the Government.

Penal Provisions

Section 271AAC of the Income-tax Act (inserted with effect from Assessment Year 2017-18 vide Taxation Laws (Second Amendment) Act, 2016) empowers AO to levy penalty at the rate of 10% of the tax payable under section 1 15BBE if any addition is made under section 68, section 69, section 69A, section 69B, section 69C, section 69D. However, no penalty shall be levied if such income is disclosed in the return of income and tax on such income is paid under Section 115BBE on or before the end of the relevant previous year. Tax is payable @ 60% on the additions made by the Assessing Officer on which is considered undisclosed income and added at the time of assessment.

Changes in Form 26AS

CBDT has notified new Annual Information Statement (AIS) vide Notification No. 30/2020 dated 28.05.2020 the new Annual Information Statement (AIS) under section 285BB by inserting a new Rule 114-I in the Income Tax Rules, 1962 to replace age-old Form 26AS notified under Rule 31AB as per the Finance Act, 2020.

The New Annual Information Statement (AIS) will be effective from 01.06.2020 and from that date the old Form 26AS will become obsolete. The Finance Act 2020 has inserted a new section 285BB regarding Annual Information Statement, in order to expand the scope of Form 26AS beyond the information related to taxpayers tax deducted and tax collected.

The new brought Form 26AS shall include-

1. All information relating to tax deducted and tax collected, payment of taxes and refund, as was available in the earlier Form 26AS;

2. Details about income tax demand, pending and completed tax proceedings including assessment and reassessment proceedings, revision and any appeal related information.

3. Information in respect of Specified Financial Transactions shall also be included. Section 285BA requires transactions of purchase/ sale of goods, property, services, works contract, investment, expenditure, taking or accepting any loan or deposits to be submitted in Form 61A/B by specified persons including prescribed reporting financial institution.

4. As per the newly inserted Rule 114-I(2) of the Income Tax Rules, CBDT shall authorise Director General (Systems) or any other officer, to upload in this form any information received from any other officer or authority under any law which shall include any adverse action initiated or taken or found or order passed under other laws such as GST, Benami Law, Custom, etc.

5. Details of information received by the Tax Department from any other country under the treaty covered u/s. 90/90A.

6. Personal information of the assesse including Mobile No., Email ID and Aadhar shall also be available in the new Form.

The Form shall be updated regularly within 3 months from the end of the month in which any information is received and hence the same shall provide all the latest information, making the form interactive. Now, the tax filer has to ensure that the required information displayed in the said statement is correct or not and if any incorrect information is found the same to be reported to respective authority for rectification and forward the copy of the same to the Assessing Officer to ensure that there is no action taken for under reporting or concealment of information at any stage.

Form 26AS in its new Avatar will provide all the information of the taxpayer which will benefit the tax authorities for having better and reliable source of information to assist in while doing E-Assessments wherein there is no/limited interaction with the assessee.

One of the source of information for selection of cases for scrutiny is mismatch of information available in Form 26AS with that furnished by the assessee in the ITR which is easily identified by their systems. The Tax Authorities have the access to information about the assesse under other laws like GST and customs as well thus including information of its import, export, turnover, etc. It shall provide information to the authorities about their income or assets located outside India.

The assessee will have to provide for correct and complete information at all times to the banks or financial institutions or any other authority about any demand or proceedings under any law as it will be asked by them. Form 26AS will be a due diligence report with background checks. The Government is slowly and gradually bringing in more transparency of the profile of taxpayer making it tough to conceal or provide any incorrect information.

Fresh Start with Exuberance

Whether we can say goodbye to Covid-19 or not and when, is a big question mark! Just like HIV it is going to remain in our vicinity and we all will have to learn to live with it keeping our safe distance by following the Government guidelines and protocols. We are going through huge economic and social turmoil on account of Pandemic. Having said that, we all admit we are confined to the safety of our homes, (which we enjoyed In the beginning but are frustrated now) for more than ever thought of. We are looking forward to having a busy and hectic life as was prior to December 2019. For achieving that we will have to think beyond Covid-19.

Revival of economy will get a momentum with deep patriotism now embedded in our mind. We are looking forward to a better ‘Atmanirbhar’ India. I request all of you to maintain your exuberance for the new life after record days of complete lockdown and wish all the stakeholders in the Tax profession to prosper and attain a greater heights.

As stated earlier, we would be living with Covid-19 and not say goodbye, therefore be wise and smart, do not rush blindfolded. Be careful for you, your family, community and for the Nation at large, to add to the prosperity and to help bringing down the Covid-19 curve.

The e-publication in downloadable form for members

The first e-publication of AIFTP, prepared during complete lockdown on ‘Vivad se Vishwas’ (VSV) theme was available on website for viewing. However, after receiving complaints from many members that the same is not user friendly, the Publication Committee has decided to make available this valuable e-publication running into 414 pages to the members and public at large at a very concessional rate. The members of the Federation would be able to get the E-book at 50% discount at ₹ 250/- plus taxes i.e. for ₹ 295/- only. The added advantage of the e-publication is that the E-book will be revised / amended as and when there is clarification / amendment by the Central Government. The subscribers who have already paid for e-book would have the benefit of getting the revised e-publication for downloading in Pdf without any further cost up to 31st March 2021. An added incentive to buy this book is the reply to the queries raised by the subscribers to the book on VSV by a team of Senior Advocates headed by Dr. K. Shivram. The other features of the e-book are given in the journal. Members are requested to grab this golden opportunity.

The Tran-1 dispute

It is rightly stated that GST was the Act introduced in a great hurry without the required preparedness. The best example of the bureaucratic rigid approach is not allowing filing/revising of Tran-1 by the GST registered persons who have not been able to upload the same within the extended time due to some procedural defects or may be on account of absence of proper knowledge and facility. The article in this review about the Tran-1 credit may please be looked into. The judgment by the Delhi High Court in case of SKH Sheet Metal Component dated 16th June 2020 is worth reading (WP (C) 13151/2019) The Hon’ble Justice Sanjeev Narula has made critical observations as regards the difficulties faced by the dealers at large. They have clearly stated that on account of small clerical mistake the petitioner has to lose huge amount of ITC which they were otherwise entitled under the earlier laws. The Court has also observed “The stand of the respondent, in a nutshell, is that the petitioner committed this mistake – so he ought to suffer for the same. Let us assume that indeed the mistake happen purely on account of a human error, for which the petitioner alone is worthy of blame. Does it mean that for this blunder, the law will provide no restitution and it is a fait accompli for the petitioner? In our view, that should never be the case and law should provide remedial avenue. In our view, the stand of Central Government, focussing on condemning the petitioner for a clerical mistake and not redressing the grievance, is unsavoury and censurable. Tax laws, as it is, are complex and hard to interpret. Moreover, no mater how well the taxpayer well conversant the taxpayer may be, with the tax provision the errors are bound to occur.”

The Hon’ble High Court has also considered the impact of Finance Act 2020 and amendment to Section-140 with retrospective effect The HC held that the rules suffer from vice of vagueness in context of technical difficulties on common portal. The beneficial observation in this judgment is that ITC under the existing laws is a vested right and its credit should vest in favour of the taxpayer and could have been utilized for payment of outgoing taxes under the respective legislation, but for the repeal of existing laws. For the reasons given in the judgment the petitioner is permitted to revise Tran-1 form on or before 30th June 2020 and transition the entire ITC, subject to verification by the respondent. The respondents are directed to open the online portal for filing revised declarations in Tran-1 electronically or to accept the same manually. An important aspect which was not brought to the notice of the Court is that the credit which is claimed in Tran-1 is already passed on to the subsequent buyer by the assessee and therefore the assessee is at a greater disadvantage if the Tran-1 credit is not allowed to be claimed.

In my opinion, the judgment is perfectly in order. However, the deadline of 30th June 2020 will not totally solve the issue. Major metropolitan cities like Mumbai, Delhi, Ahmedabad and many other places, the public transport facilities have not yet started and is not likely to start by 30th June 2020 on account of increase in the containment areas. The Central Government and the Finance Ministry must take the observation made in this judgment in right spirit and suo moto extend the date at least up to 15th August 2020 for Tran-1. The GST Council has already recommended the extension of due dates falling on 30th June and thereafter. A positive well calculated step by the Government would go a long way and give a sigh of relief to many. It would also make the Government taxpayers friendly.

Need to have tax friendly environment

This reminds me of the pertinent question asked by the Hon’ble Chairman of the CBDT to Shri Sadguruji. I had the privilege to be the one amongst nine persons invited by the President of ITAT to have live conversation and question and answer session with Shri Sadguru. The need of the hour, especially when the Government is making all out efforts to rejuvenate the economy, the tax friendly measures would go a long way and would help in increasing the tax compliance rather than tax avoidance. The business class has realized that litigation has no end, there is rising resistance to corruption and therefore the mindset of the registered dealers now is more towards tax compliance than towards tax avoidance. The tax friendly measures by the Government , both under Direct and Indirect Tax would gain the confidence in the Government.

Stop Phishing inquiry

In the recent past, we have seen the GST officials sending notices and calling the registered person to produce all books of accounts like a normal assessment. This can be simply avoided if a proper desk audit is done by the official before issuing the notice. The Government has the details of the entire transactions by the dealer in e-way bill, GSTR-1, 3B, 2A along with the details of each and every invoice raised by the assessee. It is therefore futile to issue a general notice and direct the registered persons to attend with all books of accounts etc. Instead the department can act smart and tax friendly by pointing out the precise discrepancy noticed by their research department / desk audit. This would help the assessee and also would leave considerable space and time with the department to dig into the real offenders.

Webinars and National Tax Conference

Once again, may I remind members to request their friends in the Tax profession to become our members. The fees are destined to be hiked. During the lockdown and till date we had multiple, webinars, Virtual workshops, both under direct and Indirect taxes, to keep our members updated. Till date we have completed 71 webinars. The benefit of membership is having access to all webinars on our website. The GST has opened up the national stage for professionals too. AIFTP provides valuable opportunity to network with like minded professionals throughout India.

Till we are allowed to meet freely in person, the Federation has decided to hold virtual National Tax Conferences. I request you all to look forward to future programme and join in large numbers.

Stay safe, stay healthy.

With best wishes,

Nikita R. Badheka
 National President, AIFTP

Hearings via Video Conference

In continuation of the last month’s (May, 2020) Editorial by respected madam Prem Lataji Bansal – Sr. Advocate and one of our active Past President, I would supplement my thoughts on the same subject though on an entirely different but consequential aspect to Covid – 2019 in relation to Advocates in general and tax professionals in particulars.

2. We are presently under complete lockdown from 24th March, 2020, though some of the parts of our country have been partly or fully unlocked from 1st June, 2020. Major affected places like Maharashtra, Delhi, Gujarat and TamilNadu continue to be under lockdown with partial relaxation for persons rendering essential services. It is regrettable to note that advocates and their staff are not covered under the said category for travelling by suburban trains in Mumbai therefore in those areas normal professional activities cannot be restored.

3. During the lockdown period, the courts as well as tribunal did take up cases requiring immediate interim orders, only through video conferences; so effective physical practice have come to a grinding halt since March, 2020.

4. Hearings through video conferencing is not so simple. It is easier said than done. Supreme Court, various High Court and tribunals have adopted separate procedure that have to be followed whenever an urgent matter is desired to be heard by litigant through his advocate.

5. For proper appreciation of the procedure, I would in nutshell, refer hereunder the procedure framed by Hon’ble Bombay High Court.

6. Hon’ble Chief Justice nominated designated Hon’ble Judges with specific assignments to have video conference hearing only urgent matter on notified working time and date.

7. In case the matter happen to be a fresh case, the advocate will have to submit a precipe in advance, after payment online of prescribed court fees. Duly signed soft copy of the Petition in PDF Format with an undertaking to submit hard copies on restart of regular court after the lock down period have to be submitted. All annexures are to be in additional volumes also in soft copy and that too in PDF Format.

8. In case pending (i.e. already registered) matters if required to be taken up in case of urgency, a precipe have to be emailed in advance before 11 am on an earlier day to the specified ID against the category to the matter.

9. The precipe should contain maximum three names of advocates with their email Ids, who would attend the matter at video conference hearing. The Advocates have also to mention their Bar Council Enrolment number and phone number with soft copy of photo ID.

10. If the Hon’ble Judge allow the precipe, time slot and the date for hearing will be communicated with link and PIN of video conference room. Such details are not to be shared except for giving notice to the other side. At the time slot the link and PIN have to be connected. There are quite many other technical details that have to be complied with while hearing. For those litigants, who do not have internet facility but require their matter to be heard urgently can approach the specified separate court room where such facility would be provided.

11. I referred to the procedure for the benefit of our members who seek urgent hearing of any of their matter in case of emergency during the lockdown period.

12. It is needles to mention that dress code have to be strictly adhered to. An undesirable incident happened in the case of Shri. Madhu Sharma vs. Manoranjan Sharma (Transfer Petition Case No.755 of 2019). In that case the concerned advocate started video conference with an Hon’ble Judge while in his bed room with Tshirt on. The Hon’ble Judge upon observing cavalier and casual fashion of the advocate, adjourned the matter and initiated a contempt proceedings against the concerned advocate. Ultimately the case reached the Supreme Court on 15th June, 2020, when the said advocate remained present and tendered unconditional apology mentioning that it was inappropriate for him to appear before the Hon’ble Judge while lying on bed dressed in a T-Shirt. In the interest of justice the Supreme Court accepted the apology so tendered but reemphasised that the minimum court etiquette in term of what can be considered to be a decent dress, background etc., have got to be followed scrupulously.

13. The moral of the story is that the litigants and their advocates should not take video conference hearing in a very causal manner but the same is require maintenance of the decorum and dignity of the court considering the seriousness of the proceedings before the court.

14. I hope my reference to the above case will receive due notice by all our members who may have occasion to approach a court via video conference hearing in case of urgency like unwarranted attachment of the bank account at the instance of tax authorities (E.g. the case of M/s. Kaish Impex Pvt. Ltd. vs. Union of India) (2020) 74 GSTR 28 (Bom).

15. A welcome step is taken by Delhi High Court through its Circular No. 01/IT/DHC/2020 dated 20th June, 2020by offering links for public view in during of court hearings through Video Conferences so as to observe the requirement of an open court proceedings. Those interested have to contact the concerned Court Master on their mobile phone numbers duly published on the cause list latest by 9:00 pm of an earlier day or before 10:00 am of the date of hearing but no such link will be offered after the commencement of the hearing.

16. While concluding I wish one and all to observe and follow the concerned State Government Guidelines, in regard to their activities of moving out of the house for undertaking any professional work.

Mumbai	P. C Joshi
Date : 22.06.2020	Member, Editorial Board