CBDT PROVED TO BE VERY UNREASONABLE TOP AUTHORITY EVEN DURING REGIME OF NAMO GOVERNMENT - Part 2

[CA DEV KUMAR KOTHARI]

Even after directions from various High Court’s action of CBDT is not only very delayed but also half-hearted, incomplete and wrong- it requires to be rectified and clarified by a new Circular or addendum to Circular dated 01.10.2015 for extension of due date u/s 139 (1) in clear terms as required u/s 119.

Earlier article:  Earlier article  was written by author on 30.0915 at about 9:00PM and was webhosted on 03.10.15 under title
	EXPECTATIONS OF EASE IN BUSINESS DENIED - CBDT ALSO APPEARS TO BE UNREASONABLE TOP AUTHORITY LIKE LOWER TAX AUTHORITIES. On the following link.

https://www.taxmanagementindia.com/visitor/Article.asp?Expert_ID=5385

The article was written when few hours were left in countdown of last moment by which ROI and TAR could be uploaded that is 12:00 PM on 30.09.2015. By the time of writing of the article CBDT had extended time only for few states and not for all states, in spite of instruction from some other High Courts.

Unjust and High handed approach by CBDT:

The above situation created  by CBDT was totally unjust and high handed approach of CBDT. When the highest administrative authority of direct tax department had such an approach, attitude and mentality, what public can expect from lower authorities. This approach of CBDT can be considered an indication of free hand given by CBDT to lower authorities to harass tax payers as is happening even during NAMO government.

Order- Instructions for extension of time to file ROI and TAR till 31.10.15 instead on30.0915 are reproduced below with highlights added by author. The latest order is dated 01.10.2015 that is after lapse of due date on 30.06.15 at 12PM. The order dated 01.10.2015 is for all India whereas earlier orders were for few states stated therein. As discussed later on, it seems that the orders issued are without proper application of  mind and are not in accordance with provisions and intent. These circulars can be again a big point of controversy and litigation. As discussed latter analysis of Circulars by way of highlighting added, circulars need to be amended and clarified.   

Order-Instruction - Income Tax

F.No.225/207/2015/ITA.II

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

North Block, ITA.II Division

New Delhi dated the 1^st of October, 2015

Order under Section 119 of the Income-tax Act, 1961

In supersession of orders under Section 119 of the Income-tax Act, 1961 ('Act') dated 30th September, 2015 vide file of even number, the Central Board of Direct Taxes, in exercise of powers conferred under Section 119 of the Act, hereby orders that the returns of income and audit reports u/s 44AB due for e-filing by 30th September, 2015 may be filed, across the country, by 31^st  October, 2015.

(Rohit Garg)

Deputy Secretary to the Government of India

Xxxx

New Delhi dated the 30^th of September, 2015

Order under Section 119 of the Income-tax Act, 1961

The Central Board of Direct Taxes, in compliance to the order of Hon'ble Punjab and Haryana High Court dated 28.09.2015 in case of Vishal Garg & Ors. vs. Union of India & Anr.; CWP 19770-2015 and in exercise of powers conferred under section 119 of the Income-tax Act, 1961 ('Act'), hereby orders that the returns of income due to be E-filed by 30^th September, 2015 may be filed by 31^st October, 2015 in cases of Income-tax assessees of the State(s) of Punjab and Haryana and Union Territory of Chandigarh.

2.  This order shall be subject to the outcome of any further appeal/SLP which the CBDT may file against the said judgment.

(Rohit Garg)

Deputy-Secretary to the Government of India

xxxxxx

New Delhi dated the 30^th of September, 2015

Order under Section 119 of the Income-tax Act, 1961

The Central Board of Direct Taxes, in compliance to the order of Hon'ble Gujarat High Court dated 29 .09.2015 in case of All Gujarat Federation of Tax Consultants vs. CBDT; Special Civil Application No. 15075 of 2015 and in exercise of powers conferred under section 119 of the Income-tax Act, 1961 ('Act'), hereby orders that the returns of income due to be E-filed by 30th September, 2015 may be filed by 31^st  October, 2015 in cases of Income-tax assessees of the State of Gujarat.

2. This order shall be subject to the outcome of any further appeal/SLP which the CBDT may file against the said judgment.

(Rohit Garg)

Deputy-Secretary to the Government of India

An analysis in addition to highlights added in circular reproduced above:

Earlier an orders were passes under the same file number on 30.09.2015 ordered that that the returns of income due to be E-filed by 30th September, 2015 may be filed by 31^st  October, 2015 in cases of Income-tax assessee of the State of Gujarat.

Thereafter another order on the same day was issued on similar lines for  the state Punjab and Haryana and Union Territory of Chandigarh.

 In both the orders, the Board has also stated that  “This order shall be subject to the outcome of any further appeal/SLP which the CBDT may file against the said judgment”

The final Circular was issued on the day next after original due date that is on 01.10.15. This circular says that it is:

In supersession of orders under Section 119 of the Income-tax Act, 1961 ('Act') dated 30th September, 2015 vide file of even number, the Central Board of Direct Taxes,

That this is also  in exercise of powers conferred under Section 119 of the Act,

The circular orders that:

1.  the returns of income and audit reports u/s 44AB due for e-filing by 30th September, 2015 may be filed, across the country, by 31^st  October, 2015.

Observation of author:

The Circualr dated 01.10.15 supersedes earlier two circulars dated 30.09.15, therefore it can be said that Circualr dated 01.10.15 supersedes earlier circulars in all respect and the circular dated 01.10.15 applies to whole of India including the states of Gujarat, Punjab and Union Territory of Chandigarh for which earlier two circulars were issued.

The ultimate circular dates 01.10.15 does not contain anything about appeal before the Supreme Court and is not subject to outcome of such appeal, if any. Therefore, extended date is not subject to any appeal before the Supreme Court against judgments of High Courts.

There should be no appeal before The Supreme Court-

--appeal if any filed should be withdrawn:

As discussed above , in view of ultimate Circular dated 01.10.15, the order is not subject to any rider as was in earlier two circulars. Therefore, the CBDT or concerned authority should withdraw appeal if any, filed on this issue and in case no appeal has been filed, there should not be an attempt to file an appeal before the Supreme Court.

About Circular- its content and effects:

Author hopes that the intent of ultimate Circular dated 01.10.2015 is to extend the ‘due date’ from 30.09.2015 to 31.09.2015 in cases where last date fixed for filing of ROI and / Or TAR (or any other similar report) was 30.09.2015. And that this circular or instruction is meant to achieve this purpose to extend the due date for all purposes.

It is needless to mention that even in absence of such circular any assessee could have filed e- ROI and e- TAR at any time within 31.03.2016. However, in such a case the return would be a belated return filed under S. 139 (4) and not within due date u/s 139 (1) of the Income-tax Act, 1961.

Therefore, the language used in the Circular or Instruction is not complete. The Circular only says that E- return  / E-  TAR may be filed by 31.10.2015.

It does not, in clear terms says that the due  date fixed as 30.09.2015 u/s 139 (1) {as defined vide Explanation 2 (a) to S. 139(1)}  is extended to 31.10.2015.

The aspects lacking in the Circular:

The circular is silent about reasons and purpose of the Circular. It also does not say that it is desirable in public interest to do so or it is in interest of tax administration to do so. Any reason is also not given for exercise of such authority as is given vide section 119. Section 119 is reproduced below with highlights added for relevant portions:

[Instructions to subordinate authorities.

119. (1) The Board may, from time to time, issue such orders, instructions and directions to other income-tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board :

Provided that no such orders, instructions or directions shall be issued-

(a) so as to require any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner; or

(b) so as to interfere with the discretion of the ²[* * *] ³[Commissioner (Appeals)] in the exercise of his appellate functions.

(2) Without prejudice to the generality of the foregoing power,-

(a) the Board may, if it considers it necessary or expedient so to do, for the purpose of proper and efficient management of the work of assessment and collection of revenue, issue, from time to time (whether by way of relaxation of any of the provisions of sections ⁴[115P, 115S, 115WD, 115WE, 115WF, 115WG, 115WH, 115WJ, 115WK, 139, 143, 144, 147, 148, 154, 155 ⁶[, 158BFA], ⁷[sub-section (1A) of section 201, sections 210, 211, 234A, 234B, 234C],¹³[234E] 271 and 273 or otherwise), general or special orders in respect of any class of incomes ⁸[or fringe benefits] or class of cases, setting forth directions or instructions (not being prejudicial to assessees) as to the guidelines, principles or procedures to be followed by other income-tax authorities in the work relating to assessment or collection of revenue or the initiation of pro­ceedings for the imposition of penalties and any such order may, if the Board is of opinion that it is necessary in the public interest so to do, be published and circulated in the prescribed manner for general information;

(b) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise ⁹[any income-tax authority, not being a ¹⁰[***] Commissioner (Appeals)] to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law;

¹¹[(c) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order for reasons to be specified therein, relax any requirement contained in any of the provisions of Chapter IV or Chapter VI-A, where the assessee has failed to comply with any requirement specified in such provision for claiming deduction thereunder, subject to the following condi­tions, namely:-

(i) the default in complying with such requirement was due to circumstances beyond the control of the assessee; and

(ii) the assessee has complied with such requirement before the completion of assessment in relation to the previous year in which such deduction is claimed :

Provided that the Central Government shall cause every order issued under this clause to be laid before each House of Parliament.]

Relevant potion of S. 139:

  Return of income.

139. ¹[(1) Every person,-

     (a) being a company ²[or a firm]; or

      (b) being a person other than a company ³[or a firm], if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax,

shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed :

Explanation 2.-In this sub-section, "due date" means,-

      (a) where the assessee ⁶⁵[other than an assessee referred to in clause (aa)]  is-

           (i) a company ⁶⁰[******]; or

           (ii) a person (other than a company) whose accounts are required to be audited under this Act or under any other law for the time being in force; or

           (iii) a working partner of a firm whose accounts are required to be audited under this Act or under any other law for the time being in force,

     the [30th day of September] of the assessment year;

(3) If any person who has sustained a loss in any previous year under the head "Profits and gains of business or profession" or under the head "Capital gains" and claims that the loss or any part thereof should be carried forward under sub-section (1) of section 72, or sub-section (2) of section 73, or sub- section (1) ¹⁴[or sub-section (3)] of section 74, ¹⁵[or sub-section (3) of section 74A], he may furnish, within the time allowed under sub-section (1) [***], a return of loss in the prescribed formand verified in the prescribed manner and containing such other particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under sub-section (1).

[(4) Any person who has not furnished a return within the time allowed to him under sub-section (1), or within the time allowed under a notice issued under sub-section (1) of section 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier :

Observation of author:

On reading of S. 119 , 139  and other provisions relating to filing of reports,  we find that (a) assessee is already allowed u/s 139 (4)  to file a return after ‘due date’ but before end of the period of one year from end of assessment year. Therefore, an assessee can file a return of income for AY 2015-16 by 31.03. 2017 or before completion of assessment, if it is earlier. The Circular only says that E-return or E- TAR can be filed by 31.10.15 instead of by 30.09.15. There is nothing stated that if the return is filed or report is uploaded by 31.10.15 than it will be in compliance of filing within due date as required u/s 139 (1) of the Income-tax Act. This clarity is very much essential because of many  advantages associated with filing of return within due date which are not available in case a return is filed after due date u/s 139(1) but within time allowed u/s  139 (4).

 the case for relaxation of requirement about due date as per  S. 139 regarding filing or e-filing of Return of Income or return of loss , Tax audit reports and other reports are in nature of relaxation allowed to public and tax payers / assessee.

The instructions to lower authorities can be issued vide clause (a) whereas relaxations can be granted bide clauses (b) and (c) .

In all clauses, the authority is given to the Board in terms of and subject to condition laid down in the following words:

Clause (a) is for directions to lower authorities and it contains the following conditions: (a)         the Board may, if it considers it necessary or expedient so to do, for the purpose of proper and efficient management of the work of assessment and collection of revenue, issue, from time to time (whether by way of relaxation of any of the provisions of sections ….. 139 ….

Clause (b) is for making relaxations for the tax payers/ public, it contains conditions like:

           (b) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise ⁹[any income-tax authority, not being a ¹⁰[***] Commissioner (Appeals)] to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law;

Thus as per clause (a) board can authorise tax authorities (namely the Assessing Officers or Centralised receiving centers) to receive  returns and reports.

Vide clause (b) Board can make relaxations. Return of income to be filed by a particular date is also in nature of claim for  deductions and relief, refund, anc benefits for carry forward of loss etc.

In both clauses language used require that the Board will issue circular when it   consider that it is it desirable or expedient so to do….

Therefore, the circular issued without recording of such desirability

and satisfaction and also reasons for such desirability is a defective circular.

Therefore, it is desirable that the Board should issue an addendum to the circular expressing that the Board consider it necessary, expedient and in public interest to extend the due date u/s 139 (1) from 30.09.2015 to 31.03.2015. To avoid any confusion and for clarity a new circular complete in all respect may be issued in supersession of Circular dated 01.10.2015.

Request to the Board:

Though the Courts have already directed to CBDT to issue relevant forms of returns, and reports and make available facilities for e-filing of the same  on the first day of assessment year, it is requested to the Board that forms and facilities should be made available as soon as possible so that assesses and tax practioners can start working for preparation of details and also working on ROI and forms  them even prior to commencement of assessment year. This is possible because applicable law under Act and Rule are available, generally before commencement of the previous year.

Therefore, if timely steps are taken, E-Forms and  E-ROI with software can be made available for tax payers and tax practioners even in mid of previous year.

Besides to standardize the forms for any year following features can be added:

Blanks can be left for previous year and assessment year. These can be filled in.

Some residuary columns and rows can be kept which can be used as may be applicable.

With ROI, facility to attach explanations, clarifications and further claims for consideration by the Assessing Officers can be added.

Discussions to this article

[Nitin Brahma]

Why do we need extensions? We Indians have a habit of prolonging the work till the last day due to lethargy and then we want extensions. Every year we look for extensions due to some pretext or the other. Extensions reduce the amount of time the tax department gets to process the returns and as a result the refunds. Then we again blame the tax department for delaying the refunds.

We as professionals should impress upon our clients to abide by the timelines under any situation so that we do not need extensions.

This is my opinion. People may differ.

- Nitin Brahma

[Debtosh Dey]

Definitely, lakhs of tax payers suffered for rushed filing of ITR & TAR when it was evident that HCs’ deferment orders for some States were to be uniformly adopted. TAR itself created disputes since it requires more details on some aspects than in ITR. Finally, India needs thorough reforms on laws including taxation for ensuring certainty and for reducing paper work. For instance, separate sets of Fixed Assets accounts under Companies Act and Income-Tax Act for the differential rules on depreciation, are uncalled for. Instead, business entities including companies could adopt Income-Tax’s rule and no separate depreciation rule was needed under Companies Act. This is subject to the fact that Income-Tax depreciation could be based on useful lives as now provided in Companies Act. There are plenty of aberrations in the ill-drafted Income-Tax Act, that give rise to multiple interpretations creating problems for tax payers.

Debtosh Dey, M. Sc (Engg), FIE, C. Engg (I), FCMA, FCS, LL.B.