An analysis and some suggestions in view of recent instructions for processing of returns of AY 2009-10 to clear backlog .

[C.A. DEV KUMAR KOTHARI]

Instruction No. 5/2010 Dated 21-7-2010 [F.No.225/25/2010-ITA-II] :

This instruction had been issued with a view  to clear backlog of returns for A.Y. 2009-10 for which previous year was ended on 31.03.2009 and in normal course returns would have been filed within due date under section 139(1) for different type of assessee. We find minimum time allowed was 31.07.2009 and + longest time allowed is 30th September 2009 in case of companies and assesses having requirement of tax audit report, except some specific cases where extension was allowed beyond 30.09.2009. Therefore, we find that the circular has been issued for some assesses, after about one year from the time allowed to furnish the return and in  case of companies and assesses having requirement of TAR after about ten months from the date allowed to file the return.

The Circular:

The circular reads as follows with highlights provided:

The issue of processing of returns for Asst. year 2009-10 and giving credit for TDS has been considered by the Board. In order to clear the backlog of returns, the following decisions have been taken:

(i) In all the returns filed in ITR-1 and ITR-2, for the Asst. Year 2009-10, where the aggregate TDS claim does not exceed Rs. Three lakh (3 lacs) and where the refund computed does not exceed Rs. 25,000; the TDS claim of the tax payer shall be accepted at the time of processing of the return.

(ii) In all the returns filed in forms other than ITR-1 and ITR -2, for the Asst. Year 2009-10, where the aggregate TDS claim does not exceed Rs. Three lakh (3 lacs) and the refund computed does not exceed Rs. 25,000 and there is 10% matching of TDS amount claimed, the TDS claim shall be accepted at the time of processing of the return.

(iii) In all remaining cases, TDS credit shall be given after due verification.

Relevant returns:

As the circular is with reference to forms of returns it is necessary that before analyzing the circular further it is necessary to note the return forms applicable in different situations. The prescribed Return Forms for Assessment Year 2009-10 were as follows:

Form of Return	Remarks
(i) ITR-1 return of income for individuals having income from salary/ pension/ family pension and not having any other income except income by way of interest chargeable to income-tax under the head Income from other sources;	This form was For  individuals in specified circumstances and due date was 31.07.09
(ii) ITR-2 return of income for Individuals and Hindu Undivided Families (HUFs) not having any income under the head Profits or gains of business or profession;	This form was For  individuals and HUF in specified circumstances and due date was 31.07.09
(iii) ITR-3 return of income for Individuals and HUFs being partners in firms and not carrying out business or profession under any proprietorship;	This form was For  individuals and HUF in specified circumstances and due date was 31.07.09 and in some circumstances due date could be 30.09.09 when the Firm was required to obtain TAR
(iv) ITR-4 return of income for individual and HUFs having proprietory business or profession;	This return was for individuals and HUF having proprietory business due date could be 31.07.09 or 30.09.09 in case of TAR required.
(v) ITR-5 combined form for return of income and fringe benefits for Firms/ Association of Persons / Body of Individuals;	IT and FBT return for firms, AOP, and BOI the due date was 31.07.09 or 30.09.09 (TAR cases)
(vi) ITR-6 combined form for return of income and fringe benefits for companies (other than companies claiming exemption under section 11;	IT and FBT return for companies and due date was 30.09.09
(vii) ITR-7 combined form for return of income and fringe benefits for persons including companies required to furnish return under section 139(4A) or section 139(4B) or section 139(4C) or section 139(4D);	IT and FBT return for certain companies and due date was 30.09.09
(viii) ITR-8 stand alone form for return of fringe benefits for persons who are not required to furnish return of income but are required to furnish return of fringe benefits.	Stand alone return of FBT for persons not required to file ITR but required to file return of FBT.

Analysis of circular:

Clausse of circular	Remarks
(i) In all the returns filed in ITR-1 and ITR-2, for the Asst. Year 2009-10, where the aggregate TDS claim does not exceed Rs. Three lakh (3 lacs) and where the refund computed does not exceed Rs. 25,000; the TDS claim of the tax payer shall be accepted at the time of processing of the return.	Relates to assesses required to file return in forms ITR 1 and ITR 2 as discussed above. TDS should not exceed Rs. Three lakh and refund computed should not exceed Rs. 25000. Then claim for refund shall be accepted at processing stage without any verification.
(ii) In all the returns filed in forms other than ITR-1 and ITR -2, for the Asst. Year 2009-10, where the aggregate TDS claim does not exceed Rs. Three lakh (3 lacs) and the refund computed does not exceed Rs. 25,000 and there is 10% matching of TDS amount claimed, the TDS claim shall be accepted at the time of processing of the return.	Relates to assesses required to file return in forms other than ITR 1 and ITR 2 that is to say who were required to file ITR 3 -ITR 8 as discussed above. Thus it will cover FBT combined and stand alone return also. TDS should not exceed Rs. Three lakh and computation for refund should not exceed Rs.25000 and there should be at least 10% matching of TDS (I suppose matching means matching under OLTAS). Then claim for refund shall be accepted at processing stage without any verification.
(iii) In all remaining cases, TDS credit shall be given after due verification.	This apply to all other cases that is to say where : TDS claimed is more than Rs. Three lakh and / or refund computed is more than Rs.25000/- And in cases falling in clause (ii) where TDS matched are less than 10%.

Authors point of view:

General -Credit found under OLTAS in form no. 26A can be fully allowed without further verification.

In clause (i) of circular: there should be requirement of checking credit under OLTAS in form no. 26A and verification in cases where credit is not found. Verification can be based on computer systems as far as possible and rest can be by verification with documents.

In clause (ii): 10% matching is too low, amount matched in OLTAS should be allowed and for balance there should be verification. Verification can be based on computer systems as far as possible and rest can be by verification with documents.

Standardization is required:

As noted earlier the circular is issued quite late. Late refund causes interest burden on government and also financial burden on taxpayers due to delay in getting excessive tax deducted and / or paid. Therefore, it is suggested that standard instructions can be issued as applicable to any year with some modifications (as to from or amounts). Once a standard policy is adopted, a new circular, if required for any year can be issued just on beginning of the assessment year. This will facilitate the taxpayer to plan his cash inflows by way of refund. Furthermore if the taxpayer is aware of procedure and time required in relation to refunds, he will take timely steps for reconciliation of tax credit and file early return to claim refund and to improve his liquidity.