Compliance to notice u/s 143(1)(a) CA Rucha Vyas

Interim Budget 2019 “The Income Tax Department now functions online. Returns, assessments, refunds and queries are all undertaken online. Last year, 99.54% of the income-tax returns were accepted as they were filed. Our Government has now approved a path breaking, technology intensive project to transform the Income-tax Department into a more assessee friendly one. All returns will be processed in twenty-four hours and refunds issued simultaneously. Within the next two years, almost all verification and assessment of returns selected for scrutiny will be done electronically through anonymized back office, manned by tax experts and officials, without any personal interface between taxpayers and tax officers.” Hon’ble Finance Minister

Ambit of Discussion Divergent Scope of Proceeding u/s 143(1) Types of adjustments Compliance to 143(1)(a)- Step by Step analysis Corrective measures rucha Beyond section 143(1)

Divergent Scope of Section 143(1)(a) “Intimation” - Subset of an Assessment order. Computation of Income + Determination of Tax Income Tax Return and Tax Audit Report- Compatibility Test

Types of Adjustments The Provision of section 143(1)(a) – Proposes to make the following adjustments. Any arithmetical error in the return an incorrect claim , if such claim is apparent form the information in the return Disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date u/s 139(1) Disallowance of expenditures indicated in the tax audit report but not taken into account in computing the total income. Disallowance of deduction claimed u/s 10AA, 80IA, 80IAB, 80IB, 80IC, 80ID or section 80IE, if the return is filed beyond the due date specified u/s 139(1) Addition of income appearing in Form 26AS/Form 16 which has not been included in the total income (Amended by FA 2018, applicable from A.Y.-2018-19)

Proviso to Section-143(1)(a) “Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode: Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made:”

Mismatch, error , Incorrect claim etc. Human error Debatable claim Technical error

Compliance to 143(1)(a)- Step by step analysis

Process Involved Understanding the query Re-verification of the ITR vis a vis Computation of Income and 3CD Verifying the XML file Response to be filed – electronically Agree Or Partially Agree Or disagree Revised Return Or File response Processing of Income -Intimation u/s 143(1) Determination of Total Income, Tax, Interest and Fees payable. Filing Rectification Application u/s 154

How to file response?

“Agree”

“Partly Agree”

“Disagree”

Case Studies Sr No. Case Study Sample Intimation 1 Disallowance of claim u/s 36(1)(va) based on the information submitted in 3CD 2 Adjustment on account of Carry Forward of Loss – Not allowed due to late filing of ITR u/s 139(1) 3 Taxability of Income under Schedule SI- Impact on account of set off of loss 4 Reporting in 3CD vis a vis proposed adjustment – Club Expenditures u/s 37 Sample Intimation Sample intimation Sample Intimation Sample Intimation

Case Studies Sr No. Case Study Sample Intimation 5 Adjustment on account of Carry Forward of Loss – Not allowed on conversion of Firm into LLP 6 Trust- Rejection of exemption claimed u/s 11 on account of unavailability of 12AA details in the ITR 7 Non allowance of depreciation u/s 32(1)(i) based on the Business Code entered in ITR 8 Income credited to the P & L but considered under other heads of income- Mismatch 9 Reporting in 3CD vis a vis proposed adjustment – 40A(3) Sample Intimation Sample Intimation Sample intimation Sample intimation Sample intimation

Rectification of Intimation

Rectification Response

Tax Credit Mismatch Response

Status Correction

Additonal Information for 234C- Response

Rectification Response

Beyond 143(1)(a)

Beyond 143(1)(a) Scope of inquiry - seeking additional information u/s 143(1)? Section-143(1A)- Power to CBDT Centralized processing of Return Scheme 2011 Rule 2(d) – Commissioner means the “Commissioner of Income Tax, Centralized Processing Center” Rule 7(2) stipulates that processing of the return shall be undertaken at CPC. Rule 9 specifies the power of the CPC to rectify the mistakes in any intimation or order u/s 154 of the Act. Rule 12 clearly provides that no personal appearance is warranted in connection with the proceeding before the CPC. Rule 12(iii) also provides that the Center may call for such clarification, evidences or document as may be required for the purpose of facilitating the processing of return and all such clarification, evidences or document shall be furnished electronically. 291 ITR 500

Beyond 143(1) 143(1D) read with proviso- amended by FA 2016 & further by FA 2017 241A – inserted by FA 2017 139(5) v/s 143(1)- Time limit Mis-Reporting of Income vs Under Reporting of Income – 143(1)(a) and section 270A Section 143(1)(a) only speaks about the returns made u/s 139 or in response to 142(1) Whether processing of return is mandatory in case of 153A or 153C? Claim inconsistent with the Tax Audit Report Filing of an application to the AO Appropriate disclosure in the ITR and 3CD Appeal u/s 246A An Assessee is entitled to raise before appellate authorities additional grounds in terms of additional claims not made in return filed by it.