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बजट प्राव्धानो पर सीधी और पते की बात। Straight and honest talk on Budget amendments.
1.TDS at Double Rate in case of Non-Filers of ITRs (Section 206AB):
The Finance Bill 2021 has proposed to insert a new section 206AB in the Income Tax Act, w.e.f. 1.7.2021 which mandates that the deductor will be required to deduct TDS at twice the applicable rate or @ 5% whichever is higher, if the deductee has not filed his/her ITR for the immediately two preceding financial years and the due date of filing such ITR for those two previous financial years has expired and the aggregate amount of tax deducted and collected at source in his case is Rs. 50,000 or more in each of these two previous years. This new section is in line with the existing section 206AA of the Act, which provides for deduction of tax at source @ 20% if the deductee has not furnished his/her PAN to the deductor. It has also been clarified now that if the deductee has neither furnished his/her PAN to the deductor, and nor has filled his/her ITR for the two immediately preceding financial years then the deductor will be required to deduct TDS @20% as prescribed in section 206AA of the Act. It has also been clarified that very soon a functionality will be made available to all the deductors to enable them to know the ITR filing status of the deductees in the previous two financial years.
सीधी और पते की बात: It needs to be appreciated that already by deducting and depositing TDS under Chapter XVII-B of the Act, the taxpayer is discharging the burden of exchequer by assisting in tax collection. So, is it feasible and justifiable to further burden the deductor to verify the return filing discipline of the deductee also?
Further more clarity is desirable regarding the applicability of this new section 206AB on super senior citizens having the gross total income of Rs. 5,00,000/- and as such not required to file their ITRs, and also on the senior citizens aged 75 years or more having only pension income or interest income from the pension paying bank, and who will not be required to file their ITR.
2. Final Fact-Finding Appellate Authority Also Going Faceless w.e.f. 1.4.2021 {Section 255(7)}
The ‘Seed Thought’ of the idea of extension of the ‘faceless adjudication’ mechanism to the ITAT level was given by our Hon’ble PM Sh. Narendra Modi during the inauguration of the new state-of-the-art office-cum-residential complex of the ITAT Cuttack Bench on 11.11.2020.
The Finance Ministry has been quick enough to give this seed thought of our hon’ble PM, a concrete shape by proposing to insert a new subsection (7) in section 255 of the Income Tax Act, 1961 in the Finance Bill 2021 w.e.f. 1.4.2021.
As this section 255(7) has to be given effect from 1.4.2021 only, so we can expect a “Scheme for Faceless Proceedings before ITAT”, very soon, in line with and similar to the ‘Faceless Appeal Scheme, 2020’, which has already been implemented w.e.f. 25.9.2020.
सीधी और पते की बात: Can written submissions substitute oral representations? Will the Legislature not do more justice to its faceless adjudication by giving a by-default right of personal hearing through video conferencing in all cases?
It needs to be appreciated that ITAT is the last fact-finding appellate authority as the High Court & Supreme Court admits substantial questions of law only and not of facts, so it is very essential and desirable that the proposed “Scheme for Faceless Proceedings before ITAT”, should be drafted carefully and meticulously and not simply copied from the existing Faceless Appeal Scheme, 2020, so as to enable complete adherence to the principles of natural justice and the rule of ‘audi alteram partem’ (hear the other side), i.e. grant of suitable opportunity of being heard to the appellant.
In the Faceless Appeal Scheme, 2020, the appellant is not having any 'by-default' right of personal hearing and the appellant may only request for a personal hearing by way of videoconferencing/telephony, so as to make his oral submissions or present his case before the appeal unit under this Scheme. The Chief Commissioner or the Director General, in charge of the Regional Faceless Appeal Centre (RFAC), under which the concerned appeal unit is set up, may approve the request for personal hearing, if he is of the opinion that the request is covered by the circumstances as maybe notified by CBDT. The circumstances where the request of the appellant for personal hearing via video conferencing may be approved are yet to be notified by CBDT.
This burning and litigative issue of lack of suitable opportunity of being heard in the new faceless appeal scheme resulting in violation of Principle of Natural Justice and Article 14 of the Constitution of India, has become more critical in view of the admission of the writ petition of the taxpayer by the Hon'ble Delhi High Court in the case of Lakshya Buddhiraja on 16-10-2020, on this very issue.
Further the Right of Filing Rebuttal to the objections of NeAC/AO against the admission of additional ground of appeal & additional evidence by the appellant has also not been provided in the Faceless Appeal Scheme, 2020.
No doubt the primary objective of the faceless tax administration is the elimination of physical interface and as such physical visits and meetings between the assessee and the adjudicating authority are resisted to be allowed, but nonetheless that objective can still be achieved by inserting an enabling legislative provision of the grant of by-default right of personal hearing through video conferencing or telephony to the appellant, if he/she asks for it, in the faceless assessment, appeal and penalty schemes and now the upcoming faceless proceedings before ITAT scheme.
Nobody can deny that it is far easier to explain the factual matrix and legal propositions of one’s appeal orally than by reproducing and conveying it in writing.
Grant of half an hour opportunity of personal hearing via video conferencing to the assessee/appellant or his/her authorised representative to enable him/her to represent his/her case, is far more effective, meaningful and productive than the electronic uploading of 1000 pages written submission paper book, which the adjudicating authority may choose to read or not.
Thus, in order to reduce litigations and tussles, the CBDT from the very beginning itself, should insert the legislative provision of grant of by-default opportunity of personal hearing via video telephony to the appellant, in all cases, wherein the appellant asks for it in writing, and not just in some limited notified circumstances, in the proposed ‘Scheme for Faceless Proceedings before ITAT’.
3. New Regime of Income Escaping Assessments and Subsuming of Search related Assessments in Income Escaping Assessments (Section 147, 148, 148A)
Amendments have been proposed in the Finance Bill 2021, to substitute the existing sections 147 and 148 of the Income Tax Act, to reduce the time period for reopening the already concluded assessments from existing 6 years to 3 years. However, where the escapement of income is suggested to be of Rs 50 lakhs or more in a financial year in the form of undisclosed asset, then the maximum time period for reopening the already concluded assessments is 10 years.
सीधी और पते की बात: No doubt that the proposed reduction in time period for reopening of assessments from 6 years to 3 years is a welcome and appreciable initiative. However, the issue of concern is the fact that the existing mandatory condition of formation of an independent reason to believe by the assessing authority that income of the assessee has escaped assessment so as to assume lawful jurisdiction u/s 147, is proposed to be substituted with the presence of any flagged information as per the risk management strategy of CBDT or the final audit objection of C&AG, suggesting that income of the assessee has escaped assessment.
A further clarity is desirable from CBDT that whether the present “information” generated in Annual Information Return (AIR) u/s 285BA of the Income tax Act would also be considered as the “flagged information” suggesting escapement of income, so as to warrant assumption of jurisdiction under the newly proposed sections 148 and 147. If that being the case, then naturally these amendments are of a lot of concern and apprehension because in such cases, suspicion arising out of such flagged information will substitute the reason to believe of the assessing authority.
Even the newly proposed section 148A, requiring the assessing authority to provide a suitable opportunity of being heard to the assessee and also mandating prior approval of the competent income tax authority before issuing notice u/s 148, and as such being perceived by the Legislature as an adequate safeguard, authorises the assessing authority to proceed with the issuing of notice u/s 148 merely if he thinks it fit to do so and it nowhere requires the formation of an independent reason to believe by such assessing authority, of the escapement of income.
Also, the existing proviso to section 147 requiring the mandatory condition of failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of assessments for reopening the already concluded assessments beyond a period of 4 years and uptill 6 years, has found no place in the newly proposed section 147 and 148.
Further, w.e.f. 1.4.2021 the existing legislative provisions contained in section 153A and 153C relating to assessments pursuant to search and seizure, are proposed to be made inoperative and such search related assessments are proposed to be subsumed in income escaping assessments.
A deeming fiction has been proposed in the Finance Bill 2021 to provide that in search u/s 132, survey u/s 133A and requisition u/s 132A cases, initiated on or after 1.4.2021, the assessing officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the three assessment years immediately preceding the assessment year relevant to the previous year in which the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person.
The position of law as existing currently is loud and clear that additions/disallowances under s.153A of the Act towards unabated assessments are permissible only where incriminating materials are found in search showing unaccounted income. The scope of assessment under s.153A of the Act is limited to the incriminating evidence found during the search and no further in so far as unabated assessments are concerned. Unless there is incriminating material qua each assessment years to which additions are sought to be made in respect of concluded assessments, the assessment under s.153A of the Act by making additions/disallowances would be vitiated in law.
However, in the newly proposed section 148, the Legislature it seems has deliberately done away with the terminology of abated and unabated assessments. So, in the coming time to come, the learned revenue authorities may take a plea that in the absence of any concept of abated or unabated assessments, and especially in view of the express deeming fiction of blanket presumption of possession of information by the assessing authorities suggesting that income of the assessee has escaped assessment is all cases of search u/s 132, survey u/s 133A or requisitions u/s 132A, the presence of incriminating material is no more a mandatory requirement.
However, it needs to be appreciated that such survey, search or requisition measures are extreme measures of tax administration and as such if resort to such extreme measures is being taken by the revenue authorities then it can atleast be expected of them to unearth something incriminating during the course of such survey, search or requisition so as to justify the making of their additions/disallowances in the consequential assessments pursuant to search, otherwise what difference will it remain between the regular and routine assessments and the search related assessments.
4. Taxability of Interest Income on Employees Annual PF Contribution in excess of Rs. 2.5 lakhs {Section 10(11) & 10(12)}
The Finance Bill 2021 has proposed amendments in sections 10(11) and 10(12) to provide that interest income earned by an employee on his provident fund contribution of more than Rs 2.5 lakhs in a financial year will be taxable w.e.f. 1.4.2021.
सीधी और पते की बात:
i) Whether contribution to PPF will also be counted in the threshold annual employee contribution limit of Rs. 2.5 lacs?
Answer: NO, because the explanatory memorandum to Finance Bill 2021 has used the expression “to that fund”, so it appears that this threshold limit of Rs. 2.5 lakhs p.a. applies individually to each such provident fund. But yes, the contribution in your Voluntary Provident Fund will be counted for the purpose of determining the threshold limit of Rs. 2.5 lakhs.
In any case, the proposed amendment will not have any impact on your PPF contribution as the maximum limit for PPF contribution as per PPF Deposit Scheme 1968 is Rs 1.5 lakhs p.a. already.
ii) Since employee's contribution is 12% of his basic salary plus DA, so an annual contribution of Rs. 2.5 lakhs mean a monthly contribution of Rs. 20,833/- which in turn implies a basic salary of roughly around Rs 1.73 lakhs per month. Isn't?
Answer: These calculations are correct to a certain extent but only if the employee is not contributing anything voluntarily in excess of his usual 12% contribution. But an employee can also contribute more than 12% of his basic salary plus DA, as his voluntary contribution in the Voluntary Provident Fund (VPF). There is no restriction to his contribution. Infact that is the main reason for bringing in this amendment. You all know that any interest earned by us on our PF contribution was totally exempt uptill 31.3.2021. So, many high salary bracket individuals used to park their savings in the form of their voluntary PF contribution in excess of the 12% limit in VPF and earn tax free interest income on it. So, to restrict the amount of this tax-free income, the Govt. has brought in this amendment.
iii) Is the contribution of Government Employees to General Provident Fund (GPF) also covered in this budget amendment?
Answer: Yes, it is covered. Our CBDT Chairman has just clarified it on a news channel. So, now if the Government Employee’s annual contribution to GPF exceeds Rs. 2.5 lakhs p.a. then interest earned by him/her on that excess contribution will be taxable w.e.f. 1.4.2021.
