DTC Procedures

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    Direct Taxes Code Bill, 2009Procedural aspectsBy Prof. (Dr.) Paresh ShahF.I.C.W.A.,Ph.D.(Finance).,F.D.P.(IIMA)

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    Intent of DTC

    Intent of Intent of DTCDTC

    Reducing scopeof litigation

    Single Codefor all direct

    taxes

    Flexibility

    Elimination of regulatoryfunctions

    Consolidationof provisions

    Use of simple

    language

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    What's in for Assessment procedure?

    DTC aims to better tax compliance,reduce compliance costs and lower

    administrative burden.

    The Code seeks to achieve this byconsolidation of the procedure relating

    to filing of tax base returns, assessmentand appeal proceedings

    Some of the provisions introduced bythe Code could possibly result in an

    increase in compliance and thereforeneeds to be represented

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    Return of income

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    Return - key changes

    F iling of return by political parties and Non-profit organizations made mandatory

    TP accountant report to be filed with TPO (currently with AO)

    Stop-filer / non-filer concept introduced

    Concept of return of tax bases introduced in place of return of income toconsolidate income tax, wealth tax and dividend distributions

    Non-resident assessees may not be able to claim exemption from filing thetax returns for income earned from interest etc. which has been subject to

    appropriate withholding

    Concept of assessment year and previous year done away with and financialyear brought in

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    Returns- timelines

    Due date for filingof return

    3 0 September: (a) Companies;(b) a person or working partner of a firm required to have hisaccounts audited

    31July

    :Others

    31 August : In cases other than thosementioned below.

    3 0 June : If the person is not a companyand does not derive any income frombusiness.

    Defective return Assessee must rectify defect inreturn within 15 days of suchintimation or

    W ithin such further period as the

    AO may allow.

    Time limit increased to 3 0 days W aiver of time period by AO not

    envisaged

    Time limit for filingrevised/belatedreturn

    Before the expiry of one year fromthe end of relevant assessmentyear; OR

    Before completion of assessment;whichever is earlier.

    21 months from end of relevant financialyear; or

    Before completion of assessment;whichever is earlier

    [Time limit reduced by 3 months]

    Particulars Existing Proposed

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    Assessments andRe-assessments

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    Assessment- timelines

    Time-limit for serving scrutinynotice

    Six months from the end of thefinancial year in which return isfurnished.

    Four months from end of financial year inwhich :

    return is furnished;return is treated as invalid;notice of section 151 /152 wasissued.

    Time limit for completion of assessment (for non-TPO referredcases)

    Within

    21months from the end of the assessment year in which the

    income was first assessable

    Within

    21months from the end of thefinancial year in which the return was filed

    [No change in time limit]

    Time limit for completion of assessment (for TPO referred

    cases)

    W ithin 33 months from the end of the assessment year in which theincome was first assessable.

    (a) After the expiry of the period of 4 2 months; OR

    (b) 3 months from the end of the month in

    which TPO report is received

    whichever is later.

    Particulars Existing Proposed

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    Assessment proceedings other key issues

    Rectification application to be disposed off within two years from end of financialyear. Deemed rejection if application for rectification remains un-disposed for 6months

    Situations where orders deemed to be prejudicial to interest of the revenuedefined

    TPO can independently decide whether a specific case needs to be scrutized;reference of AO not required

    Alternate remedy of approaching CIT with respect to orders prejudicial to theinterest of the assessee do not find place in the DTC

    Any notice sent through post/ courier will be deemed to be served on the 5 thday after the day on which such notice was sent

    Scrutiny to be made in accordance with risk management strategy of theB oard and shall be absolutely confidential

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    Assessments by DRP - a welcome change

    AOforwards

    assessmentorder draft

    AO AssesseeFiles an

    objection

    AOpasses

    thefinal

    Order

    No

    DRPissues

    direction

    Yes

    AOpasses

    thefinal

    Order

    Issue of demandnotice

    CIT(A)

    ITAT

    The scope of Dispute Resolution Mechanism extended to alltaxpayers where the variation proposed to the returned

    income is more than Rs 2 5 lakhs

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    Reassessments

    Time period for the issue of noticeunder section 1 48 : 4 / 6 years.

    Reason dont accompany noticeissued under section 1 48.

    Notice (along with reasons) shall be issued:

    a) for 7 financial years immediately preceding the financial year in which thesearch and seizure operation has been carried out or the material hasbeen obtained; and

    b) within 7 years from the end of the relevant financial year in any other case.

    Deemed cases of escaped assessment - new entries :

    Assessment has not been made in accordance with any decision,p rejudicial to the assessee , rendered by :

    i. ITAT, NTT, HC or SC in the case of the assessee or any other personunder this Code, the Income-tax Act, 19 61 ; or

    ii. a court in the case of the assessee or any other person under any other law.

    Computation or assessment has not been made in accordance with anyorder, direction, instruction or circular issued by the B oard.

    Available instructions/directions of higher authorities not considered by AOat time of earlier assessment.

    Reassessment pursuant to objection raised by CAG Audit.

    Existing Proposed

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    Appeals

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    APPEALS

    Commissioner of Income Tax (Appeals) [CIT(A)]Appealable order before the CIT(A) can be :

    - any order passed by any income tax authority below the rank of theCommissioner

    - an intimation issued by the department

    CIT (A) can consider and decide on any matter not considered by AO implying :- matters not arising out of assessment proceedings can now be considered by

    CIT(A)- matters suo-moto raised by CIT(A) even if not raised by assessee

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    APPEALS

    ITATL ist of appealable orders have been simplified

    Indicative time period for deciding the appeal reduced to 2 years from 4 years

    Order pursuant to direction of DRP appealable only by assessee

    High court appeal process substituted by NTT

    HIGH COURT / National Tax Tribunal

    Appeal to NTT against ITATs order.

    Orders of the NTT can be appealed against in the Supreme Court.

    The powers and functions of the NTT and the procedure before it shall be as setout in the NTT Act, 2005 .

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    Penalty Proceedings

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    Penalty

    Default Penalty under the Act Penalty under the DTC

    U nder reporting of tax base / penaltyfor concealment

    100 to 3 00 percent of the tax onconcealed income

    100 to 200 percent of the tax onunder reported tax base

    F ailure to maintain the prescribedbooks of account and documents for a financial year

    INR 25 ,000

    and2 percent of the value of the

    international transaction

    INR 50 ,000 to INR 200 ,000

    F ailure to get the accounts auditedor obtain the tax audit report

    0 .5 percent of the total salesINR 100 ,000 , whichever is less

    INR 50 ,000 to INR 200 ,000

    F ailure to obtain / furnish TP reportfrom accountant

    INR 100 ,000 INR 50 ,000 to INR 200 ,000

    F ailure to deduct or pay tax atsource

    Amount equal to tax not deducted or paid

    25 to 100 percent of the taxdeductible

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    Tax Administration

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    Way forward

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    Way forward

    The DTC proposes significant changes to the current tax systems

    Taxpayers would need to assess impact of some of the proposals ontheir current structures and business models

    Need to integrate tax into business decision process and vice versamore important than ever

    Business community needs to watch developments and activelyengage with government for presenting business point of view.

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    Stop filer/ non-filer

    E xisting Proposed

    Parallelprovisions arethere for issue of notice under section 1 42 (1 )for furnishingreturn of Incomeetc.

    Stop F iler (Section 151 ): in relation to a financial year means a person who hasnot furnished a return for the financial year but has

    (a) furnished a return for the immediately preceding financial year; or (b) been assessed for the immediately preceding financial year; or (c) not furnished a return in response to a notice served under section 151 for the immediately preceding financial year.

    Non F iler (Section 152 ): in relation to a financial year means a person

    (a) who has not furnished,-

    (i) a return of tax bases for the financial year; and(ii) a return of tax bases for two immediately preceding financial years; and

    (b) who has not been issued any notice under section 151 in respect of therelevant financial year and two immediately preceding financial years.

    Notice to Stop filer and Non filer : W ithin 21 months from end of relevant financialyear.

    Return to be filed : W ithin 3 0 days of the receipt of the notice.

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