Direct Taxes Code Bill, 2009

Procedural aspects
By Prof. (Dr.) Paresh Shah
F.I.C.W.A.,Ph.D.(Finance).,
F.D.P.(IIMA)
Direct Taxes Code BillTAX
DIRECT - Rationale
CODE BILL- RATIONALE

2
Intent of DTC

Single Code for

all direct taxes

Consolidation of Use of simple

provisions language

Intent of
DTC

Elimination of Reducing scope of

regulatory litigation
functions

Flexibility

3
What's in for Assessment procedure?

The Code seeks to achieve this by

DTC aims to better tax compliance,
consolidation of the procedure relating
reduce compliance costs and lower
to filing of tax base returns, assessment
administrative burden.
and appeal proceedings

Some of the provisions introduced by

the Code could possibly result in an
increase in compliance and therefore
needs to be represented

4
Return of income

5
Return - key changes

Concept of return of ‘tax bases’ introduced in place of return of ‘income’ to

consolidate income tax, wealth tax and dividend distributions

Concept of ‘assessment year’ and ‘previous year’ done away with and ‘financial
year’ brought in

‘Stop-filer’ / ‘non-filer’ concept introduced

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

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

Non-resident assessees may not be able to claim exemption from filing the
tax returns for income earned from interest etc. which has been subject to
appropriate withholding
6
Returns- timelines

Particulars Existing Proposed

Due date for filing • 30 September: (a) Companies; • 31 August: In cases other than those
of return (b) a person or working partner of mentioned below.
a firm required to have his
accounts audited

• 31 July: Others • 30 June: If the person is not a company

and does not derive any income from
business.
Defective return • Assessee must rectify defect in • Time limit increased to 30 days
return within 15 days of such • Waiver of time period by AO not
intimation or envisaged

• Within such further period as the

AO may allow.

Time limit for • Before the expiry of one year • 21 months from end of relevant financial
filing from the end of relevant year; or
revised/belated assessment year; OR
return • Before completion of assessment;
• Before completion of assessment; whichever is earlier
whichever is earlier. [Time limit reduced by 3 months]

7
Assessments and
Re-assessments

8
Assessment- timelines

Particulars Existing Proposed

Time-limit for • Six months from the end of the • Four months from end of financial year in
serving scrutiny financial year in which return is which:
notice furnished.
• return is furnished;
• return is treated as invalid;
• notice of section 151/152 was
issued.
Time limit for • Within 21 months from the end of • Within 21 months from the end of the
completion of the assessment year in which the financial year in which the return was
assessment (for income was first assessable filed
non-TPO referred
cases) [No change in time limit]
Time limit for • Within 33 months from the end of (a) After the expiry of the period of 42
completion of the assessment year in which the months; OR
assessment (for income was first assessable.
TPO referred (b) 3 months from the end of the month in
cases) which TPO report is received

whichever is later.

9
Assessment proceedings– other key issues

Scrutiny to be made in accordance with risk management strategy of the

Board and shall be absolutely confidential

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

TPO can independently decide whether a specific case needs to be scrutized;

reference of AO not required

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

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

defined

Alternate remedy of approaching CIT with respect to orders prejudicial to the

interest of the assessee do not find place in the DTC

1
Assessments by DRP - a welcome change…

The scope of Dispute Resolution Mechanism extended to all

taxpayers where the variation proposed to the returned
income is more than Rs 25 lakhs

AO
DRP passes
issues the
direction final
Order
ITAT

AO Yes
forwards
Files an Issue of
AO Assessee objection
demand
assessment notice
order “draft” No
CIT(A)
AO
passes
the
final
Order

1
Reassessments

Existing Proposed

• Time period for the issue of notice Notice (along with reasons) shall be issued:
under section 148 : 4 / 6 years.
a) for 7 financial years immediately preceding the financial year in which the
• Reason don’t accompany notice search and seizure operation has been carried out or the material has
issued under section 148. been 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,

prejudicial to the assessee, rendered by:

i. ITAT, NTT, HC or SC in the case of the assessee or any other person

under this Code, the Income-tax Act, 1961; 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 any

order, direction, instruction or circular issued by the Board.

– Available instructions/directions of higher authorities not considered by

AO at time of earlier assessment.

– Reassessment pursuant to objection raised by CAG Audit.

1
Appeals

1
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 the
Commissioner
- 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

1
APPEALS

ITAT

List 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 / National Tax Tribunal

High court appeal process substituted by NTT

Appeal to NTT against ITAT’s 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 set out
in the NTT Act, 2005.

1
Penalty Proceedings

1
Penalty- overhauled

 Penalty to be levied if a person has ‘willfully under-reported’ tax

base
 ‘Tax base deemed to be ‘willfully under-reported’ in following cases:
• Failure to file return by due date
• Assessed tax base greater than returned tax base
• Tax base on re-assessment greater than tax base assessed
earlier
 Satisfaction’ of AO not required

 Penalty notice to be issued only if proceedings pending.

Proceedings shall be deemed to be pending if:
• Notice of demand / intimation issued for relevant financial
year and remaining unpaid (in part or full)
• Appeal filed against any order / intimation for relevant
financial year
 No corresponding section for power to reduce / waive penalty by
CIT

 Limits for imposition of penalty (without approval of Joint

Commissioner) enhanced
• INR 100,000 vs INR 10,000 in case of penalty levied by AO
• INR 500,000 vs INR 20,000 in case of penalty levied by AC / DC

1
Penalty

Default Penalty under the Act Penalty under the DTC

Under reporting of tax base / penalty 100 to 300 percent of the tax on 100 to 200 percent of the tax on
for concealment concealed income under reported tax base
Failure to maintain the prescribed INR 25,000 INR 50,000 to INR 200,000
books of account and documents for
and
a financial year
2 percent of the value of the
international transaction
Failure to get the accounts audited 0.5 percent of the total sales INR 50,000 to INR 200,000
or obtain the tax audit report INR 100,000, whichever is less

Failure to obtain / furnish TP report INR 100,000 INR 50,000 to INR 200,000
from accountant

Failure to deduct or pay tax at Amount equal to tax not deducted or 25 to 100 percent of the tax
source paid deductible

1
Tax Administration

1
Tax Administration

CENTRAL BOARD OF DIRECT TAXES (‘CBDT’)

Powers of CBDT curtailed to issue/relax conditions in relation to grant of any

deduction or relief or dispose off case in any particular manner

CBDT cannot admit application or claim for any exemption, deduction, refund or
any other relief after expiry of specified period for making the application or claim

CBDT empowered to seek any information regardless of anything to the contrary

contained in any law in force

CBDT dropped from the list of Income tax authorities

2
Way forward

2
Way forward…

 The DTC proposes significant changes to the current tax systems

 Taxpayers would need to assess impact of some of the proposals on

their current structures and business models

 Need to integrate tax into business decision process and vice versa
more important than ever

 Business community needs to watch developments and actively

engage with government for presenting business point of view.

2
 Stop filer/ non-filer
Existing Proposed
• Parallel • Stop Filer (Section 151): in relation to a financial year means a person who has
provisions are not furnished a return for the financial year but has –
there for issue of
notice under (a) furnished a return for the immediately preceding financial year; or
section 142(1) (b) been assessed for the immediately preceding financial year; or
for furnishing (c) not furnished a return in response to a notice served under section 151 for
return of Income the immediately preceding financial year.
etc.
• Non Filer (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 the
relevant financial year and two immediately preceding financial years.

• Notice to Stop filer and Non filer: Within 21 months from end of relevant financial
year.

• Return to be filed: Within 30 days of the receipt of the notice.

Click to go back