Assessment of Persons Other than Individuals and ITR Filing

TAX UNDER E-ENVIRONMENT

Return of Income

Every person:

a. being a company or a firm; or

b. being a person other than a company or a firm, if his total income or the total income of any other person in respect of which he is assessable under this Act [income before giving effect to sec. 54, 54B, 54D, 54EC, 54F, 54G, 54GA, 54GB and chapter VIA (i.e., deduction u/s 80C to 80U)] during the previous year exceeded the maximum amount which is not chargeable to income- tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed – [Sec. 139(1)]

Compulsory filing of return

Any person, being resident other than not ordinarily resident, shall furnish, a return, within due date, in respect of his income or loss for the previous year irrespective of the fact that his total income does not exceed basic exemption limit or does not have any taxable income, if he:

(i) holds, as a beneficial owner or otherwise, any asset (including any financial interest in any entity) located outside India or has signing authority in any account located outside India; or

(ii) is a beneficiary of any asset (including any financial interest in any entity) located outside India.

Exception: An individual, being a beneficiary of any asset (including any financial interest in any entity) located outside India where, income, if any, arising from such asset is includible in the income of the person referred above in accordance with the provisions of this Act.

Ø “Beneficial owner” in respect of an asset means an individual who has provided, directly or indirectly, consideration for the asset for the immediate or future benefit, direct or indirect, of himself or any other person.

Ø “Beneficiary” in respect of an asset means an individual who derives benefit from the asset during the pervious year and the consideration for such asset has been provided by any person other than such beneficiary.

Mandatory furnishing of return in case of high value transactions [7^th Proviso to Sec. 139(1)]

A person (other than firm and company), who is not required to furnish a return as per aforesaid provision, and who during the previous year:

a. has deposited an aggregate amount exceeding ₹ 1 crore in one or more current accounts maintained with a banking company or a co-operative bank; or

b. has incurred expenditure of an aggregate amounts exceeding ₹ 2 lakh for himself or any other person for travel to a foreign country; or

c. has incurred expenditure of an aggregate amount exceeding ₹ 1 lakh towards consumption of electricity; or

d. fulfils such other conditions as may be prescribed,

shall furnish a return of his income on or before the due date in such form and verified in such manner and setting forth such other particulars, as may be prescribed.

Forms – Return of income

Rule 12 provides the following Form for filing a return of income for different assessee:

ITR - 1 (Sahaj)

For Individuals having Income from Salaries, one house property (does not have any brought forward loss), other sources [Interest (does not have any loss under the head) etc. but except winnings from lottery or income from race horses] and having total income upto ₹ 50 lakh

However, the form is not to be used by an individual who:

a. has any brought forward / carry forward loss under the head ‘Income from House Property’;

b. has assets (including financial interest in any entity) located outside India;

c. has signing authority in any account located outside India;

d. has income from any source outside India;

e. has income to be apportioned in accordance with provisions of section 5A

f. has claimed deduction u/s 57, other than deduction from family pension;

g. is a director in any company;

h. has held any unlisted equity share at any time during the previous year;

i. is assessable for the whole or any part of the income on which tax has been deducted at source

in the hands of a person other than the assessee;

j. has claimed any relief of tax u/s 90 or 90A or 91;

k. has agricultural income, exceeding ₹ 5,000;

l. has total income, exceeding ₹ 50 lakh;

m. has income of the nature referred to in section 115BBE;

n. is a person in whose case tax has been deducted u/s 194N; or

o. is a person in whose case payment or deduction of tax has been deferred u/s 191(2) or 192(1C)

p. has to furnish return under 7th proviso to sec. 139(1)

q. has income under the head “Capital Gains” and / or “Profits and Gains of Business or Profession”;

r. has loss under the head “Income from Other Sources”.

ITR - 2

For Individuals and HUFs not carrying out business or profession under any proprietorship

ITR - 3

For individuals and HUFs having income from a proprietary business or profession

ITR - 4

(Sugam)

In the case of a person being an individual (ordinarily resident) or a HUF (ordinarily resident) or a resident firm (other than LLP), deriving income under the head “Profits or gains of business or profession” and such income is computed in accordance sec. 44AD, 44ADA and 44AE

Taxpoint: The form is applicable to an assessee computing his business or profession income u/s

44AD, 44ADA and 44E.

The form is not applicable to a person who:

a. has assets (including financial interest in any entity) located outside India;

b. has signing authority in any account located outside India;

c. has income from any source outside India;

d. has income to be apportioned in accordance with provisions of sec. 5A;

e. is a director in any company;

f. has held any unlisted equity share at any time during the previous year;

g. has total income, exceeding ₹ 50 lakh;

h. owns more than one house property, the income of which is chargeable under the head “Income

from house property”;

i. has any brought forward loss or loss to be carried forward under any head of income;

j. is assessable for the whole or any part of the income on which tax has been deducted at source

in the hands of a person other than the assessee;

k. has claimed any relief u/s 90 or 90A or deduction of tax u/s 91;

l. has agricultural income, exceeding ₹ 5,000;

m. has income of the nature referred to in sec. 115BBE;

n. has income of the nature specified in sec. 17(2)(vi) on which tax is payable or deductible, as the case may be, u/s 191(2) or 192(1C).

ITR - 5	For a person other than (i) Individual; (ii) HUF; (iii) Company; & (iv) Person filing Form ITR-7
ITR - 6	For Companies other than companies claiming exemption u/s 11
ITR - 7	For persons including companies required to furnish return u/s 139(4A) or 139(4B) or 139(4C) or 139(4D) or 139(4F)
ITR - V	Income Tax Return Verification Form [Where the data of the aforesaid Return of Income has been transmitted electronically without digital signature]

Functionalities available at e-Filing Portal

Few of the functionalities available at e-filing portal are as follow:

◉ View Form 26AS

◉ View (with download facility) e-Filed Return / Form

◉ Download pre-filled json

◉ e-Verify Return

◉ Generate EVC

◉ Add / Disengage CA

◉ Add / Register as Representative

◉ Filing of Returns

◉ Filing of return in response of notice u/s 139(9)

◉ Aadhar linking

◉ e-Proceedings

◉ Filing of appeal to CIT(Appeals)

◉ Registration or updation of Digital Sign

◉ Refund reissue request

◉ Validation of Bank Account or Demat Account

◉ Profile updation

Time limit for filing return of income [Explanation 2 to Sec. 139(1)]

A return should be filed on or before the following due date (of respective assessment year):

Revised Return [Sec. 139(5)]

If an assessee discovers any omission or wrong statement (bonafide in nature) in the return filed, he can revise his return u/s 139(5).

Time limit: Assessee may file the revised return -

◉ before 31^st December of the relevant assessment year; or

◉ before completion of regular assessment,

- whichever is earlier.

Notes

a. Replacement of original return: Once a revised return is filed, it replaces the earlier return. This signifies that

the revised return should be complete in itself and not merely an accessory to the original return.

b. Revision of revised return: A revised return can again be revised i.e. a second revised return can be filed u/s 139(5) for correcting any omission or wrong statement made in the first revised return within specified time.

c. Revision of belated return: A belated return u/s 139(4) can be revised.

d. Revision of loss return: A loss return can be revised

e. Return filed pursuant to notice u/s 142(1) cannot be revised.

Defective Return [Sec. 139(9)]

When a return is termed defective - A return of income is said to be defective where all the following conditions are not fulfilled:

◉ The return is furnished without paying self-assessment tax along with interest, if any.

◉ The annexure, statements and columns in the return of income have been duly filled in.

◉ The return is accompanied by the following documents -

a. a statement showing the computation of tax liability;

b. the audit report u/s 44AB (where the report has been submitted prior to the furnishing of return, a copy of audit report together with proof of furnishing the report);

c. the proof of tax deducted or collected at source, advance tax paid and tax paid on self-assessment;

d. where regular books of account are maintained by the assessee:

i. copies of Manufacturing A/c, Trading A/c, Profit and Loss A/c or Income and Expenditure A/c or any other similar account and Balance Sheet;

ii. in the case of –

● A proprietary business or profession - the personal account of the proprietor;

● A firm, AOP or BOI - personal account of the partners or members; or

● A partner or member of the firm, AOP or BOI - his personal account in the firm, association of persons or body of individuals;

where regular books of account are not maintained by the assessee –

e. where regular books of account are not maintained by the assessee:

i. a statement indicating the amount of turnover or gross receipts, gross profit, expenses and net profit of the business or profession and the basis on which such amount have been computed; and

ii. the amount of sundry debtors, sundry creditors, stock and cash balance as at the end of the previous year.

f. where the accounts of the assessee have been audited, copies of the audited Profit and Loss A/c, Balance Sheet and a copy of the Auditor’s report;

g. Cost audit report u/s 233B of the Companies Act, 1956 (if any).

Effect: Where the Assessing Officer considers that the return of income furnished by the taxpayer is defective, he

may intimate the defect to the taxpayer and give him an opportunity to rectify the defect(s).

Time limit for rectification: The assessee must rectify the error within a period of 15 days from the date of intimation (served on the assessee) or within such extended time as allowed by the Assessing Officer. Where the taxpayer rectifies the defect after the expiry of the period of 15 days or such extended period but before the assessment is completed, the Assessing Officer can condone such delay.

Consequence when defect is not rectified: If defect is not rectified within the time limit, the Assessing Officer will treat the return as an invalid return and provisions of the Act will apply as if the taxpayer had failed to furnish the return at all.

Verification of Return [Sec. 140]

Assessee	Case	Verified by
Individual	In general	Individual himself
	Where the individual concerned is absent from India	Individual himself or by the duly authorized person of such individual
	Where the individual is mentally incapacitated	Guardian of such individual or any other person competent to act on his behalf
	Where by any other reason it is not possible for the individual to verify the return.	Any person duly authorised by him
	Note: When return is verified by any authorised person in that case the return should be accompanied with power of attorney.
HUF	In general	Karta
HUF	Where the ‘karta’ is absent from India or is mentally incapacitated	Any adult member of the family.
Firm	In general	Managing partner
Firm	If due to any reason it is not possible for managing partner to verify or where there is no managing partner	Any adult partner
Limited liability partnership	In general	Designated partner
Limited liability partnership	If due to any unavoidable reason such designated partner is not able to verify the return, or where there is no designated partner as such	Any partner or any other prescribed person

Local authority	Principal Officer
Political party	Chief Executive Officer
Company	In general	Managing Director (MD)
	If due to any reason it is not possible for MD to verify or where there is no MD	Any director or any other prescribed person
	Where an application for corporate insolvency resolution process has been admitted by the Adjudicating Authority under Insolvency and Bankruptcy Code, 2016	Insolvency professional appointed by such Adjudicating Authority
	Non-resident company	A person holding a valid power of attorney. Copy of such power of attorney must be attached with the return.
	Company in process of winding up	Liquidator of the company
	Where the management of the company has been taken over by the Central or State Government.	Principal officer
Any other association	Any member or principal officer
Any other person	Such person or any other person competent to act on its behalf.

Faceless Assessment Scheme

Background

The Finance Minister (FM) while presenting the Budget 2019 stated that the existing system of scrutiny assessments in the Income-tax department involves a high level of personal interaction between the taxpayer and the tax department, which leads to certain undesirable practices on the part of tax officials. The FM further stated that to eliminate such instances, and to give shape to the vision of the Prime Minister (PM), a scheme of faceless assessment in electronic mode involving no human interface will be launched in a phased manner.

Subsequently, in order to impart greater efficiency, transparency and accountability to the assessment process, a new faceless assessment scheme was introduced in 2019. Accordingly, most of the functions of the tax department starting from the filing of returns, processing of returns, issuance of refunds and assessments are performed in the electronic mode without any human interface. In order to take the reforms initiated by the tax department to the next level and to eliminate human interface, the FM in her Budget 2020 speech proposed an amendment so as to enable faceless appeals on the lines of faceless assessments.

On 12 September 2019, the Central Board of Direct Taxes (CBDT) had notified¹ E-assessment Scheme, 2019 under Section 143(3A)² of the Income-tax Act, 1961 (the Act). Further in exercise of the powers conferred by Section 143(3B)³ to give effect to the Scheme, CBDT had also notified⁴ the relevant directions.

On 13 August 2020, the PM launched ‘Transparent Taxation’ platform encompassing faceless assessments, faceless appeals, etc. The PM stated that the faceless assessments/appeals will have technology driven interface (e.g. in case of scrutiny

assessments, there will be random selection of cases and selection will not be limited to jurisdictional Assessing Officer). The facility of faceless appeal will be available for citizens across the country with effect from 25 September 2020.

On the same day, CBDT issued a Notification⁵ to amend the E-Assessment Scheme and to implement the Faceless Assessment Scheme under Section 143(3A). Further in exercise of the powers conferred by Section 143(3B) to give effect to the Scheme, CBDT also amended⁶ the relevant directions. The amended Scheme shall come into force on the date of its publication in the Official Gazette⁷.

Recently, CBDT has also issued various orders/Notifications⁸ to implement the Faceless Assessment Scheme.

CBDT Notifications to amend the Faceless Assessment Scheme

Nomenclature of the Scheme

Originally when the Scheme was introduced it was named as ‘E-Assessment Scheme’. However, the Scheme has now been renamed as ‘Faceless Assessment Scheme’.

¹ Notification No. 61/2019, 12 September 2019

²The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of making assessment of total income or loss of the taxpayer under sub-section (3) so as to impart greater efficiency, transparency and accountability……..

3 The Central Government may, for the purpose of giving effect to the scheme made under sub-section (3A), by notification in the Official Gazette, direct that any of the provisions of this Act relating to assessment of total income or loss shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification.

⁴ Notification 62/2019, 12 September 2019

⁵ Notification No. 60/2020, dated 13 August 2020

⁶ Notification No. 61/2020, dated 13 August 2020

⁷ Notification has been published in the Official Gazette on 13 August 2020 ⁸ CBDT Order (F No. 187/3/2020 -ITA-I), dated 13 August 2020, Notification Nos. 62 to 66 of 2020, dated 13 August 2020

Scope of 'assessment'

The original E-assessment Scheme covered assessments only with respect to total income or loss of the taxpayer under Section 143(3). However, the amended Scheme covers the best judgement assessment under Section 144 also.

Procedure for Assessment

The procedure for e-assessment has been amended as follows:

· The present scope of the Scheme was restricted to regular assessment proceedings for a limited class of taxpayers to whom statutory notice was issued under the said Scheme. The amended Scheme extends it to all ongoing assessment/reassessment proceedings which are being carried on by the jurisdictional tax authority. Such migration to the Scheme can be effective upon intimation to the taxpayer. Thereupon, those proceedings will be concluded in a faceless manner as per the Scheme.

· Under the E-assessment Scheme there was no option to file response to the notice issued by National e-Assessment Centre⁹ (NEC) for obtaining the information, documents or evidence requisitioned by the assessment unit. It has been amended to provide that the taxpayer or such other person shall file a response with NEC within the time specified in the notice or as extended by NEC upon an application made for the same.

· NEC shall send the report received from the verification unit or the technical unit, based on the request made to the concerned assessment unit.

· Where the taxpayer fails to comply with the notice¹⁰, the NEC shall serve upon such taxpayer a notice under Section 144 giving him an opportunity to show-cause, on a date and time to be specified in the notice, why the assessment in his case should not be completed to the best of its judgment.

· The taxpayer shall, within the time specified in the notice issued under Section 144 or such time as may be extended on the basis of an application in this regard, file his response to the NEC.

· Where the taxpayer fails to file response to the notice under Section 144 within the time specified in the notice or within the extended time, if any, the NEC shall intimate such failure to the assessment unit.

· As per the E-Assessment Scheme, mandatorily, a draft assessment order was to be passed by the Assessment Unit¹¹ for all cases. Thereafter, the NAC was to decide whether said draft assessment order requires review on the basis of certain risk parameters. If so, the draft assessment order would be transferred to the Review Unit¹² for review. If the Review Unit provides some modifications to the draft assessment order, then the NAC was to forward such suggestions to the concerned Assessment Unit.

It is now amended to provide that these suggestions will be forwarded to a different Assessment Unit, other than the Assessment Unit which was involved in draft assessment proceedings. Such assignment of work will be undertaken through an automated allocation system. This will introduce one more level of screening of the draft assessment order.

· Under E-assessment Scheme, the NEC shall, after completion of assessment, transfer all the electronic records of the case to the AO having jurisdiction over such case for the following actions–

Ø Imposition of penalty

Ø collection and recovery of demand

Ø rectification of mistake

Ø giving effect to appellate orders

Ø submission of remand report, other report to be furnished, or any representation to be made, or any record to be produced before the Commissioner (Appeals) [CIT(A)], Appellate Tribunal or Courts

Ø proposal seeking sanction for launch of prosecution and filing of complaint before the Court.

However, the new procedure removes reference to the above actions and provides that the AO may take such actions as may be required under the Act.

Penalty proceedings for non-compliance

The E-Assessment Scheme provided that NEC shall levy the penalty as per the draft order of penalty and serve a copy of the same on the taxpayer or any other person, as the case may be. However, the amended Scheme provides that the NEC shall along with draft order of penalty serve a demand notice on the taxpayer or any other person, as the case may be. Thereafter, electronic records of the penalty proceedings shall be transferred to the AO having jurisdiction over the said case for such action as may be required under the Act.

⁹ A central unit set up under the Scheme to monitor the entire functioning of

the Scheme and single point of contact for the taxpayer and the tax authority

¹⁰ Notice issued by NEC for obtaining the information, documents or evidence requisitioned by the assessment unit or notice issued under Section 142(1) or with a direction issued under Section 142(2A) of the Act

¹¹ A unit set up under the Scheme to conduct various functions of assessment ¹² A unit set up under the Scheme to carry out the function of review of draft assessment orders prepared by various Assessment Units at the direction of the NAC

Appellate proceedings

As per the E-Assessment Scheme, the taxpayer could file an appeal before the jurisdictional Commissioner (Appeals) against an assessment made by the NEC. However, the amended Scheme extends the right to make such appeal even against the penalty orders.

Exchange of communication exclusively by electronic mode

The E-assessment Scheme provided that all communications between NEC and the taxpayer or his authorised representative, shall be exchanged exclusively by electronic mode. Further, all internal communications between the units shall also be exchanged exclusively by electronic mode.

The amended Scheme further provides that the above provision shall not apply to the enquiry or verification conducted by the verification unit in certain specified circumstances.

Authentication of electronic record

The E-assessment Scheme provided that an electronic record shall be authenticated by the originator by affixing his digital signature. However, in case of the originator, being the taxpayer or any other person, such authentication may also be done by electronic signature or electronic authentication technique in accordance with the Scheme.

The above provision has been amended to provide that an electronic record shall be authenticated by -

· NEC by affixing its digital signature; and

· the taxpayer or any other person, by affixing his digital signature if he is required under the Rules to furnish his return of income under digital signature, and in any other case by affixing his digital signature or under electronic verification code.

Request for personal hearing

· The Chief Commissioner or the Director General, in charge of the Regional e-assessment Centre (RAC), under which the concerned unit is set up, may approve the request for personal hearing if he is of the opinion that the request is covered by the specified circumstances.

· The E-assessment Scheme provided that any personal hearing shall be conducted exclusively through video conferencing, including use of any telecommunication application software which supports video telephony, in accordance with the procedure laid down by the Board. The amended Scheme further provides for the approval of the Chief Commissioner or the Director General, in charge of RAC, in the cases where personal hearing requests have been received.

CBDT Notification under Section 143(3B) to further amend the scheme

In line with the above amendments in the Scheme, CBDT, has also amended its earlier Notification¹³ which provided for certain directions from the central government for relaxing few provisions of the Act for smooth functioning of the Scheme. Some of the key amendments in the Notification are as follows:

Transfer of case to jurisdictional AO with the prior approval of CBDT

The Principal Chief Commissioner (Pr.CCIT) or Principal Director General, in charge of the NAC, may at any stage of the assessment, if considered necessary, transfer the case to jurisdictional AO, with the prior approval of CBDT.

Power to specify format, mode, procedure and processes

In the amended Scheme such powers shall be exercised by Pr.CCIT/ Pr.DG, with the prior approval of CBDT. Further such powers can also be exercised in the following circumstances:

· Circumstances with respect to exchange of communication through electronic mode shall not apply

· Circumstances in which personal hearing has been requested with the approval of Chief Commissioner or Director General.

CBDT order – assessment orders to be passed through the Faceless Assessment Scheme, exceptions are provided

In order to ensure that all the assessment orders are passed through the Faceless Assessment Scheme, 2019, CBDT has issued an Order¹⁴ directing that all the assessment orders shall henceforth be passed by NEC through the Faceless Assessment Scheme, 2019, except:

· Assessment orders in cases assigned to Central Charges.

· Assessment orders in cases assigned to International Tax Charges.

Any assessment order which is not in conformity with above, shall be treated as non-est and shall be deemed to have never been passed. The order shall come into force with effect from 13 August 2020.

CBDT Order - Survey action under Section 133A

Section 133A gives power to the Income-tax Authority to conduct survey proceedings. It may enter any place

¹³ Notification No. 62 dated 12 September 2019

¹⁴ Order (F No. 187/3/2020 -ITA-I)

of business or profession during the hours at which such place is open for the conduct of business or profession and in the case of any other place, only after sunrise and before sunset. The survey action under Section 133A being an intrusive action, it is expected that the same should be carried out with utmost responsibility and accountability.

Therefore, CBDT had directed that the officers posted in Directorates of Investigation (Investigation Wing) and Commissionerates of TDS, only and exclusively shall act as ‘Incometax Authority’ for the purposes of power of survey under Section 133A.

The competent authority for approval of such survey action under Section 133A shall henceforth be DGIT (Inv) for investigation wing and Pr.CCIT/CCIT (TDS) for TDS charges, as the case may be. The order shall come into force with effect from 13 August 2020.

CBDT Order/Notifications re-constituting e- assessment centres and jurisdiction of Income-tax authorities

Recently, CBDT has issued an Order¹⁵ re-constituting RAC with 30 headquarters spread over 20 cities, in pursuance of Faceless Assessment Scheme notified and in supersession of earlier office order issued in October 2019. The Order also announces composition of each RAC. The order states that Principal Commissioner of Income-tax (RAC) (Technical Unit) will be stationed at Delhi, Mumbai, Chennai and Kolkata respectively. However, they will be reporting to Pr.CCIT (NAC), Delhi for administrative purpose.

Further, CBDT has also issued various Notifications (No.62 to 66 of 2020, dated 13 August 2020) amending jurisdiction of income-tax authorities under Section 120. CBDT directed that the Income-tax authorities of RACs, having their specified headquarters shall exercise the powers and functions of AOs concurrently, to facilitate the conduct of Faceless Assessment proceedings in respect of specified territorial areas.

¹⁵ F No. 187/3/2020 ITA-1, dated 13 August 2020

Commerce Lecture

Saturday, 26 April 2025