By Rahul Garg (Chartered Accountant)

You are aware that the Government brought in an Ordinance in March to relax certain provisions of Income Tax law alongwith deferral of various timelines in relation to Compliances, appeals and proceedings before the filed level officers till June 2020 to provide immediate relaxations to the taxpayers. Interest rates for delays in payment of tax dues were also reduced in view of stiff liquidity challenges with the taxpayers during the lockdown period. Finance Ministry is trying to provide best possible support to the Industry on the administrative front as well and hence, taken timely steps for extension of lower withholding certificates of last year till 30th June, so that the liquidity of the taxpayers is also not jeopardized due to their inability of obtaining fresh such certificates from the field officers for FY 2020-21. Extension of the major Direct tax settlement scheme (Vivad se Vishwas) announced by the Government during the last Budget till 30th June without any additional payment is also a big tax-friendly measure during the lockdown period.

In continuation to the above taxpayer-friendly measures, the CBDT has now issued the Central Action Plan for the first quarter of this Financial Year laying down the road map for the officials of the tax department. While the Action Plan is comparatively short vis-a-vis the previous such plans on account of Covid-19, however, the entire emphasis of the Government in this plan is to utilize this lockdown period by the officers effectively for cleaning the past records and doing the strong groundwork for the post lockdown period.

It is interesting to note a major shift in the approach of the Government wherein the emphasis is more towards Qualitative rather than Quantitative measures i.e. the focus is more on identification and strong preparation of cases (out of the cases provided by Directorate of Systems) which are worth picking up for reassessment under section 147 of the Income Tax Act due to revenue leakage. In the past, a large number of these cases traveled to WRIT Courts on the grounds of lack of Jurisdiction itself of the tax officer, in view of restrictive provisions in the law for reopening of cases and the success record of Revenue is not very encouraging in view of weak groundwork by the field officers such as Recording of appropriate Reasons to believe for initiation of such proceedings which is a basic and primary requirement alongwith other technical requirements for valid initiation of such proceedings.

While the cases of reopening would still be litigated on merits of the case by taxpayers but the objective of CBDT appears to have atleast Basics right and the proceedings are not quashed by the Courts atleast on technical grounds of jurisdiction alone (whether it is a case of reopening within or beyond four years of Assessment Year). This should cut significant time of tax department, taxpayer and also Courts in litigating such matters in multiple rounds and at multiple levels. The classic example of such never ending litigation is the recent decision of Supreme Court that was decided in April in the case of NDTV wherein although the Court has decided the matter of reopening in favor of taxpayer on the technical ground of lack of jurisdiction as the Revenue was not able to prove the non-disclosure of material facts by NDTV in the first round of regular assessment, however, the Court has left the issue of authority of Revenue to reopen this case as per second proviso to section 147 of the Act wherein the provisions are wide and the officer has more power to reopen the case. This situation could well be avoided if the reliance on second proviso was recorded in the reasons itself.

The other direction in relation to verification of records so that the pending rectification applications can be disposed off and effects can be given to the appellate orders by the tax officers in all eligible cases. This would also immensely help taxpayers as pendency of such applications is also a major pain point for them and takes years to close after multiple rounds of follow ups by the taxpayers and help them to save time as well as having pending refunds determined by the officers. Revenue would also be benefited with this and they get a right picture of demands or refunds that are actually recoverable or payable after processing of such cases, which will help them putting time at the right place going forward.

The Board has directed the officers to reconcile all manual demands PAN wise and Yearwise with the Systems, so that duplicate demands can be removed. This would again a right step to improve the quality of records and have the House in order, so that the valuable time of both officers and taxpayers can be saved in not litigating the unenforceable / ineffective demands and the Courts are also not burdened with the
taxsutra All rights reserved unnecessary Stay applications.

To make effective use of the lockdown period, the Board has also directed the Senior officers to dispose of all the applications filed by Trusts and received as on 31 march 2020 seeking registrations under section 12AA or section 80G for income tax exemptions, by 30 June 2020. This should help bringing in certainty for this class of taxpayers and also the tax officers would be able to analyse the applications in minute details to ensure that the activities of trusts are genuine and also meeting the requirements of the law. This is an important area considering the strong focus of CBDT to curb tax avoidance / evasion by such entities.

In the end and apart from other routine items, it has been directed that the collegium of CCITs / DGITs identify the non-prosecutable appeals and withdraw the same by 30 June 2020. This is again one more major step by the Government to achieve its objective of curbing the heavy pending litigation which is not worth carrying forward. As a major taxpayer confidence building measure, the field officers are directed (in Bold letters!!) not to initiate any adverse action / communication against the taxpayer till further directions from the Board which is again a major step by the Government to avoid any inconvenience to the taxpayer, during this lockdown period.