Startup India Registration: How beneficial is it for your business?

Launched on 16th January 2016, the Startup India Initiative has rolled out several programs to support entrepreneurs, build a robust startup ecosystem, and transforming India into a country of job creators instead of job seekers.

These programs are managed by a dedicated Startup India Team, which reports to the Department for Industrial Policy and Promotion (DPIIT).

Startup India was set up to provide handholding support to startup ventures and streamline their incentive disbursals under the DPIIT.

The idea is to provide an enabling environment for startups to flourish and lure investments. The initiative commenced in April 2016, with the operationalization of the Startup India Hub, the online portal providing multiple offerings under Startup India and connecting aspirants to other vital ecosystem builders.

Also, the scope of definition was broadened to include scalable business models with a high potential of employment generation or wealth creation.

Additionally, the requirement of a letter of recommendation from an incubator/ industry association was also removed to avail benefits offered under the initiative.

Currently, there is at least one recognized startup in each of the States and UTs. The startups recognized until February 2020 span across 54 industrial sectors with a maximum number of startups registered under IT services and Healthcare & Life sciences followed by the education sector.

DPIIT-RECOGNISED STARTUPS ARE ELIGIBLE FOR THE FOLLOWING BENEFITS

  • Intellectual Property Rights (IPR) benefits
  • Relaxation in public procurements norms
  • Self-certification under Labour & Environment laws
  • Fund of Funds for Startups (FFS)
  • Faster exit for Startups
  • Seed Fund Scheme

DPIIT-RECOGNISED STARTUPS MAY APPLY TO IMB FOR THE FOLLOWING BENEFITS

Startups incorporated on or after 1st April 2016 can apply for income tax exemption. The Inter-Ministerial Board validates the innovative nature of the business for granting Income Tax Benefits and is constituted by representatives from DPIIT, DBT, and DST.

Income Tax exemption for 3 out of 10 years

The recognized startups that are granted an Inter-Ministerial Board Certificate are exempted from income tax for a period of 3 consecutive years out of 10 years since incorporation.

Exemption for the purpose of clause (VIIB) of sub-section (2) of section 56 of Income Tax Act,1961

A DPIIT recognized startup is eligible for exemption from the provisions of section 56(2)(viib) of the Income Tax Act. The Startup has to file a duly signed declaration in Form 2 to DPIIT {as per notification G.S.R. 127 (E)} to claim the exemption from the provisions of Section 56(2)(viib) of the Income Tax Act.

Best Resources with Startup India Registration Portal

Startup India provides free resources to startups to help them scale faster, better, and stronger. The Startups recognized under the scheme are offered various free resources of which some of them are mentioned here-

Pro Bono Services

$5.8M Worth of value benefits is offered. The Scheme has collaborated with leading corporates and startups and others to provide services of legal support, build an app, use cloud credits, cloud telephony services, and many more.

Blockchain-based Certificate Verification Platform

The Department for Promotion of Industry and Internal Trade (DPIIT) has launched a Blockchain-based Certificate Verification Platform to enable instant access and verification of the certificates issued to recognized startups through the Startup India Portal.

The platform can be utilized by Government Departments, PSUs, Banks, and Investors to verify the authenticity of the information submitted by startups.

Networking and Discussion

Members of the startup ecosystem – startups, investors, mentors, incubators, accelerators, and government bodies can connect on the online forum of the Startup India portal.

The platform provides the ecosystem members with the opportunity to discuss, express, and opine on the forum through discussion threads, blogs, and one-to-one messaging.

State’s Startup Policies

Startup India presents a list of 30 State Government policies that offer benefits to startups. Startups and entrepreneurs across these states can access the policy documents, website links, and contact details of the respective nodal agencies.

Tools and Templates

The Portal offers a wide range of templates ranging from lease agreements, employment contracts, deeds, NDAs, etc. freely available in multiple Indian languages that will allow the startups to focus on what is important to the business.

How RSA Consultants can help?

We are a team of experienced Chartered Accountants, Company Secretaries, and Business Consultants and have experience working with many Startups and understanding the needs of such an organization.

We will fill out the application and submit it on your behalf with DPIIT as well as Income Tax Department and will give you absolute clarity on the process to set realistic expectations. You may explore more at ITAT Orders.

CBDT extends various due dates to provide relief to taxpayers in view of COVID – 19: [Circular No. 9 of 2021 in F. No. 225/49/2021-ITA-II]

In view of the adverse circumstances arising due to the severe Covid-19 pandemic, the CBDT in exercise of its power under section 119 of the Income Tax Act, 1961 provided relaxation in respect of the following compliances:

Particulars Extended Due Date
The Statement of Financial Transaction (SFT) for FY 2020-21 30th June, 2021
The Statement of Reportable Account for the CY 2020 30th June, 2021
TDS Return – Q4 of FY 2020-21 (26Q & 24Q) 30th June, 2021
The Certificate of TDS in Form No. 16 – Q4 of FY 2020-21 15th July, 2021
TDS/TCS Book Adjustment Statement in Form No. 24G for the Month on May 2021 30th June, 2021
TDS Return by trustee of an Approved Superannuation Fund for FY 2020-21 30th June, 2021
Statement of Income paid or credited by an investment fund to its unit holder in Form No. 64D for the FY 2020-21 30th June, 2021
Statement of Income paid or credited by an investment fund to its unit holder in Form No. 64C for the FY 2020-21 15th July, 2021
Return of Income for AY 2021-22  (original due date – 31st July, 2021 u/s. 139(1)) 30th September, 2021
Tax Audit Filing Due Date for FY 2020-21 31st October, 2021
Audit Report of person who entered into International Transaction or Specified Domestic Transactions u/s. 92E for FY 2020-21 30th November, 2021
Return of Income for AY 2021-22  (original due date – 31st October, 2021 u/s. 139(1)) 30th November, 2021
Return of Income for AY 2021-22  (original due date – 30th November, 2021 u/s. 139(1)) 31st December, 2021
Revised or Belated Return of Income for AY 2021-22 u/s. 139(5) and 139(4) respectively (original due date – 31st December, 2021) 31st January, 2022

The said circular is available on www.incometaxindia.gov.in

Relaxation granted by MCA due to second wave of Covid-19

Circular-1: Maximum Gap between two Board Meetings under section 173 of the Companies Act, 2013. 

MCA has extended a gap between the two board meetings by 60 days for the first two quarters of Financial Year 2021-22. Accordingly, the gap between the two consecutive Board Meetings may extend to 180 days during the quarter April to June 2021 and July to September 2021, instead of 120 days as per Section 173 of the Companies Act, 2013.

The circular can be accessed at http://www.mca.gov.in/Ministry/pdf/GeneralCircularNo8_03052021.pdf

Circular-2: Relaxation of filing forms for Creation and Modification of charge

MCA has provided relaxation in respect of filing of forms of creation and modification of charge between 01.04.2021 to 31.05.2021 (both days inclusive). As per provisions of Section 77 of Companies Act, 2013 form CHG-1 and CHG-9 relating to Creation and Modification of Charge need to be filed in a maximum of 120 days from the date of creation or modification of charge.

The Circular shall not apply in case:

-When the form has already been filed before the date of issue of this Circular.

-The timeline for filing the form is already expired prior to 01.04.2021.

-Filing of form CHG-4 for the satisfaction of charge.

The circular for modification of charges can be accessed at https://www.mca.gov.in/Ministry/pdf/GeneralCircularNo7_03052021.pdf

 Circular – 3: Relaxation in additional fees for filing of form after the due date

As per this circular, if the due date of any form (except CHG-1, CHG-4, and CHG-9) falling between 1st April 2021 to 30th May 2020 then those forms can be file without additional fees till 31st July 2021.

 S.No.FormsPurpose of the formLast DateExtended Due Date
1MSME-1For reporting dues to MSME exceeding 45 days, if any on a half-yearly basis30/04/202131st July 2021
2LLP Form-11Annual Return to be furnished30/05/202131st July 2021
3DPT-3Return of Deposits30/06/202131st July 2021
4Form CFSSApplication for issue of immunity certificate under the Companies Fresh Start Scheme (CFSS), 202030/06/202131st July 2021
5FC-4Annual Return of Foreign Company30/05/202131st July 2021

This has provided great relief to all the Companies and LLPs registered under the Companies Act, 2013 & Limited Liability Partnership Act, 2008 by the MCA.

The circular can be accessed at https://www.mca.gov.in/Ministry/pdf/GeneralCircularNo6_03052021.pdf

No addition can be made in respect of completed assessments if no incriminating material is found during the course of search.

The DCIT Vs. M/s.Creative Trendz Pvt. Ltd.

[I.T(SS)A No’s.272/AHD/2016 & 273/AHD/2016]

Facts of the case

The assessee is a company engaged in the business of embroidery of cloth and job work. The assessee filed its Return of Income for year for A.Y 2009-10 on 15.09.2009 declaring total income of Rs.1,85,10,810/-. The Return of Income was processed and accepted under section 143(1) of the Act. A search action under section 132 was carried out on 18.02.2014 in the premises of the assessee. Consequent upon the search, a notice under section 153A dated 28.11.2014 was issued to the assessee to file Return of Income for the year under consideration. The Assessing Officer after serving notice under section 143(2) of the Act proceeded for re-assessment of income furnished in response to notice under section 153A of the Act. During the assessment the AO issued notice to the assessee vide notice dated 16.03.2016 as to why the share capital of Rs.3.13 crore raised during the A.Y. 2009-10 and Rs.3.57 crore in A.Y. 2010-11 should not be treated as unexplained cash credit. The assessee in its reply dated 23.03.2016 stated that assessment completed under section 143(3) cannot be interfered without any incriminating material found during the course of search.

The AO did not accept the contention of the assessee and concluded that the assessee had failed to pass the test as required under section 68 of the Act to prove the identity of shareholders genuineness of the transaction and credit worthiness of the creditor. The AO made addition of Rs.3.13 crore as unexplained cash credit.

AR’s Arguments

The Ld. AR for the assessee submitted that the assessment
for the year was completed under section 143(3) and no
incriminating material was found during the search related with
the share application money. The investor company has sufficient
share capital and reserve funds available with them. The AR further submitted that the AO in the entire assessment, nowhere mentioned that any incriminating material was found during the search on 18.02.2014. He further submitted that “It is settled law by various High Courts and Hon’ble Supreme Court’s decision that no addition can be made in unabated assessment in absence of incriminating material in relation to the assessment year.” Further, no incriminating material related with share application money was recovered in the search carried at the premises of the assessee, thus, the AO was not justified to make addition under section 68 of the Act against the assessee. The Ld. AR relied on the judgement of Hon’ble Delhi High Court in the case of Kabul Chawla [2015] 93 CCH 0210 (Delhi HC) and the decision of Special Bench of All Cargo Global Logistics Ltd. vs. DCIT 147 TTJ 0513 (SB) which has been upheld by the Hon’ble Bombay High Court, in CIT vs. Continental Warehousing corporation [2015] 58 taxmann.com 78 (Bom) and held that in absence of incriminating material unearthed during the search, the addition is not permissible.

DR’s Arguments

The Ld. DR for the Revenue had submitted that as per explanation in section 153A (d), the AO has power to assess or re-assess the total income in respect of six assessment years. Nowhere is it mentioned that AO cannot make assessment under section 153A if not incriminating material is found.

Findings of the case

The Ld. Tribunal held that the Ld. DR failed to bring any fact that assessment for the year under consideration was pending at the time of search on 14.02.2014 of that the issue of share capital was not the subject matter in the assessment was not reported while filing the Return of Income in the assessment year under consideration. The Ld. DR referred the explanation attached with section 153A that the AO has power to assess or re-assessing total income in respect of each assessment year falling within six assessment years. There is no dispute regarding statutory provision in the Act. However, the Hon’ble Bombay Delhi High Court has laid down Law that no addition in absence of incriminating material can be made in respect of assessment which has become final if no incriminating material is found during the search. The Ld. DR failed to bring any contrary fact to our notice that any incriminating material was found during the search. No contrary law is brought to our notice. Therefore, the Ld. Tribunal have no option except to affirm the order to Ld. CIT(A) and hence, the appeal of the revenue was dismissed.

Find more such judgments on https://www.itatorders.in/

 

Lease Financing Model: Lease Financing as a Viable Business Option

Ever heard of businessmen exploring the idea of using an asset on a rental basis on account of a shortage of finance to buy the asset.

In terms of finance, the term ‘Lease’ is defined as ‘an agreement whereby the Lessor (legal owner) conveys to the Lessee (another party) in return for a payment or series of periodic payments (Lease rents), the right to use an asset for an agreed period of time.’

Here, we would be talking more about a specific type of leasing that is Equipment Leasing

Why does a company consider leasing?

The following are the benefits to a company if it considers investing in capital equipment especially when compared to a cash purchase:

  • 100% of the rentals (both the capital repayment and interest) are tax-deductible for a profit-making company.
  • In most cases, no large deposit is required.
  • Repayments are fixed which makes for easy budgeting;
  • Maintains other credit lines;
  • Flexible term ranging from 1 to 5 years;
  • Easy to upgrade when you need to replace aging equipment with new ones;
  • Almost all equipment types can be funded;
  • Allows the equipment to pay for its self over the time period;
  • Most importantly, it protects your cash flow to cover future unexpected costs or just to give you peace of mind knowing your money is in your bank account and not tied up in equipment.

Why do people invest in Leasable Assets?

Equipment leasing platforms allow you to pool your money with other investors to invest in capital equipment that can be leased to businesses.

The equipment will be sold directly to the lessee as part of a lease-to-own program. Assets that are leased can be electric bikes, batteries, furniture, etc.

The advantages of leasing assets include:

  1. Consistent Cash Flow – Fixed lease payments are provided for consistent and high distribution rates throughout the operating periods of most programs.
  2. Low Correlation – Thoughtfully underwritten leasing receivables have the ability to withstand the biggest hits to both equity and debt markets.
  3. Strong Collateral – Leasing typically provides the lessor with a purchase money security interest (PMSI), meaning the lessor legally owns the equipment. Contrast this with a loan where the lender may have a lien on an asset, which is a significantly weaker position than a PMSI.
  4. Less Volatile than Stock Market – There is more stability in the leasing system as the same is not controlled by the market forces but solely by the lease agreement.
  5. Returns – As leasing is a relatively stable option, the rate of returns is also more or less stable; also they can offer an Internal Rate of Return (IRR) of up to 20%+ which can further offer an opportunity to diversify one’s portfolio.
  6. More beneficial to New Entrants like students or people who have freshly started their career.

Lease Financing Model explained with an example

Say, an electrical vehicle is leased to a company (Lessee), the following terms will be implicated vide this transaction of leasing:

  • The title of the vehicle will not be transferred to the Lessee and the same will be returned in case of termination.
  • The purchase price will be reduced on account of various subsidies received from the Govt.’s promotion scheme of Electric Vehicles (applicable on electric vehicle leasing linked to promotion scheme only).
  • Complete compensation in case of loss of vehicle by the lessee.
  • The lessee will be responsible for all maintenance expenses, including repair, accident, running costs, regular maintenance, etc.
  • A fixed amount of security deposit would be paid by the lessee to the lessor which shall be returned to the lessee upon completion of the lease agreement.
  • A pre-determined percentage would be reserved for management expenses, (normally termed as ‘Management Fees’).

What are the ways or platforms to structure a lease financing deal and invest in it?

Investing in lease financing would require negotiating with the lessee for lease rentals, negotiating with purchase vendors for the lowest purchase price, and doing the due diligence of the lessee and other legal paperwork. This structuring is difficult for a normal investor.

However, platforms like Gripinvest do it for you and all you need to do is complete the KYC, which takes 5 minutes and invest an amount that gives you a return from the very next month.

The expected IRR is as high as 22% (Pre-tax) and the structuring through LLP makes the return totally tax-free in the individual’s hands.

To maximize the returns, the asset class chose which entitles the depreciation rate of 40% and an investor may start as low as Rs.20,000/-which is also one of the reasons for best returns on investment.

Interested to know more about such opportunities? Follow the ITAT Orders blog!

File Form 10A in 5 Easy steps

Are you an applicant registered under Section 12A and 80G or Section 12AA? (i.e Trust/Societies/Hospitals, etc.). Then you need to obtain fresh registration in the prescribed format under Sec 10(23C) of the Act by 30th June 2021.

The Central Board of Direct Taxes (CBDT) has tabled a new form i.e. Form 10A for the registration/ intimation/approval/provisional approval of charitable trusts that are compulsory being effective from April 1, 2021.

This states that the person who has received income and who want to avail the benefit as per section 11 & 12 has to make an application in the prescribed standard form i.e. 10A or 10B and the stated manner to the Principal Commissioner or Commissioner, for registration of the trust or institution.

One can file Form 10A online by simply visiting the E-filing website of the income tax department using a digital signature.

Steps to file Form 10A

Step 1: First, you need to log on to the E-filing portal of the income tax department through https://incometaxindiaefiling.gov.in/

Step 2: Then, you have to go to the E-file menu located at the upper-left side of the website page and click on the Income Tax Forms.

Step 3: You need to select Assessment Year and Form 10A from the drop-down list.

Step 4: You have to select the submission mode as Prepare and submit online from the drop-down list and click on continue.

Step 5: Before filing the form, you need to read the instructions carefully and click on the submit button to complete the process.

Along with the form 10A application, the following documents must be attached by the taxpayer:

  • Where the trust is created, or the institution is established, under an instrument, self-certified copy of the instrument creating the trust or establishing the institution;
  • Where the trust is created, or the institution is established, otherwise than under an instrument, self-certified copy of the document evidencing the creation of the trust, or establishment of the institution;
  • Self-certified copy of the registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts, as the case may be;
  • Self-certified copy of the documents evidencing adoption or modification of the objects, if any;
  • Where the trust or institution has been in existence during any year or years before the financial year in which the application for registration is made, self-certified copies of the annual accounts of the trust or institution relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up;
  • Note on the activities of the trust or institution;
  • Self-certified copy of existing order granting registration under section 12A or section 12AA, as the case may be; and
  • Self-certified copy of the order of rejection of application for grant of registration under section 12A or section 12AA, as the case may be if any.

The Commissioner shall on receipt of such application examine the documents provided by the applicant and issue an order in Form 10AC with sixteen digits Alphanumeric Unique Registration Number.

Relevant FAQ’S for Form 10A are as follows:-

Q1: A charitable trust has obtained registration under Section12A of the Income Tax Act,1961. Now, suppose it wants to obtain registration under Section 80G of the relevant Act. Is it required to file a new application in Form 10A?

Ans. Yes. For each unique section code as specified in the section code list in Form 10A, applicant is required to file a separate application in Form 10A.

Q 2: Is it possible to obtain registration under multiple sections such as Section 10(23C) and Section 80G of the Income-tax Act, 1961 by filing a single application in Form 10A?

Ans. No. Applicant needs to file a separate application in Form 10A by selecting the relevant section code from the Section Code list.

Q 3: A trust is already registered under Section 10 (23C) of the Income-tax Act, 1961. It wants to obtain registration under Section 12A of the relevant act. Is it eligible to file Form 10A in such a case?

Ans. No. If the applicant is already registered under Section 10(23C) of the Income-tax Act, 1961, he is not eligible to obtain registration under Section 12A of the relevant act, and hence, he will not be allowed to file Form 10A for Section 12A registration.

Q 4: Is it possible to select multiple section codes in Form 10A to obtain registration under different sections?

Ans. No. Applicants cannot select multiple section codes in Form 10A. One single application in Form 10A can be submitted only for one section code

The form can be accessed at https://www.incometaxindia.gov.in/forms/income-tax%20rules/103120000000007795.pdf

How RSA Consultants can help?

We are a team of experienced Chartered Accountants, Company Secretaries, and Business consultants and having experience of working with many NGO’s and understands the needs of such organization.

We will fill out the application and submit it on your behalf with the Income Tax Department and will give you absolute clarity on the process to set realistic expectations. You may explore more at NGO 12ab Registration.

Solve your Income Tax puzzle with Us!

Have you received any income tax notice so far? Are you the lucky one? or the unlucky one! If yes, next 5 minutes is worth investing your time. A notice issued on you does not necessarily mean you have committed a crime. Even a minor error in tax return can invite a notice from the tax department.

The Mission of Our Income Tax Department is “To promote Compliance with our direct tax laws, through caring taxpayer service and strict enforcement, and thus realize maximum resources for the Nation.”

With the above mission in the mind, recently Income Tax department are sending Notice to various assesses.

Major reasons to expect notices or communication from Income Tax Department are as follows:-

  • Income is more than the exemption limit and ITR (Income Tax Return) is not filed.
  • Income does not exceed exemption limit but TDS (Tax Deducted at Source) is deducted and ITR is not filed.
  • TDS mismatch in ITR filed and 26AS (Govt. record).
  • Arithmetical errors in ITR filed.
  • Investments in the name of spouse or minor kids but you are claiming deduction for them.
  • For setting off refunds against remaining tax payable
  • Misreporting LTCG from equity
  • For tax evasion in earlier years 
  • Non-disclosure of foreign assets and Indian assets in certain cases.
  • Unsecured loan or advances taken/given to others.
  • High value transactions:
    1. Cash deposits in a bank totaling Rs. 10 lakh or more in a year.
    2. Credit card purchases of Rs. 2 lakh or more.
    3. Mutual fund investments of Rs. 2 lakh or more.
    4. Purchase of bonds and debentures worth Rs. 5 lakh or more in a year.
    5. Sale or purchase of property worth Rs. 30 lakh or more.

Let’s explore few of the above reasons with examples:-

1.Delay in filing Income Tax return

If you’re nearing the ITR filing deadline and still haven’t filed your returns, you will receive a reminder to do so. Notice may be issued under Section 142(1)(i) of the Income Tax Act that requires you to furnish the return.

2. For scrutiny assessment

You may receive a notice specifically under section 143(2). This means that the ITR filed by you has come under the tax authorities’ lens. Such scrutiny can be related to anything from a mismatch to inaccurate reporting etc.

3. Settlement of refunds against remaining dues and tax payable by you

You may also receive a notice if there are any dues in the form of tax, penalty, fines or any other sum payable by you. In case you claimed a refund, the assessing officer may send you a notice as an intimation that the dues will be adjusted against the Income Tax refund you have claimed.

4. For non-disclosure of income or if some income has escaped assessment.

If the income tax authorities believe that not all income from various sources has been declared then a notice is served to you on grounds of non-reportage. To avoid such incidences of non-disclosure of income while filing your Income Tax Return, you should collect all your financial statements and evidence of all your income sources, including payslips, bank statements, invoices etc.

5. A misreported LTCG from equity

Long-term Capital Gains derived from equity has to be declared and reported in your ITR. It is a complex computation, and tends to be miscalculated. Under Section 143(3), this could be included as taxable income and interest can be charged on the income tax shortfall.

6. When the TDS claimed by you does not match with Form 26AS

Your TDS at the time of filing the ITR should match with the one mentioned in Form 26AS and Form 16 or 16A as per Govt. records. If a mismatch is found, a notice will be issued under Section 143 (1).

7. For non-declaration of investments made in the name of spouse

Income from such investments is taxable in your hands, the non-disclosure of which will invite a notice from the Income tax authorities.

Unaware of the fact that whether such notices are issued to you?

It is advisable to Login to the e-filing portal (https://incometaxindiaefiling.gov.in) using your PAN and the registered password and check the your notice status. Or Consult your Tax expert to solve your Tax puzzles easily.

Suppose you have received one such notice. So what to do next?

Do not panic, simply oblige the query. Respond to the notice, and furnish the documents and information the department has sought. File a rectified return and pay the tax due, if any, within the stipulated period.

Reply to all notices issued!

Eg1. If the notice is about complete scrutiny or reassessment, you may have to undergo detailed scrutiny. Such notices come along with a questionnaire asking for information on a particular transaction, asset or income.

Eg2.If the notice is related to limited scrutiny, you have to provide details of particular assets mentioned such as when it was purchased, its cost and source of fund. The notice will also specify the date before which such information and documents are to be submitted.

Now with Faceless Scheme the government has introduced an e-proceeding facility under which all notices can be responded to online. Not responding to the notice could cost you a lot of time, money and in some cases, it could also lead to imprisonment.

Match the pieces and get the right picture.

You can either choose to represent your case yourself or authorise a tax expert to do so. The latter option is better as a professionals will fully understand each and every explanation sought and respond appropriately.

CBDT extends various compliance dates due to Covid-19 Second Wave

In view of the adverse circumstances arising due to the severe Covid-19 pandemic and also in view of the several requests received from taxpayers, tax consultants & other stakeholders from across the country, requesting that various compliance dates may be relaxed, the Government has extended certain timelines today.

In the light of multiple representations received (supra) and to mitigate the difficulties being faced by various stakeholders, the Central Board of Direct Taxes (CBDT) has, under section 119 of the Income-tax Act, 1961(the Act), provided the following relaxation in respect of compliances by the taxpayers:

  • Appeal to Commissioner (Appeals) under Chapter XX of the Act, for which the last date of filing under that Section is 1st April, 2021 or thereafter, may be filed within the time provided under that Section or by 31st May, 2021, whichever is later;
  • Objections to Dispute Resolution Panel (DRP) under Section 144C of the Act, for which the last date of filing under that Section is 1st April, 2021 or thereafter, may be filed within the time provided under that Section or by 31st May, 2021, whichever is later;
  • Income-tax return in response to notice under Section 148 of the Act, for which the last date of filing of return of income under the said notice is 1st April, 2021 or thereafter, may be filed within the time allowed under that notice or by 31st May, 2021, whichever is later;
  • Filing of belated return under sub-section (4) and revised return under sub-section (5) of Section 139 of the Act, for Assessment Year 2020-21, which was required to be filed on or before 31st March, 2021, may be filed on or before 31st May, 2021;
  • Payment of tax deducted under Section 194-IA, Section 194-IB and Section 194M of the Act, and filing of challan-cum-statement for such tax deducted, which are required to be paid and furnished by 30th April, 2021(respectively) under Rule 30 of the Income-tax Rules, 1962, may be paid and furnished on or before 31st May, 2021;Statement in Form No. 61, containing particulars of declarations received in Form No.60, which is due to be furnished on or before 30th April, 2021, may be furnished on or before 31st May, 2021.

CBDT Circular No.8/2021 in F. No. 225/49/2021/ITA-II dated 30.04.2021 issued. The said Circular is available on www.incometaxindia.gov.in.

New Penalty provision under section 270A |A blessing in disguise?

Penalty on Concealment of particulars of income or furnishing inaccurate particulars of income has always been a matter of litigation between the department and the assessee.

The scope of such provisions was always a subject matter of litigation since the tax authorities always levied the penalty whenever there was an addition or disallowance made by the AO even in cases where there was no prima facie case against the taxpayer.

The Finance Act, 2016 (FA, 2016) has, with effect from 1.4.2017, inserted section 270A in the Income-tax Act, 1961 with a view to substituting the provisions of section 271(1)(c) dealing with a levy of penalty for concealment of income or furnishing of inaccurate particulars.

The Finance (No. 2) Act, 2019 has amended section 270A with retrospective effect from 1.4.2017.

Which authorities can levy penalty u/s 270A

Penalty u/s 270A of the Act can be imposed by Assessing Officer, Commissioner (Appeals) or the Principal Commissioner or Commissioner.

Scope of penalty u/s 270A

Penalty u/s 270A shall be levied on the under-reported Income or under-reported Income as a consequence of any misreporting thereof.

Quantum of Penalty u/s 270A

ParticularsQuantum
In case of Underreporting of Income50% of the amount of tax payable on under-reported income
In case of Underreporting of Income in consequence of any misreporting thereof200% of the amount of tax payable on under-reported income

What is Under-Reporting of Income?

A person shall be considered to have under-reported his income if, –– 

  1. the income assessed is greater than the maximum amount not chargeable to tax, where no return of income is filed; 
  2. the assessed income is greater than the income determined upon processing under section 143(1)(a), where the return is filed; 
  3. the income assessed is greater than the income assessed or reassessed immediately before such reassessment;
  4. the income assessed or reassessed has the effect of reducing the loss or converting such loss into income; 
  5. the amount of deemed total income assessed or reassessed under section 115JB/115JC is greater than the deemed total income determined in the return processed under section 143(1)(a); 
  6. the amount of deemed total income assessed as per the provisions of section 115JB/115JC is greater than the maximum amount not chargeable to tax, where no return of income has been filed;
  7. the amount of deemed total income reassessed as per the provisions of section 115JB/115JC is greater than the deemed total income assessed or reassessed immediately before such reassessment.

What is Mis-reporting of income?

Cases of misreporting of income shall be the following – 

  1. misrepresentation or suppression of facts; 
  2. failure to record investments in the books of account; 
  3. the claim of expenditure not substantiated by any evidence; 
  4. recording of any false entry in the books of account; 
  5. failure to record any receipt in the books of account having a bearing on total income; and 
  6. failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X of the act.

Section 270AA has been inserted into the Act to reduce the litigation and tet the speedy recovery of the tax along with interest.

In section 270AA of the Act, the Assessee has been provided with an option to making application to AO for granting immunity from imposition of penalty under section 270A and initiation of proceedings under section 276C or section 276CC, subject to fulfilment of following conditions: –

  • (a) the tax and interest payable as per the order of assessment or reassessment under sub-section (3) of section 143 or section 147, as the case may be, has been paid within the period specified in such notice of demand; and
  • (b) no appeal has been filed

The application has to be made in form No. 68 within 30 days from the end of the month in which the order has been received by the Assessee.

After providing opportunity to the Assessee, the AO shall pass the order either accepting the application or rejecting the same within one month from end of month in which application is made by the Assessee. The order so passed by the AO shall be final and is non appealable. 

If the application is accepted by the AO, then no appeal u/s 246A or revision u/s 264 shall be admissible. However, the Assessee can file appeal u/s 246A or revision u/s 264 of the Act, if the immunity application has been rejected by the AO. The appeal in such cases has to be filed with condonation of the delay.

Immunity u/s 270AA is not available in the cases covered u/s 270A(9) i.e. misreporting of income.

Accordingly, immunity from penalty can be granted only in the case where penalty has been initiated on the ground of under-reporting of income.

Further, immunity is not available in piecemeal or issue wise, it has to be for the Assessment Order in its entirety.

Therefore, the Assessee has to forego his right to appeal with respect to all the additions made in the Assessment Order of the assessee. As per the strict interpretation of the Section, Assessee cannot pray for immunity on issue wise.

Conclusion:-

As compared to the earlier penalty mechanisms, new provisions are certainly at a higher objective to fulfil.

However, as is the case with any new provisions of law, there are a number of unresolved issues which need to be resolved in order to make these provisions workable in a clear and litigation free manner.

The income Tax department is also taking a technological turn with the new Income Tax portal designed to serve taxpayers and stakeholders. get the full coverage about the New Income Tax portal here.

FAQ’s for seek VC and seek VC adjournment for appearing in e-proceeding.

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What is VC?

VC stands for ‘Video Conferencing’. Using the VC facility, an assessee is enabled to express or submit one’s response orally before an Income Tax Authority who has initiated the proceeding and expect the response from the user.

This facility has been enabled by the department as a substitute for personal appearance/hearing before an Income Tax Authority.

The facility for oral submission is in addition to submitting response in writing.

Who can avail video conferencing facility?

It shall be noted that, assessee on whose account hyperlink of video conference is enabled against a notice, will only be eligible. Question that may arise is how to check such link appearance, then for that assessee will be required to login to e-filling, then will be required to click on e-Proceeding and will be required to select from pending proceeding link, which will show the link for video conference (If allowed).

What is the process to seek VC facility?
If a VC hyperlink is found against a notice issued by the department under the column “Video Conferencing”, the user needs to click on that hyperlink. On clicking, another window appears with the notice details prefilled.

  • Click on the hyperlink “Seek VC”.
  • On click on the same, a window appears. The user needs to choose the appropriate reason from the drop-down values. If there are no predefined dropdown, the user may select “Others” and enter the description in text box.
  • Thereafter, a text box will appear wherein user needs to provide reasons in detail for seeking VC and also can provide the date on which the user desires to submit oral submission. (Maximum 4000 characters)
  • If the user wants to upload any document supporting such a claim, there is provision to attach the same by click the button “choose File”. The document that are PDF format can only be attached and should not exceed 5 MB.
  • Now Click, submit button. A success message will be displayed on submission of request.

How to check the status of VC request raised?

VC request raised by assessee will either be approved or rejected. If approved, then the department will send an email and SMS communication informing the date and time for VC along with VC URL. The VC details will be displayed in the user’s e-proceeding VC Notice schedule. The login password will be shared 2 hours before the scheduled time of VC on to the registered mobile number. If rejected, then rejection remarks and rejection letter will be displayed to the assessee in VC Notice schedule in addition to email and SMS communication.

How to check the status of VC request ?

Steps are quiet simple:-

  • Login to e-Filing->e-Proceeding->Select Proceeding Name ->
  • Click VC hyperlink under the Video conferencing column. On click of VC hyperlink, the details of VC request submitted will be displayed.

• If request is approved, scheduled date & time of VC will be displayed under the column “VC date & Time” and status will be displayed as “Approved”. Under ITD Remarks column “VC Schedule Notice” will be displayed in hyperlink to view and download. ‘VC link’ will be visible 2 hours before the scheduled time of VC under the ‘VC link details’ column.

• If request is rejected, status will be displayed as “Rejected”. Under ITD Remarks column “Remarks” and “Rejection letter” will be displayed in hyperlink to view and download along with email & SMS communication.

What if video conference date and time is not suitable?

In case if video conference date and time given by department is not suitable than in that case assessee may submit adjournment request and can seek other date and time for such video conference. This can be done by clicking on “Seek VC Adjournment”. The point which is worth noting is the said request is required to be submitted before expiry of video conference date and time. If the said time is expired than, no request for adjournment will be accepted.

How assessee will be able to join the meeting?

If assessee wants to join the meeting, then he will be required to communicate video conference URL (which is communicated by department) to the browser. On opening of site, assessee will be required to enter the user id and password. The user name will be the registered id of taxpayer and the password for the same will be communicated by department.

While attending meeting, assessee shall keep in mind following points, that he will be required to keep identification document like Aadhaar, PAN Card, Passport or any other government issued identification document handy and share as an when required. He will be required to keep softcopy of all the documents on which you want to place reliance during the Videoconference and which may be shared during video conference.

What if video conference failed due to technical issues?

If due to technical issue video conference is not conducted than in that case, department will cancel the existing video conference and will share new date and time for video conferencing and required link for connecting.

Can Authorized Representative also join the VC meeting?

It shall be noted that only assessee can join Video Conference; however, in case were any authorized representative has been appointed through the e-filing account for such proceeding, then both assessee and authorized representative can join.

Can assessee avail the recording of meeting?

Yes, after video conferencing is successfully conducted. Further ‘VC recording’ hyperlink will be displayed, through which assessee can avail the recording of meeting. Further no charge will be paid by assessee for availing such recording, and it shall be made available to assessee within two days of video conference.

By clicking “Seek Adjournment” which facility is provided to assessee? Who can avail such facility?

If assessee is not able to join the meeting or he is not able to attend the hearing than in that case assessee can avail the facility of seek adjournment, by clicking on it assessee submits request to extend the response due date of a notice issued by an Income Tax authority. Only those taxpayers for whom hyperlink “Seek Adjournment” is enabled against a notice, can avail the facility of adjournment.

Is there any date limit within which adjournment request can be sought?

If assessee wants adjournment and he has decided to get it before response date mentioned in noticed, then he may seek adjournment up to 15 days from response date mentioned in notice. On other hand if adjournment is applied after response date than he may seek adjournment up to 15 days from date of seeking adjournment.

Have you received any VC links? Schedule a Consultation Call if you wish to hire a Legal Counsel to conduct VC hearing on your behalf.