JB NAGAR STUDY CIRCLE OF WIRC

Transcription

1 JB NAGAR STUDY CIRCLE OF WIRC ISSUES ON REVISED AND RECTIFICATION OF ONLINE FILED INCOME TAX RETURNS Compiled by CA Avinash Some Provisions of the Income Tax Act If a person has filed his return of Income u/s 139(1) of Income Tax Act 1961 i.e. within the due date of filing the return and if he subsequently finds that in the original return he has committed some mistake bonafide then he can revise his return of income u/s 139(5) of Income Tax Act. 1

2 Time period of filing the revised return As per section 139(5), the revised return can be filed before the expiry of one year from the end of the relevant assessment year or before the completion of assessment, whichever is earlier. Thus return of A.Y can be revised till 31st March 2013 or before the completion of the assessment whichever is earlier. Which Returns can be Revised Original Returns filed under Section 139(1) of the Income Tax Act, 1961; Returns filed in response to Notice under Section 148 of the Act; In case of Revised Returns filed u/s 148 all provisions of Section 139 of the Act, will apply; 2

3 Can Penalty be levied If revised return is filed to correct a bonafide mistake then no penalty can be levied, otherwise it can be levied. It is seen that sometimes assessees tend to file Revised Return after search or survey; there are case laws against and in favour of the assessee, help can be taken there from, if required; Online Filing of Rectification Returns Section 154 of the Act, deals with Rectification of Returns; Online Filed Returns rectification to be filed online only and cannot be submitted in paper till the same is not transferred to AO; CPC monitors the Online Rectification of Returns filed online; 3

4 Web Page to Check the Status Issues on Online Rectification Filing Problems How many times I can file the revised return Solution Legally, a return can be revised any number of times before the expiry of one year from the end of the Assessment Year or before the assessment by the Department is completed; whichever event takes place earlier. 4

5 Major Requirements of Filing Rectification Returns Receipt No of Original Return; Date of Submission of Original Return; Entry of Code 16- u/s 139(5) in the Revised Return for system to identify that it is Revised Return. Saved Data of the Original Return. Issues on Online Rectification Filing Problems Incorrect form used ITR Solution Yes, it can be rectified. Select Correct Utility and File the Return 5

6 Issues on Online Rectification Filing Problems e-return has been processed by CPC raising a demand or with less refund Solution If Return is lying with CPC, then file Online Rectification; If transferred to AO then file paper Rectification with AO and not with CPC. Probable Reasons inability to file Revised Return Problems Input does match records data not the Solution send a mail to efiling@incometaxindia.gov.in with the following details : CPC Order No, CPC Order Date, Aggregate Income Tax Liability (As Computed), Total Tax Credit Allowed (As Computed) 6

7 How to submit Rectification Return Step 1: Make sure you have received an intimation under section 143 (1) from CPC Bangalore for the E- returns filed by you for AY or later; Step 2: Carefully examine the intimation to see if the computation by CPC is correct even if different from what was expected by you. It may be that you may have computed tax liability or interest incorrectly. You can take the help by using departmental excel utility available in e-filing website. How to Place Request for Intimation Not received 7

8 Fill up the Request One More Step Ahead 8

9 3 Ways to Receive Intimation How to submit Rectification Return Step 3: Since the Rectification Request is to be submitted by uploading the complete xml file similar to uploading the original return, it may be preferable to start with the saved e- return data that was prepared by the return preparation utility/software (Department provided excel software or other software), in case it is available with the taxpayer. 9

10 How to submit Rectification Return Step 4: Carefully review the Common Error guide and the table provided to understand as the basic reason for the variation. How to submit Rectification Return Step 5: All errors in data entry should be completely corrected and schedules or fields left blank should be filled accurately as explained in the guide. The complete return should be filled including TDS and Tax payment schedules and not only schedules that need change or the fields that need correction. 10

11 How to submit Rectification Return This is because the entire return with corrected data would be re-processed under rectification. However, there should not be any revision in income figures or new claims since then the rectification request would be rejected or rectification would be delayed. It may be clearly noted that this facility is only for correcting mistakes apparent from record.. How to submit Rectification Return Step 6: After the Return data is corrected then the xml can be generated. This is the Rectification XML file; Step 7: Log in to and go to My Account-> Rectification-> Rectification upload. 11

12 How to submit Rectification Return How to submit Rectification Return Step 8: Fill in details from the intimation sheet which will be verified to ascertain that only the taxpayer in possession of the Intimation from CPC would be able to submit a rectification request.. 12

13 How to submit Rectification Return Common Errors noticed in E filed rectification requests Correct Communication Reference number of the CPC order which is sought to be rectified, in the specified format in online rectification screen ( Submit your rectification request screen ) rectification. 1st time rectification (For example AY 10-11, ITR 2): CPC/1011/I2/ I2 in the above reference number should be inferred as English alphabet (I) and 2 indicates the ITR Form type. Re-Rectification (For example AY 10-11,ITR 2): CPC/1011/T2/ ; 13

14 Common Errors noticed in E filed rectification requests Mention the order date of CPC which is sought to be rectified, in online rectification screen ( Submit your rectification request screen ) while applying for online rectification. Mention the row number of Aggregate Tax Liability and Total Tax Liability of CPC order instead of computed values of Aggregate Income Tax Liability and Total Tax Credit Allowed while applying for online rectification. The same are readily available on the Intimation served; Common Errors noticed in E filed rectification requests The amount against Aggregate Income Tax Liability and Total Tax Credit Allowed should be entered without comma (,) in online rectification screen ( Submit your rectification request screen ). Select the correct AY to which the rectification pertains. from drop down in Assessment Year Tab. 14

15 How to submit Rectification Return Step 9: Fill in details of Schedules where changes have been made and reasons for seeking rectification. Fill in due date for filing return, if incorrect as per intimation sheet. Leave blank if not applicable. How to submit Rectification Return 15

16 How to submit Rectification Return Fill in details which are not available in the return form such as details of 80G donations (not available in ITR forms for 1, 2 and 3) and Quarter-wise details of Capital Gains (all four types- which is not available in ITRs 2, 3, 4, 5 and 6) only if applicable. Leave blank if not applicable. Correction for Donation Details 16

17 Correction for Capital Gains Claim Details How to submit Rectification Return Note if your address has been changed in the rectification XML file, you should check the address changed checkbox to ensure that the new address is updated else the address as per old e-return only will be used. It is advised to get the Address in PAN Changed whenever there is a change. 17

18 Check on Address Flag for Change of Address How to submit Rectification Return Step 10: Now upload the Rectification XML file. Validations will be done to ascertain that only mistakes apparent from record are sought to be rectified. 18

19 How to submit Rectification Return Step 11: Upon successful upload, Rectification Request number and acknowledgement will be displayed. Download the Acknowledgement 19

20 How to submit Rectification Return What is Next 20

21 Displaying of Information Restricted Time Limit of 7 days 21

22 Withdrawal of the Rectification Request Request Withdrawn 22

23 Re-submission and Rewithdrawal allowed In case of Change of Bank Details 23

24 In case of Change of Bank Details COMMON REASONS FOR DELAY IN DISPOSAL OF ONLINE RECTIFICATIONS After filing online rectification application with change in bank details, assessee needs to send the Response sheet giving particulars of bank account along with cancelled cheque within stipulated time for the processing of the rectification to commence. For change of bank details in case of refund failure, there is NO NEED to file rectification application. Only response sheet giving particulars of bank account with cancelled cheque needs to be sent to CPC. 24

25 Issue CPC has processed the Return and Notice of Demand has been issued under Section 156. Can the Return be Revised? REASONS FOR DISPOSING OF ONLINE RECTIFICATION WITHOUT REDRESSAL. Need to carry out the corrections mentioned in rectification request in the xml, if not done the rectification will lead to non rectification of the case. Assessees having paid demand are filing for rectification to get a NIL demand rectification order. This is NOT NECESSARY. Rectification applications where TOTAL INCOME is changed will be rejected. 25

26 COMMON REASONS FOR DELAY IN DISPOSAL OF ONLINE RECTIFICATIONS Rectification requests will be auto-rejected when an earlier rectification request is under process. In such case no specific reason is given except stating that an earlier rectification request is already under consideration. Common Errors- Report of CPC Symptom and issue Salary income shown at higher figure than entered Probable reason and Resolution In Salary time higher figure is reported under Gross salary which should be excluding Exempt income (such as transport allowance etc). Taxpayer may have mentioned Transport allowance in Exempt Income and may have deducted the same to arrive at a lower net figure in the final calculation. However, the Exempt income is to be mentioned only for reporting purposes and should not be used in any calculation. 26

27 Computation of Salary details Common Errors- Report of CPC Symptom and issue Loss under House Property due to Interest paid on loans is not allowed Probable reason and Resolution In the House property Schedule the Interest paid value is not entered. Instead only the loss figure is mentioned in the final total. The totals are re-calculated while processing the return from the basic values provided. If the break up values are not provided then the total will be calculated as zero. 27

28 Common Errors- Report of CPC Symptom and issue Loss under House Property due to Interest paid on loans is not allowed Probable reason and Resolution The other possibility is that even if the House Property Schedule was correctly filled, the taxpayer has not claimed the loss in Schedule CYLA. Therefore, even if loss is correctly shown in Sch HP, the adjustment of this loss is not automatic. It has to be entered in the first row against Salary Income as shown to indicate that this loss is adjusted against salary income. Claim of Loss from House Property 28

29 Common Errors- Report of CPC Symptom and issue Tax payment is not allowed Probable reason and Resolution BSR code, Challan number and date of deposit may have been incorrect since any mismatch may lead to rejection of tax payment. Date of deposit of challan; Compare the details in Form 26AS before filing the e- Return. Common Errors- Report of CPC Symptom and issue Tax payment is not allowed Probable reason and Resolution BSR code, Challan number and date of deposit may have been incorrect since any mismatch may lead to rejection of tax payment. Date of deposit of challan cannot be beyond or after date of filing of return. 29

30 Common Errors- Report of CPC Symptom and issue Tax payment is not allowed Probable reason and Resolution Taxpayer should NOT report tax payments made by Deductors as given in Form 16 or Form 16A as their own payment under Schedule IT. This is meant ONLY to enter tax payments DIRECTLY made by taxpayer himself.. Prepaid Taxes through Challans 30

31 Common Errors- Report of CPC Symptom and issue TDS credit is not allowed Probable reason and Resolution Taxpayer should ensure that the TAN number is valid and as per the Form 16A issued by Deductor. PAN number of Deductor should NOT be mentioned in place of TAN. In many cases Deductors may have given TDS certificate with certain TAN but submitted TDS return to Department under different TAN. Common Errors- Report of CPC Symptom and issue TDS credit is not allowed Probable reason and Resolution This should be verified by cross-checking against the 26AS statement for the taxpayer which is available through NSDL or at the e-filing website. Any error by Deductor should be immediately pointed out and correction ensured 31

32 Common Errors- Report of CPC Symptom and issue Chapter VI A deduction specially 80C deduction is not allowed Probable reason and Resolution While filling in Deductions in Chapter VI A, ensure to fill up the breakup showing all individual Section-wise deductions such as 80 C etc, and then mention the Total Deduction claimed. At the time of processing, it is not clear under what section is the deduction claimed if details are not given. Since each deduction has different limits and eligibility, it is not possible to allow deduction only from the total. Common Errors- Report of CPC Symptom and issue Deduction under Chapter 80G or 80IA etc is not allowed Probable reason and Resolution Details u/s 80G in Sch 80G (where the Schedule is available in the return- ITR 4, 5 and 6) along with correct totals may not have been entered, before claiming the total in Chapter VI-A. Similarly, other schedules such as 80IA/IB etc must also be filled in where relevant schedules are in the ITR, before claiming Ded. in Chapter VI-A. 32

33 Claim for Chapter VI- A deductions Common Errors- Report of CPC Symptom and issue Tax Rate applied by CPC is not as per rates for Female Taxpayers or Senior citizens or for firms or domesticcompany.mat is applied Probable reason and Resolution Entered Gender as Male or entered date of birth incorrectly but in PAN it may be different.. Check PAN 33

34 Common Errors- Report of CPC Symptom and issue Tax Rate applied by CPC is not as per rates for Female Taxpayers or Senior citizens or for firms or domesticcompany.mat is applied Probable reason and Resolution For assessee filing return ITR 5, Status (such as Cooperative Society, Firm, etc) in the Gen Information Portion may not have selected correctly; Select Gender Correctly 34

35 Common Errors- Report of CPC Symptom and issue Tax Rate applied by CPC is not as per rates for Female Taxpayers or Senior citizens or for firms or domesticcompany.mat is applied Probable reason and Resolution Incorrect status selection can lead to taxation at higher rate or disallowance on specific deduction like 80P, etc. available only to co-op. society Common Errors- Report of CPC Symptom and issue Tax Rate applied by CPC is not as per rates for Female Taxpayers or Senior citizens or for firms or domesticcompany.mat is applied Probable reason and Resolution Taxpayers filing ITR 6, the correct selection while opting for item under Gen Information relating to If a Domestic Company must be made. Domestic companies MUST NOT select N as it applies for foreign company and rates of taxes are higher. 35

36 Wrong Selection of Status will also Impact Common Errors- Report of CPC Symptom and issue Tax Rate applied by CPC is not as per rates for Female Taxpayers or Senior citizens or for firms or domesticcompany.mat is applied Probable reason and Resolution Schedule MAT MUST be filled by all taxpayers filing ITR 6 irrespective of whether the book profit calculations result in application of provisions of MAT. Taxpayer may not have calculated MAT. 36

37 MAT details compulsory for ITR-6 Common Errors- Report of CPC Symptom and issue Income from Business is not correctly computed Probable reason and Resolution There are many reasons for variation in Income From Business:While entering Totals (for ex Total Duties and Taxes etc), breakup is not given. Value entered in Sl no 42 (Depreciation) (where Books of Accounts are maintained) should match the value in Sch BP: 37

38 Figures to match and co-relate Taxes and duties to be shown seperately 38

39 Common Errors- Report of CPC Symptom and issue Income from Business is not correctly computed Probable reason and Resolution Sl no 11 (Depreciation debited to P&L Account) Profit Before Tax (and not Profit After Tax) should be entered in item 1 of Sch BP; Depreciation allowable under IT Act u/s 32(1) (ii) must be as per Sch DEP. Depreciation problem 39

40 Common Errors- Report of CPC Symptom and issue Income from Business is not correctly computed Probable reason and Resolution When Schedule Profit and Loss is filled with a claim for depreciation but depreciation amount is either not added back at item A1 1 in Schedule BP or details of depreciation in plant and machinery and other assets are not filled by the assessee in Schedule DPM, DOA and Schedule DEP, this may lead to disallowance of depreciation. Depreciation problem 40

41 Common Errors- Report of CPC Symptom and issue Income from Business is not correctly computed Probable reason and Resolution Schedule DPM, DOA and DEP should NOT be left blank if Depreciation is being claimed. Entering total value of Depreciation in Sl A12 in Schedule BP WITHOUT entering DPM, DOA, DEP will lead to disallowance of Depreciation. Schedule DEP Claim for Depreciation must 41

42 Schedules Figures to match Common Errors- Report of CPC Symptom and issue Income from Business is not correctly computed Probable reason and Resolution Where block ceases to exist, enter correct value in Cap.Gains / Loss u/s 50. Under NO OTHER CIRCUMSTANCE should item 16 be filled. Negative value, if entered in Sl 16, implies that block ceased to exist and then no Depreciation will be allowed for that block. 42

43 Capital Gains figures to be filled correctly Capital Gains under Section 50 43

44 Common Errors- Report of CPC Symptom and issue Income from Business is not correctly computed Probable reason and Resolution Where P&L account is filled and includes Deemed income u/s 44AD, 44AE 44AF etc, ensure that relevant figures in A4 and A33 in Sch BP are correctly filled Presentation of Presumptive Profits 44

45 Common Errors- Report of CPC Symptom and issue Income from Business is not correctly computed Probable reason and Resolution Total of Deemed Income (IF NON ZERO) under Sections 44AD, 44AE, 44AF, 44B, 44BB, 44BBA, 44BBB, 44D, 44DA, Chapter XII-G and First Sch of IT Act as per Sl no 33 of Sch BP) should not be lower than Sl no 4 of Sch BP. Common Errors- Report of CPC Symptom and issue Income from Business is not correctly computed Probable reason and Resolution In case nature of business does not include Tea/Coffee/Rubber, the net profit or loss from business or profession after applying Rule 7A,7B, 7C in A37 should be entered as the same value as arrived in Sl no 36 of Sch BP 45

46 Nature of Business plays Imp role Common Errors- Report of CPC Symptom and issue Income from Business Computed Higher than the actual income Probable reason and Resolution Net Profit before tax as reported in the Profit and Loss Account to match with the Computation; Any additional claim or disallowances to be separately disclosed. 46

47 Common Errors- Report of CPC Symptom and issue Income from Business is not correctly computed Probable reason and Resolution Where Schedule OI is filled with details of disallowances or amounts which are to be added back to income due to the provisions like 36, 37, 40, 40A, 43B, assessee must fill in the details in Schedule BP in arriving at the income from Business and Profession. Disallowance to be stated seperately 47

48 Common Errors- Report of CPC Symptom and issue Income from Business is not correctly computed Probable reason and Resolution At the time of processing these disallowances are taken from Schedule OI and applied to relevant items in Sch BP. This will result in increase of Income under Business due to these disallowances. Losses brought forward from previous years has not been allowed Before claiming adjustments in Sch BFLA, ensure that Schedule CFL is not left empty. The correct breakup of the losses claimed for setoff must be filled in Sch CFL which alone will be considered for Schedule BFLA. Direct entries in Schedule BFLA without any entry in Schedule CFL will not be entertained, thus leading to demand due to disallowance of claim for adjustment of brought forward loss. 48

49 Losses Claim Presentation Losses brought forward from previous years has not been allowed Unabsorbed depreciation loss MUST be included in CFL against appropriate year or in case it relates to prior to AY period then it MUST be entered in the row relating to AY ONLY if the unabsorbed Depreciation is entered in CFL, then it will be allowed in Sch BFLA calculation. In Sch BFLA, enter all adjustments correctly. Do not leave blank as system will not allow adjustments of brought forward loss unless claimed in Sch BFLA. 49

50 Unabsorbed Loss of Earlier Years Capital Gain is not correctly calculated Start from full value of consideration in Capital Gain schedule. DO NOT ENTER ONLY FINAL VALUES. Enter the correct breakup to arrive at STCG and LTCG values. Do not leave blank any intermediate figures such as Full Value of Consideration etc.ensure that the value entered in Sch CG under LTCG Proviso (option under proviso to S.112(1) is exercised) is also correctly entered in Sch SI under LTCG proviso (Section 22). 50

51 Breakup for Capital Gains Must Capital Gain is not correctly calculated All Capital gain tax calculations are as per special rates given in Schedule SI. In case this is not correctly entered then the calculation may differ. In most cases taxpayers have entered capital gains in CG schedule at 20% tax rate, but in Schedule SI entered in code corresponding to 10% rate by mistake. In such cases tax may be calculated at both these tax rates. Verify that correct quarterly breakups for LTCG and STCG are provided in 51

52 Deemed Capital Gains Capital Gain is not correctly calculated Sch CG and the total of the quarterly breakups match with the respective values in Sch SI (taxable Income after adjusting Min Chargeable to Tax) after set off of all losses. Ensure that the value entered in Sch CG under STCG 111A is also correctly entered in Sch SI under STCG 111A (Section 1A) Enter correct breakup of STCG 111A and other than 111A in Sch CG. 52

53 Fill Up Schedule SP For Special Rates Quarterly Break up of Capital Gains 53

54 Circular for processing Returns Instruction No. 01/2012 [F.NO.225/34/2011-ITA.II], dated The issue of processing of returns for the Asst. Year and giving credit for TDS has been considered by the Board. In order to clear backlog of returns, the following decisions have been taken: (i) In all returns (ITR-1, ITR 2, ITR 3, ITR 4, ITR 5 & ITR-6), where the difference between the TDS claim and matching TDS amount reported in AS-26 data does not exceed Rs. One lac, the TDS claim may be accepted without verification. (ii) Where there is zero TDS matching, TDS credit shall be allowed only after due verification. However, in case of returns of ITR-1 and ITR-2, credit may be allowed in full, even if there is zero matching, if the total TDS claimed is Rs. Five thousand or lower. (iii) Where there are TDS claims with invalid TAN, TDS credit for such claims are not to be allowed. (iv) In all other cases, TDS credit shall be allowed after due verification. Prevention is Better Returns generated from private softwares MAY not be accurate and final; Validation Utilities provided by ITD is more or less control oriented. Final Computation needs to be physically verified before filing; Do not try to over-ride the utilities provided to suit the same as per the requirements since these are control based 54

55 Some Useful Tips Returns are generally prepared by Staff and uploaded, ensure its correctness before uploading to avoid Revision and Rectification; Ensure sufficient and accurate back up is available for future requirements.. Not to depend much on the system, better to have one hard copy; Delete the workings created from time to time to ensure that the latest figures are only available which were used for the returns filing.`` Any Further help required Call Centre of Income Tax Department available; Can send and get reply on Help Tools available on the Website of the Income Tax Any recommendation to CPC can also be submitted under Feedback Section 55

56 Representations from BCA, CITC Arrears of Demands, matter taken up by our Professional Associations.. Good work; Department has already appointed Nodal Officer under each CCIT to ensure that the problems are being solved; Letter format released in which the Applications to be made.. Full circular and details available on the website Departments Initiative Complaints Cell was made online for filing Complaints against each of such Demand on the website of the Dept.. Discontinued within 3 working days due to overwhelming response; Grievances can finally be lodged for action not taken on the web-portal of the GOI

57 24X7 filing; Key Benefits No Need of Personal Interference by any one in processing of the Returns; Generally Takes a week s time to get the rectification provided details submitted are correct; Whether a Boon or Curse for Professionals? Record Numbers of Returns Filed Income Tax Department has received a record number of 1.64 crores e-returns in the F.Y Department thanks Taxpayers for their overwhelming response. From Assessment Year , total income of individual or HUF exceeds Rs. 10 Lakhs to compulsorily e-file; Department is planning to give Digital Signature FOC to all the taxpayers to use them for E-filing and then the process of sending ITR-V to Bangalore will be discontinued. (Source: News Item) Filing of Tax Audit Report in Form 3CD with Digital Signature of the Professional may be made compulsory in the near future. 57

58 E-Assessments New Utilities Compute Tax Liability based on the information filled.. Acts as self assessment, if verified properly; Days will come in the near future, where we will have E-assessments; Reports of un-reconciled transactions in the Form 26AS submissions and Returns details submitted will only be the source of scrutiny; Another Cause of Concern CPC acts as a preserver of the Information. Data given by the Assessee shall be preserved for life time. It s a Data Centre of all the information collected and information is cent percent reliable; The said information may be used for future analysis and further investigations, search, seizure in future; 58

59 E-Filing Season has started Utilities for ITR-1,2,3, 4 and 4-S has commenced for the AY ; Others will be uploaded in the due course of time; Tendency to file it first and see it later on results in most of errors and omissions, better be avoided Forgiveness Applying computer technology is simply finding the right wrench to pound in the correct screw. A mistake in Tax Returns can be corrected by paying penalties and result in monetary loss but the non-correction of Mistakes made in Relationship in TIME will ruin your entire LIFE Correction of Both.. earlier the BETTER A MISTAKE should always be taken as a Mistake and not as MY Mistake or HIS Mistake as it leads to difference in the Hearts..Let us correct it in TIME 59

60 Doubts & Querries Any Questions Thank You C.A. Avinash V. Rawani 119 Rawani and Company, Chartered Accountants B-206, Hinal Heritage, Patel Wadi, S.V.P.Road, Near Chamunda Circle, Borivali West, Mumbai avinash@carawani.com Website: The views stated in the material and also discussed are purely of the compiler for the discussions at the Study Circle and should not be used for any legal interpretation. Any decision to be taken by the user of this information is to be taken after studying the requisite provisions of the respective Act and specific applications to particular client. Neither the compiler nor the study circle shall be responsible for the same. 60