CBDT: latest Circulars, Instructions, Notifications, E-Assessment

CBDT Wiki

The Central Board of Direct Taxes (CBDT) is a statutory authority functioning under the Central Board of Revenue Act, 1963.

It controls the income-tax department which operates under the Income-tax Act, 1961.

The officials of the CBDT also function in an ex-officio capacity as part of the Finance Ministry and deal with matters relating to levy and collection of direct taxes.

CBDT

Powers

The CBDT has statutory powers under section 119 of the Income-tax Act, 1961.

It is empowered to issue orders, instructions and directions to other income-tax authorities as it may deem fit for the proper administration of this Act.

All authorities and all other persons employed in the execution of this Act are obliged to observe and follow such orders, instructions and directions of the CBDT.

Restrictions

There are restrictions on the powers of the CBDT.

It is not empowered to issue any orders, instructions or directions:

(a) so as to require any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner; or

(b) so as to interfere with the discretion of the Commissioner (Appeals) in the exercise of his appellate functions.

Relaxation of statutory provisions

The CBDT is empowered to issue directions and orders from time to time by way of relaxation of any of the provisions of various specified sections of the Income-tax Act.

It can also issue directions as to the guidelines, principles or procedures to be followed by other income-tax authorities in the work relating to assessment or collection of revenue or the initiation of proceedings for the imposition of penalties.

However, the directions or instructions issued cannot be prejudicial to assessees.

CBDT Circulars

The CBDT has the power to issue circulars under section 119 of the Income-tax Act.

The circulars issued are binding on all income-tax authorities.

The binding effect of the Circulars was recognized by the Supreme Court in UCO BANK vs. COMMISSIONER OF INCOME TAX (1999) 154 CTR 0088 : (1999) 237 ITR 0889 : (1999) 104 TAXMAN 0547.

It was held in the Supreme Court judgements that the Circulars are not meant for contradicting or nullifying any provisions of the statute.

The Bench of five judges of the Supreme Court in Navnitlal C. Javeri vs. K.K. Sen has also recognized the binding effect of CBDT Circulars.

The CBDT Circulars are meant for ensuring proper administration of the statute, they are designed to mitigate the rigours of the application of a particular provision of the statute in certain situations by applying a beneficial interpretation to the provision in question so as to benefit the assessee.

The Bombay High Court has also held that a circular which is properly issued under s. 119 of the IT Act for proper administration of the Act and for relieving the rigour of too literal a construction of the law for the benefit of the assessee in certain situations would be binding on the Departmental authorities.

Notifications

The CBDT also has the power to issue Notifications from time to time.

These Notifications are issued so as to confer exemption or qualification for eligibility to institutions referred to in section 10 of the Act.

The Notifications also amend the provisions of the Act or the Rules

Chairman

The CBDT Chairman is the senior-most IRS civil servant in the Government of India.

The CBDT Chairperson is the ex officio Special Secretary to the Government of India and also cadre controlling authority of the Indian Revenue Service.

He is under the direct charge of the revenue secretary of India.

He is placed above the officers of the rank of Lieutenant-General, Vice-Admiral or Air Marshal, CBI Director and Deputy Comptroller and Auditor General in the Order of Precedence.

There is no fixed tenure for the office of the Chairman. Generally, the average tenure of the chairman is around 2 years and can be extended by the Government.

Sushil Chandra is the chairperson of the CBDT.

CBDT Chairman

Website

The official website of the CBDT is https://www.incometaxindia.gov.in/

Headquarters

The office or headquarters of the CBDT is at the following address:

CENTRAL BOARD OF DIRECT TAXES,
9TH FLOOR, LOK NAYAK BHAWAN,
KHAN MARKET, NEW DELHI – 110003.

Telephone: 011-24622788, 011-24640970

CBDT Press Release: Promoting Voluntary Compliance through e-Verification Scheme-2021

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As part of the e-Verification Scheme-2021, Income Tax Department (ITD) is in the process of sending communication to taxpayers pertaining to ‘mismatch’ between the information filed in the Income Tax Return (ITR) vis-à-vis information of specified financial transactions, as available with the Department, for ITRs filed for AY 2021-22 (FY 2020-21).

• This information is being communicated to the taxpayers through their e-mail accounts as registered with the ITD.

• The Department urges taxpayers, to view their AIS through the e-filing portal and file updated ITRs (ITR-U), wherever necessary.

• This is to increase transparency and to promote voluntary tax compliance.

• Eligible non-filers can also file their ITR-U.

• The last date for filing ITR-U for A.Y. 2021-22 (i.e. for F.Y. 2020-21) is 31.03.2024.

For more details, please see the Press Release: https://pib.gov.in/PressReleseDetail.aspx?PRID=2011373

CBDT Guidelines for compulsory selection of returns for Complete Scrutiny during the Financial Year 2022-23

MASTI

F.No.225/ 81/2022/ITA-11
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes (ITA-II division)

North Block, New Delhi, the2 September, 2022

To

All Pr. Chief Commissioners of Income-tax/ Chief Commissioners of Income-tax All Pr. Director Generals of Income-tax/ Director Generals of Income-tax.

Madam/Sir

Subject: Guidelines for compulsory selection of returns for Complete Scrutiny during the Financial Year 2022-23 — procedure for compulsory selection in such cases — regarding.

Kindly refer to CBDT’s Guidelines dated 11.05.2022 and 03.06.2022 on the above-mentioned subject (copies enclosed).

  1. With reference to the above, I am directed to state that SI.No.2.2 of para no.2 of CBDT’s Guidelines dated 03.06.2022 shall be substituted as under:
Si. No. r                                 Parameter Procedure      for      compulsory

selection

2 Cases pertaining to search & seizure/requisition
2.2 Search           &    seizure/requisition    on    or   after The cases shall be selected for

scrutiny                    with            prior

administrative    approval        of Pr.

CIT/Pr. DIT/CIT/DIT concerned, who shall ensure that such cases are transferred to Central Charges u/s 127 of the Act within 15 days of service of notice u/s 143(2)/142(1) of the Act by the Assessing Officer concerned.

01.04.2021: Assessments in cases arising from
search & seizure actions/requisitions u/s 132/132A conducted on or after 01.04.2021.

 

  1. All other contents of the said Guidelines will remain unchanged.
  2. The above may be brought to the notice of all concerned for necessary compliance. Enclosure: As above

tici)qt 24

(Ravinder Maini)

Director (ITA-H), CBDT

Copy to:

  1. PS to FM/PS to MoS (F)
  2. PS to Secretary (Revenue)
  • Chairman, CBDT & All Members, CBDT
  1. All Joint Secretaries/CsIT, CBDT
  2. DGIT (Systems)
  3. Web Manager with request to upload on the Departmental website
  • JDIT, Data-Base Cell for uploading on irsofficersonline website

2:671 12622—

(Ravinder Maini) Director (ITA-II), CBDT

 

F.No.225/ 81/2022/ITA-11
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes (ITA-II division)

North Block, New Delhi, the tLJune, 2022

To

All Pr. Chief Commissioners of Income-tax/ Chief Commissioners of Income-tax

All Pr. Director Generals of Income-tax/ Director Generals of Income-tax.

Madam/Sir

Subject: Guidelines for compulsory selection of returns for Complete Scrutiny during the Financial Year 2022-23 — procedure for compulsory selection in such cases — regarding.

Kindly refer to CBDT’s Guidelines dated 11.05.2022 on the above-mentioned subject (copy enclosed).

  1. With reference to the above, I am directed to state that Sl.No.2 of para no.2 of CBDT’s Guidelines dated 11.05.2022 shall be substituted as under:
Si. No. Parameter Procedure for compulsory selection
2 Cases pertaining to search & seizure/requisition
2.1 Search          &     seizure/requisition           prior     to The cases shall be selected
for     scrutiny        with      prior

administrative     approval     of

Pr.             CIT/Pr.             DIT/CIT/DIT
concerned, who shall ensure
that    such                            cases            are

transferred to Central Charges u/s 127 of the Act within 15 days of service of notice u/s 143(2)/142(1) of the Act by the Assessing Officer concerned.

01.04.2021: Assessments in search & seizure cases
to be made under Section(s) 153A, 153C read with section 143(3) of the Act and also for return filed for assessment year relevant to previous year in which the search was conducted u/s 132 or requisition was made u/s 132A of the Act.

 

    Where such cases are not centralized and Return of Income is filed in response to notice u/s 153C, the Assessing Officer concerned shall serve notice u/s 143(2) of the Act.

Where such cases are not centralized and no Return of Income is filed in response to notice u/s 153C, the Assessing Officer concerned shall serve notice u/s 142(1) of the Act calling for information.

2.2 Search          &   seizure/requisition    on         or        after The cases shall be selected for scrutiny with prior administrative approval of Pr. CIT/Pr. DIT/CIT/DIT concerned, who shall ensure that such cases are transferred to Central Charges u/s 127 of the Act within 15 days of service of notice u/s 143(2)/142(1) of the Act by the Assessing Officer concerned.
01.04.2021: Assessments in cases arising from
search & seizure actions/requisitions u/s 132/132A conducted on or after 01.04.2021, for returns pertaining to A.Y. 2021-22.

 

  1. All other contents of the said Guidelines will remain unchanged.
  2. The above may be brought to the notice of all concerned for necessary compliance.

Enclosure: As above

6TP 612121

(Ravinder Mai i) Director (ITA-II), CBDT

 

Copy to:

  1. PS to FM/PS to MoS (F)
  2. PS to Secretary (Revenue)
  • Chairman, CBDT & All Members, CBDT
  1. All Joint Secretaries/CsIT, CBDT
  2. DGIT (Systems)
  3. Web Manager with request to upload on the Departmental website
  • JDIT, Data-Base Cell for uploading on irsofficersonline website

a oto2-2(Ravinder Maini

Director (ITA-II), CBDT

 

F.No.225/ 81/2022/ITA-11
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes (ITA-II division)

North Block, New Delhi, the 11 to May, 2022

To

All Pr. Chief Commissioners of Income-tax/ Chief Commissioners of Income-tax All Pr. Director Generals of Income-tax/ Director Generals of Income-tax.

Madam/Sir

Subject: Guidelines for compulsory selection of returns for Complete Scrutiny during the Financial Year 2022-23 — procedure for compulsory selection in such cases — regarding.

Kindly refer to the above.

  1. The parameters for compulsory selection of returns for Complete Scrutiny during Financial Year 2022-23 and procedure for compulsory selection in such cases are prescribed as under:
S
No
Parameter Procedure for compulsory selection
  Cases pertaining to survey u/s 133A of the Income-tax Act,1961(Act)
Returns filed for the assessment year relevant to The cases shall be selected for compulsory
  the previous year in which survey was conducted scrutiny with prior administrative approval
  under section 133A of the Act subject to exclusion below: of Pr.        CIT/Pr.DIT/CIT/D1T concerned,

who      shall ensure that such cases    are
transferred to Central Charges u/s 127 of

  Exclusion: the Act within 15 days of service of notice
  Cases, where following conditions are satisfied, are excluded from selection for compulsory scrutiny: u/s 143(2) of the Act by the Assessing Officer concerned.
  1.      books of accounts, documents, etc. were not impounded;

2.      returned income (excluding any disclosure

of hitherto undisclosed                 income made

 

 

  during the Survey) is not less than returned .1 income of preceding assessment year; and

3.            assessee     has        not     retracted   from    the

disclosure referred to in point 2 above.

 
2 Cases pertaining to Search and Seizure
  Assessments in Search and Seizure cases to be made under section(s) 153A, 153C read with section 143(3) of the Act and also for return filed for assessment year relevant to previous year in which the Search was conducted under section 132 or requisition was made under section 132A of the Act. The cases shall be selected for compulsory scrutiny with prior administrative approval of Pr. CIT/Pr.DIT/CIT/DIT concerned, who shall ensure that such cases are transferred to Central Charges u/s 127 of the Act within 15 days of service of notice airs 143(2)1142(1) of the Act by the Assessing Officer concerned.

Where such cases are not centralized and Return of Income is filed in response to notice u/s I 53C, the Assessing Officer concerned shall serve notice u/s 143(2) of the Act.

Where such cases are not centralized and no Return of Income is filed in response to notice this 153C, the Assessing Officer concerned shall serve notice u/s 142(1) of the Act calling for information.

3 Cases in which notices uis 142(1) of the Act, calling for return, have been issued & no returns have been furnished
  Cases where no return has been furnished in response to a notice u/s 142(1) of the Act. I The Assessing Officer shall upload the underlying documents, on the basis of which notice u/s 142(1) was issued, on ITBA, for access by National Faceless Assessment Centre (NaFAC).

The Directorate of Income-tax (Systems) shall forward these cases to NaFAC, which will take further necessary action.

 

    Notice u/s 142(1) of the Act calling for information shall be served on the assessee through NaFAC.
4  Cases in which notices u/s 148 of the Act have been issued
  Cases where return is either furnished or not furnished in response to notice u/s 148 of the Act. (i)   Cases, where notices u/s 148 of the Act have been issued pursuant to search & seizure/survey actions conducted on or after the 15‘ day of April, 2021:

These      cases    shall      be    selected    for

compulsory           scrutiny          with       prior

administrative approval of Pr. CIT/Pr.DIT/CIT/DIT concerned who shall ensure that such cases, if lying outside Central Charges, are transferred to Central Charges u/s 127 of the Act within 15 days of service of notice u/s 143(2)1142(1) of the Act calling for information by the Assessing Officer concerned.

(ii) Cases not covered in (i) above:

The Assessing Officer shall upload the underlying documents, on the basis of which notice u/s 148 was issued, on ITBA, for access by NaFAC.

The Directorate of Income-tax (Systems) shall forward these cases to NaFAC, which will take further necessary action.

Notice u/s 143(2)1142(1) of the Act calling for information shall be served on the assessee through NaFAC.

5 Cases related to registration/ approval under various sections of the Act, such as 12A, 35(1)(ii)/ (Ha)/ (iii), 10(23C), etc.
  Cases where registration/approval under various sections of the Act, such as section 12A, 35(I)(ii)/ (Ha)/ (iii), 10(23C), etc. have not been granted or have been cancellediwithdrawn by the Competent The Assessing Officer shall prepare a list
of cases falling under this parameter with

 

 

Authority, yet the assessee has been found to be claiming tax-exemption/deduction in the return. However, where such orders of withdrawal of registration/approval have been reversed/set-aside in appellate proceedings, those cases will not be selected under this clause.

prior administrative approval of P CIT/Pr.DITICIT/DIT concerned.

The list of such cases shall be submitted by the Pr. CITIPr.DITICIT/DIT to the Pr.CCIT concerned for onward transmission to NaFAC with a copy marked to DGIT(Systems).

 

Notice u/s 143(2) of the Act shall be served on the assessee through NaFAC.

Cases involving addition in an earlier assessment year(s) on a recurring issue of law or fact and/or law and fact

 

Where the addition in an earlier assessment year(s) on a recurring issue of law or fact and/or law and fact (including transfer pricing issue) is:

  1. exceeding Rs. 25 lakhs in eight metro charges at Ahmedabad, Bengalura„ Chennai, Delhi, Hyderabad, Kolkata, Mumbai and Pune;
  2. exceeding Rs. 10 lakhs in charges other than eight metro charges;

and where such an addition:

  1. has become final, as no further appeal has been preferred against the assessment order; or
  2. has been upheld by the Appellate Authorities in favor of Revenue; even if further appeal of assessee is pending, against such order.

 

Cases related to specific information regarding taxevasion

 

Cases, in respect of which:

(a) specific information pointing out tax-evasion for the relevant assessment year is provided by any law-enforcement agency, (Investigation Wing/ Intelligence/ Regulatory Authority/ Agency, etc.) ; and

The Assessing Officer shall prepare a list of cases falling under this parameter with prior administrative approval of Pr. CIT/Pr.DIT/CIT/DIT concerned.

The Assessing Officer shall upload the
underlying documents containing specific

 

(b) the return for the relevant assessment year information regarding tax evasion, for is furnished by the assessee.                            access by NaFAC.

The list of such cases shall be submitted by the Pr. CIT/Pr.DIT/CIT/DIT to the Pr.CCIT concerned for onward transmission to NaFAC with a copy marked to DGIT(Systems).

Notice uls 143(2) of the Act shall be served on the assessee through NaFAC.

  1. It is clarified that where return has been furnished in response to notice ids 142(1) of the Act and such notice u/s 142(1) of the Act was issued due to the information contained in NMS Cycle/SFT information/information received from Directorate of I&CI, such return will not be taken up for compulsory scrutiny. Selection of such cases for scrutiny will be done through CASS cycle.
  2. The cases shall be selected for compulsory scrutiny by the International Taxation and Central Circle charges following the above prescribed parameters and procedure with prior administrative approval of CIT/Pr.DIT/CIT/DIT concerned. The cases which are selected for compulsory scrutiny by the International Taxation and Central Circle charges following the above prescribed parameters and procedure, shall, as earlier, continue to be handled by these charges.
  3. As per the amendments brought by Finance Act 2021, the time limit for service of notice u/s 143(2) of the Act has been reduced to three months from end of the Financial Year in which the return is filed. Therefore, selection of cases and transfer of cases, wherein assessments have to be completed in faceless manner, to NaFAC shall be completed positively by 05.2022. In cases selected for compulsory scrutiny, service of notice u/s 143(2) of the Act shall be completed by 30.06.2022.
  4. These instructions may be brought to the notice of all concerned for necessary compliance.

ICIJA”-+ACtl-t2 2- (Ravinder maini)

Director (ITA-II), CBDT

Copy to:

  1. PS to FM/PS to MoS (F)
  2. PS to Secretary (Revenue)
  • Chairman, CBDT & All Members, CBDT

CBDT Notifications Clarify whether Gift card or vouchers, Mileage points, reward points, Subscriptions etc are taxable as Virtual Digital Assets

MASTI

(i) The levy of a 30% tax on income from transfer of VDAs in the hands of the transferor;

(ii) receipt of VDAs for nil or inadequate consideration is taxable in the hands of the recipient; and

(iii) Persons responsible for paying any consideration to Indian residents for transfer of VDAs are obliged under Section 194S of the Act to deduct tax at source (TDS) at 1% with effect from 1 July 2022.

The Act defines Virtual Digital Assets (VDAs) as folows:

(i) any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically; (ii) notified non-fungible tokens (NFTs); (iii) any other digital asset as maybe notified by the Central Government.

The Central Government is entitled to issue a notification to exclude any digital assets from the definition of VDA.

The Central Government has issued two notifications bearing numbers 74 and 75 of 2022, both dated 30 June 2022 to clarify whether digital gift cards, loyalty points, etc would be covered in the scope of VDAs. The two Notifications read as follows:

MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 30th June, 2022
(Income-tax)

S.O. 2958(E).––In exercise of the powers conferred by proviso to clause (47A) of section 2 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies following virtual digital assets which shall be excluded from the definition of virtual digital asset:
(i) Gift card or vouchers, being a record that may be used to obtain goods or services or a discount on goods or services;

(ii) Mileage points, reward points or loyalty card, being a record given without direct monetary consideration under an award, reward, benefit, loyalty, incentive, rebate or promotional program that may be used or redeemed only to obtain goods or services or a discount on goods or services;

(iii) Subscription to websites or platforms or application.

2. This notification shall come into force from the date of publication in the Official Gazette.

[Notification No. 74/2022/F. No. 370142/29/2022-TPL (Part-I)]
ANKIT JAIN, Under Secy.

MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 30th June, 2022
(Income-tax)

S.O. 2959(E).––In exercise of the powers conferred by clause (a) of Explanation to clause (47A) of section 2 of the Income-tax Act, 1961 (43 of 1961) (hereinafter referred as ‘the Act’), the Central Government hereby specifies a token which qualifies to be a virtual digital asset as non-fungible token within the meaning of sub-clause (a) of clause (47A) of section 2 of the Act but shall not include a nonfungible token whose transfer results in transfer of ownership of underlying tangible asset and the transfer of ownership of such underlying tangible asset is legally enforceable.

2. This notification shall come into force from the date of publication in the Official Gazette.

[Notification No. 75/2022/F. No. 370142/29/2022-TPL (Part-I)]
ANKIT JAIN, Under Secy.

E-assessment Scheme, 2019 | CBDT Notification

MASTI

In its bid to curb corruption by making tax filing and their review faceless, the government has come out with e-assessment scheme, 2019 making it mandatory for all communication between tax department and taxpayers to be done online.

Now, tax notices will be issued by a centralised e-assessment centre requiring taxpayers to reply only through digital mode. Through mobile app, real-time alerts would be sent to assessees updating about progress in the case.

The tax department has, however, reserved the right to allocate an assessment case to a tax officer where complexity is involved.

Moving to digital from the decades-old system of manual scrutiny, the tax department would use data analytics, artificial intelligence, machine learning and other latest tools to ascertain misreporting or evasion. The move is in line with the government’s promise to eliminate human interface in tax matters.

Finance Act 2018 had introduced three new sub Sections – 3A to 3C to Section 143 with a view to notify a new e-assessment scheme, where the assessment proceedings will be conducted in electronic mode, which will almost eliminate person-to-person contact to the extent it is technologically feasible.

Rakesh Nangia, Managing Partner, Nangia Advisors (Andersen Global) said that the idea of e-assessments, is in principle, an outstanding one but the administrative systems and procedures need to be developed to ensure that it does not result in uncalled-for injustice to the taxpayers.

“The use of artificial intelligence, machine learning, video conferencing, telecommunication application software, mobile app etc. in the e-assessment process are few measures which emerged economies have already adopted long back. However, the digital capabilities may pose significant implementation challenges in India,” Nangia said.

The Central Board of Direct Taxes (CBDT), the policy-making body of the Income Tax Department had been running e-assessment as a pilot project in few major cities before expanding it pan-India. The initiative was launched to reduce visits by taxpayers to income tax offices and their interface with the taxmen, thereby bringing anonymity in proceedings.

Laying down the assessment procedure, the scheme says that National e-Assessment Centre shall serve a notice on the assessee under sub-section (2) of section 143, specifying the issues for selection of his case for assessment. The assessee would be given 15 days time from the date of receipt of the notice to file their response.

“The National e-assessment Centre shall assign the case selected for the purposes of e-assessment under this scheme to a specific assessment unit in any one regional e-assessment centre through an automated allocation system,” the scheme said.

All communications between the National e-assessment Centre and the assessee will be exchanged exclusively by electronic mode. The internal communication within the department will also be online.

DOWNLOAD: Download CBDT Notification E-assessment Scheme, 2019

MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 12th September, 2019
(INCOME-TAX)
S.O. 3264(E).–In exercise of the powers conferred by sub-section (3A) of section 143 of the Income-tax Act,
1961 (43 of 1961), the Central Government hereby makes the following Scheme, namely:__
1. Short title and commencement.–– (1) This Scheme may be called the E-assessment Scheme, 2019.
(2) It shall come into force on the date of its publication in the Official Gazette.
2. Definitions .–– (1) In this Scheme, unless the context otherwise requires, ––
(i) “Act” means the Income-tax Act, 1961 (43 of 1961);
(ii) “addressee” shall have the same meaning as assigned to it in clause (b) of sub-section (1) of section 2 of
the Information Technology Act, 2000 (21 of 2000);
(iii) “assessment” means assessment of total income or loss of the assessee under sub-section (3) of section
143 of the Act;
(iv) “authorised representative” shall have the same meaning as assigned to it in sub-section (2) of section
288 of the Act;
(v) “automated allocation system” means an algorithm for randomised allocation of cases, by using suitable
technological tools, including artificial intelligence and machine learning, with a view to optimise the use
of resources;
10 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(ii)]
(vi) “automated examination tool” means an algorithm for standardised examination of draft orders, by using
suitable technological tools, including artificial intelligence and machine learning, with a view to reduce
the scope of discretion;
(vii) “Board” means Central Board of Direct Taxes constituted under the Central Board of Revenues Act,
1963 (54 of 1963);
(viii) “computer resource” shall have the same meaning as assigned to them in clause (k) of sub-section (1) of
section 2 of the Information Technology Act, 2000 (21 of 2000);
(ix) “computer system” shall have the same meaning as assigned to them in clause (l) of sub-section (1) of
section 2 of the Information Technology Act, 2000 (21 of 2000);
(x) “computer resource of assessee” shall include assessee’s registered account in designated portal of the
Income-tax Department, the Mobile App linked to the registered mobile number of the assessee, or the
email account of the assessee with his email service provider;
(xi) “digital signature” shall have the same meaning as assigned to it in clause (p) of sub-section (1) of
section 2 of the Information Technology Act, 2000 (21 of 2000);
(xii) “designated portal” means the web portal designated as such by the Principal Chief Commissioner or
Principal Director General, in charge of the National e-assessment Centre;
(xiii) “e-assessment” means the assessment proceedings conducted electronically in ‘e-Proceeding’ facility
through assessee’s registered account in designated portal;
(xiv) “electronic record” shall have the same meaning as assigned to it in clause (t) of sub-section (1) of section
2 of the Information Technology Act, 2000 (21 of 2000);
(xv) “electronic signature” shall have the same meaning as assigned to it in clause (ta) of sub-section (1) of
section 2 of the Information Technology Act, 2000 (21 of 2000);
(xvi) “email” or “electronic mail” and “electronic mail message” means a message or information created or
transmitted or received on a computer, computer system, computer resource or communication device
including attachments in text, image, audio, video and any other electronic record, which may be
transmitted with the message.;
(xvii) “hash function” and “hash result” shall have the same meaning as assigned to them in the Explanation to
sub-section (2) of section 3 of the Information Technology Act, 2000 (21 of 2000);
(xviii) “Mobile app” shall mean the application software of the Income-tax Department developed for mobile
devices which is downloaded and installed on the registered mobile number of the assessee;
(xix) “originator” shall have the same meaning as assigned to it in clause (za) of sub-section (1) of section 2 of
the Information Technology Act, 2000 (21 of 2000);
(xx) “real time alert” means any communication sent to the assessee, by way of Short Messaging Service on
his registered mobile number, or by way of update on his Mobile App, or by way of an email at his
registered email address, so as to alert him regarding delivery of an electronic communication;
(xxi) “registered account” of the assessee means the electronic filing account registered by the assessee in
designated portal;
(xxii) “registered e-mail address” means the e-mail address at which an electronic communication may be
delivered or transmitted to the addressee, including-
(a) the email address available in the electronic filing account of the addressee registered in
designated portal; or
(b) the e-mail address available in the last income-tax return furnished by the addressee; or
(c) the e-mail address available in the Permanent Account Number database relating to the
addressee; or
(d) in the case of addressee being an individual who possesses the Aadhaar number, the e-mail
address of addressee available in the database of Unique Identification Authority of India ;or
(e) in the case of addressee being a company, the e-mail address of the company as available on the
official website of Ministry of Corporate Affairs; or
(f) any e-mail address made available by the addressee to the income-tax authority or any person
authorised by such authority.
(xxiii) “registered mobile number” of the assessee means the mobile number of the assessee, or his authorised
representative, appearing in the user profile of the electronic filing account registered by the assessee in
designated portal;
(xxiv) “video telephony” means the technological solutions for the reception and transmission of audio-video
signals by users at different locations, for communication between people in real-time.
(2) Words and expressions used herein and not defined but defined in the Act shall have the meaning respectively
assigned to them in the Act.
3. Scope of the Scheme.–– The assessment under this Scheme shall be made in respect of such territorial area, or persons
or class of persons, or incomes or class of incomes, or cases or class of cases, as may be specified by the Board.
4. E-assessment Centres.– (1) For the purposes of this Scheme, the Board may set up-
(i) a National e-assessment Centre to facilitate the conduct of e-assessment proceedings in a centralised manner,
which shall be vested with the jurisdiction to make assessment in accordance with the provisions of this
Scheme;
(ii) Regional e-assessment Centres as it may deem necessary to facilitate the conduct of e-assessment
proceedings in the cadre controlling region of a Principal Chief Commissioner, which shall be vested with the
jurisdiction to make assessment in accordance with the provisions of this Scheme;
(iii) assessment units, as it may deem necessary to facilitate the conduct of e-assessment, to perform the function
of making assessment, which includes identification of points or issues material for the determination of any
liability (including refund) under the Act, seeking information or clarification on points or issues so identified,
analysis of the material furnished by the assessee or any other person, and such other functions as may be
required for the purposes of making assessment;
(iv) verification units, as it may deem necessary to facilitate the conduct of e-assessment, to perform the function
of verification, which includes enquiry, cross verification, examination of books of accounts, examination of
witnesses and recording of statements, and such other functions as may be required for the purposes of
verification.
(v) technical units, as it may deem necessary to facilitate the conduct of e-assessment, to perform the function of
providing technical assistance which includes any assistance or advice on legal, accounting, forensic,
information technology, valuation, transfer pricing, data analytics, management or any other technical matter
which may be required in a particular case or a class of cases, under this Scheme; and
(vi) review units, as it may deem necessary to facilitate the conduct of e-assessment, to perform the function of
review of the draft assessment order, which includes checking whether the relevant and material evidence has
been brought on record, whether the relevant points of fact and law have been duly incorporated in the draft
order, whether the issues on which addition or disallowance should be made have been discussed in the draft
order, whether the applicable judicial decisions have been considered and dealt with in the draft order,
checking for arithmetical correctness of modifications proposed, if any, and such other functions as may be
required for the purposes of review,
and specify their respective jurisdiction.
(2) All communication among the assessment unit, review unit, verification unit or technical unit or with the assesse or
any other person with respect to the information or documents or evidence or any other details, as may be necessary for
the purposes of making an assessment under this Scheme shall be through the National e-assessment Centre.
(3) The units referred to in sub-paragraphs (iii), (iv), (v) and (vi) of paragraph (1) shall have the following authorities,
namely:–
(a) Additional Commissioner or Additional Director or Joint Commissioner or Joint Director, as the case may
be;
(b) Deputy Commissioner or Deputy Director or Assistant Commissioner or Assistant Director, or Income-tax
Officer, as the case may be;
(c) such other income-tax authority, ministerial staff, executive or consultant, as considered necessary by the
Board.
5. Procedure for assessment.––(1) The assessment under this Scheme shall be made as per the following procedure,
namely:__
(i) the National e-Assessment Centre shall serve a notice on the assessee under sub-section (2) of section 143,
specifying the issues for selection of his case for assessment;
(ii) the assessee may, within fifteen days from the date of receipt of notice referred to in sub-clause (i), file his
response to the National e-assessment Centre ;
(iii) the National e-assessment Centre shall assign the case selected for the purposes of e-assessment under this
Scheme to a specific assessment unit in any one Regional e-assessment Centre through an automated
allocation system;
(iv) where a case is assigned to the assessment unit, it may make a request to the National e-assessment Centre for
__
(a) obtaining such further information, documents or evidence from the assesse or any other person,
as it may specify;
(b) conducting of certain enquiry or verification by verification unit; and
(c) seeking technical assistance from the technical unit;
(v) where a request for obtaining further information, documents or evidence from the assessee or any other
person has been made by the assessment unit, the National e-assessment Centre shall issue appropriate
notice or requisition to the assessee or any other person for obtaining the information, documents or evidence
requisitioned by the assessment unit;
(vi) where a request for conducting of certain enquiry or verification by the verification unit has been made by the
assessment unit, the request shall be assigned by the National e-assessment Centre to a verification unit
through an automated allocation system;
(vii) where a request for seeking technical assistance from the technical unit has been made by the assessment unit,
the request shall be assigned by the National e-assessment Centre to a technical unit in any one Regional eassessment
Centres through an automated allocation system;
(viii) the assessment unit shall, after taking into account all the relevant material available on the record, make in
writing, a draft assessment order either accepting the returned income of the assessee or modifying the
returned income of the assesse, as the case may be, and send a copy of such order to the National eassessment
Centre;
(ix) the assessment unit shall, while making draft assessment order, provide details of the penalty proceedings to
be initiated therein, if any;
(x) the National e-assessment Centre shall examine the draft assessment order in accordance with the risk
management strategy specified by the Board, including by way of an automated examination tool, whereupon
it may decide to –
(a) finalise the assessment as per the draft assessment order and serve a copy of such order and notice
for initiating penalty proceedings, if any, to the assessee, alongwith the demand notice, specifying
the sum payable by, or refund of any amount due to, the assessee on the basis of such assessment;
or
(b) provide an opportunity to the assessee, in case a modification is proposed, by serving a notice
calling upon him to show cause as to why the assessment should not be completed as per the draft
assessment order; or
(c) assign the draft assessment order to a review unit in any one Regional e-assessment Centre, through
an automated allocation system, for conducting review of such order;
(xi) the review unit shall conduct review of the draft assessment order, referred to it by the National e-assessment
Centre whereupon it may decide to__
(a) concur with the draft assessment order and intimate the National e-assessment Centre about such
concurrence; or
(b) suggest such modification, as it may deem fit, to the draft assessment order and send its
suggestions to the National e-assessment Centre;
(xii) the National e-assessment Centre shall, upon receiving concurrence of the review unit, follow the procedure
laid down in sub-paragraph (a) or sub-paragraph (b) of paragraph (x), as the case may be;
¹Hkkx IIμ[k.M 3(ii)º Hkkjr dk jkti=k % vlk/kj.k 13
(xiii) the National e-assessment Centre shall, upon receiving suggestions for modifications from the review unit,
communicate the same to the Assessment unit;
(xiv) the assessment unit shall, after considering the modifications suggested by the Review unit, send the final
draft assessment order to the National e-assessment Centre;
(xv) The National e-assessment Centre shall, upon receiving final draft assessment order, follow the procedure laid
down in sub-paragraph (a) or sub-paragraph (b) of paragraph (x),as the case may be;
(xvi) The assessee may, in a case where show-cause notice under sub-paragraph (b) of paragraph (x) has been
served upon him, furnish his response to the National e-assessment Centre on or before the date and time
specified in the notice;
(xvii) The National e-assessment Centre shall,-
(a) in a case where no response to the show-cause notice is received, finalise the assessment as per the
draft assessment order,as per the procedure laid down in sub-paragraph (a) of paragraph (x); or
(b) in any other case, send the response received from the assessee to the assessment unit;
(xviii) The assessment unit shall, after taking into account the response furnished by the assessee, make a revised
draft assessment order and send it to the National e-assessment Centre;
(xix) The National e-assessment Centre shall, upon receiving the revised draft assessment order,-
(a) in case no modification prejudicial to the interest of the assessee is proposed with reference to the draft
assessment order, finalise the assessment as per the procedure laid down in sub-paragraph (a) of
paragraph (x); or
(b) in case a modification prejudicial to the interest of the assessee is proposed with reference to the draft
assessment order,provide an opportunity to the assessee, as per the procedure laid down in subparagraph
(b) of paragraph (x);
(c) the response furnished by the assessee shall be dealt with as per the procedure laid down in paragraphs
(xvi),(xvii), and (xviii);
(xx) The National e-assessment Centre shall, after completion of assessment, transfer all the electronic records of
the case to the Assessing Officer having jurisdiction over such case., for –
(a) imposition of penalty;
(b) collection and recovery of demand;
(c) rectification of mistake;
(d) giving effect to appellate orders;
(e) submission of remand report, or any other report to be furnished, or any representation to be made, or
any record to be produced before the Commissioner (Appeals), Appellate Tribunal or Courts, as the
case may be;
(f) proposal seeking sanction for launch of prosecution and filing of complaint before the Court;
(xxi) Notwithstanding anything contained in paragraph (xx), the National e-assessment Centre may at any stage
of the assessment, if considered necessary, transfer the case to the Assessing Officer having jurisdiction
over such case.
6. Penalty proceedings for non-compliance.– (1) Any unit may, in the course of assessment proceedings, for noncompliance
of any notice, direction or order issued under this Scheme on the part of the assessee or any other person,
send recommendation for initiation of any penalty proceedings under Chapter XXI of the Act, against such assesse or any
other person, as the case may be, to the National e-assessment Centre, if it considers necessary or expedient to do so.
(2) The National e-assessment Centre shall, on receipt of such recommendation, serve a notice on the assessee or any
other person, as the case may be, calling upon him to show cause as to why penalty should not be imposed on him under
the relevant provisions of the Act.
14 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(ii)]
(3) The response to show – cause notice furnished by the assessee or any other person, if any, shall be sent by the
National e-assessment Centre to the concerned unit which has made the recommendation for penalty.
(4) The said unit shall, after taking into consideration the response furnished by the assesse or any other person, as the
case may be, –
(a) make a draft order of penalty and send a copy of such draft to National e-assessment Centre; or
(b) drop the penalty after recording reasons, under intimation to the National e-assessment Centre.
(5) The National e-assessment Centre shall levy the penalty as per the said draft order of penalty and serve a copy of the
same on the assessee or any other person, as the case may be.
7. Appellate Proceedings.– An appeal against an assessment made by the National e-assessment Centre under this
Scheme shall lie before the Commissioner (Appeals) having jurisdiction over the jurisdictional Assessing Officer and any
reference to the Commissioner (Appeals) in any communication from the National e-assessment Centre shall mean such
jurisdictional Commissioner (Appeals).
8. Exchange of communication exclusively by electronic mode.–– For the purposes of this Scheme,-
(a) all communications between the National e-assessment Centre and the assessee, or his authorised
representative, shall be exchanged exclusively by electronic mode; and
(b) all internal communications between the National e-assessment Centre, Regional e-assessment Centres
and various units shall be exchanged exclusively by electronic mode.
9. Authentication of electronic record.–– For the purposes of this Scheme, an electronic record shall be authenticated
by the originator by affixing his digital signature in accordance with the provisions of sub-section (2) of section 3 of the
Information Technology Act, 2000 (21 of 2000):
Provided that in case of the originator, being the assesse or any other person, such authentication may also be done by
electronic signature or electronic authentication technique in accordance with the provisions of sub-section (2) of section
3A of the said Act:
10. Delivery of electronic record.––(1) Every notice or order or any other electronic communication under this Scheme
shall be delivered to the addressee, being the assessee, by way of-
(a) placing an authenticated copy thereof in the assessee’s registered account; or
(b) sending an authenticated copy thereof to the registered email address of the assessee or his authorised
representative; or
(c) uploading an authenticated copy on the assessee’s Mobile App; and
followed by a real time alert.
(2) Every notice or order or any other electronic communication under this Scheme shall be delivered to the addressee,
being any other person, by sending an authenticated copy thereof to the registered email address of such person, followed
by a real time alert.
(3) The Assessee shall file his response to any notice or order or any other electronic communication, under this Scheme,
through his registered account, and once an acknowledgement is sent by the National e-assessment Centre containing the
hash result generated upon successful submission of response, the response shall be deemed to be authenticated.
(4) The time and place of dispatch and receipt of electronic record shall be determined in accordance with the provisions
of section 13 of the Information Technology Act, 2000 (21 of 2000).
11. No personal appearance in the Centres or Units.––(1) A person shall not be required to appear either personally or
through authorised representative in connection with any proceedings under this Scheme before the income-tax authority
at the National e-assessment Centre or Regional e-assessment Centre or any unit set up under this Scheme.
(2) In a case where a modification is proposed in the draft assessment order, and an opportunity is provided to the
assessee by serving a notice calling upon him to show-cause as to why the assessment should not be completed as per the
¹Hkkx IIμ[k.M 3(ii)º Hkkjr dk jkti=k % vlk/kj.k 15
such draft assessment order, the assessee or his authorised representative, as the case may be, shall be entitled to seek
personal hearing so as to make his oral submissions or present his case before the income-tax authority in any unit under
this Scheme, and such 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.
(3) Any examination or recording of the statement of the assessee or any other person (other than statement recorded in
the course of survey under section 133A of the Act) shall be conducted by an income-tax authority in any unit under this
Scheme, 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.
(4) The Board shall establish suitable facilities for video conferencing including telecommunication application software
which supports video telephony at such locations as may be necessary, so as to ensure that the assessee, or his authorised
representative, or any other person referred to in sub-paragraph (2) or sub-paragraph (3) is not denied the benefit of this
Scheme merely on the consideration that such assessee or his authorised representative, or any other person does not
have access to video conferencing at his end.
12. Power to specify format, mode, procedure and processes.––(1) The Principal Chief Commissioner or the Principal
Director General, in charge of the National e-assessment Centre shall lay down the standards, procedures and processes
for effective functioning of the National e-assessment Centre , Regional e-assessment Centres and the unit set-up under
this Scheme, in an automated and mechanised environment, including format, mode, procedure and processes in respect
of the following, namely:__
(i) service of the notice, order or any other communication;
(ii) receipt of any information or documents from the person in response to the notice, order or any other
communication;
(iii) issue of acknowledgment of the response furnished by the person;
(iv) provision of “e-proceeding” facility including login account facility, tracking status of assessment,
display of relevant details, and facility of download;
(v) accessing, verification and authentication of information and response including documents submitted
during the assessment proceedings;
(vi) receipt, storage and retrieval of information or documents in a centralised manner;
(vii) general administration and grievance redressal mechanism in the respective Centres and units.
[Notification No. 61/2019/F.No. 370149/154/2019-TPL]
ANKUR GOYAL, Under Secy.

CBDT Circulars On Prosecution Of Offenses And Compounding Of Offenses Under Direct Tax Laws

MASTI

Circular No. 24 12019
F.No.2 85/08/2014-IT(Inv. V)/ 349
Government of India
Ministry of Finance
Department of Revenue
(Central Board of Direct Taxes)
*******
Room No. 515, 5th Floor, C-B1ock,
Dr. Shyama Prasad Mukherjee Civic Cent re,
Minto Road, New Delhi – ll 0002.
Dated: 09.09.2019

Subject: Procedure for identification and processing of cases for prosecution under Direct Tax Laws-reg.

The Central Board of Direct Taxes has been issuing guidelines from time to time for streamlining the procedure of identifying and examining the cases for initiating prosecution for offences under Direct Tax Laws. With a view to achieve the objective behind enactment of Chapter XXII of the Income-tax Act, 1961 (the Act), and to remove any doubts on the intent to address serious cases effectively, this circular is issued.

2. Prosecution is a criminal proceeding. Therefore, based upon evidence gathered, offence and crime as de fined in the relevant provision of the Act, the offence has to be proved beyond reasonable doubt. To ensure that only deserving cases get prosecuted the Central Board of Direct Taxes in exercise of powers under section 119 of the Act lays down the following criteria for launching prosecution in respect of the following categories of offences.

i. Offences u/s 276B: Failure to pay tax to the credit of Central Government under Chapter XII-D or XVII-B.

Cases where non-payment of tax deducted at source is Rs. 25 Lakhs or below, and the delay in deposit is less than 60 days from the due date, shall not be processed for prosecution in normal circumstances. In case of exceptional cases like, habitual defaulters, based on particular facts and circumstances of each case, prosecution may be initiated only with the previous administrative approval of the Collegium of two CCIT/DGIT rank officers as mentioned in Para 3.

ii. Offences u/s 276BB: Failure to pay the tax collected at source.

Same approach as in Para 2.i above.

iii . Offences u/s 276C(l): Wilful attempt to evade tax, etc.

Cases where the amount sought to be evaded or tax on under-reported income is Rs. 25 Lakhs or below, shall not be processed for prosecution except with the previous administrative approval of the Collegium oftwo CCIT/DG IT rank officers as mentioned in Para 3.

Further, prosecution under this section shall be launched only after the confirmation of the order imposing penalty by the Income Tax Appellate Tribunal.

iv. Offences u/s 276CC: Failure to furnish returns of income.

Cases where the amount of tax, which would have been evaded if the failure had not been discovered, is Rs. 25 Lakhs or below, shall not be processed for prosecution except with the previous administrative approval of the Collegium of two CCIT/DGIT rank officers as mentioned in Para 3.

3. For the purposes of this Circular, the constitution of the Collegium of two CCIT/DGIT rank officers would mean the following-

As per section 279(1) of the Act, the sanctioning authority for offences under Chapter XXII is the Principal Commissioner or Commissioner or Commissioner (Appeals) or the appropriate authority. For proper examination of facts and circumstances of a case, and to ensure that only deserving cases below the threshold limit as prescribed in Annexure get selected for filing of prosecution complaint. such sanctioning authority shall seek the prior administrative approval of a collegium of two CCIT/DGIT rank officers, including the CCIT/DGIT in whose j urisdiction the case lies. The Principal CCIT(CCA) concerned may issue directions for pairing of CCslT/DGIT for this purpose. In case of disagreement between the two CCITIDGIT rank officers of the collegium, the matter will be referred to the Principal CClT(CCA) whose decision will be final.

In the event that the Pr.CCIT(CCA) is one of the two officers of the collegium, in case of a disagreement the decision of the Pr.CCIT(CCA) will be final.

4. The list of prosecutable offences under the Act specifying the approving authority is annexed herewith.

5. This Circular shall come into effect immediatel y and shall apply to all the pending cases where com plaint is yet to be filed.

6. Hind version shall follow.
Encl: As above
(Mamta Bansal)
Director to the Government of India

Circular No. 25/2019
F.No.285/0812014-IT(Inv. V) /350
Government of India
Ministry of Finance
Department of Revenue
(Cent ral Board of Direct Taxes)
*******
Room No. 515, 5th Floor, C-Block,
Dr. Shyama Prasad Mukherjee Civic Centre,
Minto Road, New Delhi -110002.
Dated: 09.09.20 19

Subject: Relaxation of time-Compounding of Offences under Direct Tax Laws-One-time measure-Reg.

The Central Board of Direct Taxes (CBDT) has been issuing guidelines from time to time for compounding of offences under the Direct Tax Laws, prescribing the eligibility conditions. One of the conditions for filing of Compounding application is that, it should be filed within 12 months from filing of complaint in the court.

2. Cases have been brought to the notice of CBDT where the taxpayer s could not apply for Compounding of the Offence, as the compounding application was filed beyond 12 months. in view of para 8(vii) of the Guidelines for Compounding of Offences under Direct Tax Laws. 2014 dated 23. 12.2014 or in view of para 7(ii) of the Guidelines for Compounding of Offences under Direct Tax Laws, 2019 dated 14.06.2019.

3. With a view to mitigate unintended hardship to taxpayers in deserving cases, and to reduce the pendency of existing prosecution cases before the courts, the CBDT in exercise of powers u/s 119 of the Income-tax Act, 1961 (the Act) read with explanation below subsection (3) of section 279 of the Act issues this Circular.

4.1 As a one-time measure, the condition that compounding application shall be filed within 12 months, is hereby relaxed, under the following conditions:

i) Such application shall be filed before the Competen t Authority i.e. the Pr. CCIT/CCITIPr. DGIT/DGIT concerned, on or before 31.12.2019.

ii) Relaxation shall not be available in respect of an offence which is generally/normally not compoundable , in view of Para 8.1 of the Guide lines dated 14.06.20 19.

4.2 Applications tiled before the Competent Authority, on or before 31.12.2019 shall be deemed to be in time in terms of Para 7(ii) of the Guidelines dated 14.06.2019.

4.3 It is clarified that Para 9.2 of the Guidelines dated 14.06. 2019, shall not apply to all such applications made under this one-time measure. The other prescriptions of the Guidelines dated 14.06.20 19 including the compounding procedure, compounding charges etc. shall apply to such applications.

5. For the purposes of this Circular, application can be filed in all such cases where a) prosecution proceedings are pending before any court of law for more than 12 months . or b) any compounding application for an offence filed previously was withdrawn by the applicant solely for the reason that such application was filed beyond 12 months, or

c) any compounding application for an offence had been rejected previous ly solely for technical reasons.

6. Hind version shall follow.
(Mamta Bansal)
Director to the Government of India

DOWNLOAD: Download CBDT Circular No. 24 12019 and Circular No. 25/2019 dated 9th September 2019

CBDT Circular On Bogus Long-Term Capital Gain (LTCG)/Short Term Capital Loss (STCL) On Penny Stocks

MASTI

Circular No. 23 of 2019
F. No. 279/Misc./M-93/2018-ITJ(Pt.)
Government of India
Ministry of Finance
Department of Revenue
Central Board Direct Taxes
Judicial Section
New Delhi, 6th September 2019

Subject: -Exception to monetary limits for filing appeals specified in any Circular issued under Section 268A of the Income-tax Act, 1961-reg

Reference is invited to the Circulars issued from time to time by Central Board of Direct Taxes (the Board) under section 268A of the Income-tax Act,1961 (the Act), for laying down monetary limits and other conditions for filing of departmental appeals before Income Tax Appellate Tribunal (ITAT), High Courts and SLPs/appeals before Supreme Court.

DOWNLOAD: Download CBDT Circular No. 23 of 2019 (Penny Stocks Monetary Tax Limit)

2. Several references have been received by the Board that in large number of cases where organised tax-evasion scam is noticed through bogus Long-Term Capital Gain (LTCG)/Short Term Capital Loss (STCL) on penny stocks and department is unable to pursue the cases in higher judicial fora on account of enhanced monetary limits. It has been reported that in large number of cases, ITATs and High Court have recognized the unique modus operandi involved in such scam and have passed judgements in favour of the revenue.

However, in cases where some appellate fora have not given due consideration to position of law or facts investigated by the department, there is no remedy available with the department for filing further appeal in view of the prescribed monetary limits.

3. In this context, Board has decided that notwithstanding anything contained in any circular issued u/s 268A specifying monetary limits for filing of departmental appeals before Income Tax Appellate Tribunal (ITAT), High Courts and SLPs/appeals before Supreme Court. appeals may be filed on merits as an exception to said circular, where Board, by way of special order direct filing of appeal on merit in cases involved in organised tax evasion activity.

4. Hindi version follows.
(Neetika Bansal)
Director (lTJ)
CBDT, New Delhi
Copy to:
I . Chairman, Members and all other officers in CBDT of the rank of Under Secretary and
above.
2. All Pr. Chief Commissioners oflncome tax and all Directors General oflncome Tax
3. ADG (PR, P&P), Mayur Bhawan, New Delhi for printing in the quarterly Tax Bulletin
and for circulation as per usual mailing list.
4. The Comptroller and Auditor General ofIndia.
5. ADG (Vigilance), Mayur Bhawan, New Delhi.
6. Joint Secretary & Legal Advisor, Ministry of Law & Justice, New Delhi.
7. All Directorates of Income-tax, New Delhi and ProDGIT(NADT), Nagpur.
8. ITCC (3 copies).
9. ADG (System)-4, for uploading on the Department’s website.
10. Data Base Cell for uploading on irsofficersonline.gov.in.
II. njrs_support@nsdl.co.in for uploading on NJRS.
12. Hindi Cell for translation.
13. Guard file.
(Neetika Bansa )
Director (lTJ)
CBDT, New Delhi

Guidelines for manual selection of returns for Complete Scrutiny during the financial-year 2019-20

MASTI

F.No.225/169/2019/ITA-11
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes (ITA-II division)
North Block, New Delhi, the 5th September, 2019

To

All Pr. Chief-Commissioners of Income-tax/Chief-Commissioner of Income-Tax

All Pr. Directors-General of Income tax/Directors-General of Income-tax

Sir/Madam

Subject: Guidelines for manual selection of returns for Complete Scrutiny during the financial-year 2019-20-regarding.-

1. The parameters for manual selection of returns for Complete Scrutiny during financial year 2019-20 are as under.-

(i) Cases involving addition in an earlier assessment year(s) on a recurring issue of law or fact: –

a. exceeding Rs. 25 lakhs in eight metro charges at Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai and Pune while at other charges, quantum of addition should exceed Rs. 10 lakhs;

b. exceeding Rs. 10 crore in transfer pricing cases. and where such an addition:-

1. has become fi ~al as no further appeal has been filed against the assessment order; or

2. has been confirmed at any stage of appellate process in favor of revenue and assessee has not filed further appeal; or

3. has been confirmed at the 1st stage of appeal in favor of revenue or subsequently; even if further appeal of assessee is pending, against such order.

(ii) Cases pertaining to Survey under section 133A of the Income-tax Act, 1961 (‘Act’) excluding those cases where books of accounts, documents, etc. were not impounded and returned income (excluding any disclosure made during the Survey) is not less than returned income of preceding assessment year.

However, where assessee has retracted from disclosure made during the Survey, such cases will be considered for scrutiny.

(iii) Assessments in search and seizure cases to be made under section(s) 153A, 153C, 158BA, 158BC & 158BD read with section 143(3) of the Act and also for return filed for assessment year relevant to previous year in which authorization for search and seizure was executed under section 132 or 132A of the Act.

(iv) Cases where registration/approval under various sections of the Act such as 12A,
35(1)(ii)/(iia)/ (iii) , lO(23C), etc . have not been granted or have been cancelled/withdrawn by the Competent Authority, yet the assessee has been found to be claiming tax-exemption/deduction in the return. However, where such orders of withdrawal of registration/approval have been reversed/set-aside in appellate proceedings, those cases will not be selected under this clause.

(v) Cases in respect of which specific information pointing out tax-evasion for the relevant year is given by any law- enforcement /intelligence/regulatory authority or agency . However, before selecting a return for scrutiny under this criterion, Assessing Officer shall take prior administrative approval from jurisdictional Pr. CIT/Pr.DIT/CIT/DIT concerned.

2. Through Computer Aided Scrutiny Selection (CASS), cases are being selected in two categories viz. Limited Scrutiny & Complete Scrutiny in a centralized manner under CASS-2019. CASS is a system-based method for scrutiny selection which identifies the cases through data-analytics and three-hundred sixty degree data profiling of taxpayers and in a non -discretionary manner. The list of these cases is being/has been separately intimated by the Principal DGIT(Systems) to the Jurisdictional authorities concerned for further necessary action. In respect of cases selected under CASS cycle 2019, the following guidelines are specified.

(i) Cases where returns are selected for scrutiny through CASS but are not verified by the assessee within th e specified peri od of e-fil ing and such ret urns remain unverified before the due date for issue of notice u/s 143(2), shou ld be reopened by issue of notice under section 148 of the Act .

(ii) Cases selected for ‘Limited Scrutiny’ but credible specific information has been/is received from any law- enforcement/intelligence/ regulatory authority or agency regarding tax-evasion in such cases, then only issue(s) arising from such information can be exam ined during the course of conduct of assessment proceedings in such ‘Limited Scrutiny’ cases, with prior administrative approval of the Pr. CIT/CIT concerned as per the procedure laid down in Board’s letter dated 28.11.2018 issued vide F.No.225/402/2018/ITA-1 1. In such ‘limited Scrutiny’ cases, Assessing Officer shall not expand the scope of enquiry/investigation beyond the issue(s) on which the case was flagged for ‘Limited Scrutiny’ and the issue(s) arising from the information received from the above referred agency or authority.

3. This may be brought to the notice of all concerned for necessary compliance .

4. Hindi version to follow.

(Rajarajeswari R.)

Under Secretary-ITA.II, CBDT

DOWNLOAD: Download CBDT Guidelines for manual selection of returns for Complete Scrutiny

Modification by CBDT in the new system of approval in respect of application under section 197 of Income Tax Act

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F.No.275/16/2019-IT(B)
Government of India
Ministry of Finance, Department of Revenue
Central Board of Direct Taxes
*****
North Block, New Delhi 2nd September, 2019

Office Memorandum

Subject: Modification in the new system of approval in respect of application under section 197 of Income Tax Act

Reference may be made to the Board’s Instruction No. 7 of 2009 dated 23.12.2009 vide which prior administrative approva l of Commissioner of Income Tax was prescribed for issue of certificate under section 197 of the Income -Tax Act, where the tax forgone exceeded specified thresholds.

Various administrative and systematic difficulties related to such amount of revenue forgone under the newly introduced system of online application uls 195/197 of the LT. Act 1961 in respect of non-resident taxpayers were brought to the notice of the Board.

To address these difficulties, a proposal for raising the threshold of revenue forgone
was made so as to balance the needs of supervisory control and expeditious grant of certificate .

2. The above matter has been examined in the Board and it has been decided to raise threshold of revenue effect for issue of certificates under section 197/195 needing approval of the Commissioner of Income Tax (IntI. Taxation) to Rs. 10 Crore.

This threshold will be applicable for all stations in respect of all applications of non-resident taxpayers either pending as on date or filed hereafter.

This issues with the approval of the Chairman , CBDT.

(Naveen Kapoor)
Under Secretary to the Govt. of India
Ph. No. 011-23094182

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CBDT Consolidated circular No. 22/2019 dt. 30.08.2019 for assessment of Startups

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Circular No..22/2019
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
North Block, New Delhi , dated the 30th August, 2019

Sub: Consolidated circular for assessment of Startups – reg.

In order to provide hassle-free tax environment to the Startups, a series of announcements have been made by the Hon’ble Finance Minister in her Budget Speech of 2019 and also on 23rd August, 2019.

To give effect to these announcements, the Central Board of Direct Taxes (CBDT) has issued various circulars/clarifications in the matter. This circular consolidates all these circulars and further clarifies as under:-

2. Assessment of Startups

The circular No. 16/2019 dated 7 th of August, 2019 provided for the following procedure for pending assessment of the Startups:-

i. In case of Startup companies recognized by Department for Promotion of Industry and Internal Trade (DPIIT) which have filed Form No.2 and whose cases are under “limited scrutiny” on the single issue of applicability of section 56(2)(viib) of the Income-tax Act, 1961 (the Act),the contention of the assessee will be summarily accepted.

ii. In case of Startup companies recognized by DPIIT which have filed Form No. 2 and whose cases have been selected under scrutiny to examine multiple issues including the issue of section 56(2)(viib)of the Act, this issue will not be pursued during the assessment proceedings and inquiry on other issues will be carried out by the Assessing Officer only after obtaining approval of the supervisory authority.

iii. In case of Startup Companies recognized by the DPIIT, which have not filed Form No.2, but have been selected for scrutiny, the inquiry in such cases also will be carried out by the Assessing Officer only after obtaining approval of the supervisory authorities.

3. Time limit for Completion of pending assessments of the Startups

All assessment referred to in 2(i) should preferably be completed by the AOs by 30th September, 2019. The assessments referred to in 2(ii) & 2(iii) should be taken up on priority and should be preferably completed by 31st October, 2019.

4. Procedure for addition made U/S 56(2)(viib) in the past assessment

The clarification issued on 9th August,2019 provided that the provisions of the section 56(2)(viib) of the Act shall also not be applicable in respect of assessment made before 19th February, 2019 if a recognised Startups has filed declaration in Form No.2.

The following procedure is laid down with regard to addition made under section 56(2)(viib) of the Act in assessment order passed before 19th February, 2019:-

i. In case the appeal against the assessment is pending before the Commissioner of Income-tax (Appeal)[CIT(A)], the appellate order should be passed by CIT(A) on or before 31st December, 2019 after taking into account the fact that the Startup has filed declaration in Form No. 2 and hence the provisions of section 56(2)(viib) of the Act are not applicable for the addition made under section 56(2)(viib) of the Act before 19th February, 2019. The Department shall no t file further ap peal on the issue of addition made under section 56(2)(viib) of the Act;

ii. In case the case is pending before the ITAT, the Department shall not press the ground relating to addition under section
56(2)(viib) of the Act in these cases.

5. Income-tax demand

It is reiterated that the outstanding income-tax demand relating to additions made under section 56(2)(viib) shall not be pursued and no communication with the assessee in respect of outstanding demand shall be made for this purpose. In respect of other income-tax demand, it is decided that the income-tax demand shall not be pursued unless the demand is confirmed by the ITAT.

6. Constitution of Startup cell

In order to redress grievances and to address various tax related
issues in the cases of Startups, a Startup Cell is constituted on 30th August, 2019 with the following ex-officio members:-

S.No . Portfolio Designation Contact Number

1. Member (IT&C) Chairman 011-230982831
2. JS (TPL-II) Member 011-23092859
3. CIT (ITA) Member 011-23092837
4. Director (ITA-I) Member Secretary 011-23092107
5. Under Secretary (ITA-I) Member 011-23095479
7. The Cell, for any grievances/ communications relating to Startups may be approached at % Under Secretary, ITA-I, Room No. 245A, North Block, New Delhi-11000l. Ph. No. 011-23095479/ 23093070 (F). The Cell will also be accessible at star tupcelI.cbdt@gov.in.

(F.No. 173jl49/2019-ITA-I)
8. Hindi version to follow .

(Prajna Paramita)
Director (ITA-I )

DOWNLOAD: Download CBDT Circular No. 22/2019 dated 30th August 2019

Taxation Of Startups – Angel Tax: Complete Guide

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This is a guide to the levy of “angel tax” on start-ups. It summarizes the legislative amendments made to the Income-tax Act 1961 and also the various circulars and instructions issued by the CBDT.

What is “angel tax”?

Section 56(2)(viib) (Section) of the Indian Tax Laws (ITL) (popularly known as the “angel tax” provisions) is an anti-abuse provision which applies when a CHC issues shares (including preference shares) to a resident at a premium and receives consideration which is in excess of the FMV of the shares. The excess amount so received is deemed as income from other sources in the hands of the CHC in the year of issue of the shares.

• Rule 11UA of the Income Tax Rules (Valuation Rules) prescribes the valuation methodology for determining the FMV of various types of assets (including unquoted equity shares), not only for the purposes of the angel tax provision, but also for other anti-abuse provisions involving transfer of assets without consideration or at a value less than the FMV.

• The FMV of unquoted equity shares for the purpose of the angel tax provision read with Rule 11UA is the higher of the following:

Net asset value as reflected in the audited balance sheet of the CHC (break-up value method)

OR

The DCF value as determined by a Category-I MB or Accountant

OR

The value that the company is able to substantiate to the satisfaction of the Tax Authority, basis the holding of various intellectual property rights (IPRs) like goodwill, know-how, patents, copyrights etc.

• In case of unquoted shares and securities other than equity shares in a company not listed in any recognized stock exchange, as per Rule 11UA, the FMV is the estimated open market value as may be determined by a Category I MB or Accountant. This rule applies to both angel tax and other anti-abuse provisions.

• Prior to the Valuation Notification, the term “Accountant” was defined as under:

• For angel taxation: In case of valuation of unquoted equity shares, an Accountant is a Fellow CA who is not appointed as a tax auditor under the ITL or as a statutory auditor under the Companies Act, 2013.

• For other anti-abuse provisions: Any CA in practice who can act as an Authorized Representative for the taxpayer and fulfils the independence criteria as prescribed under the ITL.

• Changes brought about by the Valuation Notification are as follows:

• The Valuation Notification has withdrawn the option given to the taxpayer to obtain a valuation report from a CA for determining the FMV of unquoted equity shares based on the DCF method for the purpose of the angel tax provision. As a
consequential amendment, it has also omitted the definition of “accountant”.

• Thus, where the taxpayer wishes to rely on the DCF method, it can now obtain a DCF valuation report only from a Category 1 MB. A valuation report from a practising CA will no longer be a valid compliance for the angel tax provision.

• However, it may be noted that the above change applies only to the valuation of unquoted equity shares required for the angel tax provision by adopting the DCF method option. For shares other than unquoted equity shares (like preference
shares), the taxpayer continues to have the option to obtain a valuation report from either a Category I MB or a CA. The changes in Rule 11UA are depicted in the table at Annexure.

• The aforesaid amendment comes into force from the date of publication in the official gazette i.e., 24 May 2018.
• Exemption from the angel tax provision for eligible

DOWNLOAD: Download Guide To Angel Tax On Startups – CBDT Circulars, Notifications, Press Note, Instructions

“start-ups”

• The angel tax provision does not apply to shares issued by a venture capital undertaking to a venture capital fund or a venture capital company[“Venture capital undertaking”, “venture capital fund” and “venture capital company” shall have meaning as assigned under Explanation(c) to Section 10(23FB) of the ITL].

• In addition, the provision does not apply when shares are issued to a class or classes of persons as notified by the CG. Pursuant to exercise of this power, the CG issued the following notifications with corresponding reference to the DIPP notifications.

• The additional conditions imposed by the 2018 DIPP Notification for start-up companies are:

• A cap of INR100m on the aggregate of paid-up share capital and share premium post issue of shares.

• Requirement to furnish a valuation report obtained from a Category I MB specifying the FMV of the shares, in accordance with Rule 11UA.

• As per the 2018 DIPP Notification, the conditions required to be fulfilled by the investor are, either:

• Average returned income of INR2.5m or more for the preceding three financial years.
OR

• Net worth of INR20m or more on the last date of the preceding financial year.

• The Start-up Notification aligns with the 2018 DIPP Notification and provides that where shares are issued at premium for a consideration in excess of the FMV, the angel tax provision shall not apply on such consideration received from an investor by a start-up company, in accordance with the approval granted by the IMB under the 2018 DIPP Notification.

• This change comes into force retrospectively from 11 April 2018, being the date on which the 2018 DIPP Notification was issued/published in the official gazette.

Key amendments of Finance (No. 2) Bill, 2019 relating to Angel tax on startups

Withdrawal of exemption and automatic levy of penalty where start-ups breach condition for angel tax exemption

► FB 2019 proposed to introduce claw back provision for “angel tax” exemption availed of by start-up companies in the event of breach of any of the notified conditions. “Angel tax” refers to taxation of excess premium received by a closely-held company from a resident investor (i.e., consideration received in excess of fair market value of shares). But, the claw back was proposed for the whole premium (consideration received in excess of face value of shares), instead of only excess premium.

► At the enactment stage, the claw back is restricted to only excess premium over fair market value, but with a more onerous consequence that such claw back shall be deemed to be misreported income attracting penalty @ 200% of the excess premium.

Angel tax exemption extended to issue of shares to all sub-categories of Category-I AIFs

► FB 2019 proposed to extend exemption from angel tax currently available for investment by a Venture Capital Company or a Venture Capital Fund (being a sub-category of Category-I AIF) in a Venture Capital Undertaking to investment by Category-II AIFs also. This left out other sub-categories of Category-I AIFs like infrastructure fund, social venture fund, SME fund etc.

► At the enactment stage, the exemption is extended to all sub-categories of Category-I AIFs. Thus, investment by any entity in Category-I or Category-II AIF in a Venture Capital Undertaking (including a recognized start-up) will now be exempt from angel tax.

CBDT notifies exemption for start-ups from ups from “angel tax” as per relaxations notified by DPIIT

Notification No. 13 of 2019 dated 5 March 2019 was issued by the Central Board of Direct Taxes (CBDT) in relation to exemption to start-ups from taxation of excess share premium received by such start-up companies from a resident investor under an anti-abuse provision of the Indian Tax Laws (ITL) popularly known as the “angel tax” provision.

On 19 February 2019, the Department for Promotion of Industries and Internal Trade (DPIIT) issued a Notification (2019 DPIIT Notification) which substantially relaxed the conditions and procedure for exemption from “angel tax” for start-up companies by adopting a “green channel” process in place of the earlier approval-based process.

In order to claim exemption, the “start-up company” which fulfils the modified conditions[4] has to merely file a self-declaration stating that the eligible start-up has not invested in non-qualifying assets[5] which shall be transmitted by the DPIIT to the CBDT.

In the light of new exemption regime prescribed by the 2019 DPIIT Notification, the present CBDT Notification, as a consequential step, supersedes the earlier CBDT Notification[6] and grants exemption to start-ups from “angel tax” provision if the start-up company complies with the conditions specified in the 2019 DPIIT Notification.

The present CBDT Notification comes into force retrospectively from 19 February 2019, being the date of the 2019 DPIIT Notification.

In relation to past issue of shares, in line with the 2019 DPIIT Notification, the relaxation will not apply to prior years where assessment orders in relation to angel tax have already been passed by the Tax Authority. As per news reports, the CBDT has instructed the Tax Authority not to take coercive action and ensure speedy disposal of such appeals on priority.

But where no such demands are raised or notices are received but assessment orders are yet to be passed, taxpayers can expect relief from angel tax provision by complying with the 2019 DPIIT Notification. If conditions of the 2019 DPIIT Notification are not fulfilled, taxpayers will need to defend their case on merits by justifying the share valuation.

It may also be noted that the present CBDT Notification does not address invocation of broader provisions to treat share investments by non-resident investors as unexplained cash credits.

CBDT lays down administrative mechanism for pending assessments of start-up companies

The Central Board of Direct Taxes (CBDT) issued Circular No. 16/2019 dated 7 August 2019 in relation to the manner of conducting assessment proceedings (including pending assessments as of date), involving angel tax and other issues, in case of start-up companies.

Angel tax, under the Indian Tax Laws (ITL), refers to a tax on premium received by a closely-held company on issue of shares in excess of the fair market value (FMV) of the shares.

Such FMV is determined basis normative valuation rules or the valuation report by a merchant banker or any other basis as substantiated to the satisfaction of the Tax Authority.

With a view to promote the start-up industry, the CBDT issued a notification[3] stating that “start-up” companies which satisfy the conditions prescribed under the notification[4] issued by the Department for Promotion of Industries and Internal Trade (DPIIT) (2019 DPIIT Notification) will be exempt from the levy of angel tax. The 2019 DPIIT Notification, however, did not explicitly provide any relief where the assessment proceedings are pending with the Tax Authority.

► In wake of representations from the start-up industry, through the Budget Speech on 5 July 2019, the Finance Minister had announced that the CBDT shall frame a special administrative mechanism for disposing pending assessments of start-ups and for redressal of grievances. The Finance Minister also assured that, for start-up companies, the Tax Authority shall not conduct inquiry or verification without the approval of the supervisory officer.

► Pursuant thereto and by exercising powers granted to the CBDT under the ITL for proper administration, the CBDT Circular was issued on 7 August 2019 for granting relaxation to start-up companies in relation to the manner of conduct of pending assessments for angel tax and other issues.

► The CBDT Circular was issued in light of various instances where notices for conducting assessment or reassessment have been issued by the Tax Authority before or after the issue of the 2019 DPIIT Notification and where such cases are, presently, pending for disposal.

The relaxation provided by the CBDT is as follows:

► Procedure for completion of pending assessment for recognized start-ups: In case of recognized start-up companies satisfying the conditions for availing angel tax exemption under the 2019 DPIIT Notification, the procedure shall be as follows:

o In case of “limited scrutiny” where the sole issue of applicability of angel tax is being examined, the Tax Authority shall not conduct any verification. The Tax Authority is directed to summarily accept the contentions of recognized start-up companies.

o In case of “limited scrutiny with multiple issues” or “complete scrutiny” where assessment is conducted in case of other issues along with examination of levy of angel tax, the issue of angel tax shall not be pursued by the Tax Authority.

Furthermore, the Tax Authority shall conduct inquiry or verification for other issues only after obtaining the approval of the supervisory officer. Furthermore, in relation to other issues, assessment proceedings shall be conducted as per the procedure laid down under the ITL.

► Procedure for start-up companies not having DPIIT approval: In such cases where the assessment is being conducted for angel tax or other issues, the Tax Authority shall conduct inquiry or verification only after obtaining the approval of the supervisory officer.

Adhering to the promise of the Finance Minister, the CBDT has taken a proactive measure to clear the air on the outcome of assessment proceedings of start-up companies. While this is a welcome move, the said directions are not applicable in relation to the issues of start-up companies which are pending at the appellate level and assessments have already been conducted by the Tax Authority in past years.

CBDT extends Angel tax exemption to start-up companies for completed assessments of past years

The Central Board of Direct Taxes issued Instruction No. F.No.173/354/2019-ITA-1 dated 9 August 2019 (CBDT Instruction) to extend exemption from Angel tax to start-up companies where addition of income in relation to Angel tax is made in assessment orders passed before 19 February 2019.

“Start-up” companies which satisfy the conditions prescribed under the notification[4] issued by the Department for Promotion of Industries and Internal Trade (DPIIT) [5] (2019 DPIIT Notification) are exempt from the levy of Angel tax[6]. The 2019 DPIIT Notification extended the condition-based exemption to past and proposed issue of shares undertaken by start-up companies. However, it did not provide any relaxation where an addition has been made in relation to Angel tax in an assessment order before issue of 2019 DPIIT Notification i.e., prior to 19 February 2019.

In order to mitigate hardship caused to the start-up companies, the CBDT has, on realization of the lacuna, issued a clarification on 9 August 2019 to relieve recognized start-ups where addition is made for Angel tax income in assessment order passed before 19 February 2019. To claim such an exemption, the start-up company is required to submit self-declaration as required in the 2019 DPIIT Notification confirming that all the conditions laid down in the said Notification are fulfilled.

The CBDT clarification follows the CBDT Circular[7] which lays down administrative mechanism for conduct of assessment proceedings (including pending assessments). The present CBDT instruction is a welcome move which directs the Tax Authority to grant Angel tax exemption in case of past years where assessment orders were passed before the date of 2019 DPIIT Notification. The Government of India has been proactive in resolving the concerns faced by the start-ups.

Accordingly, start-up companies which are recognized and have filed requisite declaration to the CBDT may apply for rectification of assessment order passed by the Tax Authority within the time limit prescribed under the ITL. In case of on-going assessment proceedings at appellate level, the present CBDT clarification may help the start-up companies to defend their cases before the relevant authorities.

CBDT forms dedicated cell for start-ups to redress tax grievances

The Central Board of Direct Taxes (CBDT) issued Order dated 30 August 2019 for setting-up of a dedicated cell for start-ups (“Start-up Cell”) to redress the grievances and address the various issues under Indian Tax Laws (ITL), including angel tax. The CBDT Order is issued in light of the announcement made by the Finance Minister in Budget Speech as also at the press meeting held on 23 August 2019.

The Start-up Cell comprises the officials from different hierarchy at CBDT and can be contacted over telephone number (011-23095479/23093070 (F)) and email id (startupcell.cbdt@gov.in).

The CBDT Order is issued to implement the announcement made by the Finance Minister in Budget Speech on 5 July 2019 as also at the press meeting held on 23 August 2019 and is the latest in a series of proactive steps undertaken by CBDT to provide impetus to Start-up industry and clarify the ambiguities under the ITL.

The Start-up Cell comprises the following officials from different hierarchy at CBDT:

Official Designation in Start-up Cell
Member (Income Tax and Computerisation)
Chairman
Joint Secretary -Tax Policy and Legislation-II
Member
Commissioner of Income Tax (ITA)
Member
Director (ITA-I)
Member Secretary
Under Secretary (ITA-I)
Member

The Start-up Cell can be contacted over telephone number (011-23095479/23093070 (F)) and email id (startupcell.cbdt@gov.in) provided in the Order. The official address of the Start-up Cell is located at Room No. 245A, North Block, New Delhi – 110001.

This recent initiative by the CBDT is aimed to ease the compliance issues for start-ups. The CBDT Order is the latest in a series of proactive steps undertaken by CBDT to provide impetus to Start-up industry and clarify the ambiguities under the ITL. Earlier, on 5 March 2019, the CBDT issued a Notification to provide exemption from angel tax to start-ups satisfying the prescribed conditions.

Subsequently, in July 2019, the Finance (No.2) Act, 2019 introduced several measures to ease the tax burden in the hands of start-ups and their promoters[4]. Thereafter, as promised by the Finance Minister in Budget Speech on 5 July 2019, the CBDT laid down a specific administrative mechanism for pending assessments of start-ups involving angel tax and other issues.

The CBDT also extended the benefit of angel tax exemption to start-ups where additions were made in assessment orders passed before 19 February 2019. Also, in a press meeting on 23 August 2019, the Finance Minister announced a blanket relaxation from angel tax to start-ups registered with Department for Promotion of Industry and Internal Trade. These measures are expected to address the tax issues of start-ups and improve ease of doing business for such entities.