Recently there have been made very major changes regarding reporting of details of long term capital gain transactions in schemas of ITR-2 and ITR-3. And CBDT has issued clarification through press release on 16/07/2019 with title 'clarification on incorrect reports in social media pertaining to difficulty in filing of Income Tax Returns'.
Three abstracts have been taken here from that press release which are(1)no changes have been made in any of the Income-tax Return (ITR) forms including ITR-2 and ITR-3 since the notification made on 1st April 2019.(2) More than 85 lakh taxpayers have filed returns in ITR-1 till date by using the said utility, which has also undergone update later. (3) Updation in utility of ITR forms is based on feedback and mainly aimed at easing the compliance burden of the taxpayers by facilitating easier e-filing.
Now, we will discuss these three abstracts based on following legal provisions.
Section 139 read with Section 295 of Income Tax Act, 1961 confers authority to notify the ITRs to Central Government which in turn delegates it to CBDT through Ministry of Finance. CBDT notifies ITRs for each Assessment Year under Rule 12 of Income Tax Rules.
Now Rule 12(4) reads as The [Principal Director-General of Income-tax (Systems) or Director-General of Income-tax (Systems)] shall specify the procedures, formats and standards for ensuring secure capture and transmission of data and shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to furnishing the returns >[in the manners (other than the paper form) specified in column (iv) of the Table in sub-rule (3)][and the report of audit [or notice] in the manner specified in proviso to sub-rule (2)].
From the preceding two paragraphs, it may be interpreted that CBDT, by the way of issuance of notification, can make changes in forms of ITRs. And duty of Principal Director-General of Income-tax (Systems) or Director-General of Income-tax (Systems) is to specify the procedures, formats and standards for ensuring secure capture and transmission of data. Thus, Principal Director-General of Income-tax (Systems) or Director-General of Income-tax (Systems) can make only those changes in schema as per Rule 12(4) which are necessary to ensure secure capture and transmission of data.
Now what happened in last one week with reference to forms of ITR and their schemas which caused debate on social media is changes regarding reporting of long term capital gain transactions in quite detailed format as compared to the format prescribed in notification no. 32/2019 dated 01/04/2019 by CBDT.
Now, the question arises as to - can we say that the duty of Principal Director-General of Income-tax (Systems) or Director-General of Income-tax (Systems) as defined under Rule 12(4) of Income Tax Rules, 1962 confers a right to ask for additional details which are not part of notification issued by CBDT?
Its seems from reading of Rule 12(4) that Thus, Principal Director-General of Income-tax (Systems) or Director-General of Income-tax (Systems) can make only those changes in schema as per Rule 12(4) which are to ensure secure capture and transmission of data. How can one interpret that the additional details specified in schema regarding reporting of long term capital gain transactions like ISIN, FMV of 31/01/2018, Quantity of scrip etc. are to ensure secure capture and transmission of data. Further, the word 'Format' used in Rule 12(4) must also be interpreted with reference to reading of whole sentence which is followed by phrase 'for ensuring secure capture and transmission of data.' So, here the meaning of term 'Format' should be interpreted like XML format, number of decimal places allowed, minimum length of some field, and maximum length of some field and so on. But in no way, it appears to incorporate the powers to ask for those details which are not part of notification originally issued by CBDT.
Similar question can be raised with regard to schema changes made in AY 2018-19 for bifurcation of interest as to Interest savings, interest on FDR etc. Similar question can also be raised with regard to schema changes made in AY 2018-19 for bifurcation of turnover or gross income as to cash turnover and turnover through banking channel.
Now, coming to the three abstracts from clarification issued by CBDT which are listed in second paragraph of this article as under.
1. Based on above analysis and attempt of interpretation of legal provisions, can we say technically that no changes have been made in any of the Income-tax Return (ITR) forms including ITR-2 and ITR-3 since the notification made on 1st April 2019?
2. More than 85 lakh taxpayers have filed returns in ITR-1 till date by using the said utility, which has also undergone update later. But, major changes are not made in schema of ITR-1, but in schema of ITR-2 and ITR-3 so far.
3. If updation is mainly aimed at easing the compliance burden of the taxpayers by facilitating easier e-filing, then asking for additional details in long term capital gain cases is for easing or to make it more difficult?
Actually, formats of ITR forms must be thought well in advance before month of march, and must be notified latest by middle of Month of March so that developers of softwares can have sufficient time to make available softwares by 1st of April of relevant assessment year and people can avail their statuary right to have sufficient time to file return from 1st April to 31 July or 30th September. Further, no changes or minimum changes (only once or twice) should be made in schemas subsequently which must adhere to the original formats notified by CBDT without asking for additional details not mentioned in original formats notified by CBDT.
Such co-operative nature of taxing authorities will boost confidence of tax payers on government and encourage them to make compliances in timely and correct manner.
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