Budget 2016 has primarily driven the objective of accelerating start ups, investment and growth as well as reducing litigation. He also reiterated that the government will “provide a stable and predictable taxation regime. We will not resort to such (retrospective) amendments in future”. Budget provides easy assessment and reduced penalty.

To provide a stable and predictable taxation regime, FM Jaitley came out with a ‘Direct Tax Dispute Resolution Scheme’ to resolve cases pending in any Court, Tribunal, Arbitration or mediation under the Bilateral Investment Protection Agreement (BIPA).

 

To provide relief from cumbersome procedure of assessment and penalty thereon, FM has brought many amendments for taxpayers:

 

• Assessment proceedings or hearings before the AO permissible in a digital mode.
• Mandatory processing of the return of income before issuing a regular assessment order.
• Return of income is to be processed where a notice of assessment is issued to re-compute the total income or loss after considering the adjustment due to arithmetical error or an incorrect claim apparent from the return of income. Scope of adjustment is widened to consider information available with the AO in the audit report, for earlier years’ return of income, Form 26AS statement, Form 16, Form 16A.
• An opportunity of being heard is granted to the taxpayer before making an adjustment by giving intimation in writing or in an electronic mode within 30 days, in absence of any response received the adjustment will be made.
• These provisions are to take effect from 1 June 2016.

 

Assessment Time limits

• Time limit to complete the regular assessment reduced to 21 months (from 24 months) from the end of the relevant assessment year and for reassessment reduced to 9 months (from 12 months) from the end of the financial year in which notice for re-opening is issued.
• Time limit for completion of assessment where reference is made to the TPO reduced to 33 months (from 36 months) from the end of the relevant assessment year.
• Time limit to complete assessment of revisionary orders, appellate orders or the Commissioner’s order of setting aside or cancelling an assessment reduced to nine months from the end of the relevant financial year.
• The AO is required to pass appeal effect order within three months in cases where no fresh assessment or reassessment is required and can seek six months extension in cases beyond his control.
• It is also proposed to complete assessment, reassessment or re-computation for appellate orders other than any reference, on or before the expiry of 12 months from the end of the month in which such order is received by the Commissioner. However, cases pending on or before 1 June 2016, the time limit is later of 31 March 2017 or 12 months from the end of the month in which such order is received.

 

These provisions are to take effect from 1 June 2016.

 

Penalty

Under-reporting or misreporting of income

 

• The existing provisions relating to levy of penalty (100 to 300 per cent of tax sought to be evaded) due to concealment of income or furnishing of inaccurate particulars of income by the taxpayer is to be replaced by provisions categorising the defaults into two categories viz. under-reporting of income and misreporting of income.
• Penalty in the cases of ‘underreporting of income’ and underreporting of income due to ‘misreporting’ is to be 50 per cent and 200 per cent respectively of tax payable to be computed as stipulated of under-reported income.
• A person shall be considered to have under-reported his/her income if –
• Assessed income or deemed total income is greater than income determined in the intimation or basic exemption limit where return is not filed.
• Assessed income is greater than income assessed or reassessed previously or has an effect of reducing loss or converting it into income.
• The under-reported income to exclude certain situations where taxpayers offer satisfactory explanation with all material facts; assessment on estimate bases where books are accurate and complete; etc.

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