Is there any year in the history of the Income-tax Act when
it has not suffered amendments?
Do I need to answer above?
Income-tax Act is one Act which has suffered maximum
amendments compared to any other Act in this country and may be in the world.
One wonders why amendments year after year, one wonders why
so many amendments to amendments also. The Finance Act, 2007 itself suffered
33 amendments, including insertions of completely new amendments/sections to
the Income-tax Act, all carried out without any discussion on them in
parliament. On 4th May, 2007 these amendments were brought in and passed and
on 11th May, 2007, the amended Finance Bill got the assent of the President.
One further wonders, why so much of mutulation of the
Income-tax Act at this stage when the new Direct Tax Code, supposed to
simplify tax law, is in the offing, the draft of which is ready and to be
presented in the monsoon session of the Parliament.
To study and understand the applicable law for each
assessment year is a nightmare. Hence, CTC, many many years before decided to
bring out a publication covering compilation and collating all amendments
carried out applicable to the relevant assessment year after going through at
least two Finance Acts, other amendment Acts, if any, number of amendments to
the Rules and all other material.
It is a great commendable service CTC renders to its
members and others. This issue of Income-tax Review contains all that
one-needs to know to enable him to get equipped to prepare the Returns of
Income for A.Y. 2007-08.
All the authors who have contributed the articles on
various topics: New RoI, Amendments carried out vide the Finance Act, 2007 and
Direct Tax Amendments applicable for A.Y. 2007-08 etc. have done an admirable
job and we appreciate their service.
Three days after the Finance Act, 2007 came into being,
vide Income-tax (Fourth Amendment) Rules, 2007 dated 14-5-2007, CBDT
prescribed EIGHT new Forms for Return of Income (RoI), specific for
assessment year 2007-08.
Never in history, to the best of my memory, are 8 different
RoI prescribed on one single day. Prior to 14-5-2007 we had 10 forms of RoI
(Nos. 1, 2, 2B, 2C, 2D, 2E, 2F, 3, 3A & 3B besides Return in Form No.16AA).
All forms (except No.7) now notified are annexureless, no
papers to be attached, in order to make them amenable for electronic filing.
No doubt, there should be progress and one should aim for a
paperless world. No doubt electronic media should prevail for communication
and transmitting all kinds of information. However, questions we are asking:
• why such major changes in administering the Act being
made in a hurry and so late, leaving little time to get familiarised with
forms;
• why burden tax-payers by prescribing so many details
to be prepared & filled up in the RoI.
It is difficult to understand why such elaborate
information is being collected through the new forms of RoI. Considering the
number of pages in each return form to be filled in and number of pages of
instructions, the returns are bound to be bulky consuming tons of paper (Paper
Industry will be happy!). The Income-tax Department will have to find
additional space for storage of these returns. If about 97% of the returns are
not to be scrutinised, it is difficult to understand what useful purpose will
be served by collecting this volume of information from the assessees.
It will be difficult for any lay man to correctly prepare
his return of income. Assessees will have to take the assistance of Tax Return
Preparers (TRPs) or tax professionals. This will increase the compliance cost.
At present, the tendency is to submit all data for preparing the RoI to the
tax professionals only few days before the due date for filing the RoI. This
tendency will have to be given up and the assessee will have to give his
accounts, particulars of his income, other innumerable data, may be more than
a month before the due date for furnishing the RoI so that same can be filed
in time and where RoI is mandatorily required to be furnished electronically,
it can be so organised.
There are chances that the businessman may have written his
books of account in a manner which do not contain various details now required
to be provided. The financial year ended 31-3-2007 is over, in some cases
final accounts are already prepared and audited and submitted to banks, etc.
They do not contain details as are now required. Accounts will now have to be
prepared again.
Businessman may have accounted purchases inclusive of
custom duty, VAT/sales tax etc. Now, RoI forms Nos. 4 & 5 require to give
amount of purchases (net of refunds and duty or tax, if any) and then
separately: custom duty, countervailing duty, special additional duty, union
excise duty, service tax, VAT/sales tax, any other tax, paid or payable.
Similarly, elaborate details are to be given for
compensation to employees (10 sub-heads), insurance (4 sub-heads) and so on.
There are as many as 51 (if it was number 52, one would have compared with
pack of playing cards) items besides sub-items in format of Profit and Loss
Account in Form No.4.
It appears that various schedules in these forms total 40.
The dream of any taxpayer who does not have substantial
income is that it should be possible for him to prepare his return of income
and furnish it. To fulfil this dream, in past one-page forms were prescribed
called SARAL, NAYA SARAL and so on. Now forms like Nos. 4, 5 & 6 have 20, 22 &
24 pages respectively to provide volume of information. It will be difficult
for any layman to correctly prepare his return of income. Since these forms
are notified, hardly a day passes when some difficulty is not pointed out by
one or other professional e.g. many are asking how to fill up schedule AIR as
more than one interpretation is possible for some of the 8 items in this
schedule.
However, there is always a silver lining to anything. I
wonder whether the forms are tax-payer friendly or not but they are definitely
"friendly" for professionals. The President of ICAI in his communication in
June issue of ‘The Chartered Accountant’ writes:
"The annual returns for 2007-08 will henceforth be filed
using eight new forms classified as the ITR series 1 to 8. All newly designed
forms have been hosted on the Income Tax Department’s website. These changes
will definitely boost compliance and bring more tax revenues for the
Government. This development has cast a new responsibility on members to make
this Government initiative successful by creating awareness among the
tax-payers. Let’s take these changes as an opportunity to meet both our social
as well as professional goals".
It is said that what cannot be cured, must be endured. Let
us go beyond endurance, let us do our best for our clients and for ourselves.
Let us reconcile happily with the new forms of RoI.
Would you like this better?
CA. Narayan Varma
