The Delhi high court has recognized the woes of taxpayers owing to the non-functioning of the Income-tax E-portal.
As the taxpayer – a private company, was unable to respond to the show cause notice within the limited time frame given, as it could not upload the required documents and explanatory statements, the high court has set aside the assessment order which had raised a significant demand.
The income-tax (I-T) officer, has been asked to continue the proceedings afresh in the case of One Mobikwik Systems - the private company which had filed the writ petition seeking relief. The assessment will resume from the stage of issue of the show cause notice.
Owing to remedial measures taken by Infosys, the service provider of the e-portal, domestic taxpayers are now able to upload the required financial statements and other documentation in response to a show cause notice, but non-residents continue to face issues.
“The e-portal is still not fully functional. Taxpayers having similar challenges, where manual filing is not an option, should be able to rely on this order, to safeguard themselves against penal consequences,” states Anish Thacker, immediate past President, Chamber of Tax Consultants.
Ameet Patel, partner at Manohar Chowdhry & Associates, points out that non-residents are still unable to submit the required evidence, as it requires e-verification prior to uploading of documents. It is not mandatory for non-residents to have a digital signature certificate (DSC) in India, their PAN and Aadhar (if they have one), are not linked owing to absence of an Indian mobile number.
Thus, they are unable to generate an electronic verification code (EVC). The only way forward is for the non-resident to give a power of attorney to a chartered accountant, but this cannot be done at the last minute and the time to respond to a notice is typically very short.
In this case, for the financial year 2016-17, One Mobikwik Systems, had declared a loss of Rs. 102.86 crore in its I-T return. The I-T return was picked up for scrutiny and a show cause notice was served on June 11 (which was a Friday) at 5.44 pm.
The taxpayer was required to furnish audited financial statements of the non-residential investors. It was also required to explain why foreign remittances received from them should not be treated as ‘unexplained income’. The company was given time to furnish the required information by 11 am – Monday.
As the company was unable to respond owing to the non-functioning of the e-portal and the narrow time available, the I-T officer went ahead and treated Rs. 51.28 crore as unexplained income. He applied the rigorous provisions of section 115BBE of the I-T Act and a tax demand of Rs. 58.30 crore was raised.
The Delhi High Court has set aside this assessment order, which raised the demand, and the proceedings will begin afresh from the stage at which they were when the show cause notice was first issued.
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