Need To Rationalize TAR And ITRs

Presently, in India, a large number of the income tax assesses are enforced to get their accounts audited under the section 44AB of the Income Tax Act, 1961. The report of audit (TAR) is enforced to be e-filed by the tax auditor along with consequent approval by the assessee to the income tax department. Thereafter, the income tax return (ITR) is enforced to be prepared and e-filed by the assessee. The consistent ITRs are ITR-4, 5 & 6. The efforts have been made to evaluate the drawbacks in the present system and to suggest some measures to discard them.

The various drawbacks in the present system are given below:

DUPLICATE SUBMISSION OF SAME INFORMATION : In the ITR, almost all the immense information as accommodated in the TAR are again enforced to be furnished e.g., profit and loss account, balance sheet, quantitative details, detailed depreciation chart, details of disallowable expenses under numerous sections as reported by the tax auditor, details of various incomes not credited to the profit and loss account and the other assumed the incomes as reported by the tax auditor, method of accounting and of valuation of stock and changes therein and their impact, carry forward of losses and unabsorbed depreciation, business details like name, code etc., details of auditor, date of signing & furnishing of audit report and many other information.

The duplicate duty takes more time and efforts on the part of the assesses, without any additional advantage to the income tax department.

DIFFERENT FORMAT FOR FILING SAME INFORMATION IN TAR AND ITR: For furnishing of numerous similar information, the format in the TAR and ITR are different e.g., in case of TAR, the profit and loss account and balance sheet and agendas are enforced to be furnished in pdf format whereas in the case of ITR, the same are enforced to be furnished in XML format in the ITR form itself. Further, no exact heads of income, expenditure, assets, liabilities etc. have been described for furnishing the profit and loss account and balance sheet along with the TAR, whereas in the ITR the above mentioned information is to be furnished only in the specific format. Due to this, there can be chances of mistakes and deviations in the similar information in TAR and ITR.

UNNECESSARY LITIGATION WITH THE DEPARTMENT: In some cases, it is essentially seen that the information as filed in the ITR is compared at the end of the department with that of similar information in the TAR and due to the mismatch between them, solely due to the different format in TAR and ITR and not due to any actual mismatch, notices for limited scrutiny have been issued to the assesses. Hence, practically and in reality, the present procedure of e-filing of TAR and ITR is also a reason for irrelevant litigation between the department and the assessee.

SUGGESTIONS: To overcome with the above mentioned problems, some practical suggestions are stated below:

1. There should not be any kind of duplication of the information in TAR and ITR. The information which is already accommodated in the TAR should not be again sought in the ITR.
2. The ITR forms should be rationalised and the columns relating to such duplicate information which is already accommodated in the TAR should be removed from them.
3. Both TAR and ITR can be internally linked in the departmental computer system so that the information essential for processing of the ITR can be taken directly from the TAR, by the departmental computer system itself.
4. The format of filing the information in TAR can also be rationalized so that the information accommodated in the TAR which is essential for the purpose of processing of ITR can be taken directly by the departmental computer system from the TAR, for e.g., instead of filing of the balance sheet, profit and loss account etc. with the TAR in pdf format, the same can be sought along with the TAR in XML format so as align them with the format of ITR.
5. In some cases, if the assessee has more than one business and the books of account of different businesses are to be audited by different auditors, then this system can work evenly.
6. In some cases, where the assessee is not subject for the tax audit or has not got the accounts audited although the liability for that, the assessee can be enforced to prepare and submit both the ITR part and TAR part himself. A separate consolidated utility can be contributed to them so that they can fill up both the parts in one step easily and smoothly without having any additional compliance burden.
7. The present system is having different due dates for ITR and TAR can continue in the new system also. All the other facilities which the assessee and the tax auditors have under the present system can also continue under the new system.

CONCLUSION: Hence, the rationalisation of TAR and ITR can reduce the work burden of one hand and compliances on part of the assesses and on other hands can also be helpful for the department for steady tax administration, reduction in errors, speedy work and minimization of litigations.

Tax Assist is a professional income tax consultancy in India for both corporate houses and individual tax payers; the latter comprising Salaried Individuals, Seafarers, Professionals and Non Resident Indians.

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