There has been a wave of changes brought in since the adaptation of information technology more and more in day-to-day activities, be it any kind of activity. Even the change is being adapted by the Income tax department not only by implementing electronic filing of return but also bringing technology in disposal of assessments, appeals, etc. It is very noteworthy that even the new income-tax forms notified by the Government have made it mandatory to file audit reports in the electronic mode at the time of filing tax returns.

CA Uttamchand P. Jain, throws light on the two additional Rules added by CBDT vide Notification No. 83/2021/F. No. 370142/30/2021-TPL namely “Rule 130 – Omission of certain rules and Forms and savings” and “Rule 131 – Electronic furnishing of Forms, Returns, Statements, Reports, Orders etc.”; Referring to Rule 131, the author states “It is a settled principle of law that the “Form” cannot go beyond the Rule under which it is notified and the Rule in turn cannot override the relevant Act.”. Gives an illustrative example of how we as taxpayers blindly follow the rule if e-filing when none of the forms prescribes so in particular. Highlights on the fact that there is no facility on the e-filing portal of revising any already uploaded form by adding an addendum or corrigendum to it, states “CDBT has taken a new path by inserting Rule 130 & Rule 131... novel way has been adopted for “Omission of certain rules and Forms and savings” which were hitherto was normally done under direct taxes at least by amending the respective Rule”

"Filing of Forms and Audit Reports – Are we on to the way to path Correction!"

The information technology has brought in tremendous change in the way we comply with the law. We have become so machine dependent that we literally follow the path as provided by the information technology and also are under its control, though at many times blindly. Under many laws including under the Income Tax Law, we are now day in day out interacting with the department through online media, not only by way of filing returns, audit reports, applications but also including assessments, appeals, etc. The work is outsourced to the companies which can implement and support such transmission of data.

On 29^th July, 2021, the Central Board of Direct Taxes had come out with the Notification No. 83/2021/F. No. 370142/30/2021-TPL, which is carried in the Gazatte, wherein the Income Tax Rules are amended to add two new Rules namely “Rule 130 – Omission of certain rules and Forms and savings” and “Rule 131 – Electronic furnishing of Forms, Returns, Statements, Reports, Orders etc.”

The insertion of Rule 131 seems to be very interesting and to understand the need for the same to be brought in, one may have to travel a little backwards. It is a settled principal of law that the “Form” cannot go beyond the Rule under which it is notified and the Rule in turn cannot override the relevant Act. Let us take an example – filing of Tax Audit Report. The relevant Section is 44AB and when we go through the Section, after sub-clause (e) the words used are “…….. get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed: …….”

When look at the prescribed form which is covered by Rule 6G

Report of audit of accounts to be furnished under section 44AB.

“6G. (1) The report of audit of the accounts of a person required to be furnished under section 44AB shall,—

(a) in the case of a person who carries on business or profession and who is required by or under any other law to get his accounts audited, be in Form No. 3CA;

(b) in the case of a person who carries on business or profession, but not being a person referred to in clause (a), be in Form No. 3CB.

(2) The particulars which are required to be furnished under section 44AB shall be in Form No. 3CD.]

[(3) The report of audit furnished under this rule may be revised by the person by getting revised report of audit from an accountant, duly signed and verified by such accountant, and furnish it before the end of the relevant assessment year for which the report pertains, if there is payment by such person after furnishing of report under sub-rule (1) and (2) which necessitates recalculation of disallowance under section 40 or section 43B.]” – Inserted by the Income-tax (Eighth Amendment) Rules, 2021, w.e.f. 1-4-2021.

On careful reading of this rule, one has to conclude that only Forms namely 3AC, 3CB and 3CD are prescribed to be used for specific circumstances and or purpose. The said rule is silent on the mode of filing – manual or online. Even the notified form does not say it is e-form. This is the scenario for many of other forms other than return of income.

Then how is it that we have been asked to file online and we are also religiously filing it year after year. Further, the notified form and the e-form are also not same in many places including the restrictions as to number of characters. Just to highlight one of such instances, is the information called for in clause 23 of the notified form 3CD,

In the e-form the same clause gets modified as

Hence, the mute question to be answered is whether the CBDT can do something which is not within its ambit based on its own action.

The department as well as all publication on the subject have been and are stating that the online filing of the forms is empowered by the proviso in “Rule 12 – Return of income and return of fringe benefits”. The head note of the rule itself stated that it is for Return of Income. After sub rule 2 there is a proviso – “Provided that where an assessee is required to furnish a report of audit specified under sub-clause (iv), (v), (vi) or (via) of clause (23C) of section 10, section 10A[, section 10AA], clause (b) of sub-section (1) of section 12A, section 44AB [, section 44DA, section 50B], section 80-IA, section 80-IB, section 80-IC, section 80-ID, section 80JJAA, section 80LA, section 92E, [section 115JB, 5[section 115JC] or section 115VW] [or to give a notice under clause (a) of sub-section (2) of section 11] of the Act, he shall furnish the same electronically.”

This rule 12 is subordinate to Section 139 and Section 139D in particular though said section is not referred to at all in the said rule 12. Section 139D reads as under

“139D. The Board may make rules providing for—

(a)  the class or classes of persons who shall be required to furnish the return in electronic form;

(b)  the form and the manner in which the return in electronic form may be furnished;

(c)  the documents, statements, receipts, certificates or audited reports* which may not be furnished along with the return in electronic form but shall be produced before the Assessing Officer on demand;

(d)  the computer resource or the electronic record to which the return in electronic form may be transmitted.”

It would worthwhile to spend some time on reading section 139C

“139C. (1) The Board may make rules providing for a class or classes of persons who may not be required to furnish documents, statements, receipts, certificates, reports of audit or any other documents, which are otherwise under any other provisions of this Act, except section 139D, required to be furnished, along with the return but on demand to be produced before the Assessing Officer.

(2) Any rule made under the proviso to sub-section (9) of section 139 as it stood immediately before its omission by the Finance Act, 2007 shall be deemed to have been made under the provisions of this section.”

Thus, when a harmonious reading of all the sections as discussed above and rules prescribed thereto it can be concluded that the rule 12 stipulating to file a certificate or audit report through electronic mode seems to be ultra-virus. It is to be seen whether in all cases where the assessee hitherto before has not filed the said reports electronically, correctly or wrongly, but produced as and when asked for, penalty can be levied?

One more area of conflict is the filing of revised report – there seems to be no such concept particularly when there is new sub-rule inserted with effect from 1^st April, 2021, wherein it is specifically stated that the form can revised and the circumstances under which it can be revised. Hence, one can conclude that the form already uploaded cannot be revised otherwise as stated in sub-rule (3). However, it can also be construed that an addendum or corrigendum can done to a form which is already filed but the online filing portal does not have a facility to do so.

May be to overcome the wrong path taken all along, the CDBT has taken a new path by inserting Rule 130 & Rule 131. Again, a new novel way has been adopted for “Omission of certain rules and Forms and savings” which were hitherto was normally done under direct taxes at least by amending the respective Rule. Now whenever we are going to read a rule, we will have to travel to rule 130 as well. By inserting Rule 131, the PDGIT (Systems) or DGIT (Systems) is now empowered – “……may with the approval of the Board specify that any of the Forms, returns, statements, reports, orders, by whatever name called, prescribed in Appendix II, shall be furnished electronically……” as well as empowered the said authority to lay down the data structure. The Appendix II is yet to be seen as well as the specification to which all forms, returns, statements, reports, etc., are to be filed electronically.