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The “E” – Ease of doing business

April 12, 2017[2017] 80 164 (Article)

The electronic way of doing business looks like has gripped the entire nation. While some of us are still debating the preparedness of going the digital way of doing transactions, the Indian tax authorities, though not so surprisingly has also jumped on the digital bandwagon.

The way of obtaining a tax identification number and representation before the tax authority in India as per the existing framework could well be a passé, with the recent communication from the apex policy making body of the Income Tax Department ("Department"), the Central Board of Direct Taxes ("CBDT") which gives an insight on the various measures being taken by the Department to go the digital way thereby achieving the objective of "Ease of Doing Business" and E- Governance.

An overview of such initiatives is as under:

Obtaining PAN and TAN in just a day's time:

CBDT in order "to improve the Ease of Doing Business" in India by way of press release has informed the public at large that obtaining Permanent Account Number, popularly known as PAN and Tax Deduction and Collection Account Number, also known as TAN is now just a day's job.

The CBDT has updated that it has tied up with the Ministry of Corporate Affairs (MCA) wherein the Applicant companies are submitting a single form Simplified Proforma for Incorporating Company electronically or SPICe (INC 32)" on the MCA portal to incorporate a company electronically. Once the MCA receives the data for incorporation which also is generally used to process a PAN/TAN application, it forwards the same to the CBDT.

Once the due verification process is done by the CBDT, the PAN and TAN are issued immediately to the Applicants without any further information sought from the applicant. TAN is also allotted simultaneously and communicated to the Company.

Further, the Certificate of Incorporation of newly incorporated companies now includes the PAN in addition to the Corporate Identity Number.

The above process right from receipt of information till the processing of the PAN application has now been done in a day time as against the existing framework where PAN was generally allotted in week to two weeks' time.

Introduction of E-PAN

Keeping the objective of "Ease of doing business" in perspective, the CBDT not only has brought down the time to process the PAN application considerably but has also ensured that the PAN card is despatched soon to facilitate business by introducing an Electronic PAN Card (E-PAN) which is being sent by email to the Applicants.

The above measure would go a long way in ensuring that the applicant would now have a digitally signed E-PAN card which can be used as proof of identity before the various agencies/government bodies electronically or by storing in the Digital Locker

Here are some statistics released by the CBDT which goes to show that the above move has been quite a success.

In March 2017 alone, almost 95% cases of the total 10,894 newly incorporated companies, PAN was allotted within 4 hrs of filing the application. Similarly TAN was allotted to all such companies within 4 hrs in 94.7 % cases and within one day in 99.73% cases.

The above initiative of the CBDT is expected to significantly improve the ranking of India in the Ease of Doing Business Study conducted by World Bank. Not only the rankings, foreign investors would now be more encouraged to look at India as a favoured destination for investment.

Introduction of E-Proceeding:

Vide notification no. 4 dated 3 April 2017, the CBDT in a move to do away with the "Traditional" way of conducting tax proceedings, has introduced E – Proceeding for communication between the Department and the Assessees.

The current framework provided the Department to serve a notice requesting the Assessees to personally appear, represent and file submissions before them in connection with the assessment proceedings.

However, as part of the E - Governance initiative to facilitate a simple way of communication between the Department and the Assessee, through electronic means, without the necessity of the Assessee to visit the tax office, the CBDT has Notified a new rule, Rule 127A to Income Tax Rules 1962, relating to authentication of notices and other documents which primarily provides that every notice or other document communicated in electronic form by an income-tax authority under the Act shall be deemed to be authenticated on satisfication of certain conditions which are provided as under:

-   In case of email: If the email is issued from the designated e-mail address of such income tax authority and if the name and office of such income-tax authority is printed on the e-mail body or is printed on the attachment to the e-mail in case of an attachment.
-   In case of an electronic record: If such electronic record is displayed on the designated website and the name and office of the income-tax authority is displayed as a part of the electronic record, or is printed on the attachment in the electronic record, if the notice or other document is in the attachment.

Further the Directorate of Systems of the CBDT has notified various procedures for ensuring secured transmission of electronic communication between the Department and the Assessee for enabling E-Proceeding.

The procedure of conducting an E-Proceeding is summarized as under:

-   The E-Proceeding would be facilitated by the Income Tax Business Application (ITBA) system of the E-filing website.
-   All the communications issued from ITBA will appear under the "E-Proceeding" Tab in the E-filing website and may also be sent to the registered e-mail address.
-   Alerts by way of a text message may also be sent on the registered mobile number of the Assessee
-   On delivery of the notice/ questionnaire/Letter to the Assessee, under "E-Proceeding" Tab in the E-filing website, the Assessees will be able to submit his response along with attachments.
-   The facility to submit a response will be auto closed within 7 days prior to the Time-Barring date. If there is no Time Barring date, then the Income Tax Authority at its option close the E-submission as and when the compliance time is complete or when the final order or decision is under preparation.
-   The functionality to conduct E-Proceeding will be available for all types of communications under various sections of the Income-tax Act viz., sections 143(3), 147, 263 or 264 etc, proceedings under section 154, hearing under various sections for penalty, proceedings in first appeal for hearing notice, proceedings for granting/rejecting registration applications u/s 12AA, 80G under exemptions, etc.,
-   The facility to conduct an proceeding under E-Proceeding form is voluntary and at the option of the Assessee and such option has to be communicated to the Department through the e-Filing website and in case the Assessee prefers the existing procedure of face to face representation, the same shall be communicated and the regular mode of conducting proceeding shall be done.
-   Upon closure or completion of any proceeding under this procedure, the final Order, letter or document will be delivered to the Assessee under "E-Proceeding" Tab of the website.
-   The Assessee will also be able to view the entire history of notices, questionnaires, letters, orders on the e-filing website and of his responses under the new system.

While the Department has come out with similar initiatives in the past like sending notices through email and the mandatory filing of Appeal before the Commissioner of Income tax (Appeals), the above initiative looks more robust and effective and would facilitate in conducting the paperless assessment proceeding.

Key Takeaways

The above move of the Ministry of Finance to expedite the process of providing PAN/ TAN and introducing the E-PAN card, is a welcome step and should be received well not only by the Indian business community but also by those foreign businessmen who had India as one of their favoured destination of investment.

Further, the measure of E-proceedings would not only achieve the objective of E-governance but also brings in more authenticity of conducting the proceedings as against the traditional face to face conduct of proceedings.


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