CA Vinay Kawdia has explained the legal framework for communication of statutory notices and orders in the electronic format and drawn attention to all the relevant circulars and notifications issued by the CBDT. He has also highlighted the practical consequences of the move to communicate electronically and cautioned that it could expose taxpayers to unwanted harassment
As a part of Government’s initiative towards E-governance, Income-tax Department has brought digital transformation of its business processes to a significant extent through the Income-Tax Business Application (ITBA) project which provides an integrated platform to conduct various tax-proceedings electronically through the ‘e-Proceeding’ facility available on it. To facilitate this initiative CBDT has issued series of circulars on the subject matter in last 2 years, to note a few:
– Notification No. 2/2016 dt. 03.02.16 on Service of notice generally– Procedure, Formats and Standards for ensuring secured Transmission of electronic communication
– Notification No. 4/2017 dt. 03.04.17 – Introduction of e-proceeding for communication between I.T. Department and assessee
– Instruction No.8/2017 dt. 29.09.17 and No. 1/2018 dt. 12.02.18– Conduct of assessment proceedings electronically in time –barring scrutiny cases
Further, S. 282 and 282A read with Rule 127 and 127A are amended from time to time to augment the above objectives. CBDT has tried to develop a "one-size fits all" approach that could be followed under e-proceedings which, however, is giving rise to some serious issues. Scope of this article is limited to the issues arising out of issue, dispatch and service of notices under the new e-communication regime.
A. Legal framework:
As per S. 282 of the Act, the service of a notice or summon or requisition or order or any other communication under this Act may be made by delivering or transmitting a copy thereof, to the person therein named-
a) by post or by such courier services as may be approved by the Board; or
b) in such manner as provided under the Code of Civil Procedure, 1908 for the purposes of service of summons; or
c) in the form of any electronic record as provided in Chapter IV of the Information Technology Act, 2000; or
d) by any other means of transmission of documents as provided by rules made by the Board in this behalf.
As per S. 282A(1), where the Act requires a notice or other document to be issued by any income-tax authority, such notice or other document shall be signed and issued in paper form or communicated in electronic form by that authority in accordance with such procedure as may be prescribed.
Sub rule (1) of Rule 127 regarding service of notices etc. clarifies that, for the purposes of sub-section (1) of section 282, the addresses (including the address for electronic mail) to which a notice or any other communication under the Act may be delivered or transmitted shall be as per sub-rule (2).
Sub rule (2) inter alia states that for communications delivered or transmitted electronically, notices or other communications may be delivered to specified email address of assessee.
Sub-rule (3) of Rule 127 of the Income Tax rules, states that the Pr. DGIT (Systems) shall specify the procedure, formats and standards for ensuring secured transmission of electronic communication and shall also be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to such communication.
Further, Rule 127A regarding Authentication of notices and other documents specifies that every notice or other document communicated in electronic form by an income-tax authority under the Act shall be deemed to be authenticated-
– in case of e-mail, if the name and office of such income-tax authority is displayed or printed in e-mail body or e-mail attachment, as the case may be and the e-mail is issued from the designated e-mail address of such income-tax authority;
– in case of an electronic record, if the name and office of the income-tax authority is displayed in the electronic record itself or is printed on the attachment,
and such electronic record is displayed on the designated website.
B. CBDT Notifications:
In exercise of the powers delegated by the Board as per sub-rule (3) of Rule 127, the Pr. DGIT (Systems) specified the procedure, formats and standards for ensuring secured transmission of electronic communication, according to which –
– All emails sent or received as per this procedure shall be stored in the ITD database and the communication status shall be displayed in the assessee’s "My Account" on the E-filing portal – https://incometaxindiaefiling.gov.in which can be accessed by the assessee after registration and login
– The time and place of dispatch and receipt of electronic record or electronic communication shall have the same meaning as provided in section 13 of the Information Technology Act, 2000.
Notification No. 4/2017 extended the facility of electronic communication between the Department and the Assessee through the E-Proceeding functionality of the E-filing account of the Assessee on the Departmental website https://incometaxindiaefiling.gov.in.
E-Proceeding is a part of e-governance initiative to facilitate communication between the Department and the taxpayer, through electronic means, without the necessity of the taxpayer to visit the Income-tax Office.
E-Proceeding offers the functionality for any Income-tax Authority to conduct various proceedings through online exchange of communication in form of notices/letters/questionnaire issued from the Income-tax Business Application (ITBA) of the Department to the taxpayer account in the e-Filing website and online response/submission from Assessee in compliance with such notices/letters/questionnaire, through E-Proceeding in the e-Filing website.
Through Notification No. 4/2017, Pr. DGIT (Systems) specified the additional procedures, formats and standards for ensuring secured transmission of electronic communication and authentication of electronic communication of notice or other document through the E-filing account of the taxpayer on the Designated Website https://incometaxindiaefiling.gov.in.
For the purposes of this notification, the expression,
i. "electronic communication" means electronic mail or the display of an electronic record on the website of the Income-tax Department as may be specified.
ii. "electronic mail" means a message or information created or transmitted or received on a computer system, computer resource or communication device including attachments in text, images, audio, video and any other electronic record, which may be transmitted with the message.
iii. "electronic record" means data, record or data generated, image or sound stored, received or sent in an electronic form or micro film or computer generated micro which as defined in Clause (t) of Sub-section (1) of Section 2 of Information Technology Act, 2000.
It has been reiterated in the said notification that, for the purpose of this notification, the time and place of dispatch and receipt of electronic record or electronic communication shall have the same meaning as provided in Section 13 of the Information Technology Act, 2000. Further, the registered account of the assessee on the e-filing website is deemed to be computer resource designated by the assessee in accordance with Section 13 of the Information Technology Act, 2000.
Further, the data including attachments, if any, delivered as a record in the "E-Proceeding" Tab to the Assessee’s account in the E-filing website of the Department shall constitute an ‘Electronic record’ as defined in Clause (t) of Sub-section (1) of Section 2 of Information Technology Act, 2000.
D. Scope of E-proceedings:
It is important to note that, the functionality to conduct E-Proceeding will be available for all types of notice/questionnaire/Letter issued under various sections of the IT Act. For example, hearing notice for assessment proceedings under section 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, seeking clarification for resolving E-Nivaran grievances etc. can also be conducted using the E-Proceeding functionality using electronic communication of notice or any document by any Income-tax Authority and electronic submission of response by Assessee.
E. Issue for consideration:
In the context of issue of notice u/s 148 manually, Hon’ble High Courts held as follows:
In the light of the arrangement between the revenue and Department of Posts, it is held that the despatch having been done in terms of ‘business post arrangement’ is sufficient to hold that the notice despatched on 31.03.15 was well within the period of limitation.
In other words, notice handed over to postal authorities on or before the last date of limitation period is a valid notice even if served after limitation period. ( 78 taxmann.com 37 (Madras), Kanubhai M. Patel vs. ITO, SCA No. 5295/2010 (Guj.), etc.)
Now what would be the legal position as regards issue, dispatch and service of notices under the new e-communication regime?
As per CBDT Notifications discussed above, the time and place of dispatch and receipt of electronic record or electronic communication shall have the same meaning as provided in section 13 of the Information Technology Act, 2000.
Section 13 of The Information Technology Act, 2000:
Time and place of despatch and receipt of electronic record.-
(1) Save as otherwise agreed to between the originator and the addressee, the despatch of an electronic record occurs when it enters a computer resource outside the control of the originator.
(2) Save as otherwise agreed between the originator and the addressee, the time of receipt of an electronic record shall be determined as follows, namely:-
(a) if the addressee has designated a computer resource for the purpose of receiving electronic records,-
(i) receipt occurs at the time when the electronic record enters the designated computer resource; or
(ii) if the electronic record is sent to a computer resource of the addressee that is not the designated computer resource, receipt occurs at the time when the electronic record is retrieved by the addressee;
(b) if the addressee has not designated a computer resource along with specified timings, if any, receipt occurs when the electronic record enters the computer resource of the addressee.
(3) Save as otherwise agreed to between the originator and the addressee, an electronic record is deemed to be despatched at the place where the originator has his place of business, and is deemed to be received at the place where the addressee has his place of business.
If we connect S. 13 of Information Technology Act 2000 with S. 282/282A of Income Tax Act read with Rule 127/127A of the Income Tax Rules and the standards notified by Notification No. 4/2017 as discussed above, following facts emerges:
– Notice in prescribed proforma from designated e-mail address of the income tax authority to the specified e-mail address of the assessee [as per Rule 127(2)(b)] is a valid issue of notice
– Any data or record received or sent in an electronic form is ‘Electronic Record’
– The data including attachments, if any, delivered as a record in the "E-Proceeding" Tab to the Assessee’s account in the E-filing website of the Department shall constitute an ‘Electronic record’
– The registered account of the assessee on the e-filing website is deemed to be ‘computer resource’ designated by the assessee in accordance with Section 13 of the Information Technology Act.
– The despatch of an electronic record (i.e. soft copy of notice in PDF format) occurs when it enters a computer resource (i.e. registered account of the assessee on the e-filing website) outside the control of the originator (i.e. Income Tax Authority).
– Receipt of an electronic record (i.e. notice, etc.) occurs at the time when the electronic record enters the designated computer resource i.e. registered account of the assessee on the e-filing website [S. 13(2)(a)(i) of Info. Tech. Act]
To summarize, the date of first appearance of notice under E-proceedings tab in assesee’s official login on efiling portal shall be the date of dispatch as well as date of service of notice!!
G. Practical aspects:
Naionawide, thousands of notices u/s 148 were issued by the department electronically for A.Y. 2011-12 in the month of march 2018. Last date for valid issue of notice u/s 148 for A.Y. 2011-12 was 31st March 2018. However, many assessees’ received the notices by e-mail only that too in first week of April 2018. Technically date of issue of notice by AO and date of receipt of notice by assessee by e-mail shall be the same. Having said that, whether receipt of notice u/s 148 for A.Y. 11-12 by e-mail on say 07th April 2018, is valid issue of notice??
The answer lies in the analysis as above, according to which date of receipt of e-mail is irrelevant and the date of first appearance of notice under E-proceedings tab in assesee’s official login on efiling portal shall be the date of dispatch as well as date of service of notice.
Therefore, in the above example, if the notice received by e-mail in April 2018 is dated say, 30.03.2018, department will always take a stand that the date of first appearance of the said notice under E-proceedings tab in assesee’s official login on efiling portal was nothing but 30.03.2018, the fact, which assessee can’t controvert!!
In other words, assessees’ are expected to check their efiling account on daily basis to know about the issue of notices in their name, if any!
H. Enquiry before assessment- Instruction No. 1 of 2018:
For enquiries before assessment in terms of section 142(1)(ii) of the Act, notice shall be issued electronically and delivered upon the assessee in his ‘E-Filing’ account. While filing the response electronically in compliance with notice under section 142(1)(ii) of the Act, the concerned assessee shall verify it in the manner prescribed under rule 14 of Income-tax Rules, 1962.
This is very dangerous. In case of general enquiries before assessment through notice u/s 142(1), AIR realated notices, etc. or specific enquiries before reopening of assessment, if such notices are not complied with, it may end up with selection of case for scrutiny assessment/ income escaping assessment u/s 147 by assessing officer.
Now imagine a scenario where, on one fine morning such enquiry notice started appearing in assessee’s login account on e-filing portal, of which assessee is totally unaware. Practically hundreds of such efiling logins of clients are being handled by tax consutants and the assessee’s are totally unaware about this.
Now if no simultaneous email /sms is received by assessee alerting him about the issue of such enquiry notice, the notice is likely to remain unattended within specified time limit resulting in to assessee being exposed to unwanted harassment of assessment/reassessment proceedings.
At this juncture, I don’t have anything further to say except lots of legal and technological questions in my mind. For the time being, to conclude, the e-proceedings and e-assessments will change the face of assessment proceedings and the future of tax litigation.
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