For past sometime the Board has been concerned about the need for improving general quality of scrutiny assessments on a sustainable basis. In this connection, reference is invited to Board’s instruction No. 2/2006 dated 27.04.2006 which required monitoring of scrutiny assessments by Range Heads under the powers available to them under section 144A of Income tax Act. Instructions have also been issued from time to time for strengthening the machinery for review of assessments and inspection of assessment charges. However, it is felt that there is significant scope for improving the quality of scrutiny system. The matter came up for discussion during 25th Annual Conference of Chief Commissioner of Income tax held in August 2009. A presentation was made by CCIT Chandigarh outlining a scheme for improving quality assessments implemented in NWR Region. After taking into account various suggestions, it was decided to devise a similar scheme with appropriate flexibility for country-wide implementation.

The Income-tax (13th Amendment) Rules, 2009 was notified on 18th December 2009. It substitutes Rule 3 of the Income-tax Rules, 1962. The text of the Notification can be downloaded here.

Considering the facts and circumstances of the class of cases of TPAs and insurance companies, the Board has decided that no proceedings u/s 201 may be initiated after the expiry of six years from the end of financial year in which such payment have been made without deducting tax at source etc by the TPAs. The Board is also of the view that tax demand arising out of Section 201(1) in situations arising above, may not be enforced if the deductor(TPA) satisfies the officer in charge of TDS that the relevant taxes have been paid by the deductee assessee (hospitals etc.). A certificate from the auditor of the deductee assessee stating that the tax and interest due from deductee assessee has been paid for the assessment year concerned would be sufficient compliance for the above purpose. However, this will not alter the liability to charge interest under Section 201 (1 A) of the Income Tax Act till payment of taxes by the deductee assessee or liability for penalty under Section 271C of the Income Tax Act as the case may be.