The last few months have been extremely stressful for tax practitioners in India. The main reason for this is that the Finance Ministry has brought about several changes either in the law or in the administration of the law. This has added a huge burden on tax professionals in terms of compliances. The objective of this article is not to criticize the government for its actions. There is bound to be a reason behind every change that is brought about. For example, for the past 3 months, virtually every discussion on tax veers around the GST implementation. There is widespread discontent amongst a large section of the society on this particular aspect. But there are no two views on the fundamental question as to whether India requires GST. The answer, to my mind, is a clear Yes. In the same way, many actions on the part of the government that have resulted in changes in the Income-tax law or in the administration of this law would definitely have some justification or the other.
However, the reason for writing this article is to bring out the torment that most tax professionals are facing at present. The one big reason behind this situation is the pace at which changes are brought about. I am confident that 99 out of 100 Chartered Accountants practicing on the tax front will agree with me that the number of changes that the government is constantly bringing about either in the law itself or in the compliances is mind boggling and that the pace at which these changes are brought about is too fast to keep up with.
One such change was brought about on 22nd September when tax professionals got a rude shock when they tried to log onto the income-tax department’s e-filing portal – www.incometaxindiaefiling.gov.in
. Before talking about the actual change, it would be important to understand the background behind the change and its implications.
Readers may be aware that this portal is the repository for all the e-filing that happens in the country for income-tax matters. Whether it is the annual income-tax return forms (ITRs) or the tax audit reports or any other report under the Income-tax Act, 1961, everything is to be uploaded electronically on this portal. For this purpose, every person / entity that has a Permanent Account Number (PAN) has been provided with a login ID by the tax department. One needs to login using the PAN and a password. This portal has been at the centerstage of massive action on the e-filing front for the past several years. Even the Form 26AS which is the most important tax related document for any tax payer is accessible through this site.
Now, over the years, the income-tax department has brought in a large number of improvements in this portal. At the same time, the process of registering on the site has also undergone a sea change. Basically, for logging onto the site, one needs to feed in the PAN, the password and the date of birth / incorporation as the case may be. There is also a “captcha” code that has to be filled in every time. If the information fed in is correct then only the login succeeds.
For each PAN, one has to link a mobile number and an email address. Till some years ago, this aspect was not very important. It was also not very strictly adhered to. But lately, it has become impossible for someone to have a PAN and not link a mobile number and an email address to that PAN. There has been a sea change in the tax administration in the last few years. More and more reliance is placed by the income-tax department on e-governance. Not only e-filing of returns but issue of refunds, processing of returns, issue of scrutiny notices, filing of appeals, filing of quarterly TDS statements, issue of TDS certificates – the list goes on and one – all have gone electronic. Almost every aspect of tax administration is dependent on technology now. For this, obviously, there has got to be an open and easy line of communication between the tax payer and the tax department. If a tax return has to be filed electronically, naturally, there has got to be a way in which the tax department can inform the tax payer that the return has been filed successfully or not. There has got to be a way in which the refund has to be communicated to the tax payer. Today, refunds are getting credited directly into one’s bank account in most cases. Now, bank accounts are also linked to a mobile number and, in most cases, to an email address. The Aadhaar number is also linked to a mobile number and an email address. While one may continue to challenge the Aadhaar in the courts, the fact remains that it has become a very important tool in the hands of the government. And notwithstanding the opposition to the same, the Aadhaar is being made mandatory more and more by the present government. Similarly, for almost every online portal (whether it is an e-commerce site or an e-taxi site or net banking facility), it is clear that without a mobile number and an email address, it is not possible to register on such sites. Even social networking sites require an email address.
The point is that the requirement of having a mobile number and an email address is now almost mandatory for everyone even otherwise and independent of the income-tax site.
This brings us to the main issue that was responsible for the recent change that I have mentioned earlier. Many citizens in the country are either not tech savvy or are too old to bother to have an email address. While many senior citizens do have mobile numbers, they may not necessarily have an email address. Even those who have a mobile number do not feel comfortable in providing that number to any government authority. The main reason for this could be that they are not very quick in accessing the mobile and therefore, in many cases, the OTPs that are generated get invalidated because by the time the OTP is accessed and read by the senior citizen, its validity has already expired. Similarly, many NRIs also do not have an Indian mobile number. It is for these reasons (and many other genuine reasons), that in a large number of cases, a common email address and a common mobile number was used for linking multiple PANs. For example, in my own case, my email address and my mobile number were used by me for myself as well as my five family members. Apart from this, for a few very old clients too, I had been using the same email address and mobile number. This practice is very common and almost every practicing CA in the country would have multiple PANs registered or linked to his email address and mobile number.
The change that was brought about suddenly on 22nd September was that when someone tried to log onto the e-filing portal, that person (whether an individual or an artificial entity like a partnership firm or a company or a trust) had to first update the profile settings. For this, a long form was to be filled up. The profile required data regarding email address and mobile number. There is even a provision for providing a “primary” email address and mobile number and a “secondary” email address and mobile number. When one tried to fill up these fields, if that mobile number and the email address were, as per the income-tax department’s records, already linked to more than 3 PANs, an error message was displayed. What this meant was that one could not complete the updating of the profile. And unless the profile is updated, one cannot login. Now, taking my own example, if I wanted to log onto the e-filing portal for my own case, I could not because my mobile number and email address were linked to more than 3 PANs (including mine). Thus, I had to either go and first change the email address and mobile number for my family members or, for my own case, give some other email address and mobile number.
Now, why was this change brought in? Unfortunately, there is no public notice or notification that gives the reasons for the change. The only cryptic clue given is on the home page of the portal where, under the heading “News and Updates”, on 22nd September, there was a new entry which read as under:
“New Registration process to facilitate effective communication between the taxpayer and department is enabled. The existing e-Filing users are required to update their profile by logging into e-Filing account. Users who have registered already and not activated has to register again.”
Thus, the change was brought about to “facilitate effective communication between the taxpayer and department”.
There can be no dispute about the need for effective communication between the taxpayer and the tax department. And in the context of the time that we are living in where almost everything is done electronically, it is obvious that the communication channels will necessarily involve the mobile phone and emails. Therefore, there can also be no dispute about the tax department’s insistence that every tax payer must have an email address and a mobile number so that communication with the taxpayer is facilitated. Those of us who are now very comfortable with the e-governance initiatives of the government definitely know and appreciate the advantages of e-communication. It is faster, smoother, hassle free and more importantly, it does away with the need for physical interaction with a tax officer. For example, getting a refund within a few days of filing the return was something unheard of in the pre-e-filing days. Today, it has become a part and parcel of our lives. Tonnes of paper were earlier wasted in printing ITR forms, computations, tax audit reports, MAT certificates etc etc. All this is a thing of past now. Therefore, if we tax payers or tax professionals are happy with the fact that the government is doing away with almost all physical filings/payments/assessments etc., we need to be ready to accept the technological challenges that come with the e-governance initiatives.
The next question that arises is – what is the problem if more than one PAN is linked to a particular email address / mobile number?
Obviously, the income-tax department must be privy to some information and facts about misuse of the earlier position where upto 10 PANs could be linked to one email address and one mobile number. It is possible that the emails sent to these email addresses or messages sent to the mobile numbers were either misplaced or ignored. Often, the emails from the income-tax portal go into the SPAM mailbox of the tax payer. One can only imagine what could be happening and the level of compliance when hundreds of emails go to the same email address for multiple tax payers. The Finance Minister has harped on the data analytics of the demonetization related data and the returns filed. It is obvious that the analysis has revealed misuse of common email address and mobile numbers by unscrupulous people. It is therefore possible that in order to counter such evasive people, the government has made it difficult by curtailing the use of the email address and mobile number to not more than 3 PANs.
However, notwithstanding the noble and justified reasons for the change brought about, the fact remains that tax payers and tax professionals in particular have been caught completely off guard. The move has been criticized widely by many. I too was one of the first to raise my voice against it. However, my criticism is not of the move itself but of the manner in which it has been brought in and the pace at which changes are brought about in quick succession.
While the justification for the change may be valid, the fact remains that there are several situations when there is no choice but to give the same email address and mobile number for more than 3 PANs. These have already been pointed out to the authorities by me (and several others) and we await their response. Here are some examples why more than 3 PANs can be linked to the same email address and mobile number:
a) Mr A uses his own email address and his mobile number for his own PAN
b) He also uses the same for his mother who is a super senior citizen and who does not have a mobile number or an email ID.
c) He also uses the same for a private limited company in which he is the Managing Director (and therefore he is the signatory for that company’s tax matters)
d) He also uses the same for a trust in which he is a trustee and for which he signs the tax returns
e) He also uses the same for his HUF of which he is a Karta
f) He also uses the same for his brother who is a Non Resident and who has appointed Mr A as the power of attorney holder for his tax matters
g) Mr A is also a partner in a partnership firm and signs the tax returns of that firm. So, for the firm’s PAN also, he has provided his email address and mobile number
There can be many more such reasons. Unfortunately, these genuine cases have not been taken into consideration by the income-tax department before enforcing the sudden change on 22nd September. The fact that someone could be acting in different capacities and therefore using the same contact details has been completely ignored by the department.
I have very high regard for the Central Processing Centre located at Bangaluru. I have visited it twice and have interacted vigorously with the top team there (both from the income-tax department’s side as well as from the Infosys side). I find them to be very receptive to complaints. On 22nd September, when I came to know about the changes, I wrote to the CPC team immediately. They have provided a reasoned reply to me which I am taking the liberty of reproducing below (emphasis and highlight has been supplied by me):
“Income Tax Department is moving towards e-governance in all its functions including assessment and post assessment related activities. It desires that, there should be least or no personal interface with the taxpayers in these proceedings. That means, all the communication between the department and the taxpayers would have to be mainly through e-mail & SMS and the compliance through the e-filing portal login. Hence it is critical that the notices and communication of the department is served directly to the taxpayer or the least under worst situation, their near relation to meet the requirement of law. It is observed that currently 90% of the e-mail & SMS communications that are send out of to the taxpayers does not reach them. In this situation, the governments e-governance initiative is bound to fail. Hence, this task of comprehensive cleanup of the taxpayers profile has been undertaken.
To address this specific grievance of the taxpayers that they be allowed to use one e-mail ID and Mobile number with respect to their close relation, a cap of three users have been fixed. With respect to use of same e-mail & mobile as a Principle Signatory of the other entities, the current validation rule is being modified. Once modified, the cap on use of email & mobile number will be limited to Individual users.
With respect to non-residents, the primary mobile number has to be of themselves irrespective of the country in which they reside. That is the reason, the country code slot has been provided to capture the same against the mobile number. Only in the secondary mobile, Indian mobile is sought. In the secondary contact details, the non-residents are expected to provide their Indian contact. It could be their agent, AR etc.”
If the statistics given by the CPC about the failure rate in serving of notices to the tax payers is taken at face value then it is alarming and then the action taken on 22nd September appears to be justified.
So, what is my grievance? I have no problem in restricting the use of my email address and my mobile number to only 3 PANs. In fact, I am going to ensure that ultimately, only my own PAN is linked to my mobile number and email address. I have no objection to the government continuing to increase its focus on e-governance. In fact, I am completely floored by the heights we, as a nation, have achieved in this direction. I wholeheartedly support any move that is aimed at stopping tax evaders in their tracks and at preventing corruption.
What is unpalatable to me is the continuous change that is brought about almost every second day. At a time when the entire nation is grappling with the massive paradigm shift brought in by the introduction of GST, we need to provide enough time to everyone to settle down and come to terms with the GST related after shocks. Tax professionals themselves are under huge pressure because of GST and Ind AS and ICDS and various other new provisions. Burdening them further with multiple small changes every now and then and that too right in the middle of the busy season is unfair and unnecessary.
“The Only Thing That Is Constant Is Change” – so said Heraclitus the ancient Greek philosopher. The Indian finance ministry seems to be an ardent fan of Heraclitus. However, the taxman seems to have forgotten that constant change is detrimental to the peace of mind of the citizens. One cannot go on bringing about change on a daily basis to the laws of the country. This constant change is distracting, irritating, discomforting and is diametrically opposed to the concept of “ease of doing business” in India which has been touted loud and clear by the present government. There is no ease of doing business if changes are brought about every now and then. These changes confuse people. These changes result in a huge wastage of time. It is high time the government realizes that people are fed up with the massive compliance burden that is already cast upon them. Constant changes to this burden is perceived very negatively by tax payers. Often, people are left wondering as to whether their main job is to carry out their business/profession or to comply with the tax laws of the country. The earlier government was criticized for its policies of tax terrorism. The present government seems to be going overboard in its zeal to tackle tax evasion and black money and is bringing in changes almost on a daily basis with a view to curb loopholes and strangle the menace of tax evasion. But in the process, it is losing sight of the fact that this whole strategy is back firing as it is perceived as tax torture by the honest tax payers. The earlier the government realizes this, the better it would be for all.