e-Filing of Income Tax Returns -
Service to or Harassment of the Tax Payer?

[Submitted by CA. Girish Borkar,
Mumbai]

October 19, 2006

The finance ministry has made it mandatory for Company's other than those claiming exemption under section 11 vide NOTIFICATION NO. 189/2006, dated 24-7-2006. This is an excellent initiative and in the long run will make the entire tax administration system transparent and above board. For assessment year 2006-07 relevant to financial year ending March 2006 if Form 1 is digitally signed and uploaded the paper copy need not be filed with the income tax department. Not signing the form digitally will require you to take a print out of the provisional receipt and a print out of the return submitted electronically and have the same physically filed though without the earlier attachments like audited accounts, challans etc.

To file the return electronically, I have downloaded their required files on 9^th September, 2006 (fvu version 1) on 6^th October (fvu version 2) and on 10^th October (fvu version 4). I have written to the department twice about the practical problems being faced by the assessees in trying to comply with the legal provisions. Some of these problems have been taken care of but new ones keep cropping up.

At the meeting held on 10^th October, 2006 at 4.00 pm with the Chief Commissioner Income Tax I - Mr. Venkatramani and the Joint Secretary to the MOF Mr. Modi we were informed that 300 hundred returns were already filed electronically. The question is last year by 9^th October around 500000 returns would probably have been filed. The pressure on the servers at the fag end of the oncoming deadline is going to make e-Filing a monumental task. We were also informed that we should not go to private vendors of software as the department would not give a guarantee on the effectiveness of software sold by private vendors but could guarantee success through the departments freely downloadable software.

An attempt will be made in brief to guide the reader through the various problem areas and thus let the reader decide whether all the returns will be filed by the due date - namely 31^st October 2006.

Till 12^th October the assessee needed to register the company ID on the web site http://incometaxindiaefiling.gov.in/portal to download the following files :

• Form 1 ver 1.0.4 (excel version)
• Excel FVU ver 1.0.4 (this is not a government file validation utility and is owned by Skorydov whose website shows the latest fvu as version 11).
• Ereturnprerequisitesetup
• ITeTaxForm1 ver 1.0.6

 
After downloading the above files, you need to enter the tax relevant data in the excel utility downloaded (latest ver 1.0.4). If you have a problem in enabling the macros, you need to click on tools in the excel tool bar, then on options and then select security options, then click on macro security at the right hand bottom corner of the window and select the option medium from high and click ok. Now you are ready to embark on your e-Return preparation adventure - because it is an adventure no less with all kinds of hidden pitfalls which you have to navigate.

I will now proceed to highlight only those worksheets which are problematic out of the 36 which you need to fill. Please do not panic as all 36 worksheets may not be applicable to your organization.  

1. The worksheet for 'Beneficial Owners' and 'Directors' has various columns which you need to fill - great! The second and third columns in these worksheets respectively deal with the address of the concerned person. You enter all details of the address apart from City, State and PIN code in these columns. You then proceed to validate the data after entering data in all the other worksheets, convert it to 'srf' format and export it into the file validation utility for conversion to 'xml' format. You load this file into the Form1 exe utility and go to the relevant points in the return form and guess what happens - lo and behold your address data has been incompletely captured as the utility has five address fields apart from city, state and pin. So you manually re-enter data already entered!! But the department believes duplication will make things perfect!
    
2. The Profit and Loss worksheet is most likely designed for manufacturing organizations and you need to cull out data for various expense heads to capture them in this worksheet and the difference needs to be input into line 26 'other / miscellaneous expenses.
    
3. Schedule 1 - Computation. Actually this is the main worksheet which in earlier days used to capture all the relevant information pertaining to the tax return. The earlier version (1.0.2) used to compute correctly but the latest version leaves a lot to be desired. After entering the PBT in line 1 you need to show other adjustments like exempt income, exemption under section 10, depreciation as per income tax and these lines provide hyper links to the respective worksheets wherein you enter the data which should normally reflect automatically in the concerned cells in this worksheet. But that does not happen - not only this does not happen but the arithmetic adjustments which should be included to arrive at the final taxable income do not include the 'balance profit or loss' displayed in line 15 of this worksheet - which in effect has completely excluded the original profit before tax!!
    
4. Depreciation. One would have expected the depreciation to be calculated automatically after filling in he relevant data fields - but no this does not happen you will have to apply the formulae yourself to arrive at the depreciation.
    
5. Schedule 8. The law says that you can bring forward unabsorbed depreciation for any number of years with other losses being restricted to only eight years. But there is no provision for bringing forward depreciation of the 9^th and earlier years.
    
6. BSR Code in all tax payment worksheets needs to be entered again the Form 1 exe as the excel worksheet provides a single field and the return form you need to enter it in tow fields of three and four characters each.
    
7. Schedule 24 - TDS. This worksheet is the most tedious to enter - as a company in the service sector is likely to have hundreds of certificates with multiple lines of payment in case the deductor has issued an annual TDS certificate. You need to know the TDS circle where the deductor files his returns, the TAN number of the deductor the rate at which it was deducted and amounts in the excel sheet and instead of capturing the data regarding TDS Area code, AO Type, Range Code and AO number in this worksheet. The TDS area code etc are not reflected in the TDS certificate hence you need to go onto the net and find out the relevant details for entering from http://tin.tin.nsdl.com/tan/servlet/TanAOsearch? After entering all the data if you take a preview of the return in Form1 the TDS sheet in Schedule 24 does not show a single entry in spite of the same reflecting in the xml data!!! Can you beat that!!!?
    
8. The next step is trying to upload the xml file onto the departments server. Earlier you needed to login with the company ID but now you need to create an user ID also for the Company. After creating the User ID one would expect to login with the user id after validation to upload the return - but no this does not happen - you get a message -" Response has already been committed, be sure not to write to the OutputStream or to trigger a commit due to any other action before calling this method." What do you make of this message - I do not know. It is in technical language which no layman will understand. But this is the message you get.
      
9. At  the time of uploading if the server gives you an error, then you need to open the xml file check the schema an go to form 1 exe and make the corrections directly in the exe file instead of going to excel and following the entire process all over again and save the file and try uploading till you succeed.
    

The only thing I can say is that the department needs to revise its motto 'Technology in the service of the tax payer'. I have been trying to file electronic returns myself so that I can educate my clients on the various pitfalls, but the forms uploaded the fields designed are so half baked that it is not funny.

Why does the Finance Ministry want to push something down the citizens throat food which is half baked and badly cooked and that by a given deadline. I foresee tremendous problems in e-filing - server overload - in fact whole of yesterday I was getting an internal server error from the eFiling website. The people in power and the administrative wings of the various professional bodies should take up this matter with the Government and make eFiling optional for this year and mandatory from the day they give the citizens technology which actually works in the service of the tax payer!