Volume 3, Issue 17

30th Aug, 2010

Tax Alert
Important Amendment Relating to E-filing of Tax Returns

The return of income has to be signed and verified in the case of a company by:

  • The Managing director or,
  • Where there is no managing director, or where the MD is not able to sign for any unavoidable reason, by any director thereof or
  • Where the company is not resident in India, by a person who holds a valid power of attorney from such a company.

As per Rule 12 of Income tax Rules 1962, it is mandatory for company assessees to file their tax returns electronically. Further, CBDT vide notification no 49/2010 dated 9th July 2010 has made it mandatory for company assessees to file the return using the Digital Signature Certificate (DSC) from Assessment Year 2010-11 onwards.

The uploading mechanism of the department calls for the registration of the DSC on e-filing website- http://incometaxindiaefiling.gov.in of the government. The procedure for registering the DSC is as under:

  1. The authorized signatory would log onto the E-filing website using the Login user id and password of the company
  2. Under “My Account” he would have to select -> Update Digital Certificate -> Register the DSC.
  3. The taxpayer has to select the appropriate type of DSC (.pfx or USB token).

Once this is done, the system verifies whether the name of the person holding the DSC matches with the name of the Director/Key Person mentioned in the Key Person Schedule of the Company (ITR-6). This verification is possible only if at least one earlier I-T Return has been filed by the Company i.e. the department has the details of the key person.

At the time of uploading the I-T Return of the Company, the system verifies the following:

  1. Whether the DSC is registered;
  2. Whether the unique Sl. No of the DSC used to sign the I-T Return is the same as the unique Sl No of registered DSC; and,
  3. Whether the PAN of the Verifier (Authorized Signatory) as mentioned in the Verification portion of the I-T Return, is the same as that of the person bearing the registered DSC

Only after successful verification of the above is the I-T Return permitted to be digitally signed and uploaded.

(Please note that in case of SKP’s clients, the above procedure would be carried out by us if the DSC is in our possession)

The above procedure to file the return using DSC was only optional till A. Y. 09-10. The return filed electronically without digital signature was required to be followed up with signed verification which was to be sent by ordinary post to Centralised Processing Centre, Bengaluru within a period of 120 days from the date of e filing.

However, the above requirement now stands withdrawn with the amendment in Rule 12 to file the return with DSC mandatorily.

Registration of DSC as per the existing procedure as mentioned above would not be possible for the following taxpayers:

  1. Non-resident companies where the directors are foreign nationals;
  2. Companies where the I-T return is being filed for the first time;
  3. Companies where the Managing Director has changed and other Directors are either unavailable or even they have changed.

As such, a new procedure has been notified for the registration of DSC as under:

  • The authorised signatory must obtain a fresh DSC having encrypted value of his PAN, as issued by the certifying authorities with effect from 01/08/2010.
  • The Authorized Signatory’s PAN has to be entered while registering the DSC. The same PAN must be entered in the Verification portion of the I-T Return which he is signing in his capacity as Director/Authorized Signatory.
  • Once the Authorized Signatory’s PAN matches the encrypted value of the PAN present in the DSC, the DSC will be registered after selecting the appropriate type of DSC (.pfx or USB token).
  • Thereafter, the IT return can be filed using this registered DSC.

Practical Issues

It appears that in view of the new procedure, foreign nationals who are directors in Indian Companies will now be required to apply for PAN in India.

Way forward

  • Fresh DSC having encrypted value of PAN will have to be obtained for all new companies and in case of those existing companies where MD/ Directors have changed after filing of last year’s return.
  • Where the authorised signatory does not fall in any of the above 3 categories (a, b, c above), i.e. the said signatory’s details are already available with the Income-tax Department, the old procedure as mentioned above may still be followed. However, in some circumstances, registration may still fail. The IT department’s helpdesk also doesn’t seem to have a solution to redress the said technical error. Thus, it would be advisable that the new procedure has to be followed for registration using the new DSC with encrypted value of PAN.

SKP Comments

The timing of the issue of this notification seems faulty as the due date of filing the corporate returns is only a month away and it would be extremely difficult to first obtain the PAN for the foreign directors and thereafter to obtain the PAN encrypted DSC for that director. It would have been better if the Government had made this requirement mandatory from the next assessment year.