Direct Tax Alert - CBDT issues notification to amend IT Rules for authenticating electronic records under the faceless assessment proceedings

Background

With a view to bring transparency in the assessment, the Taxation & Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 introduced Faceless Assessment regime, 2019 which was later notified¹ by the Central Board of Direct Taxes (CBDT). Sec 144B of the Income-tax Act, 1961 (IT Act) pertaining to Faceless Assessment scheme has been inserted by the said amendment with effect from 1 April 2021. Section 144B(7)(i)(b) of the IT Act provides that taxpayers who are required to furnish a return of income under digital signature (DSC) are mandatorily required to authenticate submission in electronic mode by affixing its DSC. In respect of taxpayers who are not required to furnish return under DSC, an additional option to authenticate the submission through electronic verification code (EVC) is provided. Since taxpayers are facing challenges in authenticating online submissions in the faceless assessment proceedings, the CBDT issued a notification² amending the Income-tax Rules, 1962 (IT Rules) to provide that it will now not be mandatory to authenticate online submissions through DSC.        

We, at BDO in India, have analysed and summarised the said notification hereunder:

• Rule 14C is inserted prescribing the manner of authentication of an electronic record under electronic verification code (EVC) under Section 144B(7)(i)(b) of the IT Act.
• The amended Rule provides that electronic records submitted through the registered account of the taxpayers in the designated portal of the Income-tax Department shall be deemed to have been authenticated by the taxpayer under EVC.

BDO Comments

Currently, many taxpayers (such as companies, tax audit cases etc.) are facing challenges in affixing the DSC as they are mandatorily required to authenticate the electronic records by affixing a DSC. This relaxation will help the taxpayer as it no longer requires affixing of DSC. Further, it is pertinent to note that prior to the amendment brought in by Taxation & Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020, the documents (excluding tax returns) were being filed without affixing DSC.