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Relief By CBDT On Compliances By Start-ups

In order to give effect to the announcements made by Hon’ble Finance Minister to provide hassle-free tax environment to the Start-ups, Central Board of Direct taxes (CBDT) has issued consolidated circular providing clarification in the following matters of the Income Tax Act, 1961(The Act): –

  • Assessment procedure and time limit for completing pending assessment
  1. In case a start-up company recognized by Department for Promotion of Industry and Internal Trade (DPIIT) and the cases are under limited scrutiny, below clarifications for assessment procedure are provided: –
 IssuesProceeding
(a)Form No. 2 filed and single issue of applicability of section 56(2) (viib)Contention of assessee will be summarily accepted with no further proceedings.
(b)Form No. 2 filed and multiple issue including issue of section 56(2) (viib)Proceeding to be initiated by AO after approval form supervisory authority.
(c)Form No. 2 not filedProceeding to be initiated by AO after approval form supervisory authority.
  1.  Assessing Officer shall complete the assessment and pass order by 30th Sept, 2019 and assessments under (b) & (c) above are preferably be completed by 31st Oct, 2019.
  • Procedure for addition made u/s 56(2) (viib) of The Act

If any assessment made before 19th Feb, 2019 and Form No. 2 is filed, provisions of section 56(2) (viib) of The Act shall not be applicable. Further below procedure for addition u/s 56(2) (viib) is provided for the cases pending before 19th Feb, 2019: –

Case pending before CIT(A)Department shall not file further appeal on the issue of addition u/s 56(2) (viib) of The Act
Case pending before ITATDepartment shall not press the ground relating to addition u/s 56(2) (viib) of The Act
  • Income Tax Demand

It is clarified that the outstanding demand u/s 56(2) (viib) shall not be pursued and no communication shall be made to assessee and in respect of any other demand shall only be pursued only confirmed by ITAT.

Source & Abbreviations used: –

CBDT press release dated 2nd Sept’2019 read with Circular No. 22/2019 dated 30th Aug’2019

AO – Assessing Officer; CIT(A) – Commissioner of Income Tax (Appeals); ITAT – Income Tax Appellate Tribunal

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