CAN THE system take on the load?

By an announcement on October 24, companies were allowed to file their income-tax returns by November 30 instead of October 31. The reason given for this is `large number of holidays'. The press release giving the extension reads: "The move (extension) follows representations from some sections of taxpayers and professionals that they may not be able to complete their work by October 31. This is because there were many holidays in October because of which some of them faced difficulties in adapting to the new format."

Overloaded system

Obviously, the reason given is an excuse for covering the imperfections in the system, which could not take the load of thousands of corporate and other returns, which had to be filed by October 31. The corporate assessees number nearly 3.75 lakh. Further, vide order under Section 119(2)(b) dated July 24, 2006, the CBDT had extended the date for furnishing income-tax returns or returns of fringe benefits for the Assessment Year 2006-07 in the case of all non-corporate taxpayers to October 31, barring individuals and HUFs, who do not have income from business or profession. Thus, the on-line load became quite substantial.

The fact of the number of holidays was surely not a bolt from the blue. They were known months in advance. Hence, the extension cannot be justified on this ground. The reasons, necessitating extension, are some other.

Hastily introduced?

The Government must accept that the e-filing of returns was hastily introduced without rigorous testing of on-line filing and debugging. Undisputed reports are that the on-line system did not work properly, broke down frequently, without proper testing, and was introduced in an ad hoc manner.

Chartered accountants and others complained that they could file only few returns and this position is evident from the fact that according to the Revenue Department's own figures, only 19,000 returns were filed till October 24, as against 3.75 lakh companies and numerous other assessees that were expected to file the returns by October 31. According to a newspaper report, the system of e-filing of returns has been developed by a leading IT company. A small applet is available for download at the Income Tax Website. The applet contains the 24-page IT return form electronically. A CA is expected to fill out the various forms, click a button and upload them. A spokesperson of the IT company when contacted by the paper is reported to have said: "We have only developed the back-end software we don't operate the e-filing system."

One can imagine the problems felt in e-filing of returns by the taxpayers. The problem was more difficult in smaller cities and towns, where there was not enough bandwidth and where there are only dial up connections.

Besides the problem of the system, the e-filing forms were notified only by the end of July 2006. These forms are much larger in size comprising (in the case of companies) 31 columns in the main return form, 29 columns covering the P/L A/c and balance-sheet, 21 columns concerning other information, 15 columns for FBT, 32 columns concerning computation of income and tax (128 main columns in all with several sub-columns) and 25 schedules. Obviously, these required understanding and concentrated effort to compile the desired information in capsuled forms in a big way. The time and data entry operators required thus became substantial, which were not easily available. The various columns/sub-columns needed to be filled up with care and being the first time exercise it, naturally required time to familiarise. Also, the software was made available only by the end of September and the system did not work satisfactorily.

It is said that e-filing system did not even open because of the heavy load, crashed frequently, did not upload specific forms and gave error messages. The software designers had had to, quietly, debug the system, change the software, when complaints surfaced, installed new patches without making pre-announcements. All these problems were known but liitle seems to have been paid to them, and no decision was taken to extend the date till October 24, by which time the festival season was over. Also, it is said the representations made were not heeded. The Institute of Chartered Accountants of India is said to have pointed out to the Finance Ministry that the format prescribed in the balance-sheet in Form No 1 is different from that prescribed in Schedule VI of the Companies Act, which required re-grouping of the figures, but no attention was paid to bring the two at par.

The foregoing discussion brings out the problems faced by the taxpayer in e-filing of returns within the stipulated period of October 31.

Yet, the CBDT remained unresponsive to this till the fourth week of October and announced the justified extension only on October 24, by which date the most important festival of Diwali was over.

It was a pity to see taxpayers and Chartered Accountants burning midnight oil to achieve the impossible simply because of the absence of a fool-proof system to file returns on-line. Worse, they have also drawn flak for not knowing how to operate the system.

If taxpayers deserve some concession, it should be given in time and with grace.

T. N. Pandey
(The author is a former Chairman of CBDT.)