The Central Board of Direct Taxes (CBDT) has issued a clarification instructing its officers that registered companies that have already been selected for verification under the angel tax provision will not be scrutinised and their defence will be accepted summarily.
Further, even unregistered companies have been given relief, with the assessing officer being allowed to scrutinise them only after getting permission from his superior officer.
“Instances have come to the notice of the Board that notices… have been issued by the assessing officers in respect of start-up companies before issue of notification of the Department for Promotion of Industry and Internal Trade dated February 19, 2019, or even afterwards which are presently pending for disposal,” the CBDT clarification on Wednesday said. The February 19 notification by the DPIIT laid out the norms under which a start-up would be recognised by the government. It also said that these registered start-ups would not be scrutinised under the angel tax provision as long as they and their investors met the eligibility criteria laid out in the notification.
The start-up community, however, has repeatedly approached the DPIIT and the CBDT saying that several start-ups had already received notices from the tax authorities before the February notification came into effect.
‘No verification’
“Where the start-up has been recognised by the DPIIT but the case is selected under ‘limited scrutiny’… no verification on such issues will be done by the AOs (Assessing Officers) during the proceedings… and the contention of such recognised start-up companies on the issue will be summarily accepted,” the CBDT’s Wednesday clarification said.
This provision has been extended to companies that have been selected for ‘complete scrutiny’ as well. Further, the clarification seeks to ease the plight of those start-ups that have not yet been registered with the DPIIT.
