Central Board of Direct Taxes has simplified the process of assessment in respect of Start-ups in a press release dated 10th August, 2019. As per the framework, action could be taken against Start-up entities only after the approval of a supervisory officer. The approval is necessary for all Start-up Companies recognized by DPIIT irrespective of filing of Form 2 which deals with the exemption of start-ups from income tax.
In cases where scrutiny assessments of start-up entities are pending, the CBDT has decided that:
i) The contention of the assessee Start-up will be summarily accepted in case of ‘limited scrutiny’ where the Start-up is recognised by the DPIIT and has filed Form No.2.
ii) In case of Start-up Companies recognized by DPIIT which have filed Form No. 2 and whose cases have been selected under scrutiny to examine multiple issues including the issue of section 56(2)(viib), this issue will not be pursued during the assessment proceedings. Inquiry on other issues will be carried out by the Assessing Officer only after obtaining approval of the supervisory authority.
iii) In case of start-up companies which have not filed Form No. 2, but have been selected for scrutiny, the inquiry in such cases also will be carried out by the Assessing Officer only after obtaining approval of the supervisory authorities.
Click here to see press release.