Refrain from Notifying Taxpayer when asking for information from Foreign Tax Authorities -Instructions
CBDT notes that it is frequently seen that requests for Exchange of Information in Form A (of the Manual of Exchange of Information issued by C.B.D.T. in May, 2015) addressed to Foreign Tax Authorities have been received from field formations without proper explanation as to why it is necessary to refrain from notifying the taxpayer. This leads to avoidable delays on account of further correspondences between Foreign Tax Authorities, FT &TR Division and field formations for subsequent clarification in this regard.
As per international standard for Exchange of Information, a requesting State may request exception from 'prior notification' if it is able to demonstrate through some specific evidence that the request for information is either (a) very urgent or (b) prior notification to the taxpayer/person of such request for information is likely to hamper/undermine the success of investigation.
CBDT notes that very often such evidences and explanations are not attached with the request. Further, whenever a request for refrainment from notification is made, it automatically implies that information which is in possession of the taxpayer cannot be obtained and provided by the Foreign Tax Authorities. Thus, in many cases, Foreign Tax Authorities are expressing their inability to provide the information when it has to be obtained from the taxpayer due to the 'refrainment from notification' condition.
Board wants the field to ensure that Sl. No.8 of Form A (Part II) clearly mentions whether a request to refrain from notifying taxpayer(s) involved is to be made to the Foreign Tax Authorities. In case of refrainment is required, sufficient explanation/justification should be furnished to demonstrate the necessity of refrainment from prior notification, failing which, the request from refrainment from prior notification may not be forwarded by the FT &TR Division.