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personal finance

‘CBDT acting against taxpayers’ interest’

MUMBAI: A move by the Central Board of Direct Taxes (CBDT) to incentivise commissioners of income tax – appeals (CITs-A) to decide matters against taxpayers has met with severe criticism. Various professional associations recently filed representations against this move with the finance ministry.

There is a growing apprehension that the government’s promise of a non-adversarial tax regime is not being met. This comes in the backdrop of nearly 1 lakh prosecution notices being served on taxpayers in recent months, including those sent to small entities in their nascent years of business — even for the smallest of TDS defaults, such as the late deposit of an insignificant sum.

When taxpayers dispute their income tax demands, raised by the I-T officer, they approach the CIT-A. This is the first level of appeal. Based on the facts of the case and legalities involved, orders passed by the appellate commissioner can swing either in favour of the taxpayer or the I-T department. However, tax experts believe that the CBDT’s action plan may now prejudice the minds of the CITs-A.

In its action plan for the current financial year, the CBDT has offered incentives by way of performance credits to CITs-A for each ‘quality’ appellate order passed. ‘Quality’ orders include cases where the CIT-A enhances the order of the I-T officer (in other words, the quantum of tax demand is increased) or where he strengthens the order of the I-T officer. It also includes instances where the CIT-A levies a penalty on the additions confirmed by him to a taxpayer’s income.

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A pandora box

Sunil Gabhawalla, president of the Bombay Chartered Accountants’ Society (BCAS), one of the associations that made a joint representation to the finance ministry, says, “The ministry needs to clear the apprehensions in the mind of honest taxpayers. Earlier, CBDT’s March 8 direction that the functioning of the office of the CIT-A would be monitored by the principal chief commissioner or chief commissioner led to the fear that it could result in a bias in favour of the I-T department during disposal of cases. Soon thereafter, the CBDT’s action plan has sought to incentivise CITs-A if the orders are decided against taxpayers. This move completely erodes their impartiality and independence and creates a bias in favour of the I-T department in a quasi-judicial proceeding.”

Hinesh R Doshi, president of the Chamber of Tax Consultants, which has also filed a representation, says, “While the chief commissioner may wish to evaluate the performance of the CIT-A for administrative reasons, the parameters for evaluation should not be based on the number of cases where the appeals of the taxpayer are dismissed or where the order of the lower authorities has been strengthened or where enhancement in tax demand has been made. This will be unfair to the taxpayers who are statutorily bound to approach the CITs-A for redressal of their grievances, as it is the first appellate authority.”

Senior government officials TOI spoke to say that the illustrations of ‘quality’ orders are just some examples. Quality order also denotes one that would stand the test when the taxpayer files an appeal at the next level – with the Income-tax Appellate Tribunal (ITAT). Further, the additional credit of two units for each quality appellate order passed factors in the extra effort which is undertaken and is not a monetary reward.

Since late 2017, I-T officials pan India began to serve prosecution notices for various lapses, such as failure to deposit TDS within the time limits, non-payment or delay in payment of advance tax or even failure to file I-T returns. An RTI order, referred to in the joint representation filed by BCAS indicates that nearly a lakh prosecution notices have been issued. “In many cases, these notices have been issued without any qualitative analysis of the defaults mainly to meet the prosecution targets. Action has yet to be taken in terms of actual prosecution. But the notices hang like a Damocles sword,” says a chartered accountant.

“The spate of notices has created fear in the minds of taxpayers, as they face the prospect of being prosecuted for the smallest of lapses. Necessary directives must be issued by the MOF to ensure that the promise made by the government of a non-adversarial tax regime is maintained,” says Gabhawalla.


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