Tax Bar Meets Finance Minister &Offers Valuable Suggestions Reg Finance Bill 2020

Jan-Jan-Ka Budget-An Interactive Meeting with Mrs. Nirmala Sitharaman Hon’ble Finance Minster of India at Mumbai on February 7, 2020.

First time in the History of Income-tax, Immediately after the presentation of Budget, The Finance Minister with her team Comprising of Hon’ble Finance Secretary, Revenue Secretary, Secretary Expenditure, Chairman CBDT, Chairman CBIC,Secretary Economic Affairs, Chief Commissioners of Income -tax Mumbai and Commissioners of Income tax (Mumbai) have arranged an interactive session with the stake holders including Tax professionals.

The Hon’ble Finance Minister and her team answered most of the queries raised by the audience. More than 500 stake holders from different associations and companies have attended the interactive session. Logical explanations have been given for various issues raised by the participants. Further, the Hon’ble Finance Minister stated that she will be visiting all major cities to interact with other stakeholders.

On behalf of various Tax Bars, several representations was made.

The Tax professionals will be sending a detailed representation to Hon’ble Chairman CBDT in due course of time and has requested the Hon’ble Chairman CBDT to depute Hon’ble Member legislation to discuss the proposed amendments in the Finance Bill, 2020, clause by clause with objective suggestions.

Tax Professionals are of the opinion that if this process of interaction is followed every year, it will help the revenue, tax payers and tax professionals to avoid unintended litigations.

Editorial Board, AIFTP.

Copy of the representation of the AIFTP is attached.

ALL INDIA FEDERATION OF TAX PRACTITIONERS
215, Rewa Chambers,31 New Marine Lines, Mumbai 400020.
Tel. No: 22006342/49706343, Fax: 22006342/ E-mail: aiftpho@gmail.com /Website: aiftponline.org
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February 6, 2020
To,
Mrs Nirmala Sitharaman
The Hon’ble Finance Minister
Ministry of Finance,
Government of India,
North Block,
NEW DELHI 110001

Sub: Suggestions to the Budget and Finance Bill, 2020.

Respected Madam,

Madam, we would take this opportunity to congratulate your honour  on a ‘directional’budget for India, which will bear fruits in the years to come. All India Federation of Tax Practitioners (‘AIFTP’) is an Apex body of Tax Practitioners of India. It has more than 9000 members across the country and 150 associations as its members. One of the main objects of the AIFTP is to make representation for better administration of tax laws.

Madam, AIFTP has already sent a detailed suggestions earlier. In this representation the AIFTP is restricting its suggestions only to specific issues relating to the Finance Bill, 2020. Our suggestion are as follows:

  1. The Direct  TaxVivad se Vishwas Bill, 2020

Madam , we highly appreciate the proposed “The Direct Tax  Vivad se Vishwas Bill, 2020” which is introduced for dispute related direct taxes . There could be number of issues which may arise while implementation of the scheme. We desired that there could be a  regional ,Co -Ordination committee of the Departmental officials , representatives of the  tax professionals from various professional organizations who can interact with the officials concerned on day to day basis and get the clarifications    and inform the professionals who in turn advice the assesses to avail the benefit of the scheme . According to us this will help for effective implementation of the scheme . 
Madam , we have two issues with respect to the successful implementation of the scheme.

Clause 9(a) (i) : Firstly, it is a well-known fact that a large number of cases pertaining to ‘penny stock’are the ones that would seek refuge under this scheme. The number of cases and the quantum of addition are both high. Exclusion of assessment arising on account of 153C of the Act, further defeats the cases where information has been received subsequent to a search at another premises, as most of the cases of penny stock might have its inceptions in such a manner. Further, discrimination between a reassessment proceeding under section 147 of the Act and 153C of the Act, where the earlier mode of assessments is allowed to apply for the scheme, seems irrational. Furthermore, as discussed above, there are a lot of ‘penny stock’cases where prosecution has already been initiated by the department though the appeals are pending before the CIT (A) or Tribunal ,  these cases would not fall within the ambit of the scheme.

Clause 9(a)(ii): Secondly , the ‘institution of prosecution’being a criterion for non-eligibility under the scheme. Since, the scheme of compounding is always open for a tax payer, exclusion of such assessment years, where prosecution has been initiated, seems a bit irrational and defeats the purpose of reducing litigation.
 This needs to be addressed as early as possible for its successful implementation. AIFTP will make an honest attempt to guide the assesses to avail the benefits of the scheme .
Madam, AIFTP &itatonline.org have proposed a committee of senior professionals who have agreed to answer various issued raised by the professionals across the country .  
2. One-time settlement of prosecution matters before various Magistrate Courts.

Under the present system, it takes more than 20 years to decide prosecution matters relating to Direct Taxes. Hence, the deterrent provisions fail to achieve the desired object due to the delay in disposal of cases by the trial courts. Substantial matters of prosecutions are launched for technical defaults for delay in depositing the tax deducted at source though the tax deducted was paid along with interests. The compounding fees fixed are very high.It may be fixed reasonably so that the assesses can settle the disputes by paying compounding fees. The tax administration may consider one-time compounding application. As per the guide lines dated December 23, 2014, Compounding application will not be entertained if the application is filed after 12 months of the filing of complaint, however, as per the new Circular dated June 14, 2019, CBDT has relaxed the period to 24 months. There are instances where the accused has received the intimation of the filing of complaint after 12 months of the filing of the complaint. In few cases the application for compounding was not entertained only on technical grounds. As per the Act and judicial decisions there is no limitation for filing of compounding application. The same can be filed even after the Court holds the accused guilty of the offence. It is desired that the restrictions imposed in the circular may be withdrawn. When a show-cause notice is issued, the assessee submits their reply thereafter no intimation is received by the assessee as to whether the submission is accepted or not accepted by the department. It is the duty of concerned officer to inform the assessee in writing whether the prosecution is launched or not.  

AIFTP is of the considered opinion that one time settlement to all pending prosecution matters before Magistrate court may be desired , which will help the revenue as well as the assesses.

3.Increase in safe harbour limit of 5 percent under section 43CA, 50C and 56 of the Act to 10 percent

Vide Clauses 22, 27 &29 it is proposed to increase the real estate circle rate limit to 10% from 5% for purposes of tax. It is highly appreciated as the proposal was on the basis of representations with a view to minimise hardship in real-estate transaction and provide relief to the sector. This is good, but this itself shows that the Stamp Valuation in many cases is higher than the actual market prices.
Further, it is also felt that, in a metropolitan city like Mumbai in certain areas, the difference in Ready reckoner rates and the actual property prices is as high as 40 percent.  
Therefore, a band-aid solution is not enough and a thorough review of the Stamp Valuation is required it may be increased at least 25% .

4.Stay by the Income Tax Appellate Tribunal (ITAT)
Clause .97 . S.254 (2A):

The Finance Bill 2020, vide clause 97 proposed to provide that ITAT may grant stay under the subject to the condition that the assessee deposits not less than twenty percent of the amount of tax, interest, fee, penalty, or any other sum payable under the provisions of this Act, or furnish security of equal amount in respect thereof.
 Section 254 (1) of the Act has given the appellate Tribunal wide powers and the liberty to pass such an order as it deems fit. Question arises, whether, with the introduction of this provision, has the powers of the Tribunal been curtailed or can the Tribunal in exercise of its powers conferred under section 254(1) of the Act, still pass an order granting a stay of demand for a deposit of less than 20 per cent is debatable . The proposed provision may be held unconstitutional .

 On analyse the various stay orders passed by the Tribunal , it is only in a well deserved cases the ITAT has passed the order to deposit less than 20% of tax in dispute otherwise the ITAT has always taken interest of the revenue by passing the order to deposit more than 20 % of the cases . In stay granted matters the ITAT Order always states that if the Assessee asks for an adjournment the stay will be vacated . The delay in disposal of stay granted matters not due to assessee , in most of the cases due to department .  

The proposed amendment  will only increase the income tax litigations .

Accordingly the AIFTP is of the considered opinion the proposed amendment may be dropped .

5.Tax deduction at Source

S.192:Salaried persons are given an option to chose the new scheme of assessment , however the employer has to deduct tax at source on salary at the time of credit or payment . If the employee opt for new scheme at the end of the year , how the tax deducted will be adjusted . There could be case where the employee may opt for new scheme in the beginning of the year and may change his mind at the end , if employer deduct the tax only at the end of year he may be held liable to pay interest for failure to deduct tax at source . Some clarification may be required .

At present there are more than 25 sections under which the assessee is required to deduct tax at source and file the returns. Many a times there is no clarity on various issues. It is desired that one may consider having concept of passbook and only one return for all Tax deducted at source. The assessee may deposit the amount as advance or may adjust against  various taxes to be deducted. This will help to reduce the compliance provisions.

6. Tax on dividend received by Mutual fund .
Clause .80 . S. 194K.

As per the new proposed provision the tax is to be deducted on dividend on mutual funds . There are number of senior Citizens who have planned their   retirement by investing in mutual funds .Sudden change in the taxability of dividend may lead to financial difficulties . There are number of senior citizens who are not having taxable income and having only dividend income . Now the tax is deducted at source , they have to file their return and get the refund . Which is unintended . AIFTP is of the opinion that if declaration is filed by the assessee that he is not having the taxable income the TDS need not be deducted . This will avoid unintended hardship to the number of assesses .

7. Clause 23: S 44AB : Tax audit .

The increase in limit for tax audit from 1 crore to five crores , whether it apply to professionals also requires clarification .

8.Allocation of funds to the judiciary

One of the road block for the development of the economy is huge pendency of litigation in before the courts. No doubt the government is taking proactive measures to reduce the litigation, however the process isn’t effective and efficient enough to achieve the desired results. Further, for attracting investments, the speedy disposal of the disputes is imperative. One of the reasons for delay in disposal of the cases is on account of not appointing the judges on time. As the Government is aware of the number of judges that are going to retire in a particular year, the process of appointment can be done well in advance, to ensure that on the very next day of retirement new judge is appointed. This will require better management in the judiciary and infrastructure. Currently, there is a lack of vision and funds for the judiciary.

The All India Federation of tax Practitioners have, from time to time suggested that there should be separate allocation of funds for the judiciary in the Budget proposal. It is noteworthy that the Central and State Governments are the largest litigants in most of the forums. More than 60 per cent litigation in Courts has its genesis in the Central Acts.

The Judiciary cannot make the representation to the government, it is upon the various Bar Associations across the country to make representation to the Government regarding the difficulties faced by the judiciary, only then the common man in can have access to speedy justice.   

We request the Government to take positive measures to resolve this issue while taking into consideration the suggestions from various Bar Associations across the country.

Madam, we request you to kindly consider the afore-mentioned suggestions.

 We will be sending details representation on various clauses in due course of time 

Thanking you
For All India Federation of Tax Practitioners
Mrs Nikita Badeka                      Dr K. Shivaram                           Mr .Vipul Joshi

National PresidentSr Advocate                                  Convenor
                                                      Past President AIFTP


4 comments on “Tax Bar Meets Finance Minister &Offers Valuable Suggestions Reg Finance Bill 2020
  1. samir Jani Secretary general AIFTP says:

    I have been informed that ITAT Bar Association has also sent a detailed representation on power of ITAT on stay

  2. Paarth Garg says:

    Strange to call the Finance Secretary, a public servant, as Honorable.

  3. KEEN OBSERVER says:

    1.The cases wherein the whole demand was paid VOLUNTARILY but appeal filed before CIT (A).In such cases whether by opting in scheme whether assessee can be refunded the amounts of interest.OR ASSESSEE HAS TO PURSUE IN APPEAL.
    2.The cases wherein penalty proceedings initiated and pending ,whether opting in scheme in quantum proceedings means penalty shall be leviable.(INDIRECTLY ASSESSEE ACQUISCIESE)
    3.IN MOST cases 20% demand already paid whether setoff is allowed.In some cases the deptt collected substantial demand in March 2017 or 2018 or some other time whether setoff allowed.AS REFUNDS SHALL BE DUE.
    THE GROUND REALITIES OF THE ISSUES ARE ABOVE.
    CLARIFICATIONS BE REQUIRED OR ISSUED

  4. veeramani says:

    Investments in tax saving investments only benefit a few persons who are liable to tax. Some may benefit 10%, 20% and 30% depending upon their income levels and on the investments not exceeding 1.5 lakhs they make. Average assessees having less than taxable income does not get any benefit. The proposal is an excellent one.

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