Do Surgical Strike, Not Tax Terrorism, For Collection Of Tax

CA Prarthana Jalan has taken umbrage at the fact that the income-tax department is, in defiance of the law, resorting to “tax terrorism” of innocent taxpayers over frivolous issues with a view to increase collection and meet their own targets. She has pleaded that the department should focus its energies on the big tax evaders and do “surgical strike” upon them rather than harassing innocent taxpayers



Income Tax Officers- high


Income Tax Officers- HIGH


Income Tax Officers- HIGH


Well, as we are marching towards March, i.e end of financial year, Income tax departmentby any means even by ignoring the provisions of law , judiciary pronouncementsand fostering tax terrorism ,they just want to win over their target of “Rs. 11,50,000 CRORE- TAX COLLECTION ”.

Whereas, Honble Bombay High Court in a land mark judgement on 27th March 2018, in the case of Shri SaibabaSansthan Trust (Shirdi) vs. UOI had stated“Whereas CBDT should investigate arm twisting measures, dehors application of the law, adopted by the Revenue for recovery of tax and take corrective measures to ensure AOs are not overzealous in recovering maximum revenue before 31st March”

Ironically, on 4th January,2019, CBDT’S Chairman has instructed the department officials to maximize tax collections in general and collections under Regular Assessment in particular, the following strategies need to be implemented in this quarter in order to surpass the target of budget estimate of Rs 11,50,000 crore collection:-

(a) Targeted recovery surveys in potential cases where high amount of recovery is likely.

(b) Sale of attached properties in appropriate cases by TROs to recover confirmed demand where normal measures of recovery have not yielded results.

(c) Initiation of proceedings under section 179 of the Act in eligible cases to make recoveries of outstanding dues of the companies.

(d) Filing of prosecution under section 276C (2) against persons who are willfully evading payment of outstanding taxes.

(e) Completion of non-time-barring assessments in cases where demand is likely to be raised and collected during the current financial year itself.

(f) Verification of deductors where there is non-payment of TDS to the Government account though TDS has been deducted as well as where there is substantially low TDS as compared to last year including launching of prosecution in cases of substantial default.

(g) Verification of payment of advance tax by the seller of properties in cases where TDS under section 1941A has been made by the buyer.

(h) Monitoring of payment of Dividend Distribution Tax by obtaining information from financial websites, SERI, etc.

3. Other strategies depending upon the specific characteristics of the region should also be adopted so as to increase collections and ultimately achieve the budget target”

It has been instructed to foster efforts to collect regular assessment demands of current year as well as past years. Whereas if demand is under dispute and is subject to the appellate proceedings, then, the statutory right of appeal vested in the assesseeshould not be rendered illusory and nugatory. This right gets defeated when assesse is pressurised to pay the demand in dispute.

Further, the aforesaid instructions have been issued without considering the fact that this was the first year of E-assessments (Though E-assessments in true spirit are yet to take place). A Lot of High Pitched ironically “Best  Assessments (u/s144)”as they are called have been done especially in cases of AIR/Cash deposits/NMS etc.As per Instruction No. 96 of 1969, 100% stay of demand has to be granted in high pitched assessmentsand even otherwise such hefty demands have been raised that it is next to impossible for assessees to pay even  20% demand.

The aforesaid instruction has been upheld by Hon’ble Karnataka High Court in the case of Flipkart India Private Limited vs. ACIT:-

“CBDT Circular dated 29.2.2016 does not supersede Instruction No.1914 but modifies it. Both have to be read together. The AO and CIT cannot straightaway demand payment of 15% of the dues but have to grant complete stay if the assessment is “unreasonably high pitched” or the demand for depositing 15% of the disputed demand leads to "genuine hardship" to the assessee”

But abiding by the command of CBDT,tax officers have in the present month of January itself, have not only issued notices u/s 221(1) for tax collection against the time barring assessments done in December,2018 but in some cases even bank attachments have also been done.

Whereas recently on 11th Sep,2018,Hon’ble Bombay High Court in the case ofBhupendraMurji Shah vs. DCIT had stated
“The AO is not justified in insisting on payment of 20% of the demand based on CBDT’s instruction dated 29.02.2016 during pendency of appeal before the CIT(A). This approach may defeat & frustrate the right of the assessee to seek protection against collection and recovery pending appeal. Such can never be the mandate of law.”

There are plethora of judgements which have clearly stated that coercive measures should not be adopted by the department in collecting demands especially in cases where appeals are pending for adjudication. In some cases severe strictures have also been passed against officers for resorting to coercive collection methods yet the aforesaid instructions have been issued to the officers.

In order to meet the target, a lot of meetings, surveys/searches would be conducted by the department in the present quarter .

Prosecution notices for non payment of advance tax, return filing, TDS delay, non payment of wrong demands (without disposing of 154/ giving tax effect pending since long time) have become a common trend now. The difference between civil offence and criminal offence has been blurred. What should be the last resort to be taken by the department and in case of severe, intentional, deliberate, contumacious conduct is eventually becoming the first resort they are taking i.e to prosecute.

No doubt for development and smooth running of the country, high tax collection is utmost important and a blessing and every citizen should timely and correctly pay the tax on his income. Tax Evaders should be identified and penalised and even prosecuted as per the magnitude of offences but surprisingly instead of doing surgical strike on real and big tax evaders by using the drones of high data filtration and intelligence properly, Income Tax Department is using its artillery of Penalty, Prosecution, Benami law, Searches,Surveys etc even on common law abiding tax paying citizens at large, fostering an environment of Tax Terrorism. Whereas it is desirable that instead of using Tax terrorism at large,Surgical strikes on big and real tax evaders should be done.

15 comments on “Do Surgical Strike, Not Tax Terrorism, For Collection Of Tax
  1. UDAY says:

    Right from “CHANDA” to “Mallya” all are not only escaped but litterally speared for years and decades with due assistance of the Deptal expertises.

    Whereas innocent people including senior citizens are compelled to face the unpresidented harrasements.

    Lacs of crors of rupees are speared by this way only to get lucrative promotions & Postings.

    Centainly deserved to be HIGHEST AWARD?????

  2. khayam says:

    Namaste Madam

    I have been reading your esteemed articles in this web site for the long time , and I personally felt that ur articles are being made against the Income Tax Department without substantiating ur comments. In this article it was stated that the department was after innocent tax payers rather than big fishes. But here u have not mentioned who are innocent and big fishes. Please introspect yourself have you ever made any effort to give the information about the Big business men to the department ? Dear madam, Tax men are working for Building of Nation. May be some are corrupt that does mean that all the people are corrupt. What about CAs madam they are earning crores of rupees in the guise of department. Dear madam so far so many people have ran away with the money of people this country, have you ever made any comments on them. Those monies were collected by taxmen of this country. Please reply.

  3. R A sharma says:

    Wonderful article with appropriate wording to the real cause and action

  4. CA SANJAY says:


  5. Ravindra K Agarwal says:

    A nicely worded logical article. Very helpful in cases where deptt. insists demands that are actually not payble, particularly when refunds are not being issued timely.

  6. KEEN OBSERVER says:

    Actually the march ending 2019 will be a peculiar scenario for TARGETS.Huge refunds are to be given as majority of LTCG matters have gone the other way and for which collections were made earlier.Further the no DEPTT appeal LIMITS has also resulted in HUGE refunds .Bogus capital matters are set aside or RELIEF GRANTED shall results in refunds. THE DEPTT HAS THUS NO CHOICE AS OUTFLOW IS SUBSTANTIAL.

  7. Manish Parekh says:

    British Era designed Acts of IRS & IAS help them and other government officers, to act on their own whims & fancies with the help of these Acts & Rules designed by Britishers and still continuing without modification. Those rules had been designed keeping in mind need for authority to suppress people’s rights and continue ruling them where officers were given powers and people could not question them. The same lobby ( British officers being replaced by Indian officers) over the next 60-70 years have ruled common man and have enjoyed at the cost of people with the same rules continuing without any change. They are the ones who are not allowing rules to be changed so that their lobby continues to enjoy the British Era UNQUESTIONABLE powers. Awareness in people coupled with strong political only can change these rules from the existing Rules to “RULE” to a democratic Rules to ” SERVE”. Till then it seems difficult to stop these arbitrary actions of the officers

  8. S Prakash says:

    Really eye opener for the income tax department.all asseess and the professionals are facy these practical problems but the author has rightly raised the voice. Congratulations

  9. atul shah says:

    We are seniors/ NRIs from NJ USA. We had bitter taste of India from DDIT,Baroda/Gujarat. DDIT knowingly or unknowingly calculated tax on capital gains at normal rate as against special 20% for AY 2015-16 and attached our bank accounts based on wrong calculation of tax by obtaining approval u/s 281B of Income Tax Act from CIT Ahmedabad. In fact there is a refund due of Rs. 418,298. Our bank accounts still remain attached and we could not pay even filing fees for CIT(A) from our bank accounts so our CAs paid from his funds. I do not understand how come on level of DDIT and CIT Appeal , officers are grossly negligent ? Why no punishment is given to them. If this kind of acts goes unpunished, there is no deterrent against such officers acting irresponsibly . Even as on today, our bank accounts remain attached. We filed complaint CPGRAMS and today received rectification order granting refund without interest due u/s 244A of Income tax Act.
    I am ExCA settled in NJ USA since 1994. If any one taking a lead and form a Public Forum to expose such rampant acts of Officers I am ready to contribute financially . Such a forum must ensure that officers are punished so no other innocent person suffers . In other case, we sent a letter that we are prepared to pay 20% of disputed tax but no action was taken by DDIT,Baroda till we filed a complaint to CPGRAMS. I appreciate such a public exposure on functioning of IT Department. Please Do not wait for someone to start movement against erring officers. Please form a Org. by Tax Professionals /Journalist/Law Students and expose them so Board take actions in all matters against erring officers.

  10. Amit kothari CA says:

    Very timely and nice article with brevity covering issues of recovery being faced.

  11. K C Aggarwal ADVOCATE says:

    Can department come up with data regarding action taken against tax authorities who have decided exparte assessments raising huge demands without ensuring proper service of notice, without proper hearing, without even going through material available on record, despite the demand having been setaside finally on above grounds.

  12. AJAY SHARMA says:

    Congrats, for addressing latest issue being faced by so many tax payers who have become victim of High Pitch assessment and 144 assessments. The article covers very nicely CBDT circulars & legal pronouncements….

  13. Paarth Garg says:

    This is applicable with equal force to the GST enforcement wing.

  14. Rajendra Khandelwal says:

    Lot of refunds are pending at Income tax deptt. and no action taken by deptt and CPC since last 6 months. Even in case of recovery survey deptt collected taxes and thereafter tax recovery done by deptt from regular refunds. when we visit deptt. they do not give any serious response regarding refund issue matters. Deptt is strict for recovery of small amount but reluctant to response high value refund. Account freezed in so many cases.



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