The Role Of Professionals In Tax Reforms: Justice Mr. R.K. Agrawal

justice-mr-r-k-agrawal-supreme-court-of-india

Justice Mr. R.K. Agrawal of the Supreme Court grapples with the several problems plaguing the Indian judicial system especially in the field of taxation. He has offered practical suggestions on how some of these problems such as those relating to pendency can be resolved. He has also highlighted the role that tax professionals should play to ensure that the reforms are speedily ushered in. The learned Judge emphasizes that legal professionals owe responsibility to the taxpayers’ community and are duty-bound to extend a helping hand for reduction of litigation and checking its mushrooming tendency

Taxes are the Governments’ way of earning an income which can then be used for various projects that the Governments need to indulge in to help boost the economy of the country or its people. Taxation is important to society because government use the tax revenues to fund projects related to health care systems, education systems, public transports etc. Also, the money collected can also be used to give employment benefits, pensions and other matters that can benefit the society as a whole. Without tax, the Government would not be able to fund the essential projects and services that people need.

Tax laws consist of a body of rules of public law that affects the activities and reciprocal interests of a political community and the members composing it as distinguished from relationships between individuals in the sphere of private law. It can be divided into substantial tax law, which is a body of the legal provisions giving rise to the charging of a tax; and procedural tax law, which consists of the rules laid down in the law as to assessment and enforcement procedure, coercive measures, administrative and judicial appeals and other similar matters.

The subject, important enough, at any time, is of particular significance now, since Indian economy, being plan-conscious and plan-directed, is in a transitionary stage, when efforts are being channelled towards the rapid economic development of the country.
Tax reform is one of the pressing Issues currently engaging the attention of the Public and the Government. Tax is not only a prolific revenue-yielder but exerts a major impact on the economic and social life of the people.

“Oliver Wendell Holmes once said: ‘I like to pay taxes. With them I buy civilisation.’”

Assuming a certain level of revenue that needs to be raised, which depends on the broader economic and fiscal policies of the country concerned, there are a number of broad tax policy considerations that have traditionally guided the development of taxation systems. ‘Fhese include neutrality, efficiency, certainty and simplicity, effectiveness and fairness, as well as flexibility. The imposition of tax leads to diversion of resources from the taxed to the non-taxed sectors. The revenue is allocated on various productive’ sectors in the country with a view to increase the overall growth of the country. Tax revenues may be used to encourage development activities in the less developed areas of the country where normal investors are not willing to invest.

In a context, where many governments have to cope with less revenue, increasing expenditures and resulting fiscal constraints, raising revenue remains the most important function of taxes, which serve as the primary means for financing public goods such as maintenance of law and order and public infrastructure.

As Stated by Holly Sklar

Taxes are how we pool our money for public health and safety, infrastructure, research and services – from the development of vaccines and the internet to public schools and universities, transportation, courts, police, parks and safe drinking water.

Taxation follows the principle of equity. The direct taxes are progressive in nature. Also certain indirect taxes, such as taxes on luxury goods are also progressive in nature. This means the such class has to bear the higher incidence of taxes, whereas, the lower income group is exempted from tax (direct taxes). Thus, taxation helps to reduce inequalities of income and wealth.

In modern times, the aim of public finance is not merely to raise sufficient financial resources for meeting administrative expense, for maintenance of law and order and to protect the country from foreign aggression. Now, the main object is to ensure the social welfare. The increase in the collection of tax increases the Government revenue. It is safer for the Government to avoid borrowings by increasing tax revenue. Taxation generates social welfare.

A part of the tax revenue is utilised for social development activities, such as health, family welfare etc., which also improve social welfare as well as social order in the society.

The taxes that we pay are what enable the lesser privileged many to get a good education and healthcare that they cannot afford themselves. In fact, the Government is able to work out plans of free primary education or free high school and college education for the under privileged only because of the income that it gains from taxpayers.

An important merit of taxation is that it is not only a good instrument of resource mobilisation for development but it also cuts down consumption of goods and thereby helps in checking inflation. Whereas direct taxes on income, profits and wealth reduce the disposable incomes of the people and thereby tend to reduce aggregate demand in the economy, indirect taxes directly discourages the consumption of the goods on which they are levied by raising their prices.

Taxation policy should be used to prevent the potential economic surplus from being wasted inconspicuous consumption and unproductive investment. It may be noted that this potential economic surplus is not a given amount but it increases in the very process of economic development.
It is worth mentioning that in a mixed economy such as ours, there is a need to raise not only the public savings and investment but also to promote private savings and investment so that the overall rate of saving and investment in the economy is stepped up. This implies that taxation measures should not impair incentives to save and invest of the people. Therefore, a developing economy encounters a crucial dilemma in augmenting larger resources for public investment on the one hand and to promote private savings and investment on the other.

Role of professionals

The tax profession is a solemn and serious occupation. It is a noble calling and all those who belong to it are its honourable members. Although the entry to the profession can be made merely by acquiring the qualification of tax competence, the honour as a professional has to be maintained by its members by their exemplary conduct both in and outside the Court.

Practice in the field of taxation is considered as a traditional field where members of the legal and accounting profession have made a very useful contribution. Lawyers and charted accountants, with their expertise in the field of law and accounting, have a distinct advantage in tax practice.

Some of the professionals who hold dual qualifications as an advocate and as a Chartered Accountant and who are engaged in the tax practice find their accounting background to be very useful in resolving many complicated legal issues in day-to-day practice. Apart from direct taxation, many professionals have now specialised in the filed of indirect taxation such as sales tax, excise duty, custom duty etc.

What is necessary is to create a public Image that the members of the profession are competent, that they are keeping public interest above self interest, that the members are honest and that the erring members are awarded due punishment expeditiously. This is possible only if each member supports the effort of the professional body. Legislative support may not be available for all efforts. This has to be supplemented by self regulatory measures. It is in the field of self regulatory measures that support of the members is more needed for enhancing the public image of the profession.

Pendency of tax matters before courts and methods for reduction of litigation

It is common knowledge that hundreds of thousands of cases by way of Second Appeals before Tribunal, writ petitions, applications and references before the High Courts and Special Leave Petitions before the Supreme Court relating to taxes, are pending for disposal. The pendency is increasing day-by-day because the disposal during. any period always lags behind the additions during such period. It is also noticed that while the ratio of cases as filed by the assessee and the department before tribunal is nearly equal, the same IS greatly disproportionate in the case of the matters pending before the High courts and the Supreme Court.

This attitudinal background has to be kept in mind to resolve the problems of pendency.

• As a first step, it will be necessary to drastically curtail indiscriminate filing of the applications and references by the department since the pendency on account of such applications and references constitute more than 90% of the total pendency before Courts.

• Much of litigations arise because of myriad exemption and deductions. If these are given a go-by and instead very low rates of taxes in direct taxation statutes introduced, there may hardly arise any controversy between the revenue and taxpayers.

• Lastly, legal professionals also owe responsibility to the taxpayers’ community and therefore must extend helping hand for the reduction of litigation and checking its mushrooming tendency.

Moreover, in matters of taxation, like in the administration of the law, it is not enough that justice should be done–it must also be seen to be done. If owing to defects in the tax law or in their administration, highly progressive taxes on wealth or income have no visible effect on the prevailing economic inequalities or in the standards of living of the rich, the mere enactment of advanced tax legislation will prove fruitless.

In a way, there must be equity in a taxation system and an element of redistribution of resources between high and low income people as well as similar tax burden for taxpayers with similar means. Taxation must impact neutrally on various taxpayer groups and economic sectors, and commercial decision making must not get distorted by the tax considerations. Simultaneously, the system should have nexus between the revenue proposed to be raised and the public expenditure needs. A good tax system must always pave the way for simplicity and transparency in the system. Taxpayers must be able to clearly understand the nature and extent of their obligation and consequences of non-compliance and they must also know how and when they are paying tax. Similarly, the tax scheme should be so framed that there would be minimal incentive and potential for avoidance of taxation.

So, I would like to say that we all should strive together to achieve the main object of tax laws and Constitution which could help in the development of nation in a better way. I conclude with an earnest hope that members of this Association will rise to the occasion and meet the challenges of new millennium with dynamism and enthusiasm.

I wish the Association every Success.

Jai Hind

[Source: Speech delivered at AIFTP’s Two Day National Tax Conference held at Jamshedpur on 20th August, 2016. Reproduced with permission from the AIFTP Journal]

14 comments on “The Role Of Professionals In Tax Reforms: Justice Mr. R.K. Agrawal
  1. Tax.Adv.BSKRAO says:

    REGULATION OF TAX PROFESSIONALS
    It would be difficult to have a well-functioning tax system without tax advisors. Because most taxpayers are not familiar with the intricacies of tax laws, tax advisors are needed so that taxpayers can fulfill their complicated tax obligations. As informed members of the public, tax advisors also provide input to the formulation of legislation and regulations. By counseling taxpayers on how to comply with their legal obligations, tax advisors serve an important public interest. State has interest and duty bound to foster and protect the role tax advisors. Role of tax advisors, however, differs from that of the tax authorities in that their primary loyalty is to their client, not to the state. An important function of the regulation of tax advisors is to help strike an appropriate balance between loyalty to the system and loyalty to the client.

    Regulation also has the goal of protecting clients from unscrupulous or incompetent tax advisors. Here, the regulatory interest of the state is similar to that in other areas of consumer protection. The danger is that such regulation, instead of protecting economic interests of those permitted to act as tax advisors, might strangle free exercise of profession by creating undue bureaucratic control. Different countries have adopted different regulatory approaches. Tax advice is typically given by different types of professional’s viz. Lawyers, Accountants and Tax Practitioners – each of which may be subject to independent regulation of its profession. Tax advice covers multitudes of different activities, which can be performed by professionals with different qualifications having different regulatory approaches. Tax Advice involves preparation of statements, filing of returns and acting and pleading before revenue authorities. Professional misconduct in the course of all these three activities are not covered by independent regulation of any professional body in India to make Tax Advisors accountable to revenue department. It means that, when they are not licensed for all these three activities involved in tax practice, such independent professional body restrained to take action on members against professional misconduct in tax advice. In India following five classes of Tax Professionals are working in the area of Tax Advice.

    (1) Legal Practitioners
    (2) Chartered Accountants
    (3) Cost and Management Accountants
    (4) Company Secretaries
    (5) Registered Tax Practitioners in the respective taxation statutes.

    Regulating profession by imposing conditions for admission inevitably reduces supply potential of professionals. Therefore, a rough balance between supply and demand for professional services should be maintained. Demand for tax advisors will depend on development of economy, legal system and assessment of how many tax payers are required to file the returns. Keeping in mind the basic requirement of balance between supply and demand for tax advice, limitation on resources for training and education are likely to constitute the major bottleneck in the supply of tax advisors in developing and transition countries. To avoid such bottleneck, any regulation should avoid exclusive channels of access to the profession. Variety of functions performed by tax advisors overlaps the responsibilities ordinarily carried out by other professionals, mainly lawyers and accountant’s viz. “practice of law” and “practice of accounts”. Because legal, accounting and tax services are closely connected, it is desirable to approximate certain professional rules, which the government should reduce to writing in unified law to be framed for Tax Professionals by including all the five class of well diversified group of Tax Professionals of India.

    The extent of regulation of the tax profession differs from country to country. Three general approaches that can be identified are (1) Full Regulation Model, (2) Partial Regulation Model and (3) No Regulation Model.

    (1) Full Regulation Model : followed by USA, governed by US Treasury Circular No.230 of 2011 and Australia, governed by Tax Agent Service Act 2009.
    In this model lawyers, accountants, tax Agents/return prepares should invariably apply for registration as per US Treasury Circular No.230 or Tax Agent Service Act of Australia Academic qualification, training and continuing education program are provided in above statute. All Tax Advisors who obtained PTIN/Tax Agent/Bas Agent should sign the return as such and accountable to Revenue Deptt.
    (2) Partial Regulation Model : followed by Austria, China, Germany and Japan
    In this model every Tax Advisor should obtain license with an exception to lawyers and accountants who are directly admitted. Others to become a licensed Tax Advisor must undergo prescribed program of the course and take an examination.
    (3) No Regulation Model : followed by Belgium, Portugal, Spain, UK and India,
    In this model provision for tax advice and return preparation is generally unrestricted. With an exception of countries following the US or German Models, representation before tax authorities is relatively unrestricted.

    In India, Non-lawyers are allowed to represent clients in administrative proceedings. But in view of latest verdict in the case of Bar Council of India Vs A.K.Balaji (SC) Dt.04.07.2012 read with A.K.Balaji Vs Govt. of India (2012) 35 KLR 290 21.02.2012 (HC) covering both the litigious and non-litigious matter within the definition of “practice of law” in India, other than enrolled Advocates cannot practice law any more in India (See Attachment). Therefore, representation of non-lawyers in administrative proceedings also held to bad in law, null and void with effect from 04.07.2012. Further, situation may arise that order of revenue authorities passed against the representation of non-lawyers in absence of assesses, cannot be appealed or enforced by the department to recover revenue demand raised in assessment proceedings.

    In GST regime, many new assesses will be added-up to the compliance requirement under Goods and Service Tax Act, demanding the assistance of more Tax Professionals. Hence, it is right time to have unified control and regulation of all players practicing taxation law in India, Tax Practitioners Law is the need of the hour. In India, there are professional bodies passed by the Acts of Parliament, to protect the interest of their members only, but there is no professional body to generate tax professionals to protect the interest of Govt. revenue. On date, there is no required number of competent Tax Professionals in India to fully support compliance under proposed GST regime. “More persons in the line of tax practice leads to improvement in quantum of compliance and more revenue to the Government”. Therefore, India requires separate unified law for Tax Professionals to enjoy legitimate revenue collection in GST regime.

    B.S.K.RAO, Tax Advocate, Tilak Nagar, Shimoga-577201, Karnataka State
    E-Mail : raoshimoga@gmail.com
    Mo.No. 0-9035089036

  2. Speech is great no doubt. But if you read the following i quote you will agree what to be proper.

    I have to say, Leadership of any depends of the Boards; Boards are supposed to give Leadership.
    What i find is there is clear missing of Leadership in most charitable trusts, like in Governance of a lot of governments in almost all states, including in the union cabinet too;
    Leader is supposed to give policy; that is like , a leader climbs a very tall tree in a jungle, and if he finds not a right jungle, in most of the cases, he shouts at the top of the voice, sorry this of not the right jungle;and thus he moves out in search of right jungle where he needs to provide necessary leadership like the Lion in the right jungle unlike a tiger;
    Managers is mostly some tigers like, that is he immediately says ”Shut up , we”re making progress”; that is the situation in most activities in the country for want of right leader type policies that is the fact,
    that way i could see what Thakur said after judgement reserved by the hn SC, as if this mean thinks he has leadership but what we see he is some ”manager type” person; while Lodha committee is the right Leadership committee for the sport leadership philosophy.
    I had seen him in Bombay HC he never failed to admonish any advocate mouthful if he misdirects issues; why i had seen him how many times he rightly admonished very great Kapil sibal, why even Chidambaram too;
    Any advocate when admonished, he would be sheep before him but when in the bar room he would talk all sorts of justice .Lodha.
    Indeed he is one of the able CIs of India is not any exaggeration that way he also gave direction rightly.

    Every one needs to think what is governance is; might be unpalatable, but what all palatable need not be necessarily is really useful to ythe citizens. is it not rajesh?

  3. Rajesh bhardwaj says:

    Sir, excellent speech by Hon. Justice. I particularly liked his following suggestion-• Much of litigations arise because of myriad exemption and deductions. If these are given a go-by and instead very low rates of taxes in direct taxation statutes introduced, there may hardly arise any controversy between the revenue and taxpayers.
    It is high time Hon. PM/ FM introduce flat rate of 15% for all tax payers in income tax and withdraw all exemptions/deductions/rebates etc clogging the IT Act and cause for litigation( apart from being widely misused!) . The govt itself admits that after considering all such deductions the effective rate of tax is 18-20% and propose to reduce tax rates to 25%. To widen tax base and encourage voluntary compliance a rate of 15% would be in order.

  4. Sunil Minocha says:

    All central & state Registered Tax practitioners & other TPRs waiting in the wings must be allowed to continue practice/issue certificates in the proposed sections of GST Act that aims to subsume several central & state levies/taxes under indirect tax structure, expected to be rolled out across India from FY 2017-18.It would serve multiple purpose of revenue growth,self-employment and increased Tax compliance.

  5. BSK Rao raised issues correctly. So obviously the problem is with the department of revenue as also the inefficient ‘law makers’ as such. so, how ‘law makers’ sans any qualification(s), just as a representative of people assume all powers of framing laws is a very big question before the very citizens who are dejure under Art 5 of the Constitution.

    As was held by SC in CIT v GM Dandekar 22 ITR 235 (Mad), the representative cannot be questionable that way very ‘law makers’ do escape the control of law of crimes is obvious.

    In the circumstances, my considered view the very Assessee himself being a citizen under Art 5 of the Constitution do enjoy more superior authority thany any including the very ‘law maker’ himself, as such he can sign his own tax documents where CA slots are put on the so called forms, so obviously the penal provisions under income tax Act relevant sections are practically ‘preposterous’ threat, as it is said in any court , the petitioner himself can represent his own matter without any advocate of any kind.

    So just do away those sections of the Tax Act on signing of the CA slots by the SC declaring those sections are severed under the doctrine of severability.

    If done no more laws as far as signing the tax related accounts under taxation administration system, that way final seal can be just put for ever on the issue of signatures of the CA slots allocated on the forms as such.

    This new system can allow the Assessee to use any one to be his representative to prepare the books of accounts and the very assessee himself can verify by affixing his signature himself.

    In the case of ‘legal person’ position under companies Act , the final signing authority since Company secretary is granted that authority that either he as CS alone or conjointly with the MD or the CMD as the right authorities, thus eliminate too many meaningless sections in the income tax Act 1961, as also ensure reduce as many sections and so many sub sections for better clarity of the tax la as such, that will reduce pendencies in the courts tribunals of all kinds, besides burden on constitutional courts would get well pruned is my considered opinion.

  6. Hari Agarwal says:

    highly useful guidance

  7. BSKRAO says:

    APPEARANCE & AUDIT UNDER GST LAW DOMAIN OF ADVOCATES

    (1) Indian legislature provided special class of persons called Advocates in Advocates Act, 1961 to practice all Indian laws. Section 29 of Advocates Act, specifies that Advocates alone are entitled to practice the profession of Law & Section 33 of Advocates Act specifies that Advocates alone entitled to practice the profession of law before any Court or before any authority or person. Bar Council of India Vs A.K.Balaji [SLP(Civil)No(s)17150-17154/2012] Dt.4.7.2012 (SC) & A.K.Balaji Vs Govt. of India (2012) 35 KLR 290 21.02.2012 (HC) it was clearly held by Apex Court & Madras HC that Advocates alone are entitled to practice the Profession of Law both in litigious and non-litigious matters (See Attachment)

    (2) Legal profession in India governed by Advocates Act and the disciplinary rules and regulations, code of conduct and professional ethics framed & practiced from time to time. There is also a hierarchy of disciplinary authorities such as the State Bar Council, Bar Council of India, Supreme Court, etc. These authorities can exercise their disciplinary authority/control only over the Advocates who are on the Rolls maintained under the Advocates Act. Any person who is not subject to disciplinary control of the above said authorities if allowed to practice the profession of law, he/she would go scot-free and would not be subject to the supervision and the disciplinary jurisdiction of the above said authorities. Professional misconduct in the course of “Practice of Law” purely covered under Advocates Act read with Bar Council of India Rules in India. I.e, only Bar Council in India issued license to enrolled Advocates to practice law in India & take action for professional negligence. Chartered Accountants neither licensed to practice law to enable his/her professional body to take action for professional misconduct nor any out side agencies charge them for professional negligence.

    (3) Audit means verification, depending on the purpose they are classified as Energy Audit, Environment Audit, Product Audit, Process Audit, Pollution Audit, Legal Audit in USA & Tax Audit in Indian Income-Tax Act. Here, person conducting audit should be specialized in that particular Subject. Hence, Audit in GST Law is the domain of Law Professionals. In conclusion, only person licensed to practice law in India should issue Audit Certificate under GST Law. If such authority for Appearance & audit given to Chartered Accountants, situation may arise that order of assessing authority in proposed GST Law passed against the audit & representation of Chartered Accountant become in-fructuous, bad in law, null & void, as it amounts to passing of the order without giving an opportunity of being heard to the assesse. Further, such orders can not be enforced by the Deptt. to recover revenue demand raised.

    B.S.K.RAO,
    Auditor & Tax Advocate,
    BDKRAO, Beside SBI,
    Tialk Nagar, Shimoga-577201
    Karnataka State

    E-Mail: raoshimoga@gmail.com
    Mo.No: 0-9035089036

  8. BSKRAO says:

    WIDENING TAX BASE IN INDIAN TAX LAWS & INCOME-TAX IN PARTICULAR
    (Before Hon’ble Finance Minister, Govt. of India, New Delhi)

    In this computer era, all records of business enterprises are maintained in computers and voluntary compliance of return filing U/s 139 of Income-Tax Act are also sought in digital format. Return preparation utilities are provided by the Deptt. so that there may not be any instance of wrong claims or deduction, unless there is bug in the utility provided. Therefore, Tax Professional should be more specialized in Computer Operation rather than Income-Tax Law and Accounts at Original Side. As per Section 288(2) of Income-Tax Act, Eight class of persons are authorized to act as representative of assessee. Among them, only following Five class of persons are authorized to prepare return on behalf of assessee under Rule 12A of Income-Tax Rules :-

    (a) Legal Practitioners
    (b) Chartered Accountants
    (c) Cost Accountants, Company Secretaries & Income-Tax Practitioners.

    Audit means “verification”, depending on the purpose they are classified as Energy Audit, Environment Audit, Product Audit, Process Audit, Legal Audit in USA & Tax Audit in Indian Income-Tax Act. Here, person conducting audit should be specialized in that subject. Hence the word “Audit” is not the domain of Chartered Accountants. Assessing Officers in Income-Tax Deptt. who conduct audit in assessment proceedings are not Chartered Accountants. In conclusion, person specialized in Income-Tax law should issue “Certificates/Reports”. under Income-Tax Act. In 1984 certificate from only Chartered Accountant U/s 44AB called Tax Audit introduced in Income-Tax Act to ensure that physical books of accounts are properly maintained by business enterprise & claim for deductions are correctly made and also to save the time of assessing officers to verify correctness of totals at the time of scrutiny. Since then, CA Certificates started entering Income-Tax Act and on date there are 46 Plus CA Certificates in Income-Tax Act. Because of 46 Plus mandatory CA Certificates in Income-Tax Act, Legal Practitioners, Cost Accountants, Company Secretaries and Income-Tax Practitioners can not exercise the authority granted in the statute fully & independently. This is practically causing strict hurdle for voluntary compliance. This position is comparable to decree of the court which can not be executed. Here the question is, when such other classes of persons are authorized to PREPARE RETURN under Rule 12A, there is no JUSTIFICATION to prohibit them from issue of certificates in Income-Tax Act (Here presumption is, such other class of persons also possess the knowledge of Accounting Principles prescribed U/s 145 of Income-Tax Act) It is also clear that, on introduction of CA Certificates in Income-Tax Act, original intention of legislature in Rule 12A has been struck down. In fact, there is no such type of certification clause in any country throughout the world in revenue side.

    In latest e-filing website of Income-Tax Deptt. only CA’s are treated as Tax Professionals with special login to upload CA Certificates (Impracticable procedure), without which Non-CA Tax Professional can not give compliance to the Deptt., if given his clients are under the risk of penal provision. These CA Certificates barricade support for voluntary compliance from Non-CA Tax Professionals & new Non-CA Tax Professionals are not entering tax profession on one hand and total number of practicing CA’s are not increasing on the other hand (Considering the output & death rate of practicing CA’s). In the enclosed Tax Audit Data provided by DIT(S) (See Exhibit-1), it is evident that only 65,570 CA’s are practicing throughout India. Due to Tax Audit ceiling fixed by ICAI irrespective of Corporates & Non-Corporates without considering the demographic spread of CA’s, Non-CA Tax Professionals handling tax audit cases have to roam around in search of empty slots of CA Signature to give compliance in the case of their clients during due dates. This has also resulted in high cost of compliance, due to high demand & extra payment made for reservation of empty slots of CA Signature. These CA Certificates in Income-Tax Act are causing strict hurdle for voluntary compliance not only in Income-Tax Act, but also in other Central and State Govt. tax laws (Ex: In Finance Act, 2012 negative list introduced in Service Tax requiring the assistance of more tax professionals, but number of tax professionals are stand still on date). In another 10 years, Non-CA’s who entered the Tax Profession in 1980’s will all eliminate & Govt. has to relay on only CA’s for seeking compliance under all Indian taxation laws.
    In Chapter No.7, Manual of Office Procedure Volume-II published by The Directorate of Income-Tax, lot about widening of tax base has been discussed, but nowhere discussed about hurdles for voluntary compliance in Entry Door of Section 139. Deptt. should admit the fact that compliance U/s 139 from business class comes through Tax Professionals only. Hence, more persons in the line of tax practice more revenue. Following are genuine points should be considered by CBDT before taking action for widening tax base of assesses.

    (a) Assesses sign affidavit format called Verification in the return of income, which makes him liable for imprisonment which may be extend to seven years with fine U/s 277 of Income-Tax Act in the event of furnishing false information. (See also Section 181 of IPC) Further, it was held in the case of CIT Vs HCIL Kalindee ARSSPL Delhi HC Dt.29.07.2013 that mere CA Certificate do not establish the bonafide of assesses claim & CIT Vs G.M.Dandekar 22 ITR 235 (Mad) it was held that CA’s can not be made accountable to Income-Tax Department as they are acting in representative capacity. Therefore, Deptt. should decide that it wants CA Certificates or Revenue ?

    (b) Whether Widening of Tax Base has direct relation to growth in number of persons engaged in Income-Tax practice? If so, who are the persons authorized to practice Income-Tax law U/s 288(2), assisting for propagating & compliance U/s 139. Whether they are increasing/decreasing every year, because of support/cornering in the Income-Tax law or is there any constraint in their practice. Even holding CA’s are increasing, whether they stick to practice without seeking employment ?

    (c) Hurdles in Entry Door U/s 139 of Income-Tax Act, analyzing the types of hurdle such as highly complicated process of e-return filing prevailing under Income-Tax Act on date or any other hurdle that relates to assesses or tax professionals. Extent of application and coverage of Income-Tax Act as compared to other Indirect Taxes, quantum of tax professionals required for the same and there demographic spread throughout India. Ie, whether persons on whom full power of certification and representation granted in Income-Tax Act on date are evenly spread throughout India to cover all cases ?

    (d) Stop filers tracking mechanism, whether tax professionals can handle such event better by sending notice on regular basis to their clients, if they are encouraged by the Income-Tax Deptt. without bias.

    In India there are professional bodies passed by the Acts of Parliament, to protect the interest of their members only, but there is no professional body to generate tax professionals to protect the interest of govt. revenue. Therefore, it is right time, our Central Govt. should seriously consider passing of Tax Practitioners Bill either in the lines of Tax Agent Service Act of Australia (See http://www.tpb.gov.au) or in the line of Tax Practitioners Bill of Republic of South Africa (See http://www.sars.gov.za) to generate tax professionals to fully support voluntary compliance in Indian taxation laws to enjoy the privilege of optimum tax collection by widening of genuine tax base of assesses. In developed countries like Australia 70% to 80% of population are under tax net, whereas in India only 2% of population are under tax net. This is because of confining certification powers only to Chartered Accountants in Income-Tax Act, 1961 as discussed above. On date ample tax compliance work is there, but there is no required Tax Professionals to support voluntary compliance.

    B.S.K.RAO, B,Com, LL.B, MICA,
    Auditor & Tax Advocate,
    BDKRAO, Beside SBI,
    Tilak Nagar, Shimoga-577201
    Karnataka State

    Mobile : 0-9035089036
    E-Mail : raoshimoga@gmail.com Published in Tax Guru Website on 20.01.2014

  9. N. Devanathan says:

    “Thought provoking address by learned Judge.

    The Tax Administrative Reform Commission headed by Dr. Parthasarathi Shome, after extracting the passage of preamble ,in the Book titled The Monk Who Sold His Ferrari

    criticised, censured, condemned the lack of accountability in the system is represented by in fructuous demands raised by the tax administration with impunity and made powerful suggestion to the effect that The Department should treat the taxpayer as a ‘customer’ and have ‘customer focus’ in its attitude. and interalia, And Independent Evaluation Office (IEO) should be set up to monitor the performance of the tax administration, promote accountability, evaluate the impact of tax policies and assess all factors that affect tax administration. IEO will report to the Governing Council so as to ensure its independence.

    The Government has formulated the National Litigation Policy 2010, for conduct of litigation on its behalf. The policy declares: “Government must cease to be a compulsive litigant.
    The philosophy that matters should be left to the courts for ultimate decision has to be discarded.

    ,The easy approach, ‘let the court decide’, must be eschewed and condemned, in spite of this appeals are filed mechanically and unless accountability is promoted as has been tellingly pointed shome parthasarathi docket explosions will continue for ever.

  10. I agree with his idea:

    ‘Much of litigations arise because of myriad exemption and deductions. If these are given a go-by and instead very low rates of taxes in direct taxation statutes introduced, there may hardly arise any controversy between the revenue and taxpayers’.

    In fact the fiscal administration is indeed highly confused, more so every year some new ideas or some wrong ideas, or some ‘political advantageous ideas’ and the like when surfacing, the fiscal administration gets ‘over confused’ after all finance minister will not agree with earlier finance minister under so called ‘public new policy floated by the political party in the power’ mainly because ‘one upmanship’ the new government wants to bring in, like ‘123 agreement’ by UPA, and now ‘GST’ by the BJP in power, for example.

    such ‘rigmaroles’ UPA failed to appreciate ‘ radio activity menace in nuclear power plants to be put, with the world experiences like – in the very USA, Germany, and Japan say a plenty on the ‘radio activity’ and in fact this if we need the Nuclear power plants in the name of ‘clean energy’ – liability of the Nation by way loans from world organisations running for decades on the national exchequer, is again charged on ‘Taxation’ ideas, that burden is straight transfered on ‘tax payers’, under so called fiscal policies, besides ‘monetary policies ‘ are charged – that means monetary policies run for ‘helicopter moneys’ plans sure method of reaching ‘inflations’ to ‘stagflation and so on is contributed by the so called fiscal policies in the name of OWH idea, ‘i buy civilization’ and the like so also ‘internet ‘ and so on.

    In the similar way, we have ‘infrastructure developments’ like national high ways authority planning and constructing ‘high ways’ (not anyway comparable to Turnpikes of the USA, (we have to carry on major repairs, even during the construction of high ways due to sub standard works encouraged by politicians in power for ‘obvious reasons’ (tax payer has to carry the burden to meet such nefarious obligations, like the 2G scams and other scams too , normally every government is involved to appease the politicians in power, (again the taxpayer bears the burdens incessantly every year under new garbs, that also gets into so called ‘fiscal plans’ promoted and expressed in budgets like the one mainly here ‘annual; budgets.

    similarly , the examples are galore…

    Obviously, uncontrollably diverted funds are met by tax payers – both direct and indirect – that obviously increases very big disparity between two classes – so called ‘rice’ and ‘wealthy’ and the really poor people; while ‘poor people’ number surges year after year (yoy), but politicians project they have done great things they had done they would do if re-elected to power also charges ‘taxation’ – see Mr. Trump obviously didn’t pay taxes quite many years in the USA, today on a Republican ticket says, ‘ he would do great things; likewise our indian politicians too; USA can afford the luxury but India cannot, our legal Acts just support these ‘untrustworthies’ in the guise of governments under so called ‘fiscal policies’ those fiscal policies are supported by the statutes like taxation laws, rules framed by very perpetrators, as so called ‘law makers’; (when in trouble the very so called ‘perpetrators in the guise of law makers, during the UPA rule tried to ensure that the constitutional courts cannot try those law makers, thank God that law could not get passed, if passed, our constitutional courts would under so called ‘judicial restraint’ would have been passing order in favor of such so called statutes, as the hon constitutional courts would shy to handle ‘judicial review on such ‘untenable acts or statutes’, (that way only the so called schedule IX surfaced in the form of very first amendment to the constitution) (obviously the politicians in 1950s too indulged in such ‘theatrics’).

    Therefore the taxation and laws have become more and more complicated, due to so called ‘judicial restraint’ ideas, (obviously a great support to the perpetrators of all wrongs in the garb of law makers, who got elected by clear defraud on the voters conscience , by so called free bees ideas, but that also survived, but the burden is again on all tax payers both direct and indirect taxes.

    So things went on complicated, year over year by so called ‘fiscal budgets’ and the complications surfaced in the forms of sections in so many laws created by so called ‘law makers’, in a ‘gungho’ fashions’ year over year; in fact ‘law became a misused too in the hands of the so called law makers, in fact these law makers just shamelessly caused the breach of contract to the constitutional obligations to the ‘dejure’ citizens whose Art 5 position is just taken for granted, when the very fundamental rights got abridged drastically when Art 13 was drastically abridged by so called Constitutional amendments that way Constitutional amendments, getting some kind of constitution identity.. that way so many amendments surfaced.

    can the courts say how they consciously permitted such ‘constitutional amendments’ ; certainly cannot, so they too face the problems day by day like the so called, NJAC Act, thank God , rightly anyway , rightly questioned and rightly declared ‘ultra vires’ by a sensible constitutional bench.

    therefore, our taxation policy is made ever cumbersome year over year; CAs act as per those in fact ‘illegal’ statutes , besides other statutes, so too our Advocacy community,

    Nothing is so easy is the fact whence you bow to obvious lawmakers turned ‘perpetrators’ so long as the citizens really take on them directly, like some ‘recall’ or ‘referendum’ but these perpetrators would not allow ‘recalls’ or ‘referendums’ some tome to come; unless some Robertsperres surface.

    Macaulay rightly said, india indeed a rich country there poverty cannot interfere unless ‘we as British bring in our system of laws ‘so that we can cow down these ‘Indians.

    See Bhutan govt is opening ‘law colleges’ obviously, not allowing the british indian system of laws, but mostly every thing would get based on mediation and conciliation ‘, a time tested method of running a state.

  11. vswami says:

    Contd.
    As he said, the idealogical “due process of law” “has become less due than tortuous and unending”.

    For more such erudite pieces of scholarly guidance, anyone may lookup / go through the write-up displayed on the website of LCI,Sub:”Lawyers vs.the law(s”)

  12. vswami says:

    As selected:

    “The learned Judge emphasizes that legal professionals owe responsibility to the taxpayers’ community and are duty-bound to extend a helping hand for reduction of litigation and checking its mushrooming tendency.”

    This is an aspect, of most concern,rightly underlined by no less a person than a sitting judge of the highest court. It has something to do with the ethics/ethical standards ideally expected of any professional, lawyer, or CA, in practice of tax laws.

    They owe a dual responsibility to both taxpayers, and the adjudicating authorities,alike. Once such a responsibility is discharged eminently, with due diligence, without any bias,but strictly true to own conscience and satisfy the ideal tests of righteousness,the legal system can never ever fail to work, as intended.

    The words soaked in practical wisdom, of a towering law legend, N A Palkhivala must provide a useful guidance.

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