Its’ that time of the year when Tax Officers across the Country go into a frenzy to collect taxes by fair or foul means. And with the CBDT Chairman’s brazen promise to link promotions and postings to the quantum of tax recovered, it will be a no-holds barred blood fest between the assessees and the Tax department apprehends the author. The absence of an accountability mechanism to punish the Officer in case the tax demands are held to be untenable means that there is no deterrent to prevent frivolous high-pitched assessments muses the author
January, February & March of every year is very important for the tax administration as they have to meet the target of tax collection and the assesses have to face the recovery proceedings, whether the additions are justified or not. Recent paper reports says “Income tax raids to increases as tax collection falls short”. Another leading paper carried the news that “Collect more taxes to get rewarded”.
Though there is no fault of assessee they have to approach the department number of times just to get the demand rectified. One would have appreciated if the Chairman of CBDT would have given direction to all the officials to first pass the rectification orders, give credit for tax deducted with in a reasonable time and thereafter recover the tax due to Government which has became final
One of the assessee brought to our notice that the demand was wrongly raised, which was rectified, however they have received the recovery notice once again, though no demand is pending against them. Another assessee informed us, they have to receive huge refund which was recovered when the appeal was pending before the Income Tax Appellate Tribunal. However the Assessing Officer is refusing to adjust the refund and is trying to recover the tax which he has raised by reopening the earlier years assessment. This may be the fact of many assesses, though they have fair chance of succeeding in appeal before the Tribunal, they are asked to pay the entire demand. When an appeal is pending before the Tribunal assessee can approach the Tribunal for stay of demand, where as when an appeal is pending before the Commissioner (Appeals) the assessee can approach the Commissioner (Appeals) for stay the recovery. Many High Courts have held that the Commissioner (Appeals) are having the inherent jurisdiction to stay the demand, when that appeal is pending for hearing before him. As there is no Jurisdictional High Court decision on this particular issue, the Commissioner (Appeals) are not entertaining the stay application of the assessee at Mumbai. Under the circumstances assessee can only approach the Commissioner administration and if he refuses to stay the assessee has only remedy of approaching the High Court Under Article 226 of the Constitution of India by way of Writ. Small assesses cannot afford to approach the High Court due to cost factor. Many of the assesses have not been given credit for taxes deducted due to mismatch in the computer system of tax administration. Though there is no fault of assessee they have to approach the department number of times just to get the demand rectified. One would have appreciated if the Chairman of CBDT would have given direction to all the officials to first pass the rectification orders, give credit for tax deducted with in a reasonable time and thereafter recover the tax due to Government which has became final. There are few tax officials who try to recover the taxes without following the due process of law. There are instances where tax officials have recovered the taxes when the stay application is pending before the Tribunal. Our Jurisdictional High Court in KEC International Ltd. vs. B. R. Balakrishanan (2001) 251 ITR 158 (Bom.), Paramount Health Services vs. ACIT (2010) 37 DTR 377 (Bom.), and Mahindra & Mahindra Ltd. (1992) (59) ELT 505 (Bom.) has laid down the guidelines to dispose the stay applications of the assessees. In Maheswari Agro Industries v. UOI (2012) 246 CTR 113 (Raj) (High Court), the court held that when Income assessed by the Assessing Officer was 47 times of income declared by assessee, the instruction No 95 dated 21st August, 1969 holds the field. The discretion must be used by the Assessing Officer to stay the demand unless there are overriding and overwhelming reasons to reject the application.
We hope the tax officials will follow the mandate of the Constitution of India, i.e. Article 265 of the Constitution of India which reads as under “ No tax shall be levied or collected except by authority of law”, the circulars of Board, ratio of jurisdictional High Court, Tribunal in the process of tax recovery, and change their mind set by adopting the culture of tax payer friendly tax service, by following the due process of law
In Sultan Leather Finishers Pvt. Ltd. vs. ACIT (1991) 191 ITR 179 (All), the Court held that when rectification under section 154 is pending till the disposal of rectification application no recovery will be made.
In RPG Enterprises Ltd. vs. Dy. CIT (2001) 251 ITR 20 (ITAT)(AT), the Hon’ble Tribunal has held that the Assessing officer is precluded from taking coercive action for the recovery of the disputed demand until the expiry of the period of limitation allowed for filing of the appeal against the decision of the first appellate authority and also during the pendency of stay application before any revenue authority or the Tribunal.
In DHL Express (India) P. Ltd. vs. ACIT(2011) 49 DTR 432 (Mum) (Trib.) and Honeywell Automation India Ltd v. Dy.CIT (2011) 138 TTJ 373 (Pune) (Trib), Tribunal has held that it is not mandatory that the assessee must approach the lower authorities before filing a stay petition before the Tribunal. The Tribunal held that the assessee can approach the Income tax Appellate Tribunal for stay without approaching the commissioner of Income tax. One of the great reliefs to the assesses at present as the pendency are very less the matters before the Income tax Appellate tribunal is heard within three months of filing an appeal (Except in the city of Mumbai, Pune and Ahmedabad). Hence the finality will be reached within a reasonable time, and the assesses getting the deserved reliefs in most of the cases.
How many tax officials will follow the binding precedents of High Courts, Tribunals and spirit of circulars? As there is no accountability provision in the present Income-tax Act or in the proposed Direct taxes code, 2010 honest tax payers will be the sufferers.
We hope the tax officials will follow the mandate of the Constitution of India, i.e. Article 265 of the Constitution of India which reads as under “ No tax shall be levied or collected except by authority of law”, the circulars of Board, ratio of jurisdictional High Court, Tribunal in the process of tax recovery, and change their mind set by adopting the culture of tax payer friendly tax service, by following the due process of law. It is also duty of the tax consultants to advice the assesses to pay the taxes which is rightfully due to the Government. Where the chances of success are in doubt the assessee may be requested to pay the tax, this will help the assessee to reduce the burden of interest. In case the assessee loses the matter the interest and taxes may sometimes be more than the assessed income and the payment of interest to Government is not an allowable deduction. As a good tax management advisor the assessee must be advised to the pay the tax which is rightfully due to Government at the earliest.
Reproduced with permission from the AIFTP Journal, February 2012
The problems pertains to the proper understanding of the taxing provisions before any action is initiated by way of coercive measures. With the passage of time resort to tough measures have been given `A GO AWAY WITH STAND’ in many of the judicial sagacities. When the assessee has duly discharged amount due towards the Revenue rightfully, still the assesse being serviced with a demand notice in respect of the same outstanding amount together with interest calls for a shocking state of affairs.
The problem now is even more shocking in respect of the Tax Deducted at Source returns (E-TDS Returns) (where assesses are being serviced with very heavy demand notices u/s 156 together with interests) – when the entries in respect of the return so filed do not match with the corresponding entries in OLTAS (Online Tax Accounting System) THOUGH THE TAX BEING DULY DEPOSITED TO THE CREDIT OF CENTRAL GOVERNMENT BY THE DEDUCTORS. This procedural defect can be sort out and be easily rectified by making correction returns, which the deductors are doing in the due course. But servicing them with heavy demand notices running in lakhs of rupees together with interest and a clause contained in the order u/s 201 that Penalty proceedings are initiated separately with the authorisation of the officer concerned do not go with the rhyme and scheme with which the tax measures are being looked upon and adjudicated by the tax department.
Need of the hour is to put in place a better system of disposal of problems in order to go away with the quagmire of putting up rough and tough measures by the Department and undue, unnecessary hardship to addressing claims of those who are rightful in discharge of their obligations under Taxation laws.
I agree with Dr. K. Shivaram that taxmen enjoy enormous powers without
a correspoding accountability for excesses and even for malafide
actions. But this is only a cry in wilderment. Unless the CBDT
Chaiman’s fiat is challenged in the Court of law nothing will change.
I pray, Dr Shivaram takes a lead.
There appears to be no genuine effort by the tax officials to attend to rectifications, grant of credit for taxes deducted at source and closing of demands for taxes directly paid.
When these applications are brought to their notice, they merely take the copies and hardly do anything further. As a result, demands continue to remain in the D&C Register, are uuploaded without verification and the CPC Bangalore continues to send arrear notices to the assessees.
We can’t point out CPC Bangalore that we have poending rectifications or that the credit for payments made are not given by the ITO.
Is it impossible for the Department to find a way out of this mess.
The Hon Chairman CBDT would have done well to provide for promotions to government servants depending on their endeavour to resolve tax payers grievances. However this will never be done as tax payers grievances are solved only on the tax payers providing for the welfare of the government staff and to feed the corrupt in the Department. To add insult to injury the centralized processing centre automatically adjusts refunds against demands which are the subject matter of rectification, cancellation or fake or fictitious demands without providing for any mode of quick redressal of grievances. This is an example of the Government enriching itself in a malicious manner at the expense of the taxpayer. I would strongly recommend to the various associations, chambers to challenge the authority of the CPC Bangalore to automatically adjust refunds without providing for a quick redressal of grievances. I further request the chambers to move a public interest litigation to seek the following reliefs 1) Require the authorities to first attend to tax payers grievances towards refunds, recitification 2) Prevent the CPC Bangalore from adjusting refunds 3) Scrap the system of providing plum postings on the basis of tax recovery
It is not only the matter of high pitched assessment by Tax officer. The problem is also there when appeal is preferred and Dy. Commissioner (Appeal) / lower appellate authority WITHOUT GOING THROUGH THE APPEAL , SIMPLY DISMISS IT. AND SAY WHATEVER THE ASSESSING AUTHORITY HAS DONE IS CORRECT AND APPEAL DOES NOT HOLDS ANY GROUNDS. Problem is also there when an assessee is dealing with the State / Central Government departments and the said departments neglect / fails to upload the of TDS details. Assessee does not get credit for the same. Which means more paper work, visits to the Income tax office.