It is common experience that Assessing Officers have the tendency to make huge additions and disallowances on frivolous grounds and raise huge tax demands. Coercive measures are adopted to recover the said demands. This causes immense hardship to honest taxpayers.
There are two reasons for the modus operandi of the Assessing Officers. The first is that the CBDT has/ had a policy of rewarding officers with plum postings and promotions based on the tax collected by them (see Collect Taxes; Get Promotion & Choice Posting: CBDT Chief). The second is that some unscrupulous officers get an excuse to demand bribes from the taxpayers (see Chief CIT Used Strong-Arm Techniques To Extort Bribe From Hapless Taxpayers: CBI Report).
Courts have passed repeated strictures to discourage the tendency to pass frivolous assessment orders. However, it has had no effect on the Assessing Officers.
In UTI Mutual Fund vs. ITO 345 ITR 71, the Bombay High Court deplored the tendency of the Assessing Officers to raise demands to meet budgetary requirements. “Administrative directions for fulfilling recovery targets for the collection of revenue should not be at the expense of foreclosing remedies which are available to assessees for challenging the correctness of a demand” the Court said.
In Bharti Airtel vs. ACIT 161 TTJ 428, where a mammoth addition of Rs. 5,739 crore was made on a flippant basis, the Tribunal lamented that it could not remain a “helpless spectator” and that for such a “frivolous addition, someone should be accountable for the resultant undue hardship to the taxpayer“.
In Pr CIT vs. Samcor Glass Ltd the Delhi High Court gave the department an ultimatum and directed that specific guidelines be laid down to prevent abuse of reopening power by the Assessing Officers.
Fortunately, the cries of the taxpayers have been heard by the Hon’ble Prime Minister Narendra Modi. In his latest speech, the Prime Minister has promised that Assessing Officers will be held accountable for the orders that they pass. He stated:
(Speech of the Hon’ble Prime Minister. He talks of accountability for the AO @37.00)
“We are also taking several steps to serve the honest taxpayer better. Electronic filing of returns now covers 85% of all tax returns. Earlier, electronic returns had to be followed by a paper verification which used to take weeks to be processed. This year, we have introduced e-verification using Aadhaar and over four million taxpayers made use of this facility. For them, the entire process was simple, electronic and completed instantly with no paper at all. This year, 91% of electronic returns were processed within ninety days as compared to 46% last year. Nearly 90% of refunds were issued within 90 days. I have asked the Income Tax Department to move to a system where not only returns but also scrutiny is done without having to go to the office. Queries could be raised and answered online or by Email. There should be a visible electronic trail of what is pending with whom, where, and for how long. This is being piloted in five big cities. I have also instructed that the performance appraisal system, for Income Tax Officers be changed. The appraisal should reflect, whether or not the officer’s orders and assessments have been upheld on appeal. This will deter corruption and also motivate officers to pass correct orders. When fully implemented, these changes, namely online scrutiny, and changes in performance appraisal have transformative potential.”
FICCI issued a statement in which it pointed out that it has been representing to the government over the years that assessing officers are issuing assessment orders confirming tax demands without a fair and judicious analysis of the merits of the issue and overlooking judicial precedents merely to achieve the ever elusive revenue targets prescribed for them by the government.
It emphasized that the weakness in the assessment orders is shown by the fact that on appeal 70-80 per cent of the decisions of the Tribunal are delivered against the Revenue.
“The unproductive exercise of issuing assessment orders in favour of Revenue and consequential recovery measures vitiate the tax environment and compel the assesses to litigate the matter in appeals to seek a just treatment of the tax issue. This is the primary reason for uncertainty in tax positions and unnecessary litigation” Ficci said.
Hopefully, the CBDT will respect the solemn promise of the Prime Minister and develop a fool-proof method to ensure that there is no more abuse of power by the Assessing Officers and that they are made accountable for the harassment that they mete out to taxpayers.