Editorial
The scrutiny of Income-tax returns for the assessment year
2006-07 is on in full swing, given the deadline of 31st December 2008 for
completion of assessment proceedings. The large number of cases selected for
scrutiny has resulted in most chartered accountants and tax practitioners
running around, trying to cope with the spate of assessment proceedings, and
assessing officers wondering whether it would be possible to complete such a
large number of assessments within the limited timeframe. Given the
inconvenience caused to such a large number of taxpayers in the form of
compiling substantial data and information, the question which really arises is
— Is selection of such a large number of cases for scrutiny really justified ?
Do such assessment proceedings really result in any significant tax collection ?
If one analyses the number of cases selected for scrutiny,
one notices that the overwhelming majority of cases consists of high net worth
individuals who have disclosed significant incomes, and who have also made
significant investments or purchased or sold properties. These cases seem to
have been selected under Computer-Aided Scrutiny Selection (CASS) on the basis
of information received through Annual Information Returns (AIR) regarding
investment, purchase and sale of property, etc. Given the fact that there was no
provision or place for declaration of such investments or purchase and sale of
property in the Income-tax returns for assessment year 2006-07, the Income-tax
Department seems to have blindly selected all these cases for scrutiny, even
though the income for that year may be far in excess of such investments. Most
of these cases result in nil or negligible addition to the assessed income,
yielding no additional tax revenue to the Government.
One reads press reports that as against 3.2 lakh returns
scrutinised in 2007-08, the tax authorities intend to scrutinise about 5 lakh
cases during the current year. Given the fact that most assessing officers in a
city like Mumbai had almost 300 cases to handle last year, it seems that they
would be handling almost 450 cases each in the current year — a Herculean task
indeed !
Even this would be manageable if the assessments were taken
up earlier and the assessing officers followed the CBDT instructions issued last
year, that in cases selected for scrutiny by the computerised process on the
basis of AIR information, only the transactions relating to such information
should be verified with the tax returns, to ensure that such payments are made
out of taxable income. Unfortunately, for most officers, old habits die hard and
they tend to burden themselves with unnecessary details called for from the
assessees, hoping to find scope for some addition or the other, though unrelated
to the AIR information. For the tax authorities to then plead shortage of
officers for carrying out its other functions in time, is totally unjustified.
Take the simple job of issuing refunds for the assessment
year 2007-08. It would be interesting to ask the tax authorities whether any
such refunds have actually been issued so far, though more than one year has
elapsed since the date of filing returns, and the tax authorities claim to have
fully computerised their processes. Almost all taxpayers are still waiting for
the tax authorities to get their act in order, and complete the simple process
of issue of their tax refunds. Obviously, the tax authorities would claim that
their hands are too full with handling scrutiny assessments and selecting cases
for scrutiny for the assessment year 2007-08.
A CBDT press release issued in mid-July 2008 stated that the
Tax Department has taken several steps to expedite processing and scrutiny of
tax returns. This includes doing away with the requirement of filing TDS
certificates and launch of a refund banker scheme, which is claimed to be
currently under implementation in six regions, including Mumbai. Under the
scheme, refunds are to be credited directly to the bank account of the taxpayer.
Unfortunately, the ground reality is quite different. So far,
the Department keeps on sending letters asking for bank account numbers, though
the bank account number may have been mentioned in the return. For months
thereafter, there is no sign of any refund. One therefore wonders as to when the
CBDT talks of ‘under implementation’, at what stage it is ! Would one have to
wait for a few more years for the Tax Department to resolve its own internal
problems and finally grant one’s legitimate refunds ?
The said press release says that the Government has
sanctioned 7051 additional manpower in November 2006 and that recruitment of
additional manpower will be completed by 2010. Do we have to wait till then ?
So many tall claims have been made by the Tax Department in
the past, that when one reads of any such claims or plans, one takes these with
a pinch of salt. In the same press release, the CBDT claims that the CASS system
has been further refined to focus on quality selection of cases with revenue
potential, rather than selecting large quantity of cases. Do the facts bear this
out ?
One can only pray for the day when the actions of tax authorities match their
words !
Gautam Nayak
