Editorial
A recent news report of a fraud of Rs. 11 crores committed by
issuance of bogus income tax refunds by the electronic mode comes as no surprise
to most of us. The fraud seems to have been facilitated by obtaining the
password of certain officials authorised to issue refunds. Such a fraud was
inevitable, given the lax systems and procedures followed by the Income Tax
Department.
The entire computerisation efforts have been pushed through
in a hurry, without creating the necessary environment for a robust, secure and
efficient system. Computerisation can be successful only if the personnel
involved are properly trained in the use of the systems as well as on the need
for security measures associated with the systems. Anyone who has visited an
income tax office is aware of the lack of security consciousness on the part of
the personnel of the Income Tax Department, particularly given the confidential
nature of the documents that they are dealing with. There have been instances
galore of details of income tax returns of various individuals and entities
being surreptitiously obtained from the Income Tax Department’s records by
rivals or enemies, though such information is being refused to be parted with
under the Right to Information Act. A proper retraining of the departmental
staff on the need for security and secrecy is, therefore, absolutely essential
to prevent future frauds.
The tragedy is that while such bogus refunds have been
siphoned off from the system, genuine refunds due to taxpayers are still pending
for more than a year; though it was promised that post-computerisation, such
refunds would be issued within four months of filing of the income tax returns.
While there is a significant improvement from the position that prevailed five
years ago, where one had to wait for almost three years for a tax refund, there
definitely is scope for improvement in the speed of processing of tax returns,
given the fact that such processing is now fully computerised. The only reason
that one can think of for not granting the tax refunds in time is the need for
tax authorities to show higher tax collections, to meet projected targets. One
only hopes that the pretext of the tax refund fraud is not used to further delay
the process of issuance of legitimate refunds due to taxpayers.
The system of unrealistic tax collection targets and the
pressure to meet these targets at all costs is detrimental to a taxpayer
friendly service. Such pressures result in large additions made during the
course of scrutiny assessment, whether justified or not, delays in clearance of
rectification applications, delays in passing orders to give effect to appellate
orders of the Tribunal and Commissioner (Appeals), besides delays in the
issuance of legitimate refunds. A large part of taxpayer grievances are on
account of the actions of tax authorities trying desperately, in whatever way
possible, to meet unrealistic targets set for them. Unless this problem is
tackled at the root itself, taxpayers would continue to suffer.
The enforcement of recovery of recently raised demands has
already begun in full swing, even while the appeals are being filed. All
demands, whether based on justifiable additions to income or not, are being
sought to be recovered. The CBDT has also recently clarified that recovery of
high-pitched demands should not be stayed merely because the addition is
substantial (see Spotlight on page xxx), and that instruction number 1914 would
apply to all recovery proceedings. One only hopes that a balanced view is taken
by the tax authorities while seeking to enforce recovery of demands. In the
pressure to meet collection targets, taxpayers should not be pressurised so much
that their business suffers on account of recovery of unjustified tax demands.
The government is seeking to stimulate the economy by reducing tax rates. Tax
authorities should not defeat that purpose of encouraging growth of business by
putting unwarranted financial pressure on businesses, just to try and meet
unachievable tax targets.
Tax authorities also need to keep in mind that instruction
number 1914 clarifies that appeal effects have to be given within two weeks from
the receipt of the appellate order and rectification applications should also be
decided within two weeks of the receipt of such applications. According to the
CBDT, undue delay in giving effect to appellate orders or in deciding
rectification applications should be dealt with very strictly by the Chief
Commissioners or Commissioners. One hopes that these instructions would also be
followed by the tax authorities. After all, recovery and refund are two sides of
the same coin!
Gautam Nayak
