CAG report on IT disputes and appeals

 

Comptroller and Auditor General of India(CAG) is the top Govt Auditor of India, who is a Constitutional authority. He Audits all the Central and State Govt related accounts and gives his report with his findings, lacunae observed in the system, along with necessary corrective measures as per the best practices around the world.

In his latest report on the Income & Corporate  Tax department functioning under the Central Govt, he has given some damning statistics. People in the know feel vindicated with his report lashing at the ineptitude of the Dept in tackling the inefficiency of the tax bureaucracy.

Let us look at some of his key observations:(link)

1)Income tax arrears of demand has increased from Rs.11 lac cr.in 2017-18 to Rs.12.3 lac cr, in 2018-19.

2) Out of this Rs.12.3 lac cr. the Tax dept itself says 99% of it is non-collectible or in other words, would be difficult to recover.

3)At the CIT Appeals, which is the first forum of Appeals,the Auditor observed, the number of cases has gone up from 3 lacs in 17-18 to 3.4 lacs in 18-19 and the total amount locked up has gone up from Rs.5.19 lac cr to Rs.5.6 lac cr.

4)The above amount of Rs.5.6 lac cr is more than the revenue deficit of the Central Govt for the relevant year, the CAG has remarked.

5)The total cases pending at the higher courts i.e ITAT/High Court/Supreme Court have gone up from 82000 in 17-18 to 1.35 lacs in 18-19, which is a whopping 65% jump.

6)CAG also observed that "there have been persistent and pervasive irregularities in respect of Corporation tax and Income tax assessments cases over the years.Recurrence of such irregularities, despite being pointed out repeatedly in the earlier Audit reports point to structural weaknesses on the part of the Department as well as the absence of appropriate institutional mechanism to address this".

7)The auditor has reviewed 2.72 lakh out of 2.99 lakh cases taken up by the I-T department for scrutiny during 2017-18. CAG has also audited 60,000 cases of scrutiny assessments completed in the earlier financial years. CAG found an incidence of errors in assessments checked in audit at 6% (19,768 cases), as against 6.45% in the previous year.

8)More than 82% of individual taxpayers faced TDS mismatch problems during the last three years resulting in disallowance of refund and the creation of avoidable harassment of taxpayers who are mostly middle-class salary earners.

All the above are reflections of deep-rooted malaise plaguing the system of assessments, appeals etc. The tax department is afflicted by the disease of "Appealititis" as per one of the earlier observations of CAG. The tax bureaucracy always plays safe disregarding well-founded precedent judgements of ITAT/HC and even SC, which are in favour of assessees.They conjure up a point of differentiation from precedent judgments which may sometime look contrived, trivial,frivolous, flimsy, and they blow it out of proportion to suit their arguments. The tax department is addicted to filing appeals against the hapless and penniless assessees even after SC ruling against it.This is the special caprice of the experts in the Tax dept, which drives the assessees bankrupt , if not mad. 

You add the judicial delay to this and the cost of fighting these mostly infructuous appeals and what you get is a heady decoction of endless litigation!!!The cost of all this finally falls on the honest taxpayers.

Honest taxpayers still wait for the fructification of the vision of our PM who has drawn a charter for Honouring the Honest.Hope it does not become an endless wait!

" IT Harassments"- no euphemism pl!!

Pl. see the below page from the Central Govt published data.link

Regular IT assessments done by Dept is yielding only 7 to 8% of total Gross Direct tax collected where as Adv. Tax, TDS and SA Tax is 92% i.e the voluntary compliance .

Is there not a strong case for abolishing Assts for atleast individuals who have good track record of say 10 continuous years and have limited scrutiny assessments only for Corporates/Companies with incentives for exemption from assessments if they remit Tax at least 15% more year on year.This will take care of tax buoyancy ratio and reduce assessment costs drastically.

Mr.Sunil Jain of FE recently sent a tweet to FM saying that IT dept is following up with him on some assessment notice despite complying with it and paying tax. Everyone of us have similar experiences on IT assessments despite computerisation. Straightaway all these scrutiny assessments can be called " IT Harassments "-no euphemism.

But it should also be emphasized that the scale of high pitched assessments has substantially come down over the last one/2 years but still more needs to be done in order to totally move away from Tax Terrorism to augment direct tax revenue. I am not making a case for tax evaders or dodgers who r small percentage and who will anyway continue to do so.

My firm conviction is ,if assessments are done away with , then more small businessmen will voluntarily pay under presumptive tax, file return and forget.Another indicator is the difference between how many assessees have paid tax/TDS and the no. who have filed returns.Almost 2 crore nos.!! Is it not sounding another loud bell for doing away with Assessments /Scrutiny assessments but with safeguards  like good track record or yoy 15% inc. in tax remittance etc.

 One last point. Out of such Tax assessed and  shown collected by the Dept how much is contested in appeals before CITs, Tribunals , HCs and SCs.Huge burden on these Courts will also come down and unnecessary litigation is avoided. Lots of multiplier effects can be seen if assessments are abolished.

For encouraging people to file their Income Tax return, Govt can run a lottery or even give atleast  health insurance policy under Ayushman Bharat free of cost.  

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