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Tax Refund - Dear FM, Let 'Horses of Correction' run full course!

TIOL - COB( WEB) - 544
MARCH 09, 2017

By Shailendra Kumar, Founder Editor

MARCH is the last month of the current Financial Year (FY). It is truly a busy and tension-spewing month for the taxmen and their Revenue Boards. Cash deposits cases originating from the demonetisation drive are an extra burden for the Income Tax Department which is evidently under pressure to either earn some extra revenue in the form of advance tax or to convince taxpayers to avail the hitherto poorly-responded Prime Minister Garib Kalyan Yojana. That is how the IT-savvy Department has been able to zero in on 4000 high transactions cases and all sorts of notices are being sent to them even before they file their returns and assessments are done. Returns for all such deposits are to be filed in the next fiscal but it is after all a pressure game.

Let's examine how such pressure is upsetting the 'bowels' of revenue juggernauts in the North Block. Though, unlike the CBEC, the Union Finance Minister, Mr Arun Jaitley, has not upwardly revised the revenue targets for the CBDT (The Revised Estimates are the same old Budget Estimates) but the CBDT Chairman appears to be in an unholy haste to achieve the targets. And it is notwithstanding the fact that the official data of the CSO has revised the economic growth rate from 7.6% to seven per cent which means a serious dent to the quantum of profit for the private sector and in turn, a similar blow to revenue mobilisation efforts. But, such downward revision of the projected economic growth means nothing to the CBDT Chairman who is keen and wants to see his field officers keener to realise the Budget Estimates.

What has further dented the official efforts to meet the revenue targets are a couple of amnesty schemes multiplied by demonetisation. There is a historical piece of evidence which indicates that whenever there was an amnesty scheme in the past, the revenue collections did take a hit as a good number of taxpayers availed the scheme and did not contribute to the regular tax collections. In this background, I am sure, the CBDT Chairman is aware of a possible collateral damage which may be rendered to his revenue mobilisation efforts in the last quarter.

As per the official document, the CBDT is expected to collect Rs 4.93 lakh crore of corporate tax and Rs 3.45 lakh crore of personal income tax in the current fiscal. As against this target of Rs 8.47 lakh crore, the Income Tax Department had mopped up a little over Rs six lakh crore by February-end - a massive deficit of Rs 2.3 lakh crore. In terms of percentage the deficit is about 28%. But what could be the saving grace for the CBDT is the last instalment of advance tax, which is 25%, and is due on March 15, 2017. However, it is true that since the economic growth rate has tapered a bit and the business sentiment is noticeably down, it may take a mortal blow.

Interestingly, even after knowing all these ground realities, the CBDT Chairman in his letter dated 06/03/2017 has stated that "the achievement of revenue target is sacrosanct and the single most parameter for evaluating the performance of the Department ... Performance of each CCIT and Pr. CIT will be measured against the target allotted to him/ her regardless of whether the Pr. CCIT Region as a whole achieved its revenue target or not."

It sounds not only strange but cruel too!! How does the Chairman expect his field officials to realise the targets when the projected growth rate has been lowered and there are several unusual factors militating against their efforts. Should one really read between the lines and make a presumption that the taxmen in the field have been given a licence to collect more than what is not due to the Exchequer. Is this D.O. Letter not provoking the officers to go beyond the Laxman Rekha and mobilise revenue to meet this year's target? Does Revenue Secretary Dr Hashmukh Adhia also see eye to eye with the CBDT Chairman on this issue? Are they not aware of the age-old practice in the Revenue Department which tends to arm-twist taxpayers to pay more in the current fiscal and take refund in the next year?

Should I presume that the duo of Revenue Secretary and the CBDT Chairman have forgotten the good work done by them in the past two years. One of the most laudable works done by the Modi Government is not to artificially restrict income tax refund. A refund is a legitimate due to taxpayers and has traditionally been the most potential source of taxpayers' grievances. Thankfully, the Modi Government paid adequate attention to it and the current fiscal may go down in the fiscal history books as one of the extraordinary years for giving away refund to taxpayers. As part of its measures to step up taxpayers' services, the CBDT has cleared huge backlog of refunds pending for several years in the current year and that is why the total refund has so far gone beyond Rs 1.5 lakh crore. It is true that it has hurt the continuing efforts to reach closer to the targets but it was a much-needed relief for the taxpayers and also a historic correction in the Departmental approach towards refund. By slowing down refund in the last quarter the CBDT has conventionally been realising its revenue targets. Sometimes, its officers have been arm-twisting taxpayers in the last week of March to deposit huge payments and take refund next month i.e. April. Though such a modus operandi did help the Finance Minister of the day to make tall claims about revenue realisation but did no good to either the Consolidated Fund of India (CFI) or the industry.

Thanks to the valiant political efforts by the Modi Government such an anomaly appears to be going through a systemic correction. But, going by the latest news that the Department has been asked to stop giving refunds in the month of March, it would be a case of inviting back the virus-on-the-exit syndrome! Merely because the CFI may lose another Rs 10000 crore to 15000 crore, I think, the Modi Government should not risk recalling the exiting syndrome. Let the correction run its full course. It may hurt the fiscal targets in one year but it would be a brilliant example of good fiscal governance and no more last-week arm-twisting instances. Such a decision would make better sense if one goes by the Government's latest commitment made in the Union Budget 2017. As per the Finance Bill, the Government has promised to pay interest on refund due to deductor. Such a good step towards taxpayers' services would be damaged if the refund process is artificially halted to buoy up revenue. I personally think that the Revenue Secretary should make a public statement whether any oral order has been issued in this regard. No sensible department issues written order on such issues.

Yet another important dimension of the raging issue is the conspicuous absence of a political will for positive taxpayers' services. The Income Tax Department performs the twin functions of revenue collection and the taxpayers' services. What the Chairman's D.O. Letter talks about is only the revenue collection and not even passing reference about taxpayers' services. This has confused the field formations. A good number of justice-minded officers appear to be looking for an answer to the question whether it is a case of 'viral relapse' for the Board? Whether the Board wants them to collect revenue by hook or crook? Whether taxpayers' services have taken a back seat? One may recall that only last year the CBDT had asked its officers to insist on only 15% deposit towards demand before granting stay of arrear demand unless the addition made is upheld at the first appellate stage. It was a good example of taxpayers' services as no assessee minds parting with 15% of the tax demand unless it is a high-pitched demand. All such good steps would go waste if the refunds are halted and the Exchequer is made to pay off interest on artificially-stopped refunds. The CBDT should also not forget about some of the uncharitable comments made by the PAC on the huge outgo of interest on delayed refund. It is also important that no witch-hunting policy should be pursued if an officer fails to meet the target as it would damage the morale of the Department which has been given a huge target of almost Rs 10 lakh crore for the next fiscal. Let's hope good senses finally prevail in the corridors of North Block!


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Sub: CIRCULAR ON TAX COLLECTION

I REMEMBER ONE SUCH CIRCULAR SAYING PROMOTIONS WILL BE BASED ON COLLECTIONS HAVE BEEN QUASHED BY COURTS IN PAST,

Posted by Deeapk Gadgil