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Thursday, 23 June 2016 05:41
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Shift to digital model key to less litigation

 

Though the Central Board of Direct Taxes (CBDT) target of reducing litigation has got the most attention because the taxman slipped on it—it now plans to dispose off 1.3 lakh cases in FY17 as compared to 0.7 lakh in FY15—and the amount locked up in appeals is Rs 5.7 lakh crore, the real message in the board’s action-plan is in the digitisation of the tax process.

If successful, not only will this help boost tax collections, it will significantly reduce litigation—the taxman has to keep in mind the point made by the prime minister the other day, that a mere 8% of taxes come through scrutiny. What is now planned is to do more e-mail-based scrutiny and a pilot has already been done in Delhi, Mumbai, Chennai, Bengaluru and Ahmedabad—the scheme has been extended to Kolkata and Hyderabad and, more important, to all categories of taxpayers instead of just non-corporate ones. While this means your CA can now provide the taxman the necessary details, since the scrutiny can be carried out by an officer of a different jurisdiction—an office in Bangalore can scrutinise an account in Mumbai—this imparts a degree of neutrality to the process.

Even more important is Project Insight, which includes a new compliance management central processing centre as well as a transaction analysis centre. While the former will do preliminary data verification and generate letters/notices, the latter will integrate all data as well as process and mine it for patterns and feed this to the compliance management wing.

In 2015, for instance, a total of 5.9 million persons were found to be non-compliant—letters will be sent to them to get information which will then be matched with the information the taxman already has on them. In FY16, the amount of tax collected from various people who did not quote their PAN numbers was a mere Rs 70 crore, but the purpose of the exercise is to ensure it works and look at ways to refine it over a period of time—the process will take time, and the department is looking at an expenditure of around Rs 800 crore spread out over five years; the cost is tiny, what matters is how well Project Insight takes root

 

 

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