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Walking into vivaad, again PDF Print E-mail
Wednesday, 04 March 2020 00:00
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Sarthak edit 

 

The government tying appraisals and promotions of income-tax (I-T) officials to a 100% success rate in the Vivad se Vishwas (VsV) scheme, as reported by Business Standard, militates against good sense and fairness. While the scheme was brought about not only to address India’s sclerotic tax litigation but also to engender trust in the taxman by settling of tax disputes—taxpayers availing of the scheme will be offered full waiver of the interest, penalty, and prosecution charges for settling disputes on amounts due up to January 31, and cases where the taxman is appealing an adverse ruling on its demand are to be given a 50% discount on the principal tax amount.

However, with the pressure on I-T officials to achieve a 100% target under VsV, the taxman is already relaying the pressure to the taxpayers, asking them to opt for the VsV route. This effectively means forcing the taxpayer to give up her right to appeal and seek succour through the legal route.The problem is rooted in the high-pitch demands that the taxman routinely makes, which, perhaps, has a lot to do with, as 14th Finance Commission member M Govinda Rao has pointed out in these pages, the overly optimistic tax collection targets that the government seeds in the Budget’s tax revenue collection estimates.

Indeed, much of this high-pitched demand is the reason why tax disputes have been piling up even though the government has been trying to curb “tax terror,” which includes unreasonable tax demands. Though the ruling party had made curbing tax terror a big part of its political manifesto even before the 2014 general elections, there has been a steep rise in tax demand and dispute under the Modi regime—the amount disputed has risen from Rs 4.1 lakh crore in FY14 to Rs 6.23 lakh crore in FY18.

A CAG report last year showed that, in FY18, there were over three lakh cases pending at the CIT (Appeals) level, with Rs 5.2 lakh crore locked in them, while, at higher levels, Rs 4.4 lakh crore is locked up in 0.8 lakh cases. What’s worse is that the taxman has told the CAG that it is ‘difficult to recover’ 98.2% of the disputed amount.

As per the 2018 Economic Survey, the income tax department “unambiguously” loses 65% of its cases. Against such a backdrop, it is only natural that a taxpayer would choose to wait for litigation to be completed, than rush to settle under an amnesty scheme if she has a reasonable chance of winning the tax dispute. Pressurising her to opt for the scheme instead erodes her trust, and is a far cry from the ethos of Vivad se Vishwas. On the other hand, the taxman’s high rate of losses in tax litigation indicates that the demand itself may have been untenable to start with.

In which case, the government will be acting in a fairer manner if it were to link appraisals and promotion of assessing officers to the demands that are disputed and are lost by the tax department at various levels of litigation. That would rein in the income tax officials while ensuring that the taxpayer’s faith in the system is restituted.

 
 

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