On the basis of the Pre-budget Memorandum on Direct Taxes sent by the AIFTP, Shri S. R. Wadhwa, Chairman, Direct Taxes Representation Committee (DTRC) was invited by the High Powered Committee, set up by the Finance Minister, to give evidence on the issues requiring changes in law or rules so as to reduce tax litigation and improve tax compliance.
The meeting was held in the Committee Room of the India International Centre, New Delhi on Wednesday, 31st December, 2014 between 3.30 p.m. and 5.30 p.m. The Committee was chaired by Dr. Ashok Lahiri, Chief Economic Advisor (Retd.) and Shri Siddharth Pradhan, former Chief Commissioner of Income-tax and Vice-Chairman of the Income-tax Settlement Commission, and Gautam Ray, former Chief Commissioner of Customs and Central Excise. The secretaries to the Committee, namely Dr. Vinod Shah, Jt. Secretary, CBDT, Ms. Heman Bikapriya Jt. Secretary, CBEC were also present. AIFTP was represented by Shri S.R. Wadhwa, Chairman, DTRC, V. P. Gupta and Rajesh Joshi, Members, DTRC, A.K. Srivastava, Vice-Chairman – North Zone, AIFTP and Ajay Wadhwa, Member, AIFTP and President, ITAT Bar Association, New Delhi.
A detailed Memorandum was submitted to the Committee which also included inputs by the ITAT Co-ordination Committee headed by Dr. K. Shivaram. It was explained by the Chairman, DTRC in detail. The issues included the need for a proper litigation policy, enlarging the scope of the Income-tax Settlement Commission, reducing the transaction limit for resident tax-payers before the Authority for Advance Rulings from Rs. 100 crores to Rs. 10 crores, making all orders of the CCITs/CITs appealable to the Tribunal; amendment of section 255(3) of the Income-tax Act, 1961 to increase the jurisdiction of the Single Member Bench of the ITAT, listing of common issues pending before the Courts and priority hearing and their priority disposal; amendment of section 158A of the Act requiring the revenue also to avoid repetitive appeals; issue of quarterly circulars by the CBDT making its stand known of every High Court judgment involving legal issues and disposal of appeals by the CITs in a time bound manner.
After discussion of the issues involved in the Memorandum, the Committee desired to know the sections of Income-tax Act which were promoting large scale litigation. Shri Ajay Wadhwa, Member AIFTP and President ITAT Bar association, New Delhi mentioned huge tax litigation arising out of section 14A and Rule 8D of the Income-tax Rules, 1962; and also sections. 153A and 153C. Shri S. R. Wadhwa mentioned about the large transfer pricing disputes, and the forced admission of the amount of concealment made during searches. Shri V.P. Gupta dwelt upon the difficulties arising out of the non-disposal of appeals by CITs (A) due to uneven workload and inadequate supervision. He also mentioned the need to provide against the levy of penalty u/s. 271(1)(c) of the Act where in the quantum appeal, the income is reduced or otherwise modified. He also pointed out certain anomalies in the valuation of perquisites on account of housing and use of car. Shri A. K. Srivastava stressed that the interest, being compensatory in nature, should be increased to 12% for delayed refunds. Shri Rajesh Joshi required the need to increase the number of CITs(A) so that the heavy pendency of appeals, largely in small cities can be cleared. On this point, Shri S. K. Poddar, Immediate Past-President, AIFTP, had also sent a note, ideas from which were emphasised by Shri S. R. Wadhwa.
The President and office bearers of ITSC Bar Association were also present. The President of that Association stressed the need for enlarging the scope of the Settlement Commission particularly because only one chance in a lifetime is given to file a settlement application.
Several clarifications were sought by the High Powered Committee which were duly furnished. After a prolonged discussion, the Committee desired short notes on some issues by 5th January, 2015 and the nature of amendments that would be needed. Such notes would be furnished by the due date.