Finance Bill 2015 – Wish list of tax professionals – Simple tax laws and better tax administration to achieve the goal of the Honourable Prime Minster to have “Ache din” for honest taxpayers

Professionals and honest tax-payers are having great expectations that this year’s Budget will be a vision document of the Honourable Finance Minister to have a simplified tax structure and better tax administration. The Federation has short-listed some of the issues for the kind consideration of the Honourable Finance Minister which can be deliberated upon:

1. Accountability provision in the direct tax law

Due to lack of accountability on the part of the Assessing Officers and his supervising officers, it is common to find additions being made for name sake which is not permissible in quasi-judicial proceedings, knowing well that they might not withstand judicial scrutiny. In order to keep a check on such frivolous additions, the accountability provision as suggested by Dr. Raja J. Chelliah, in his report [(1992) 197 ITR 177 (St) (257) Para 5.9] must be incorporated in the Income–tax Act, 1961, taking into consideration that the Honourable Bombay High Court has passed a number of orders against frivolous appeals filed by revenue when the Tribunal has followed the judgment of Supreme Court.

2. Speedy justice in taxation matters by Income–tax Appellate Tribunal which is the final fact finding authority is a need of the hour.

As on 1-12-2014 there are 1,00,420 appeals which are pending before the Income-tax Appellate Tribunal (the “Tribunal”) before its 63 Benches across the country. Pendency has increased due to non-appointment of members to the Tribunal. Though the interview process was completed about six months back, the appointment of members is not yet done due to reasons best known to the Government. It is essential that the members may be appointed at the earliest, which will help to reduce the pendency as well as release revenue to the Government, if any.

3. Proposal of appointment of Members of the Tribunal and Customs Excise and Service Tax Appellate Tribunal only for five years may be scrapped as it will not yield the desired result.

4. Formation of regular ‘Tax Bench’ in all High Courts to deal with direct and indirect taxes.

As the provisions of National Tax Tribunal Act have been struck down by Apex Court, it is essential that for quick disposal of taxation matters, the respective High Court may be requested to constitute a regular Tax Bench so that tax litigation may be settled within a reasonable time. The Bombay High Court has huge pendency. To clear the old references and appeals admitted, the Bombay High Court may require at least three Tax Benches and proactive support from the Tax Bar and the Department as well.

5. Transparency in the appointment of members of the Settlement Commission

To settle the taxation disputes the Settlement commission provision was introduced. If the scope is widened, many tax-payers may approach the Settlement Commission. Federation has made suggestions from time to time to bring transparency in appointment of the members of Settlement Commission and some members may be selected from the profession of law and accountancy. In this connection also, process of appointment of members of the Tribunal may be adopted which will be quite beneficial.

6. Reconciliation and arbitration within the department

A mechanism may be introduced within the department for reconciliation and arbitration with a view to final determination of cases, subject to suitable safe guards, as is the practice followed in countries like USA.

7. Quarterly circulars on every High Court judgment involving legal issues, may be published on the website of the CBDT.

8. All orders of A.O. may be made appealable to CIT(A) and all orders of CIT & CIT(A) may also be made appealable to the Tribunal.

9. Amendment be made to section 255(3) of the Income-tax Act, 1961 to increase the jurisdiction of the Single Member Bench from Rs. 5 lakhs to Rs. 25 lakhs. The last amendment was made w.e.f. 1-4-1971. Over the years, due to steep inflation, the rupee value has gone down considerably and therefore the suggestion made is worth considering without any further delay.

10. Direct appeal be provided to the Supreme Court to attain finality on very important issues which are affecting large number of assesees.

11. Special provisions for avoiding repetitive appeals – Chapter XIV-A, provision may be extended to revenue appeals.

12. Postponement of demand be made on account of arbitrary assessment by coercive methods till decision of first appeal. This is necessary because the Dept. has failed to arrest arbitrary and high-handed assessment orders which is the norm of the day.

13. Advance ruling for all resident Indians.

14. Prosecution matters in taxation – Compounding of technical offences may be done by charging nominal charges.

15. Withholding tax on payments made to non–residents under Explanation 2 to section 195 to be restricted to persons having tax presence in India.

16. Hardship arising out of the Supreme Court‘s decision in Goetze (India) Ltd v. CIT (2006) 284 ITR 323 (SC).

17. Research in tax liability to reduce generation of unaccounted money.

18. Honest Officers must be protected.

19. Transparency in tax administration and corruption free India

Government initiative regarding ‘Swachh Bharat Abhiyan’ is well received by the citizens of our country and everybody is supporting this vital cause. On the same objective, is it possible to have corruption free India? There are good number of officials and professionals whose integrity and devotion to duty cannot ever be doubted. If professionals take the oath that whatever may be the temptation or compulsion they will not indulge in unethical practice, we can have clean and unpolluted tax administration. This is the serious thought we are proposing to our fraternity for debate and response thereto.

The Federation has sent a representation to the Honourable Prime Minister, the Honourable Finance Minister, the Honourable Law Minster and also to the Chairman of the Law Commission. The Federation has presented its views on various issues before the High Powered Committee of the Finance Ministry (refer pg. No. 63) in this regard. The Federation has also sent detailed representations identifying problem areas in litigation relating to tax payers. Readers may also send their suggestions to the office of Finance Ministry by e-mail at [email protected] and [email protected].

Dr. K. Shivaram


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