Demonetisation is showing itself to be good for the country, however tax professionals are of the considered opinion that the amendment introduced in “Taxation Laws (Second Amendment) Act, 2016” may lead to unintended litigation and honest taxpayers may suffer.

Addressing the “Economic Times Asian Business Leaders”, the Honourable Prime Minister Shri Narendra Modi has stated “India is currently witnessing an economic transformation. We are now moving towards a digital and cashless economy”. The Honourable Prime Minister has also stated that “presently, cleaning the system of black money and corruption is very high on agenda”.

We are of the opinion that tax professionals must come together and make suggestions objectively to the Honourable Prime Minister to achieve the agenda of cleaning up black money from the system.

One may recollect that the Federation in the year 2002, in the consultation paper on Direct Taxes presented to the Dr. V. L. Kelkar Committee had made a representation to the Government that all payments through card must be encouraged and that there has to be an incentive for making payment though cards. We are pleased to state that Government has started encouraging payment by cards as this will help the tax administration to bring more assessees under tax net. We are of the opinion that in the years to come, India will be moving towards a paperless economy which will definitely reduce the generation of black money.

The younger generation of this country are of the considered view that
86 per cent of the Indian citizens are happy with demonetisation. They feel that the bold step of the Honourable Prime Minster of India which he has taken in the interest of the nation to eradicate corruption from the country must be appreciated.

One may also recollect that the Federation had suggested in the Year 2010, the introduction of “India Development Tax Free Relief Bond, 2010” that was similar to the now existing “Pradhan Mantri Garib Kalyan Yojana, 2016”. The “India Development tax free relief Bond, 2010” which was drafted by Shri N. M. Ranka Sr. Advocate, Past President of the Federation which was forwarded to the Government through Shri Y. P. Trivedi Sr. Advocate and then Member of Parliament. However the Government had not acted upon it at that time. We highly appreciate that the present Government has accepted the suggestions and introduced a new scheme called “Pradhan Mantri Garib Kalyan Yojana”. We are of the opinion that present scheme of the Government is a good scheme and the tax professionals must explain the scheme to the citizens who can then take advantage of it. The citizen’s awareness programme on the subject of “Demonetisation – Tax & Legal Issues” organised by the Chamber of Tax Consultants of Mumbai on 7-12-2016 was very educative and for the benefit of the readers, the gist of the programme is published in this publication.

A view can be taken that taxing deemed income as per the provisions ofthe Second Amendment Act, 2016, under sections 68, 69, 69A, 69B, 69C, or 69D @ 60% (apart from surcharge, educational cess and penalty which, when added, make the effective tax rate to 83.25%) may lead to increased litigation.

We are of the opinion that tax professionals may have to play a role in ‘Risk Management’ in Taxation by advising the assessees to comply with the law and procedure so that they will not be liable to penalty, interest or prosecution.

One of the suggestions made the Government by the Federation and many professional organisations was to introduce the accountability provision in the tax administration as recommended by Dr. Raja J. Chelliah Committee. The ITAT Bar Association, Mumbai in their representation to Justice R. V. Easwar Committee, has once again, strongly recommended that accountability provision may be introduced in the Income-tax Act.

We hope the Government will introduce accountability provision in the proposed Finance Bill.

Tax professionals are known for innovative ideas and I am sure that professional organisations will join hands and prepare a white paper on the subject of reduction of black money and eradication of corruption from the system which has spread across the country as cancer.

Dr. K. Shivaram

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