The Hindu Business Line : New I-T returns form

If the cardinal objective of the tax authorities is simplification and taxpayer-friendly measures for encouraging voluntary compliance, the new income-tax return form with the addition of three more pages to the extant single page Saral form that demands not only declaration of income but also the minutiae of expenditure, including household expenditure made during the financial year, is going to worsen the tax payers' comfort level.

Available figures suggest that from an assessee-base of 186.11 lakh in fiscal 1998-99 the number of taxpayers has risen to 308.08 lakh in fiscal 2004-05 with the increase being over 60 per cent in six years. It is also noteworthy that the total number of returns filed during fiscal 2005-06 (up to November 30, 2005) is 1,95,06,220 as compared to 1,77,11,572 in the same period of the preceding year, registering a growth of 17.94 lakh returns.

If the figures are to be believed, the number of assessees as also the number of returns filed till the fiscal 2005-06 might have only grown. Tendering a submission to the House Panel Committee for its final report on widening of tax base and evasion of tax (2005-06), a CBDT representative has said, "Now the return of income filed by an assessee does no have exact transaction-wise particulars. The returns of income will come only from annual income. So a profile-wise matching that if some body is showing an income of Rs 4 or Rs 5 lakh and if his transaction more or less than Rs 1 crore, then there is an obvious mismatch. So, this is what we will feed into our computer system for selection of cases for scrutiny."

For ordinary salaried individuals, HUFs without professional, business or agri income, the submission of statement of expenditure, including lumpsum household spend, in addition to income, is going to be a tough job as they might have to remember every details of expenditure or seek the help of an accountant to present an income-expenditure statement to a reasonably matching extent.

If expenditure details are the yardstick for tracking evasion, one should look at the figures furnished to the House Panel. Questioned about the number of enquiries made on cases involving conspicuous consumption and the outcome of such enquiries, the Finance Ministry told the Parliamentary Committee "between fiscal 2001-02 to 2003-04, the department has carried out enquiries in 75 such cases resulting in disclosure of Rs 43.58 crore."

While this amount is risible considering the level of luxury items being purchased in the country in the post- reform period, tax experts have contended that in order to reduce the huge disparity between the observable enjoyment of wealth and the income reported for tax, there should be a sustained survey of high cost moveable and immovable assets. In these cases, they have suggested that the short time lag between a high cost transaction and a simple letter from the Tax Department seeking information concerning its source would be deterrence if follow-up action were swift.

What is relevant is the speed with which the department swings into action to track the mismatch between expenditure and income and not the leisurely way of looking at the Saral form after the year is over when the assessees may not even remember the items they purchased.

So by making all the assessees to file income-expenditure statement, the officers charged with the task of tracking big fishes might be ending up doing a clerical job of scrutinising all and sundry Saral forms.

It may look simple in these days of digital revolution to process reams of paper to get an insight into the evasive elements among the taxpayers. But the follow-up action to be made by the department with its limited staff and the need to focus on high-end tax dodgers should be woefully slow if the authorities have to demand statement of income and expenditure from people whose income is less than a few lakhs or say Rs 10 lakh a year, tax experts contend.

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