The Hindu Business Line : Selection of I-T cases: Govt for less discretionary powers to AOs

EVEN as fears persist over unbridled powers to income-tax officials to harass assessees over the proposed FBT and cash transaction tax details, the Finance Ministry clearly seems to be in favour of minimising the discretionary powers of the assessment officers (AOs) while selecting cases for scrutiny.

Informed sources told Business Line that the Finance Minister at a recent meeting, while expressing the above view, has urged the chief commissioners of income-tax (CCsIT) to come up with suggestions to identify parameters against tax evaders which can be integrated into the security guidelines or the computer aided scrutiny selection (CASS) system.

According to sources, during a recent day-long brain-storming session chaired by the Union Revenue Secretary, attended by the Chairman and all members of the Central Board of Direct Taxes, and cadre-controlling CCsIT, on the need for a Centralised action plan with regard to scrutiny guidelines, a major suggestion was that selection of cases for scrutiny should be continuous throughout the year, and not limited to a specified time period.

And the guidelines so issued during a financial year should remain in force till new guidelines are issued for the next fiscal.

Favouring issue of such guidelines at the beginning of the year, the CCsIT have suggested that the power to select cases may be vested with the Income-tax Commissioner instead of CCIT.

Sources say three categories of places have been suggested by CCsIT for fixing the quantum of parameters for scrutiny guidelines, namely, a) Metro, b) Capitals and c) Small towns.

It has also been suggested that instead of taking taxable income as the criteria for picking up cases, turnover (in the case of corporates) above a particular limit may be considered for scrutiny.

Some of the suggested criteria are said to be additions to fixed assets above a certain limit, large variation in gross profit ratio and cases where refunds exceed the last instalment of advance tax paid.

Additionally, wherever in an audit report, it is mentioned that expenditure has been made in foreign currency, such cases may be picked for scrutiny.

While suggesting that cases where tax evasion is reported by agencies outside the department may also be picked for scrutiny, it is felt that the discretionary power given to CCsIT may be extended to include dropping of cases as well, after recording the reasons for the same.

This is felt necessary because under computer-aided selection of scrutiny cases, at times, such companies were selected which had either gone into liquidation or were not filing returns.

Parallel scheme for FBT: It is learnt that the chief commissioners themselves do not favour a parallel assessment scheme envisaged for the fringe tax benefit, as it would result in additional workload for the department. According to sources, they have accordingly indicated to the Ministry that this should be dispensed with without any further adieu.

Instead, it is suggested that FBT should be disallowed in the hands of the employer, and a single return for both income-tax and FBT may be filed by the employer.

A separate report filed along with the I-T return is preferred by the CCsIT.

The opinion was always in favour of an appropriate threshold for charging FBT as otherwise it would generate too much of workload for the department.

Also, since FBT is a tax on the employee being paid by the employer in the capacity of a surrogate, CCsIT have suggested that it should be checked whether the employee who is receiving the fringe benefit has any taxable income before FBT is charged on the employer.

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