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Even as the Economic Survey released on the eve of the Union Budget gloated over how tax revenues provided the anchor for fiscal consolidation before the financial tsunami slowed down the economy, expectations run high that the Finance Minister, Mr Pranab Mukherjee, would provide on Monday some breather for taxpayers in the penultimate year to the Direct Taxes Code (DTC) era when tax rates would be moderate and manageable for both individuals and industries.
Considering the fact that the Government is keen on steadily improving the tax-GDP ratio in its ongoing efforts to find funds for its inclusive and welfare programmes so that those living in the margins are not further marginalised, the need for toning up the tax administration and efficiency in the collection of taxes is seldom more urgent than it is today.
This is particularly important in the wake of the observation in the Survey that overall tax expenditure (revenue foregone on account of tax incentives or preferences) as a proportion of aggregate tax collection was placed at 68.6 per cent in 2008-09 and is estimated to have risen to 79.5 per cent in the last fiscal.
The advent of the Direct Taxes Code from April 2012, when profit-linked tax incentives would be replaced by investment-linked ones and rationalisation of tax incentives for savings, provides additional ground for efficient tax regime. But this in no way detracts the Revenue Department from slackening its constant attempts to improve tax compliance through taxpayer-friendly measures to rake in more for the Exchequer.
Tax outstanding
In a written reply to a question in the Lok Sabha on February 25, the Minister of State for Finance, Mr S.S. Palanimanickam, conceded that the total amount of direct taxes outstanding in the cases pending in the Income Tax Appellate Tribunal (ITAT), High Courts and the Supreme Court as on end-September 2010 amounted to a staggering Rs 1,10,371.80 crore.
As the tax authorities said that realisation of the dues from cases under litigation is dependent upon the outcome of the appellate processes, it is also stated that to make the tax collection machinery more effective, the Commissioners of Income Tax (Appeal) have been asked to dispose of high demand appeals entailing Rs 10 lakh and above on a priority basis.
A senior's plight
An octogenarian businessman who had left business years ago and leading a retired life told Business Line on anonymity that the I-T Department has not only retrieved the tax but levied hefty penalty for six years running to Rs 50 lakh, which the assessee paid, after belated detection by the Department. And his appeals to the CIT(A), the Tribunal and the Chief Commissioner of Income Tax (CCIT) in his region, were all turned down.
But subsequently the assessee challenged the validity of the assessment made for six years on the plea that the special provision such as Section 153C of the I-T Act cannot be invoked when the assessee has disbursed the tax in full before the issue of notice under the relevant provisions.
This was accepted both by Tribunal and CIT (A), as a result of which the subtraction for levy of penalty has lost its rationale due to the annulment of the assessment, thereby entitling the assessee to the refund of penalty.
Even as this order was passed in July 2010, the assessee did not get the refund amount which is so important for someone in the evening of his life. The businessman said that the Government's Citizens' Charter explicitly provides for grant of refund within 45 days after the order is delivered. But he is still awaiting the refund.
At a time when the country is genuinely concerned about black money stashed abroad by Indians and the compulsive need to bring it back, taxpayers who wittingly or unwittingly did not pay tax but did it readily once it was brought to their notice should not be harassed if the message goes out that penitence and belated compliance do not pay in the scheme of things devised by the tax authorities in the country.
A humane approach is better than the much-touted voluntary disclosure of income schemes (VDIS) in which the Government gets only a miniscule part of the concealed income, fiscal experts contend.
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