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How to Speed Up Tax Adjudication



That the Central Board Excise and Customs (CBEC) has at long last cracked the whip warning the field formations of “extensive delays in passing adjudication orders” has not come a day too soon. It is a testimony to the ground reality that it is not only the foreign investors who are exercised over the domestic tax authorities resorting to retrospective taxation measures but also the domestic industries which felt aggrieved more often than not by the rigidity in the appallingly laggard approach of the field officials in resolving tax disputes.

It is not unsurprising to note that in a reported missive to all chief commissioners and directorate generals, the CBEC voiced concern and dismay by frankly acknowledging that not passing orders in time earned it the ire of various courts and appellate authorities for not doing the groundwork in a proper fashion. It also adverted to a case where the show-cause notice was not adjudicated for as long as 17 years. Just imagine the jitteriness and nervousness of the taxpayer whose case has been pending for such a protracted phase, draining him of dynamism and energy to continue focusing on his core mission. But the tax official who put him on the tenterhooks had little compunction for no rhyme or reason other than slaking his perverse pleasure in ensuring that the alleged violator of the tax law is met with his nemesis! No wonder, the CBEC is compelled to concede that “in several cases show-cause notices have been quashed and the department has been prohibited from passing any adjudication order by high courts due to delay”.

So it may not come as any astounding pellet of information when Minister of State for Finance Jayant Sinha said in the Lok Sabha in a written reply to a query that out of 3296 corporate cases with outstanding income tax amount of more than Rs 10 crore as on end-March 2015, as many as 1320 cases are under litigation under Income Tax Act 1961. A further breakdown of details shows that the department appeal cases involving revenue of Rs 10 crore or more in the Supreme Court number 122 entailing Rs 4,787 crore. In the High Court, they number 142 cases entailing Rs 5,676.9 crore and in CESTAT, they number 176 cases entailing Rs 5,942.2 crore. The largest numbers from the assessee appeal front are in CESTAT at 1442 entailing a whopping Rs 56,630 crore. Even as the government is going out of its way to woo taxpayers that it has put the most tax-friendly policy for easy and ready compliance, the field officials down the line remain insensitive to the finer aspects of wringing taxes without unduly hurting or humiliating the taxpayers in a prolonged war of attrition in which neither stand to benefit.

It is also germane to recall the third report of the Standing Committee on Finance headed by Veerappa Moily in December last which lamented that “a substantial amount of tax arrears has been locked up in various courts/appellate fora”. Not mincing words, the departmental standing committee found that in “many cases, lack of accountability of the assessing officer in raising unrealistic tax demands without accompanying responsibility for recovery has led to a situation of staggering tax arrears locked up in long-winding disputes between the tax administration and taxpayers with a low proportion of recovery of tax”. This has obviously and palpably caused wastage of resources and inefficiency in collections, the Committee rued not without justifiable anger.

Notwithstanding several sloganeering to the effect that the department plays a non-adversarial role vis-à-vis the honest taxpayers, the tendency among a majority of the mandarins in the department is still to mete out raw deal if a wrong-doing, not out of willfulness but due to neglect or lapse of due diligence in complying with tax statutes, from the taxpayer is detected. Pitching improbable penalty and compelling the alleged tax errant to pay out half of the exorbitant fines are in no way non-adversarial as such unkind cut will only compound the woes of the affected party and compel him/her to run from pillar to post in quest of justice. Hence, the long-drawn-out legal and quasi-legal battle that drains everyone involved of their ardour and vigour.

One hears the savvy Finance Minister crying from the rooftop in every available forum to interact with captains of industry and foreign companies that the government is working to “put to sleep” pending taxation issues to attract more investments. Obviously, referring to the government’s latest decision not to proceed against tax notices served on foreign institutional investors and portfolio investors for their failure to pay minimum alternate tax (MAT), Jaitley told participants at the India Economic Convention in the capital on September 17  that “now a number of tax issues have been put to rest and we are trying over the next few days itself so that many others can be put to sleep either by a judicial resolution or an executive resolution”. He repeated the same soothing charade during his four-day sojourn to Singapore and Hong Kong week-end promising to render ease of doing business in India as the overarching priority of the Modi government.

While all these tall calls for enticing foreign investors will ever bear instant fruit, the low-hanging one in the form of helping domestic companies and domestic individual tax payers from being harassed by a litigation-prone department is a surefire strategy to produce win-win results for all the stakeholders in the economy. In this context, the recent communication by the CBEC to the field formations to pass adjudicating orders within the specified time in order to respect judicial discipline while resolving pending show-cause notices and appeals is definitely a salutary initiative that will help the ruffled tempers of the taxpayers who feel increasingly intimidated for all the cooperation and voluntary compliance a majority of them demonstrate in their dealings with the department. As the revenue objectives of the department flow mainly from high net worth individual tax payers and industrialists and other champions in the real sectors of the economy, it is time the department heeded to the call of the CEBC and fashioned its strategies in seeking out the tax revenues unobtrusively and less aggressively.

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