The Union finance ministry has asked field officers of the income tax department to not be adversarial to assessees, and to not send high-pitched demands without a proper basis.
This advice, issued on Friday, came amid rising concerns expressed by many companies, including multinational corporations, in transfer pricing cases.
“Supervisory officers have been directed to play a more proactive role in monitoring and guiding assessments towards ensuring high-pitched assessments without a proper basis are not made,” went instructions by the Central Board of Direct Taxes (CBDT) to field formations.
It also asked officers to ensure against lengthy questionnaires or summons without due application of mind.
The board said it had issued the instructions in its constant endeavour towards a non-adversarial tax regime.
“Emphasis has been laid on cleanliness in office, punctuality, timeliness in appointment and avoiding unnecessary adjournments,” it also said.
Though less than one per cent of returns filed are selected for scrutiny, this area of work has often drawn adverse comments, CBDT conceded.
The department uses leads from annual information returns, the central information branch and Form 26AS. The board asked officials to restrict enquiries to such information. It also asked seniors to ensure appeals against an order were on the merits of the case, not merely on the tax effect involved.
This comes as the Centre is facing challenges on tax receipts. Though this is more on the indirect tax side, the tendency is to go for high-pitched demands whenever revenue is a problem.
The Central Board of Direct Taxes said cases have separately been brought to the attention of the officers wherein tribunals and courts have commented adversely on frivolous filing of appeals.
“It has also been decided that in multi-CCIT (chief commissioner of income tax) charges, the decision to file a reference before the high court would be taken by two CCsIT,” the board said.
Many companies have objected to high-pitched demands from the department. Vodafone, Shell, Microsoft, IBM, Maruti, Gillette, Bharti Airtel, Essar, Standard Chartered, HSBC Securities & Capital Markets, Havells and Nokia are all involved in transfer pricing disputes. Nokia has, in fact, shut down its factory near Chennai over tax disputes with this department and over value- added tax issues with the state government.
Neeru Ahuja of Deloitte India said the instructions were positive. She said the standard questionnaire could contain 20-30 queries, not all relevant. “The instructions basically directed officials not to ask questions mindlessly. These are good instructions,” she said.
Tax demands of Rs 4 lakh crore are under dispute or litigation before various courts and appellate authorities.
“This is one of the serious concerns of all taxpayers in this country,” Finance Minister Arun Jaitley had said in his Budget speech. He'd also announced certain administrative measures such as a high-level committee to interact with trade and industry on a regular basis and ascertain areas where clarity in tax laws was required.