FinMin may clip power of I-T assessing officers

Plans to amend provision allowing assessing officers to file appeal against own order

As a part of amendments to the Budget proposals associated with transfer pricing, the finance ministry may either tweak or do away with the provision that allows an assessing officer to file appeal against his own order, based on the directions of the Dispute Resolution Panel (DRP).

An officer associated with the discussions on the issue in the ministry said the proposal was brought following representations from the industry which said the department didn’t have the power to appeal against the orders based on the DRP’s direction. The orders were invariably against the assessees as the panel members avoided going against the revenue interest.

He said it was expected that powers to the assessing officer to go in appeal against the order would improve the situation, but it had simultaneously created an anomalous situation in which the assessing officer would be appealing against his own order.

The official said some sections of the industry had demanded withdrawal of the proposal on the premise that it would allow a junior officer to appeal against the order based on the direction of a panel of three officers senior to him.

The ministry is now expected to make changes in the amendments to the Finance Bill. Including members from outside the income tax department in the DRPs is being seen as one of the possible solutions.

The institution of DRP was created through the Finance Act, 2009, with a view to bringing about speedy resolution of disputes in the case of international transactions, particularly involving transfer pricing issues.

Under the provisions of the Income Tax Act, the DRP has the power to confirm, reduce or enhance the variations proposed in the draft order. The income tax department, at present, does not have the right to appeal against the directions given by the DRP. The assessees have been given right to appeal directly to the Income Tax Appellate Tribunal (ITAT) against the order passed by the assessing officer.

The memorandum explaining the provisions in the Finance Bill, 2012, says: “As the directions given by the DRP are binding on the assessing officer, it is accordingly proposed to provide that the assessing officer may also file an appeal before the ITAT against an order passed in pursuance of directions of the DRP. It is,therefore, proposed to amend the provisions of Section 253 and Section 254 of the Income Tax Act to provide for filing of appeal by the assessing officer against an order passed in pursuance of directions of the DRP in respect of an objection filed on or after July 1, 2012.”

These amendments are slated to take effect from July 1, 2012.