I-T's record recovery of Rs 1 trn contributes 10% to direct tax collection

The income tax (I-T) department made record recoveries of Rs 1 trillion in 2017-18, contributing 10 per cent to the total direct tax collection last financial year. In a first, the department resorted to a slew of coercive measures like selling assets, which resulted in 33 per cent growth in arrears and tax recovery, the highest-ever, according to I-T officials. In 2016-17, growth in recoveries was 10 per cent at around Rs 750 billion.

Besides selling movable and immovable assets to make recoveries, taxmen filed prosecution cases against those not paying the demand. The department also sent out notices to directors of defaulting companies, holding them liable to pay the tax demands.
 

“Recoveries by the department contributed a large chunk to our direct tax collection. The focus was prosecution, selling assets, and pushing for convictions to make recoveries. We opted for a lot of unconventional measures. In the current fiscal year as well, the focus will continue,” said a senior tax department official.

On sale of properties linked to defaulting firms, the official said, “Earlier, the matter would remain pending even after the tribunal would confirm the department’s order. We gave out instructions that properties should be sold off where the tribunal has upheld the department’s stance and there was no stay from a higher court.” 

Fifteen properties were sold by the department in 2017-18 to make recoveries, he added.

The I-T department filed for prosecutions under Section 276 C2 of the Income Tax Act in the cases where the tax demand was not paid. “We filed a large number of complaints in court against those not paying the tax demand,” said the official. The number of prosecution cases filed by the department was the highest-ever at 4,527, a growth rate of 261 per cent over the previous year’s 1,252. Also, the number of convictions grew by 325 per cent in 2017-18 at 68 cases, the highest in many years, as against 16 cases of conviction in the previous fiscal.

The feat was achieved after the department increased the number of prosecution counsel. “In addition, we also emphasised on creating a rapport with the courts for expedited judgments. We encouraged counsel to meet the judges regularly and ask for early hearings,” said the official. Of the Rs 1 trillion worth of recoveries, Rs 600 billion pertained to arrears carried forward and Rs 400 billion to the fresh demand raised last year.

The department was also sensitised to use Section 179 of the I-T Act, under which if any tax due from a private company cannot be recovered, then the director  would be liable for the payment of such tax due to gross neglect, misfeasance or breach of duty on his part. As for recovery of disputed demand, taxmen asked for 20 per cent of the demand. “In case it was not possible to pay 20 per cent, we emphasised on the payment in instalments,” the official said.