Taxing times ahead as govt ups scrutiny

Fresh tax demands jump 130% over last year.

Faced with the prospect of missing the direct tax collection target because of the economic slowdown, the Income Tax (I-T) department has sharply increased fresh tax demands to Rs 1,24,000 crore from companies and individuals in the current fiscal, a 130 per cent increase over fresh demands raised last year.

At this level, the demand for additional payment represents nearly a third of the annual target of Rs 3,65,000 crore. Tax payers, therefore, can expect more trouble since the I-T department plans to scrutinise a higher number of returns. The department, however, maintains that the cases are selected through a computer-aided system based on parameters fixed by the CBDT, and the Chief Commissioner of Income Tax individually approves cases involving higher amounts.

“Looking at the gloomy side of the global economy, it won’t be easy to achieve the target this year. But we are trying our best. We have accelerated quality assessments, raised demands and are trying to collect tax dues before March,” said N B Singh, chairman, the Central Board of Direct Taxes (CBDT).
 

A CLOSER LOOK
	2007-08	2008-09	Growth rate
Direct tax collection			(%)
Budget	312213	365000	16.9
Actual*	220770	247131	11.9
Tax refunds	29392	28149	-4.2
Tax demand raised in scrutiny cases	54054	124401	130.1
Tax collected out of current demand	7021	3317	-52.8
* Actual collection till January 29                    (Figures in Rs crore)

Direct tax collections rose 11.9 per cent to Rs 2,47,131 crore till January 29 of the current fiscal over the same period last fiscal. This is much lower than the 16.9 per cent growth required to achieve the annual target. Moreover, in November and December 2008 direct tax collections dipped, and there are concerns that this trend may continue in the last three months of the current fiscal.

To counter that, the I-T department is looking at fresh tax demands as a source to fill the gap. The emphasis on scrutiny assessments can be understood from the 61 per cent increase in number of cases for which assessments were completed by December in the current fiscal. Assessments of 5,34,000 cases were completed this year against 3,31,000 last year.

Out of the fresh demands raised, the department has collected only Rs 3,317 crore against Rs 7,021 crore last year, indicating that the task may not be easy due to the economic slowdown and increased litigation. About 3,49,000 cases are pending this year, lower than previous year’s 5,06,000.