Improve relationship with tax payers by not delaying refunds

The brouhaha around the re-introduction of the long-term capital gains tax has monopolised the conversation around Budget 2018.
 
In this confusion, some significant administrative changes made haven’t got the attention that they deserve. One such provision is enabling the government to notify a scheme for making income tax assessments more ‘efficient, transparent and accountable’. This is sought to be achieved primarily by eliminating the interface between the Assessing Officer (AO) and the taxpayer during the assessment proceedings and freeing the assessments from the bounds of geography. In other words, depending on the type of case, a Mumbai-based tax payer may be assessed by a Chandigarh based assessment officer.
 

Harsh Roongta

The government is depending on this initiative in a big way to remove the friction that exists in the relationship between the tax department and tax payers presently. E-proceedings were implemented from last year through executive orders issued by the Central Board of Direct Taxes (CBDT) rather than through an amendment of the Act, as is proposed now. The initial experience suggests that a lot more needs to be done at the department’s end before end-to-end e-proceedings can become a reality. There have been cases where the SMS and emails received from the tax department’s central servers asked the tax payers to submit their responses online without having to visit the tax office. However, the accompanying notice itself provided a specific date and time when the tax payer is required to appear before the AO. According to tax consultants, tax officials feel that completing assessments completely online is impractical and hence, they are defying the e-proceedings instructions. Hopefully, when the revised scheme is launched, the AOs will be forced to complete the assessment completely online as their actions, in contravention of the law, can be challenged in the courts.
 
But it is a moot point whether even the successful implementation of this scheme can remove the friction between tax payers and the tax department. One big reason for the friction is the impossible collection targets. They try and achieve it by delaying tax refunds that are due. Any tax consultant will tell you that getting a large refund from the department (more than Rs 100,000) is almost impossible even if the assessment is completed and the refund becomes legitimately due. This is achieved by simply not acknowledging the tax deductible at source (TDS) credits for your account, even though they show clearly in the tax department’s records. The department will eventually rectify the order and give the refund, but by that time, the current year’s targets would have been met. And probably, the next officer will give this refund. This practice is easily trackable at the central level where the government can match the TDS credit provided in the assessment orders with ones reflected in its own records and question those  that don’t match. Right now, the AOs know that they can get away with it without any impact.
 
Ideally, an assessment officer’s track record should be scrutinised for such practices and he should be penalised for regular blemishes. Until that happens, the relationship between the tax department and the tax payer is unlikely to improve.  (The author is  a SEBI registered investment advisor)