No retrospective change in I-T Bill, only simplification: Baijayant Panda

The old law had become so complicated that even experts couldn't give the clear answer, says Panda

The new Income-Tax Bill does not override the intent of the Income Tax Act, 1961, but simplifies its language and structure, says Lok Sabha Member Baijayant Panda, who chaired the 31-member select committee to review its draft. In an interview with Monika Yadav, Panda says with the rising number of filings, resources need to be scaled up. Edited excerpts:

 

Do you believe the Bill has been simplified enough to significantly reduce tax disputes and litigation?

 

This is the first step towards simplification. The law has become complicated. It is 64 years old and has undergone more than 4,000 amendments, resulting in complexity and frequent litigation. Under Prime Minister Narendra Modi, nearly 1,500 laws have been repealed and replaced with simplified, new legislation. So, Union Finance Minister Nirmala Sitharaman has said that we will do the same thing with the Income-Tax Act. 

 

So as a first step, it was decided that without changing the policies, the focus would be on how the existing Act could be simplified. That is the Bill that was presented in Parliament a few months ago, and that is the Bill that was sent to my select committee for vetting. 

 

The number of words in the new Bill has been reduced by about 50 per cent. The 1961 law had Latin phrases and complicated descriptions. Now, this Bill’s language is simple. Instead of complicated descriptions it has formulas and tables. The objective was to simplify the law, make it easy to understand, and reduce disputes and litigation.

 

As regards the old law, even experts couldn’t give clear answers.

 

Will there be more revision?

 

We have received many suggestions about policy changes, but that was beyond our mandate. Our mandate was to simplify the law as it stood. There were suggestions about changing the policy. Those will be taken up at appropriate forums. The government policy on income tax is formulated at the time of the Budget. By and large there is a consensus that this is the Bill that will assist taxpayers and it lays the platform for further simplification. 

 

In the parliamentary system, committee recommendations are suggestive, not binding. The Bill will go back to the government, and the Cabinet will decide how many of the 300 broad suggestions we’ve made will be incorporated in the final draft. After that, Parliament will deliberate and vote on it — that will become the final Bill. The speaker has allotted time for discussion, and we expect it to be passed in the monsoon session.

 

The committee has recommended widening the scope for transfer pricing. However, experts have expressed concern that this could trigger more disputes and litigation.

 

If you simplify the language of the Bill, things become clear. So if people do come within the ambit of the law, they should be paying tax. Due to lack of clarity, some might have assumed they were not subject to tax. The transfer-pricing provision itself hasn’t changed — the language has simply been streamlined to remove ambiguity. The intent of the law has not changed. Whatever transaction was taxable earlier is taxable now. 

 

The Bill does not address the status of ongoing disputes under the 1961 Act, leading to apprehension among taxpayers that past litigation and judicial precedents could be rendered irrelevant.

 

After this Bill is passed by Parliament, it will come into effect on April 1, 2026. Until then, the old Act will stay operative. The current disputes will come adjudicated under the old law.

 

This Bill does not change the policy, it simplifies it. So wherever judgments are there are not going to change. Nothing is going to affect any benefit the taxpayer has received. There is no retrospective changing of the law, only its simplification. 

 

In the report, the select committee has raised concern about the pending appeals before the commissioner of income tax (appeals) (CIT-A), and the finance ministry has made submissions that it’s not possible to introduce deadlines for disposing of tax appeals. 

 

Faceless assessment was introduced five years ago and has had a dramatic effect on improving transparency. It removed much of the subjectivity that existed earlier. The process is now formula-based and rule-driven, with initial assessments carried out without any direct contact with officials. People are wrongly conflating the pendency of appeals with the faceless regime. The backlog began during the pandemic.

 

Cognizant of this, the ministry has been taking measures. If you look at the CIT appeals in the past two years, there has been a surge in settlement. India is growing rapidly, with return filings now exceeding the population of the United Kingdom. Appeals filed are only a tiny fraction of the 90 million returns submitted. We are now working to eliminate disputes at the roots. The target is to settle all appeals in a year. Systemic issues are being addressed. Ideally, no appeal should remain pending beyond a year. With the rising number of filings, resources also need to be scaled up. I am confident that in the coming few years, you will see a dramatic reduction in the number of unsettled cases.