Rationalization and simplification of the tax regime

Rationalization and simplification of the tax regime - which is currently repulsive for honest tax payers

Time to end tax terrorism

April 19, 2018|Financial Express|Full Article

The 2014 BJP election manifesto stated, “We will provide a non-adversarial and conducive tax environment, overhaul the dispute resolution mechanisms, rationalize and simplify the tax regime which is currently repulsive for honest tax payers.”

The government could end tax terrorism by considering the following:

High-pitch assessments are used by AOs to meet high unrealistic targets set by the political establishment instead of widening the taxpayer base. This eventually results in litigation. In July 2017, the Central Board of Direct Taxes (CBDT) increased the deposit amount for obtaining stay on the income-tax demand to 20% of the disputed amount by stating, “In view of the Board’s efforts to contain over pitched assessments through several measures resulting in fairer and more reasonable assessment orders, the standard rate of 15% of the disputed demand is found to be on the lower side. Accordingly. it has been decided that the standard rate be revised to 20% of the disputed demand, where the demand is contested before CIT(A).” Considering that high-pitch assessments are the order of the day, no deposit amount should be collected in case of appeals before CIT(A). Only if the appeal is lost should a pre-deposit be collected.

To reduce taxpayer grievances/litigation, the CBDT revised monetary limits for filing appeals in December 2015. The present limits for filing of appeals before the ITATs (Rs 10 lakh), HCs (Rs 20 lakh) and SC (Rs 25 lakh) is very low to make a meaningful impact in reducing pending cases or litigation. This should be increased by four to five times for HCs and a minimum of Rs 5 crore before the SC, and all appeals falling below this threshold should be immediately withdrawn. This will prevent the tax officers from filing routine frivolous cases, and enable the judicial authorities to focus on high value litigations. In the case of litigation at ITATs/HCs/SC, the government should commission special benches to resolve pending litigation within a defined time frame of two-three years.

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