In a bid to tackle high-pitched and unreasonable tax assessment orders, which result in heavy income tax (I-T) demands, the Central Board of Direct Taxes (CBDT) issued a notification on Monday requiring setting up of local grievance committees across I-T offices in India.
The CBDT, in its notification, acknowledges that: "The tendency to frame high-pitched and unreasonable I-T assessment orders is still persisting due to which grievances are being raised by the taxpayers. Such grievances not only reflect harassment of taxpayers but also lead to generation of unproductive work for the I-T department."
Such unreasonable I-T orders, especially in the realm of international taxation and transfer pricing, have been a cause of concern for the finance ministry. The high I-T collection targets assigned to tax officers, on which their performance appraisal is based, has often been blamed for such I-T assessments. If the I-T assessments are frivolous in nature, the tax department loses the case when the taxpayer files an appeal and the matter is disposed of by the I-T appellate tribunals (ITATs) or courts.
Recently, Prime Minister Narendra Modi, speaking at the Economic Conclave in Delhi, had announced a change in the performance appraisal mechanism. "The appraisal should reflect whether or not the officer's orders and assessments have been upheld on appeal. This will deter corruption and also motivate officers to pass correct orders," he had said. The additional measure of setting up of local grievance committees will further usher in a tax-friendly regime, said a government official.
The local committees comprising of three high-ranking I-T officers are to be set up by November end. On receiving a grievance petition from the taxpayer, the committee has to dispose it within two months.
The committee's responsibility is to examine whether there is a 'prima facie' (apparent) case of high-pitched I-T assessment, non-observance of principles of natural justice (there should be no bias), non-application of mind or even gross negligence on part of the I-T officials involved in the assessment of that particular case.
These committees will ascertain whether or not the additions made to the income of the taxpayer in the assessment order, resulting in high I-T demands, are backed by sound reason or logic. It will also examine whether the provisions of law have been grossly misinterpreted or obvious and well established facts on records have been outright ignored by the I-T officials. If the committee concludes that an unreasonable and high-pitched addition to the income of the taxpayer has been made by the tax official, a report will be sent by it to the Principal Chief Commissioner of Income-Tax (Pr CCIT), who is responsible for tax administration. The Pr CCIT will then take suitable administrative action in a bid to curtail litigation.
CBDT's notification clarifies that the objective of setting up of such local committees is to effectively and efficiently deal with the genuine grievances of the taxpayers and support an environment where I-T assessment orders are passed in a fair and reasonable manner. Such local committees are not an alternative or additional channel of filing an I-T appeal.