Prosecution notices issued for smallest of defaults, mechanically in 2018’

Concerned over the large number of prosecution cases being filed by income tax authorities, nearly six regional tax and industry associations have sought the intervention of the Revenue Secretary, highlighting the government’s promise of a non-adversarial tax regime.

“It seems that similar directions have been issued to field officers by the higher-ups, based on which, several prosecution notices have been issued by the Tax Department to mop up tax collections to meet higher targets,” said a joint representation to Revenue Secretary Ajay Bhushan Pandey.

Expansion of criteria

They also said the criteria for initiation of prosecution has been expanded and notices are now being sent for non-filing and delay in filing of income tax returns, non-payment of self-assessment tax, disallowance accepted by the taxpayer and not contested in appeal before appellate authorities (including cases of very small amount of disallowance), cases where penalty is levied whether taxpayer has challenged it or not and failure to pay taxes deducted at source.

According to the representation, the tax and industry bodies have said the move stems from a letter by the Chairman, Central Board of Direct Taxes on March 7, 2017, which had highlighted the need for prosecution and compounding as important areas against tax evaders and non-compliant assesses. “As per the information collated through RTI, we have been informed that several prosecution notices were issued by the department in 2018 throughout India, for even the smallest of defaults, in a mechanical manner without undertaking any qualitative analysis. Many petitions have been filed before various magistrate courts, which are pending for disposal,” said the representation, adding that thousands of show cause notices for initiation of prosecution have been issued all over the country just to achieve revenue targets given by the CBDT.

Prosecution notices are also being issued to foreign companies and foreign resident directors, which will impact the country’s image for foreign investors, it further noted.

“Prosecution can be used for offences under the Income Tax Act, 1961, but in the past it was being used sparingly. Now, it is being seen that even for small amounts, prosecution notices are being sent,” said a tax expert who did not wish to be named on the issue.

Tax payer-friendly

Noting that Prime Minister Narendra Modi and Finance Minister Arun Jaitley have frequently called for a tax payer-friendly and non-adversarial tax regime, the tax and industry bodies have now sought intervention from the Finance Ministry on the CBDT directive.

Source:http://cadcjain.in/wp-admin/post.php?post=1540&action=edit