In the budget estimates presented by our Honorable Finance Minister, shortfall on account of Corporation tax, Customs Duty and Excise Duty was projected to be around 58k crores. A huge shortfall indeed.
Now the question raised is how do we correct this shortfall or how to stop further shortfall in the above revenues? The following "novel" actions are being taken by our tax authorities.
Novel Method 1
Stop all refunds. No refund orders to be passed, if for an assessment year order under section 143(3) comes up for finalisation the officer ensures that the order does not have any refund (even if eligible). So what to do? Simple, Omit an advance tax challan!! If a company has paid Rs.10 crores with Rs.2.5 crore in each quarter miss out one quarter payment and show only Rs.7.5 crores and negate any refund or claim an additional tax. If in case the company immediately goes to the officer and requests for rectification of mistake the officer "off the record" says, Sir, I will pass your refund order in the next financial year, just file a Petition under Section 154, I will take it up next year!!
Novel Method 2
Send letters to companies asking them to appear before the authority asking as to why there is a shortfall in payment of advance tax. Is there a provision in Income tax law for this? Tax experts please guide me!!
Novel Method 1
Delay assessment of bills filed under DFIA or any duty benefit schemes. Either the assessments for these bills are taken up once a week or only 1 hour per day. Priority given to bills filled with full payment of duty. This is to coerce companies to pay duties, if they want their consignments to be cleared immediately.
Question : Why give benefit at all and make people run around to claim it!!
Novel Method 2
Delay refunds. Either issue a letter seeking clarification or issue a notice demanding more details, if all fails call up the assessee or the clearing agent requesting them to pursue the refund in the next financial year. This is an age old and time tested method, time and again adopted!!
Call up the companies in January / February or March requesting them not to use CENVAT credit for payment of duty instead pay all taxes through PLA. Is there a provision in law for this?
Imagine what would happen if in case a company official calls up the Assistant Commissioner of Central Excise and says, "Sir, I have a shortfall in my revenue can I pay my taxes later by 15 days?", will he get this opportunity? I am sure he will be greeted with a Show Cause Notice, which will carry Interest and Penalty
Mr.Finance Minister, Is this the way to meet tax targets? Come on Stop it we are in 21st Century and we are not idiots
When a company is at a default or "seemingly default" there is a raid, show cause notice, hearing called for and grilled. On top of this there is interest, penalty and in some cases Jail terms also. But what happens to our tax officers who do not pass refund orders on time, take up assessment on time and pass order denying genuine refunds on a silly ground? I have seen so many innumerable cases getting quashed at Tribunal levels because of trivial orders passed by Quasi Judicial tax authorities, is this the way it should be?
To clarify I will not suggest we should spare companies who are at default or who fail to comply with law, they should be prosecuted according to legal provisions, but rather I would also suggest the same should happen to tax authorities also to ensure that they are responsible enough and there is no hardship for companies in tax compliance.
Tax payments and legal compliance should be a pleasure, but unfortunately in India it is getting more and more of a pain. Imagine attending a Transfer Pricing Hearing, Hearing under section 143(1) of Income tax, Assessment under VAT rules or a Hearing for clarification on refunds with customs. The amount of documents demanded by the officers, the amount of clarifications demanded by them, most of the times, defy logic and in most cases I am sure the innumerable documents given by us land up in shelves unread and subsequently scrapped!! What a waste of time and resource!!
Tax reforms should not only be in the written law but also in tax administration, this will ensure a tax friendly environment and attract more investments, unfortunately, currently our tax administration distracts investments.