70 years on, how does I-T department uphold Constitution's values?
On the report card — justice, equality, liberty and fraternity for the taxpayer.
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On the 70th year of our Independence, while we re-dedicate ourselves to the objectives enshrined in our Constitution, it would be worthwhile to examine how the objectives can be applied to a government department - the income tax department to be specific - and what the report card would look like today.
I spoke on this matter nine years ago at the Independence Day function in the tax office I was then heading.
The Preamble to the Indian Constitution lays down the following objectives - justice, equality, liberty and fraternity.
For a taxpayer, justice means a non-adversarial tax regime. It comprises of several strands:
The questionnaire issued by the income tax department calling for information from the taxpayer should not follow a template applying to apples and oranges equally. It should not be issued in a routine manner without application of the mind.
Irrelevant information should not be asked for; neither should there be any roving enquiry. The information called for must be specific and customised for each taxpayer. Tax assessments should be made on a proper basis. It is the duty of the taxpayer to provide every information called for, adduce evidence, give explanations.
After giving them a proper opportunity, the tax collector should then pass a speaking order citing reasons.
Frivolous and high-pitched assessments should never be made. Neither should the assessments be made on suspicion, conjecture or surmise.
The appointment given to the taxpayer needs to be respected and adhered to. The taxpayer's time is valuable and he shouldn't be made to wait endlessly for his turn.
If the appointment is to be cancelled or rescheduled, the taxpayer should be intimated in advance. Making a taxpayer wait just to assert the power and arrogance of office is an egregious case of harassment and should not happen at all.
Summons should not be issued as a matter of routine. Issuing summons is a serious business and must be done rarely, only in deserving cases.
In many instances, the summons are issued without specifying whether the taxpayer is being called as a witness or in his own case. The matter for which the taxpayer has been called should invariably be mentioned.
Appeal effect orders, rectification orders and refunds should be given in a timely manner.
There should be no filing of appeals by the tax collector in violation of the monetary thresholds laid down by the income tax department. Even if the threshold has been achieved, appeals should not be filed automatically if the merits of the case do not so warrant.
The government is the biggest litigator because that is the most expedient path to adopt. But the taxpayer suffers grievously, even if he wins in the end for the sheer toll it takes on him financially and psychologically.
There should be no indiscriminate seizure of assets during raids and proper procedure should be followed preparatory to, during and after the raid.
To the taxpayer, equality means exactly what it conveys - to be treated as an equal by the tax collector; to be accorded respect and dignity; to not be treated as an inferior.
It means not to be treated as a tax evader and looked at with suspicion.
It entails that the tax department metamorphosises into a service department where the taxpayer is a valuable client.
Another aspect of equality is that all taxpayers be treated equally. The tax amnesty schemes (by whatever name called) tend to treat the honest taxpayers unequally insofar as those evading taxes get a concession for declaring their past income.
Such schemes discourage honest taxpayers and are unfair to them. They also adversely affect their morale.
This objective applies to the income tax department. Liberty implies liberty from the step-motherly treatment accorded to the income tax department by the government.
It also maintained that the government should respect its autonomy and the board should be insulated from political pressures. Photo: Reuters
Several committees have recommended giving appropriate status to the Central Board of Direct Taxes (the apex body in tax administration), its chairman, members and field staff.
The Wanchoo committee in 1971 recommended that the CBDT should be made an autonomous board with its chairman assigned the status and pay of secretary to the government of India.
It also maintained that the government should respect its autonomy and the board should be insulated from political pressures.
The Choksi committee and the Yardi committee also made similar recommendations. Even the Estimate committee of Parliament (1991-92), in its tenth report, said:
The committee is amused at the contradictory stand taken by the Ministry in deeming the two departments - income tax and customs and central excise to be more important than the Railway Board and simultaneously expressing themselves against conferring upon the head of these organisations the rank and status of a Secretary to the government, particularly when the chairman, railway board, holds the rank of principal secretary to the government of India. the committee finds no reason why similar status cannot as well be given to the Chairman of the CBDT and the CBES.
An organisation cannot work independently and produce results if its rank and file are given instructions by secretary, revenue belonging to some other service, with the CBDT chairman playing only a secondary role.
There needs to be a balance between autonomy and accountability. The quantity of control needs to be minimised and quality of accountability increased.
This can be done by the government specifying measurable goals and giving the tax department operational autonomy to achieve them.
At the field level too, the tax officers are being discriminated against vis-a-vis the Indian Administrative Service (IAS). The Wanchoo Committee has said that supremacy of the administrative service is a hangover from the colonial era. It argued that the income tax service should have the same scale of pay and status as the IAS.
As far as the tax collector is concerned, liberty to the tax collector would mean liberty to not be pressured for budget collection and be forced to adopt questionable means of jacking up tax collections.
Instances of huge tax collections being coerced out of taxpayers, only to be refunded in the following April, takes place only because of unrealistic tax targets and massive pressure to deliver.
The rank and file of the income tax department consists of direct recruits, promotee officers, inspectors and the clerical cadre.
Each category has its own set of aspirations and the tax department can only function effectively if all the sections work together harmoniously. As head of the income tax office, I opened up a sports room in the building, open to all the cadres; a dedicated office for the promotee officers and an office for the SC/ST association.
It was a small gesture but went a long way in earning trust and goodwill.
I joined the tax department in 1982 and took VRS when I was a commissioner, 26 years later, in 2008. The winds of change had already started blowing while I was in service - a gentle breeze initially, which graduated to a gale by the time I left. Professionals started joining the service.
Computerisation changed the office landscape - both in terms of ease of work as well as an investigative tool. Automation meant less interface with the taxpayers, an objective method of selection of cases for tax scrutiny, proper tax credits and faster refunds, electronic uploading of returns, and many other welcome changes.
In the mid-90s, I recall computers being installed in the rooms of all officers. Except for a few intrepid souls, the rest never removed the covers from the monitor.
A huge leap of faith was required, a paradigm shift in attitude and thinking. But it happened eventually. And all for the better.
The tax collector and the taxpayer both benefitted.
Welfare measures, generous infrastructure, better pay and emoluments and facilities, foreign postings, international and domestic training, a world class training academy - the service conditions have never been better. All these have enabled tax collectors to carry out their duties effectively.
But is the transformation complete? Does it tick all the boxes? Has the tax department converted from a government department to a service organisation?
Prime Minister Narendra Modi made a special mention of the achievements of the income tax department in his Independence Day speech - an unprecedented pat on the back from the ramparts of the Red Fort.
More than double increase in income tax returns, 18 lakh people identified whose incomes did not match their returns, 3 lakh companies found to be shell companies - the war against corruption and black money for the benefit of the poor and the growth of the country was underway, led by the tax department.
Creditable work, no doubt. But there is still some way to go before the finish. But it's happening. The woods are lovely, dark and deep, and there are still many miles left before the four objectives can truly be met.