There are more than 85,000 appeals pending before Income Tax Appellate tribunals all over the country. In 50 per cent of the cases, the income-tax department is the appellant. According to senior tax advocate and former member of Delhis Income Tax Appellate Tribunal (ITAT) Rakesh Gupta, there is a dire need to fix accountability on assessing officers and simplify procedural formalities to file returns. The present Income-Tax Act is a complex piece of legislation. It was enacted in 1961 and there have been more than 3,500 amendments in it. What are the drawbacks in the present Act? Its true that the Act, in its present form, is complex, having more than 300 sections and an equal number of provisos and explanations. Yet, the IT Act in a developing country like India is bound to be complex, since its purpose is not only to collect revenue but also channelise resources in a desired area, given the absence of equitable distribution of resources. Deductions and provisions have been added to the Act to promote the growth of a certain industry in a specific area. The IT Act is used as an economic and fiscal tool. However, it has led to heavy litigation for the department and one reason is the procedural formalities to be followed while filing returns. The second is a lack of trust in the taxpayer. How can the government win the confidence of the tax-payer? When the Raja Challiah committee was formed to look into the grievances of the taxpayer, one of its recommendations was that the accountability of the assessing officer must be fixed. As per our experience, an accounting officer ventures and computes tax on the basis of surmises and conjectures. He often ignores evidence. As a result, an assessee is forced to take the legal course. The Act provides for a first appeal before the commissioner of income tax and then a second appeal before the Appellate Tribunal. Later, the aggrieved party can approach the high court. In fact, the figure of pending appeals stood at about 2.25 lakh two years ago. The new IT Act which the finance minister is mooting must take care of this. Assessing officers must be held accountable for not calculating income tax on the basis of evidence. What procedural simplifications are needed in the present Income Tax Act? Under the present Act, one has to fill in several forms to file returns and TDS returns. The number of forms depends on the nature of deductions. This has made the entire process of filing returns a cumbersome procedure. Further, one has to file returns quarterly. Although the department has become technology savvy, the new Act, I hope, will do away with the age-old procedure of filling up forms. Its better if a fewer number of documents are filed. Also, certain provisions like imposition of penalty on employers even for the slightest aberration while filing TDS returns on behalf of employees should be deleted. In foreign countries, employers are given incentives for filing TDS as they perform a State function by deducting tax at source while distributing salaries. However, here a sword hangs over the employer while TDS returns are filed, as a minor mistake could result in serious penalties. Are there any provisions in the Act which should be deleted? A To start with, the Fringe Benefit Tax (FBT) should be done away with. Although the Supreme Court is hearing a case challenging the implementation of FBT during the 2006-07 assessment year, I still believe the government must take the initiative to do away with this tax. There is no rational connection between the provision and the objective which has to be achieved. If the government wants, it can increase income tax by 5 per cent across the board with respect to corporates. The other provision which is discouraging people from taking the corporate route is the Minimum Alternate Tax. Thirdly, the transfer pricing provision should be deleted as it has become a highly futile area of litigation.
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