Trade and industry is increasingly concerned about the recent plans of the Income Tax Department to incentivise taxmen who pass “quality orders” by imposing a penalty or increasing the amount to be paid.

While the move is yet to translate on the ground, trade associations have written to the Finance Secretary seeking relief. Experts warn that the move could impact recent government efforts to project a tax payer-friendly image.

“This completely erodes their impartiality and independence, and creates a bias in favour of the IT Department in a quasi-judicial proceeding,” said a recent letter by trade associations to Finance Secretary Hasmukh Adhia. “Industry and stakeholders envisage that the functioning of the Commissioner of Income Tax (CIT) (Appeals) as an independent judicial authority will be severely affected.”

The associations IMC Chamber of Commerce and Industry, Bombay Chartered Accountants’ Society (BCAS), Chartered Accountants’ Association Ahmedabad, Chartered Accountants’ Association Surat, Karnataka State Chartered Accountants’ Association and Lucknow Chartered Accountants’ Society have also sought a modification of the guidelines.

“Since the directive has been issued recently, and there has been widespread resentment from tax professionals and trade bodies across India, we have yet to see any major impact on the ground,” said BCAS President Sunil Gabhawalla.

But the directive is likely to have a trickle-down effect on the CITs and their subordinates, he said. The associations plan to write to the PMO and Finance Minister soon.

CBDT Action Plan

The Central Board of Direct Taxes (CBDT), in its Action Plan for FY19, had said CITs (Appeals) can get additional credits of two units for each quality order passed.

“Quality cases would include cases where enhancement has been made, order has been strengthened, in the opinion of the Chief Commissioner of Income Tax or penalty has been levied by the CIT(A),” it had said.

Other experts also said while the intent of the directive may be fair, its interpretation may differ. “If not followed in the true spirit of the guideline, it could mean that taxmen become over-zealous,” said one.

However, tax officials insist the guideline is not a new development, but just a reminder. “It has been there for a long time. Reminders of duties cannot be taken as harassment,” said a former I-T official.

Another official pointed out that the duty of the CIT (Appeals) is not only to provide relief, as is the popular perception, but to also review the enhancements and penalty. “He has the same powers as an assessing officer,” said the official, adding that tribunals will come down heavily if taxpayers are harassed.