QUESTION: It has been published that the Comptroller and Auditor General has reported that Rs.2.20-lakh crore of revenue has been locked even in first appeal itself indicating lack of effective steps to have them cleared and to have the collectible tax recovered.
The report has pointed out that the arrears of such cases are mounting, since the disposals do not match the appeals and that taxes so locked up in litigation are Rs.3-lakh crore.
Does Tax Forum have any suggestion or solution for the same apart from solutions suggested by requiring more effective steps for recovery, larger disposal of appeals or increase in strength of the appellate machinery?
ANSWER: Only a small number of cases are chosen for scrutiny. If the tax arrears under litigation are real and indicative of evaded income, evasion should be many times larger than the staggering figures in the report. But even a cursory review of cases under litigation would show that the arrears are largely on account of bad assessments, which are made at the fag end of the year, when they are getting time-barred.
Attempt on the part of the tax administration to make the assessing officers accountable by requiring administrative approvals before assessments has resulted in a larger number of bad assessments because the purpose of pre-assessment approval has failed to ensure either proper additions, where justified, or to avoid additions on flimsy grounds. Such back-seat driving by superior officers is not permissible under the law, which requires the assessing officers to be solely responsible for the assessments made by them and not to pass orders on dictates from their superior officers.
There is no accountability on the part of the superior officers who do not exercise due care in avoiding frivolous additions.
It may also be seen that the demands under litigation either before the Tribunal or the High Courts are in respect of appeals authorised routinely even against the reliefs granted at the stage of first appeal, which is practically an administrative review, since the Commissioners (Appeals) are part of the tax administration.
This lack of application of mind on the part of the authorities in authorising appeals is also responsible for unnecessary litigation. Bar against departmental appeals in cases below the limits set for disputed appeals has not served its purpose, while it has only resulted in revenue loss, where good additions have been wrongly deleted in appeal in small cases so that such self-imposed restraint tantamounts to throwing the baby with the bath water.
Incidentally, it may also be pointed out that efforts are not lacking on the part of the authorities in matters of recovery.
Number of writs against excessive use of coercive power for recovery would bear ample testimony for this inference.
Avoiding bad assessments will be one single remedy for arrears. Till then solutions for mounting arrears is not in sight. One would expect the Comptroller and Auditor General to do something about it.
