The Central Board of Direct Taxes (CBDT) has set up a four-member panel that will examine cases selected by assessing officers with potential tax liability from indirect sale of Indian assets made prior to 2012. It would take a decision on whether a tax notice is to be issued after providing an opportunity to the assessee to present their side of the story. Finance minister Arun Jaitley had announced in his Budget speech he would set up such a panel to review fresh cases arising from retrospective changes to the income tax law in 2012 before any action is taken.
If field offices have based their case for reassessment on facts that suit them alone, this mechanism will give tax payers an opportunity to be heard and it will help in taking the appropriate decision. It allows the taxpayer to present relevant facts before an independent body before any action is taken, said a person privy to the development.
Since the four senior officials in the panel joint secretaries handling foreign tax, tax planning and legislation, income tax and director of the foreign tax division are not from the field administration, they are unlikely to have a bias towards meeting tax targets by erring in favour of the state, sources said. Senior officials tending to routinely endorse the views taken by field officers have been considered as the reason for the failure of the collegium of commissioners called the dispute resolution panel that was introduced a few years ago to reduce litigation.
The high level committee has to report its decisions on the cases proposed by assessing officers for tax recovery to CBDT every six months. In case a discrepancy is observed, the apex policymaking body for direct taxes shall intervene.
The panel would only consider whether the retrospective law on indirect sale of Indian assets is invoked based on relevant facts. It would in no circumstance override an assessment officer's discretion to select a case for tax collection on any other consideration including low amount of potentially recoverable tax, explained the person.
Cairn UK Holdings, which has been issued a showcause notice indicating short term capital gains tax liability in its hands from its 2006-07 sale of India assets to Cairn India is unlikely to get the benefit of the hearing as it is not a fresh case, said tax experts. The showcause notice had referred to section 201 of the Income Tax Act dealing with consequences for failure to pay tax. The company is free to approach the court on the matter.