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New Delhi, Mar 2: The Budget proposal to empower income tax assessing officers to take action against defaulters without having to give reasons can stir a hornet’s nest.
At present, these officers have to give definite reasons before taking action and officially record their ‘satisfaction’ that a case, indeed, merits penalties. But Budget 2008-09 has proposed that they need to give only a direction for initiating penalty proceedings. The move will come into effect retrospectively from April 1, 1989 and could, potentially, reopen thousands of such cases. The decision will also be applicable to all wealth tax cases.
Typically, penalty for defaulters includes fines and/or a prison term, depending on a case’s severity.
The move follows intense judicial debate on the issue, which has created confusion. Some courts have said the assessing officers must come out with definite reasons. For instance, the Delhi High Court, in the case of CIT versus Ram Commercial Enterprises Ltd, has held that such a ‘satisfaction’ must be recorded. But other courts say this is not required.
Tax authorities feel this proposed amendment to the Income Tax Act will lead to more clarity on the issue and faster proceedings. To some extent, it will also lead to a higher compliance.
But, there is a view that assessing officers may begin such proceedings arbitrarily or without proper reasons.
Chartered accountants point out that the move will make taxpayers spend long hours with the assessing officers to discuss their cases and will trigger more numbers of litigation. This is because most assesses will feel the need to contest cases that do not give any reasons. Vikas Vasal executive director KPMG says, “Taxpayers will find it more difficult to argue in favour of their cases.”
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