CPC compliance management will track and assimilate taxpayer-related information for further action
Just about a decade ago when the member-in-charge of computerisation in the Central Board of Direct Taxes (CBDT) was asked why the income tax (I-T) department was not adopting information technology (IT) in its functioning, he said there was no budget for it?only a few lakh rupees for the whole year. The same department now boasts of over 2 crore electronically-filed returns in FY13. There is no doubt that progress has been made in moving away from paper returns to the electronic format, but the real test lies in how successfully the department can utilise crores of pieces of information that it has on high value transactions.
The record would have been very poor if the over 1 lakh letters sent by the department in FY13 to those who had not filed returns, had not yielded good results?about 1.25 lakh people filed returns and most of them paid their tax dues. Bolstered by this success, the taxman has now planned to create a separate national centralised processing centre (CPC) for compliance management.
If successful, this is expected to completely change the way income tax department currently functions. The CPC will integrate tracking and assimilation of taxpayer-related information and research and selection of cases for further action under one roof. According to the plan discussed internally, the centre will tackle all the resource-intensive works of the department such as PAN population, master data management, preliminary verification, generation of bulk letters and notices, follow-up and capture of responses.
A close look at the personal income tax asseessee profile clearly indicates why this is so critical. In FY12, the total number of assessees was about 3.44 crore. Of these, 98.3% filed tax returns showing less than R5 lakh annual income. Then, those with income above R20 lakh constituted only 0.38% of the total number of assessees but paid 63% of the FY12 collection of R1,48,073 crore. In the last 10 years, direct tax collection has increased by more than 700%, while the number of taxpayers has grown by only about 35%. This prompted the Parliamentary Standing Committee on Finance to ?desire that strenuous efforts should be made by the department both in terms of policy as well as enforcement action in widening the tax base, which obviously is not commensurate with the growth in income and wealth witnessed over the years?.
The CPC compliance management would ensure this if implemented properly. The basic idea behind the move is to enable effective utilisation of information?about 5 crore pieces of information on high-value financial transaction are already available with the department?and free resources for investigation, scrutiny and recovery of taxes. At present, this job is being done by a small cell in the directorate of systems that is handling the pilot project under which letters/notices are being sent to the people who have made high value transactions but have not filed income tax returns.
The pilot ?Non Filers Monitoring System? was launched last year on the basis of information available in Annual Information Return (AIR), Central Information Branch (CIB) data, TDS/TCS returns and cash transaction reports of FIU-IND. The target segment of 12 lakh non-filers has been identified on the basis of data analysis of 4.7 crore information records. So, what is being done currently on a pilot basis, will get institutionalised once CPC compliance management is in place.
The significance of this CPC also lies in the fact that it will act as the IT transformation bridge for the department as the whole process would be part of the larger Data Warehouse and Business Intelligence project (DW&BI), recommended by the Kelkar panel on fiscal consolidation for data mining and taxpayer profiling, which would facilitate collation of data from different sources over the time scale in an easy-to-report format providing a clear picture to proceed further in a particular case. The business intelligence component will leverage advanced reporting and analytical capabilities to utilise the data available in the warehouse to enable the end-users to create their own reports and facilitate the required analysis.
As per the roadmap drawn by CBDT, the project would be completed in two phases. In the design phase, to be completed in 12 months including selection of implementation agency, a consultant would be selected for preparing detailed project report. In the implementation phase, to be completed in 30 months, the consultant would act as project manager.
Once created, DW&BI would do a 360-degree job of suggesting steps to widen the tax base, improve compliance, detect fraud and leakages, support investigation, increase effectiveness of tax collection, generate enterprise-wide reports, monitor high risk scenarios and provide inputs for policy making.
Indeed, the plan looks impressive on paper but the actual outcome would depend on the speed at which it is implemented. There is no doubt, however, that the same IT for which the I-T department at one point of time had no funds is set to transform the department in the next few years.
santosh.tiwari@expressindia.com