Rs 10,000 cr tax demand: SBI victim of ‘taxtortion’

By: | Published: July 29, 2016 6:30 AM

India’s tax department is wont to its whimsical ways, but this one would tell you it can even intimidate the country’s largest state-sector bank and extract from it more than double the amount due as taxes because an overzealous tax officer had to meet his target.

According to a report by The Economic Times on Thursday, income tax officials called a meeting in Mumbai on July 22 and decided to seek attention of the finance ministry and the Prime Minister’s office towards interference of revenue secretary Hasmukh Adhia on their work. According to a report by The Economic Times on Thursday, income tax officials called a meeting in Mumbai on July 22 and decided to seek attention of the finance ministry and the Prime Minister’s office towards interference of revenue secretary Hasmukh Adhia on their work.

India’s tax department is wont to its whimsical ways, but this one would tell you it can even intimidate the country’s largest state-sector bank and extract from it more than double the amount due as taxes because an overzealous tax officer had to meet his target.

On March 30, according to sources, the department’s Mumbai wing slapped a R10,000-crore tax demand on State Bank of India and asked it to pay the amount on the same day. The bank, fearing the fallout of short-payment, promptly complied but asked for “rectification” saying while it had paid R4,900 crore as advance tax, the assessing officer (AO) accounted for only R1,200 crore. The AO, who had demanded interest of R5,800 crore for short-payment of advance tax, issued a rectification order the next day, the last day of the financial year, and determined refund of R9,500 crore. Curiously, the amount was to be paid to the SBI only on April 1 and so the FY16 accounts continued to show the inflated tax payment by the bank!

According to a report by The Economic Times on Thursday, income tax officials called a meeting in Mumbai on July 22 and decided to seek attention of the finance ministry and the Prime Minister’s office towards interference of revenue secretary Hasmukh Adhia on their work.

As the long-standing turf war between the officers of the Indian administrative and revenue services (IAS and IRS) over matters of taxation reached a flashpoint after several IRS officers huddled together in Mumbai to pass a resolution and strategise against the department of revenue’s (DoR) alleged interference in their day-to-day operations and decision-making, the DoR has got the political leadership to back it unequivocally.

While a finance ministry statement on Thursday said finance minister Arun Jaitley has taken “a serious view of such a resolution by officers of organised Group A service to advise the government on what role it should play”, sources told FE on condition of anonymity that the DoR’s supervisory role over the tax administration helped remove fear of harassment from the minds of taxpayers and focus on five pillars of administration — revenue, accountability, probity, information and digitisation — in a more balanced manner.

Stating that several taxpayer-friendly steps taken by the DoR in recent months have helped reduce litigation without undermining the department’s revenue objectives, the sources added the department had asked the Central Board of Direct Taxes (CBDT) to initiate action against the officers responsible for the SBI episode. “The government has made it very clear to all field functionaries that no such unfair means will be used for jacking up the revenue collection achievements,” one person said.

The nub of the issue between the IAS and IRS cadres over who would control tax administration is that the latter, despite being a specialised cadre with field-level experience, continues to be denied the final say on policy matters. The highest post an IRS officer can get is that of the chiefs of either of the two tax boards — the CBDT and the Central Board of Excise and Customs (CBEC), both reporting to the revenue secretary, usually an IAS officer. The grievance was expressed with vehemence by the IRS fraternity before the tax administrative reforms commission, which also said the IRS cadre cannot be administered by the DoR.

However, according to the finance ministry, the IRS (I-T)’s Mumbai wing’s recent resolution is “an act of insubordination”. Stating that officers indulging in acts of indiscipline “would be subject to Conduct Rules”, the ministry added: “No department of the government has absolute autonomy. It has to serve the larger goal of the government. The supervisory powers of the next higher authority ensures that there is no misuse of power by anyone in the government.”

Adhia, immediately after he assumed office last September, had urged taxpayers and whistle-blowers to write to him personally about issues such as reform suggestions, instances of harassment and simplification of rules needed, and promised that all decisions regarding taxation would be just and fair. “What I hear from various sections of society and taxpayers is that we have got some complicated laws and, on top of it, a lot of rules and notifications which really make taxation difficult to understand. Simplification of rules and procedures and transparency through the use of technology will be the topmost item getting my attention in the next few months,” he had said.

 

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