In a bold attempt to reduce frivolous tax demands, the Income Tax Department has decided to overhaul the annual performance appraisal system for tax officials, relying on the quality and effectiveness of their work and not plainly on the quantum of tax demands raised.
Sources told FE that error-free and well-reasoned tax demands, which are made following all principles of natural justice and are not struck down by courts subsequently, would earn an officer a good grade, not frivolous, high-pitched tax claims that do not stand the test of appeal. Since one of the parameters of the new appraisal system would be the actual amount of tax eventually collected, field officers are likely to make realistic assessments, said an official, who asked not to be named.
The move is likely to cheer businesses, many of which had been confronted with huge tax demands in the recent past, especially in the case of cross-border transactions. It is also in sync with the Modi government’s promise of non-adversarial tax regime. While ensuring that tax officers are held accountable for their actions, the government would also make an earnest attempt to enhance the tax base from 4.7 crore assessees, sources said.
The Income Tax Department, which has set a target of 14.6% growth in direct tax collections this fiscal, would take steps that would act as a deterrent to tax evasion. These measures include taking a more proactive approach in initiating prosecution of tax defaulters and seeking “assistance in tax collection” on a regular basis from other countries where Indian defaulters have assets.
To send a strong message of deterrence to evaders, the CBDT has decided to inform field officers not to go by the letter of a 2009 prosecution manual, which said that charges of willful attempt to evade tax (punishable with rigorous imprisonment) can be initiated in cases where penalty of Rs 50,000 has been imposed for concealing details of income, which has been confirmed by a tribunal. Instead, the message to field officers now is to launch prosecution in all cases they deem fit, not restricting themselves to only those that met the criteria in the manual.