Prime minister Narendra Modi pulling up the Central Board of Direct Taxes (CBDT) for harassment of the taxpayers at the launch of the Pro-Active Governance And Timely Implementation (PRAGATI) platform will, hopefully, put pressure on the taxman to be more taxpayer-friendly. Such meetings are to be held on the 4th Wednesday of the month. The point, however, is that what the department needs is a complete overhaul—that is what the reports of the Tax Administration Reform Commission (TARC) were all about—and it is not clear how regular meetings with the PM are going to help achieve this. Since FY06, the taxman has added R2.64 lakh crore to the incomes of MNCs operating out of the country—a decision on how to treat/fix this cannot be taken at a PRAGATI meeting. With finance minister Arun Jaitley refusing to take the 2012 retrospective tax amendment off the statute books, the fear of this being used again remains; there are 2.67 lakh tax cases pending at various forum and R6.75 lakh crore of tax arrears—mostly disputed—still pending.
What are required, under the circumstances, are some broad principles of resolution of these cases, and a complete change in the manner in which the taxman approaches cases. According to a FICCI study, the average time taken by an assessing officer to pass order is 1-2 years. At the CIT (appeals) level, it is 3-4 years, which extends to 6-8 years in certain jurisdictions. Similarly, disposal of appeals at ITAT takes
2-3 years and in the high courts, the average time taken is 3-5 years, which goes up to 8-10 years in some cases. The situation is no better in the Supreme Court and the taxpayers have to wait for 4-7 years to get a verdict and this is why the apex court has set up a special bench to
dispose of the tax cases quickly. The finance minister would do well to seriously consider the TARC recommendation to create a separate dispute resolution vertical and completely delink it from the revenue collection function. This vertical will cover the entire gamut of dispute management, starting from policies and measures to minimising the disputes to the efficient and satisfactory resolution of disputes—some recent cases this mechanism could have resolved were the Cairn one as well as the MAT notices issued recently to FPIs. The biggest benefit of this set up will be that only those cases will be pursued in which the department is absolutely sure of winning.
