How Income Tax Base can be widened

CA. M. Lakshmanan

Under the present system of limited scrutiny under CASS (Computer Aided Scrutiny Selection) Income Taxes Cases are selected for hearing under various parameters and assessments are made basing on the books of account and evidences produced. Further notices are sent to assessees basing on information collected from the Annual Information Returns (AIR) and verified whether Returns of Incomes were filed and the income returned is correct with respect to the information collected.

As of now more time is spent on the scrutinizing the returns filed than the time spent in roping new cases. More the ‘Income Returned’, more the chances of getting enquiry and hearing. It is to be avoided. By existing practice the ‘scrutiny assessments’ have to be completed necessarily by increasing the income returned either by disallowing certain expenditure or by enhancing the income earned, which results in additional taxes with interest and penalty proceedings. As a custom the income returned is not accepted and the Assessee/Representative is requested to attend the Income Tax Office many-a-times. Because of this attitude, physiological fear arises among assessees, which is deterrent for the cordial relationship between the Assessing Officer and the Assessee. Hence there is misconception among assessees that if they file returns voluntarily they will be subjected to rowing enquiry. So they wait till a compelling situation arises. If this is taken care, more people will come forward to file returns of income voluntarily. Of course the assessees should be aware of the fact that if there is willful default or concealment appropriate action would be taken by the Department.

Many of the properties are sold by registered documents up to Rs. 5,00,000/- (Rupees Five Lakhs only) without PAN of the buyer and seller and there is a chance that such transactions may escape the attention of the Income Tax Department. Hence PAN should be made compulsory for registration of documents carrying value of above Rs. 1 Lakh. At present the public receive notice after a long time after they registered the documents exceeding Rs. 30 Lakhs basing on the information available in the AIR. But this value (reporting under AIR) should be reduced to Rs. 1 lakh and the notices should be sent as early as possible. If the capital gains arising there from are offered as Income and the taxes are paid in time, the assessees can save the interest they are paying due to nonpayment of Advance Tax and belated filing of return of income after receipt of notice and they need not be subjected to penalty proceedings also. They can avoid capital gains tax by investing the proceeds/gains in approved securities or in house property before the stipulated time, if they are eligible provided they are alerted in time. This will also help to increase and the tax revenue

Presently people have accounts with various Banks and give 15G/H knowing very well that their income is more than the maximum non-taxable limits if all the interest from all the Banks are clubbed together and naturally they would have given PAN also to all the Banks. Till now notices are sent to those who have not filed their returns of income and not claimed the TDS if TDS is made by the Banks either due to non submission of Form 15G/H or by mistake by Banks without looking into the Form 15G/H submitted. Since people are giving PAN/Form 60/61 indiscriminately, the system should be made foolproof by collecting all the data about a particular individual from various sources and proceed against suspected evaders. Now it is felt that the Government has equipped itself with the system of integrating all the data (not only Bank deposits but also various financial transactions where PAN is mandatory) under single PAN from various sources and if it works, more people can be roped in. For example if a car is purchased or an investment is made under single PAN, all should be clubbed and action should be taken based on the results.

Another area is submission of Form 61/61A by people at various situations where PAN is required or otherwise they can give these forms. Though either Form 61 or Form 61A is to be obtained many get both the forms without filling the same and it is not known whether any authority is monitoring about the obtention and submission of the same with the Income Tax Department and further action taken on the forms so submitted. If more time is spent on this issue more assessees can be roped in. All the Form 60/61 given at various locations by a person should be clubbed with the help of ‘id proof’ or ‘Address Proof’ or ‘Adhar Card’.

Often it is reported that the percentage of people who pay taxes in India is too low; but it is to be seen how far we concentrate on roping in new assessees is a big question. The above areas wherein new assessees can be roped are only very few. Constantly a team of experienced officials have to device ways and means to rope in new cases basing on the past records and the present trend and close the doors for those who try to evade tax. In the long run, I think the goal can be achieved.