Now Income Tax Officers may be rewarded by the Central Government for settling all impending issues related to non-payment of direct taxes. The move is seen by many as a measure to curb direct tax evasion as well as increase tax revenues. However, financial and tax experts have indicated that the move could backfire by triggering a panic like a state among taxpayers and citizens. The side-effects could be a beyond the logical estimates of the lawmakers. Reportedly, the Central Board of Direct Taxes (CBDT) data confirms that outstanding tax amount has increased from 10.52 lakh crore on April 1, 201,7 to Rs 11.23 lakh crore on April 1, 2018.
The recent amount of income tax arrears is almost double than the Rs 5.75 lakh crore of April 2014. Last year the department had recovered Rs 3.25 lakh crore (including cash confiscation of Rs 44,633 crore) in outstanding tax payments. This has reduced the outstanding amount by 31 percent.
What Set the Alarm Bells Ringing?
The reason for the IT department proactively pursuing tax evaders since last fiscal year is the demand of additional net cash of Rs 4.26 lakh crore during the year 2017-18. Till now only Rs 76,641 crore was recovered out which only Rs 52,537 crore was in cash form. As per insider reports, the current target for the SBDT has been set at 40 percent reduction in outstanding tax arrears.
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The CBDT Solution
Reports suggest that CBDT, in order to increase compliance, will reward I-T Department appellate officers with two additional units for each quality appellate order passed vis-à-vis the assessees. For any unresolved tax disputes, the assessee needs to first appeal the Commissioner of Income Tax (Appeal). The courts come next.
The incentives will be granted based on the quality of appellate orders to be adjudged by senior officers. The quality check parameters include :
- If any increment has been done?
- Has the order been made more stringent?
- Have penalties been imposed?
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However, tax commissioner and CBDT spokesman Surabhi Ahluwalia said that there is no question of tax panic system. She added that the motive behind the incentive has been totally misunderstood. Only the Appellate Authority can increase the assessment where necessary, the assessment can remove the deficiency in order and impose a fine. That is why the power of the income tax commissioner (appeal) does not mean terror.
