I-T dept takes tech help to tackle HNIs' tax return cases : CBDT

The Income Tax department is using non-intrusive technology to tackle cases of "understatement" in tax returns filed by higher income groups and those in the super-rich category, the CBDT on Wednesday said.
Talking about the surcharge levied on high income taxpayers in the Budget, Chairman of the Central Board of Direct Taxes (CBDT), Atulesh Jindal, said the number of such people, having salaries over Rs one crore per annum, is less than a crore.

"I agree that there is some understatement of income as far as these higher income groups are concerned. Some committees, set up to study this matter, have also suggested that understatement is made among the higher income groups. However, this is in certain cases and all of them are filing their returns, no doubt. We are trying to make use of Information Technology (IT) to tackle such cases. The emphasis is on using more non-intrusive methods. We are making use of IT tools on a very large scale. We also have a very robust system to match the information that we have, from what we get," Jindal told PTI.

He said the surcharge was introduced to "compensate" for the abolition of the wealth tax. When asked how many assessees were in this category of super-rich in the country, Jindal said the figure is "less than a crore."
"The main emphasis of the Budget is to provide adequate funds for social schemes. A very substantial amount has been kept for infrastructure," the top CBDT official said, calling it a very "balanced" Budget.
Finance Minister Arun Jaitley, in his budget speech on February 29, had proposed to "raise the surcharge from 12% to 15% on persons, other than companies, firms and cooperative societies having income above Rs one crore".

A surcharge of 10% on taxable income of Rs one crore and above was imposed in 2013-14 by the then Finance Minister P Chidambaram.

In the last Budget, Jaitley had abolished the wealth tax and replaced it with an additional surcharge of two% on the super-rich with a taxable income of over Rs one crore. Jindal said the Budget has proposals that would help the government's 'Make in India' initiative and lead to simplification of tax laws.

"A lot of attention has been given to Make in India by ease of compliance to income tax provisions in this Budget. These subjects have been given utmost priority," he said.
The CBDT Chairman said a number of recommendations of the R V Easwar Committee have been included in the Budget which will simplify provisions and measures to facilitate ease of business and compliance (with tax laws).

"A number of those recommendations have been implemented either in the Budget or by way of issue of circulars or instructions (in the recent past). TDS provisions in particular have been streamlined keeping in view the recommendation of the committee in respect of certain heads. Threshold limits have been raised. Limits have been suitably enhanced. In certain items, the rate of deduction has been lowered like that for commission payment," he said.

The Easwar Committee was set up by the government last year to simplify Income Tax laws and procedures.

CBDT spares investors from capital gains disputes

Ndividual equity investors now have the sole discretionary power to decide if their income from equity is taxable or not, as per a Central Board of Direct Taxes (CBDT) circular.

The move will particularly benefit long-term equity investors, who were under scrutiny and whose capital gains were sometimes treated as business income.

The circular states, “In respect of listed shares and securities held for more than 12 months immediately preceding the date of transfer, if the assessee desires to treat the income arising from the transfer thereof as capital gain, the same shall not be put to dispute by the assessing officer.”

This simply means the individual investor sells her shares after a year, she does not have to worry about litigations and the income is non-disputable. Such cases were often open to ambiguous interpretations. The criteria for such ambiguity were many -- frequency of transactions, source of funding or even the classification of transactions in the financials.

Capital gains arising from sale of shares held for more than a year are exempt from tax.

“This is a positive move for Dalal Street, and the government has taken the right step to encourage long-term investors. Now whether you borrow money and invest or it’s your own capital, as long as you sell after a year, you are out of taxation and legal issues,” says Ambareesh Baliga, CEO, Honeycomb Wealth Advisors.

Girish Vanvari, KPMG head of tax, too feels it is a step towards ironing out legal ambiguity. “This will reduce litigation and will be very good for capital market investors. In the spirit of the circular, this should not enhance scrutiny in cases of investments that are less than 12 months, which may also be capital assets.”

However, once the assessee or investor in this case decides to treat his or her income as capital gains and not as business income, one cannot change the category in the subsequent years.

“Opting for business income gives the advantage of claiming deductions over expenses and in times of falling stock prices, but if one opts for capital gains then you can’t avail these benefits. The trade off is between paying taxes and claiming deductions,” says Sujit Ghosh, partner, Advaita Legal. However, the larger question, he says is whether the circular can be binding on the assessee. “It is an established principle of law that circulars don’t bind the assessee, but only bind the revenue,” he adds.

Moreover, while the spirit of the circular is sound, the implementation is yet to be seen.

CBDT forms directorates to monitor taxpayer service

To reduce grievances of tax payers, the revenue department has set up a dedicated structure for delivery and monitoring of taxpayer services.

CBDT Member (Revenue and Tax Payer Services) will oversee the related services in Central Board of Direct Taxes, the CBDT said in a statement.

Two separate Directorates - Directorate of Tax Payer Services I and Directorate of Tax Payer Services II - have been set up, it added.

"Together, these Directorates will be responsible for delivery and monitoring of taxpayer services in the field offices and e-services deliverable through various electronic platforms of the Department," CBDT said.
They will oversee and coordinate all matters relating to grievances of taxpayers and ensure their timely redressal, it added.

The I-T Department has been addressing grievances through Centralised Public Grievance Redress and Monitoring System (CPGRAMS), Aayakar Seva Kendras (ASK), online grievance redressal through Central Processing Centre (CPC), etc.

Taking another step in this direction, the CBDT has issued an order setting up a dedicated structure for delivery and monitoring of tax payer services.

CBDT said the responsibility for delivery of taxpayer services has also been assigned at every level in the field offices.

"This will ensure accountability of officials in redressing grievances in a time-bound manner," it said.

The report of the Tax Administration Reforms Commission (TARC) had also accorded considerable importance to redressal of grievances and a customer-focused approach in the department through creation of a taxpayer services vertical.

This structure will fulfil some of the most significant recommendations of the TARC, CBDT added.

With this, the CBDT expects a noteworthy reduction in taxpayer grievances and enhanced taxpayer satisfaction.

New wing to resolve taxpayers' complaints

Central Board of Direct Taxes (CBDT) has created a new wing in the income tax department to exclusively deal with taxpayers' grievances and complaints related to delay in issue of refunds and problems in filing tax returns among others.
This is the first time that the I-T department is witnessing a re-designation of posts, from top to bottom, to include grievance redressal and taxpayer services as an essential charge of work, albeit, by using the existing manpower of the department.

An official order issued in this regard on February 26 said approval has been accorded for "setting up a dedicated structure for delivery and monitoring of taxpayer services in the Central Board of Direct Taxes and its attached and sub-ordinate offices, with immediate effect and until further orders."

In this connection, the post of CBDT member (revenue) has also been re-designated as member (revenue and tax payer services) and the principal director-general of income-tax (administration) has been re-designated as that of (administration and tax payer services) with two new separate directorates coming up-- tax payer services I and II.
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Instead of correcting the existing ones, they go for a new set ! Additional burden through new babus to rule the new system !

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The new directorates will "oversee and coordinate all matters relating to grievances, issues pertaining to taxpayers falling within the jurisdiction of Assessing Officers across the country."
The order said the new units will "devise an effective monitoring and reporting mechanism for tax payer services in field offices, review and monitor the implementation of the citizens charter of the department and carry out research and surveys on taxpayer satisfaction."

They have also been tasked to deal with taxpayer complaints relating to matters such as processing of income-tax returns (ITRs), refunds, demand verification, permanent account number (PAN) and issues related to the central processing centre (CPC) in Bengaluru which deals with subjects of the tax paying public on a daily basis.

Sec 17 showroom fined 17,000 for charging extra VAT

Taking serious note of the practice of traders charging value added tax (VAT) on price which is inclusive of all taxes because of discount offers, the District Consumer Disputes Redressal Forum asked an Adidas showroom in Sector 17 to refund Rs 449.93 and pay Rs 17,000 to a consumer.

Anu Pratap, a resident of Sector 16, Chandigarh in her complaint before Consumer Forum said she bought a pair of shoes from the showroom under a promotional offer of 40% off.

"Maximum retail price of the said shoes was Rs 5,999 which was inclusive of all taxes," the complaint read. She alleged that after giving 40% discount, the opposite parties charged Rs 4,049 from her and charged Rs 449.93 as VAT on Rs 5,999, which was already inclusive of all taxes.

Pratap served a legal notice on showroom authorities seeking refund of the excess amount charged. But instead of refunding the amount, they sent a "vague and evasive reply" justifying their action of charging VAT.

The complainant described the aforesaid act and conduct as deficiency in service and unfair trade practice. Despite a notice, no one appeared on behalf of the showroom and the case was proceeded ex-parte.

"This act of the showroom managers draws an adverse inference against them," the forum stated. Their non-appearance shows they have nothing to say in their defence against the allegations made by the complainant. Therefore, assertions of the complainant go unrebutted and uncontroverted, the forum held.