Most of the income tax payers are not in comfort while dealing with the Income Tax Department [ITD]. Of late the ITD has been alive to this perception. The Department in the last few years has done its best to change this image. In the process, the ITD is transforming itself from an Enforcement agency to a service organisation. The Assesses are treated as Customers of the organisation entitled to the prompt services from the ITD. It now has set timeline for delivery of various services and introduced E-governance as a strategic tool for transforming Governance and improving the quality of services provided to the taxpayers. Ramesh Chandra Mishra, Special Secretary and Member, Central Board of Direct Taxes [CBDT] – Audit and Judicial, assures one stop solution for taxpayers from the ITD in a free-wheeling interview with Nageshwar Patnaik.

Excerpts from the Interview –

NP – What has been your top priority as CBDT member (audit and Judicial)?

RCM – The government has a clear cut policy to reduce litigation. Government is a major litigant in all judicial forums like Tribunals, High Courts and Supreme Court. I am looking after litigation management in income tax department. Hence reducing the number of litigation is my prime objective and we have succeeded to great extent and improving the system to unclog the judiciary.

NP – India’s low tax base has been a long-standing problem. Why is it that initiative like tracking high-value transactions or insisting on PAN cards for more transactions have not worked?

RCM – The above statement is partially correct. The department is on right track. But we must also ensure that no tax payer feels harassed. There is constant improvement in technology that the department is using so that the right people are targeted. It may take another year or so when our effort will be visible in a much longer tax base.

NP- The Tax Administration Reforms Commission (TARC), headed by Parthasarathi Shome, had suggested far-reaching changes for a customer-focused tax regime in India. What are the changes initiated so far in this regard?

RCM -The department has changed its focus from enforcement to facilitation. You must have seen the vision document, Citizen Charter, stress on grievance redressal in the department. At the client level, most taxpayer now get refund in their bank account in short period very normally and without any effort. This you can yourself verify as a journalist. Almost all the work of filing return, paying tax, conducting assessment, filing appeals, deducting TDS, claiming of refund, issue of refund, notices are done by system online without visiting the office or the official. The challenge before the Department is to identify the barriers to voluntary compliance and take proactive steps to remove them by putting in place excellent public service delivery mechanism.

NP – The TARC report strongly criticizes aggressive revenue forecasts made in the annual Budget like unachievable targets set for tax officers that often results in “Tax terrorism”. How can this be addressed?

RCM – This is an area that needs to be discussed a little more to be made implementable. We have a target as per the budget document which is distributed to various Zones. That needs some fine turning. But at the same time nobody is asked to collect forcibly. I think there has been considerable improvement. But abolishing target all together may not be possible.

NP – The report flags the problem of infructuous tax demands, stating that the Indian tax department has one of the worst recovery records in the world. Why does this happen?

RCM – The report makes a valid statement. Irrecoverable demand is a great problem faced by the department. This happens for many reasons. The major reason is very often demand created is disputed in appellate forums and by the time it is confirmed in appeal, the either taxpayer becomes unavailable or his assets are already sold or disposed off so that department does not have a person or assets to recover from.

NP – Corruption is an often cited complaint with the department. Would curbing the discretionary powers to the assessing officer help?

RCM – Discretion breeds corruption. So monopoly of discretion is choosing which case to investigate needs to be curtailed. In fact department has totally moved from manual and individual based scrutiny to systems based, automatic selection. But till all the interactions of tax payer with department are regulated. The Department recognises that continued dignity and courtesies bestowed upon taxpayers or their treatment as valued customers is vital in delivering taxpayer services. The enforcement functions, normally considered the domain of discretion of officers, now incorporate service requirements through easier/ open communication, courteous treatment, clear service standards in every interaction and fairness and equity in treatment.

NP – What is the status of the much hyped simplification and rationalization of the tax structure? Instead of fewer slabs and exemptions, we seem to be adding on more slabs, more surcharges, cesses and more complexity.

RCM – No doubt income tax Act 1962 is a complex piece of legislation and not the tax rates or slabs or calculations. Justice Eswar Committee is appointed to formulate simplification f the tax code.

NP – India ranks fourth in black money outflows with a whopping $51 billion siphoned out of the country per annum during 2004-2013. A latest report by Ambit Capital Research pegs India’s black economy at over Rs. 30 lakh crore or about 20 per cent of total gross domestic product (GDP). What steps are being taken to bring back black money to the country?

RCM – Last year in FY 2015-16 there was scheme to bring a undisclosed foreign money and assets by declaring and paying tax on it. But what the department got out of it is must be substantial if the figure cited by you is correct. Similarly there is Income Tax Disclosure Scheme [IDS] for domestic black money and unaccounted assets. Apart from that the department is trying to increase specific information based investigation to unearth to black money inside the country. For money abroad it has already sought help of other nations to give and get information relating to unaccounted money slashed in foreign banks. It has yielded some result and will more result in future.

NP – The result of the previous amnesty scheme, the Voluntary Disclosure of Income Scheme [VDIS] of 1996, which resulted in a peanuts repatriation of Rs. 10,000 crore, proved that amnesty schemes do not have any impact on curbing the parallel black money economy in our country. Do you think, the IDS, 2016 which came into effect from June 1, 2016 will be any different?

RCM – Yes, I am hopeful.

NP – Money launderers have plenty of alternatives—from tax haven that haven’t signed treaties to real estate assets in global markets that will ensure they don’t have to worry about spending up to a decade in jail. For the authorities, however, the hunt for the black stash continues. Will that too end in Whimper?

RCM – The fight against black money is an ongoing battle with SIT, Multi Agency committees, Central Economic Intelligence Bureau, Department of Revenue intelligence, DGFT, CBDT and CBEC through tax treaties, multilateral convention on sharing of tax information, automatic exchange of tax information. In the age of globalization money blow has no boundary while sovereign national Jurisdiction has. So it is always a challenge.

NP – India celebrated 25 years of economic reforms in July last. Goods and Services Tax (GST) is a major reform in indirect taxes. Direct tax base in the country is also low. What steps are being taken to keep up direct taxes in the country, particularly income tax?

RCM – Direct tax particularly income tax has a long history . The department is using advanced data analytics tool for data mixing for banks, property registration offices, car dealers, credit card service providers, RBI and is trying to develop dossier on all persons capable of paying tax though unique identifier of PAN, TAN, Adhar Import and Export Code etc. to both make sure that more and more new tax payers are added every year and the existing tax payers pay their rightful tax. I believe the department will succeed one day.

NP – There are only 35,000 people who have filed their income tax returns with an annual income of Rs. one crore? Is it realistic?

RCM – It is not at all realistic. I hope with better use of determining the department will make an impact and the figure will improve.