Scrutinty assessment a source of harrassment now also officially recognised.

[C.A. DEV KUMAR KOTHARI]

Earlier article:

On the same subject readers may fruitfully refer to an earlier article titled as "Assessment … or Harassment" published during 1996 at 131   CTR   109 (mag.)  written by the author. In the said article many types of tactics adopted were discussed which in real sense amount harassment while scrutinizing returns of income. It is said that a twelve years period is quite lengthy to make changes in fortunes of any one. As per a saying even fortunes of a garbage dumping ground can change in such a period. However, we find that the harassment tactics which prevailed then are still continuing by the public servants.

In some cases referred to in the earlier articles he process of harassment has prolonged and still continuing because the A.O. did not care to prepare and file remand report which was  requisitioned from him by the CIT(A).  Due to absence of remand report, disposal of appeal by the CIT(A) itself was delayed by about ten years. The CIT(A), playing safe and keeping in mind the interest of revenue but ignoring the continuing and prolonged harassment, confirmed addition and disallowance, although the facts made out by assessee were very clear and any report of the A.O. was just a formality- in fact the A.O. had nothing to say on the facts brought on by the assessee that the A.O. never asked the assessee in writing or verbally to file any thing further or to produce any further evidences.

 The A.O. having not been able to trace old record did not submit remand report and the CIT(A) confirmed addition and the assessee has to prefer appeal before the ITAT thus the process of harassment which begun some time in 1995 is still continuing.

Present scenario:

Scrutiny assessments have all along been a source of harassment. The assessee as well as their authorised representatives feel the pinch. The authorised representatives however, are compensated as they can charge some extra fees for time devoted and additional work generated by scrutiny assessments. However, the tax payer is the real sufferer. The tax practioners should however feel very much obliged due to extensive and many times un-necessary enquiries made by the A.O. which results in additional work for them. However, the question is whether it is justified to make unnecessary and roving enquiries.

Paperless returns are made further source of harrassment:   

In case of process of scrutiny assessment, where paperless return were filed online and then hard copy of returns with all enclosures and supporting documents were filed the assessees are facing harassment because the A.O. ignoring information given in online return and also ignoring  the paper return and all enclosures  already filed, is still calling for all documents in hard copy. The information usually provided in the annual report, tax audit report and the return of income are also being asked for.

In fact a paper copy of return is also being asked - Cant' the A.O. print the return in his office?

Thus ,the purpose being paper less or minimal  paper process is being defeated. In fact same papers have to be filed more than once. Because unless the assessee full fill requirements of the notice, the A.O. may impose penalty.    

Scrutiny assessment- a source of harassment:

It is well known that scrutiny assessment is a source of harassment. This is evident from the fact that whenever an assessment is made, unjust, illegal and improper additions and disallowances are made. Many times such disallowances or additions are made just for the sake of making additions and disallowances and raising demands. In fact, it appears that many of assessing officers have fear of criticism from higher authorities as inefficiency, or favour to assessee if they make a clean assessment.

The nature of illegal and improper additions and disallowances is evident from the fact that more than three-fourth of such additions and disallowances are deleted in the first apepal itself. As per authors exp[erience in case of scrutiny assessment initially the A.O. makes lot of additions and disallowances, however, after disposal of appeals the ultimately assessed income is many times less than the income returned by the assessee. This is because, playing safe  some  contentious relief which are not claimed in computation but are claimed by way of additional claims and  relief by way of notes and claims are also allowed by the  A.O. or the appellate authorities, hence in many cases ultimately assessed income is less than the returned income.

Thus, it is evident that scrutiny assessment is generally a well known source of harassment.

Scope of harassment:

Scope of harassment is not restricted to the assessee only. It may spread  to all parties who had dealing with the assessee. For example, the A.O. may issue a requisition in which he will call many such information which are already with the department by way of information provided in the return of income, paper return, and enclosures tot eh paper return.  The A.O. are asking details of all parties who are under the same group or in any way related with  assessee, directors or partners of assesee etc.

Once case come up for scrutiny, the A.O. generally see every aspect of the business and business dealings in a suspicious manner. For example, in some recent requisitions the A.O. has asked for :

Name, address, PAN, bank account details, address contact numbers of all  group concerns and all concerns in which the directors of the assessee are interested in any manner. He has also asked to file P & l accounts , Balance Sheets and copy of receipt of returns of income of all directors.

Certified copies of all TDS certificates issued for Tax deducted by the assessee - what is the purpose? The author is unable to understand because the return of TDS has been filed with the ITO TDS  So far disallowance  for default in payment of TDS is concerned  relevant information is given in tax audit report.

 In one case learned A.O. appears to have visited the website of the assessee ( a call centre) and has asked to provide all  physical details of the call centre, all assets  bills of all machines and facilities etc. of the call centre (they are displayed on website of assessee). Learned  A.O. has ignored the fact that the assessee setup the call centre about 7 years ago and all these details were examine by the A.O. in earlier years and now enquiry about the same may be of not much relevance.

In one case the A.O. has asked explanation as to why turnover has decreased from about 19 Crores to Rs.16 crores, though the salary and remuneration has not fallen. He has asked for all partywise details of sales and services and all agreements with clients. It appears that the learned A.O.  is either ignorant of business reality or he is deliberately attempting to ignore them to make roving enquiries.

In one case learned A.O. has asked for details of all secured loans with details of security provided, although these details are furnished in audited accounts of the assessee who is a public limited company. This shows that the A.O. has issued requisition without considering records and without application of mind.     

In one case the A.O. ignoring the circular of the Board, added entire amount of advance rent received as income of the first year in which tenancy started. Thus, he made double addition of rent for the year because assessee had already adjusted relatable advance for the period as income in first year and balance is spread over as income in subsequent years.

 The advance  amount of rent relatable to second and third year which is adjusted by the assessee in accounts in subsequent years, should be excluded from the returned income of second and third year, however, the A.O. has not excluded the same, thus he has assessed twice the amount of rent advance received. The assessee preferred rectification petition before the A.O. but that remains unattended inspite of reminders and the assessee has to prefer appeal before the CIT(A). This shows how harassment is inflicted on taxpayers.

Computerised requisitions a source of extensive harassment:

Due to issuance of requisitions generated in computer and application of copy and paste methods while preparing requisitions many not applicable or un-necessary information are being called for. This is because, going in easy way, tendency is to call for any information, if any thing is not applicable, the assessee should explain it, why the A.O. should bother.

The nature of harassment:

Tax payers and practitioners face harassment in several ways like:

a. Lot of wastage of time due to waiting time for tax payer, practitioners and witnesses, repetitive hearings and unnecessary enquiry.

b. Full contact information like room number, floor, telephone nos., phone  extension numbers, mobile phone numbers , email id etc. are not given in notice or correspondence. Thus it is difficult to contact the officer even when one visit his office for the first time because the information displayed on the board may be incomplete or wrong, the enquiry officer may himself may not be fully aware of new and junior officers like ITO/ ACIT. Experience shows that in various buildings of income tax department, it takes 15-25 minutes to get connected to any officer when one try to contact through the telephone operators. Thus the process of contacting officers itself start from the phase one of harassment. The A.O. should provide full information including at least his direct phone number, fax number, extension numbers of his chamber and his staffs office number. If mobile phone number is also provided, it will be great help and service.

c. The suspicious approach, which the Assessing Officers usually have. (does the popular  saying 'choro ko sare najar aate hein chor'  generally fits well on many  of  them?)

d. Many times asking documents several times because documents earlier filed are not properly placed in assessment records.

e. Making some disallowances or additions just for sake of making them and raising demands. Disallowances in complete disregard of facts, circumstances and law are not uncommon in a scrutiny assessment.

f. Making additions and disallowances completely in disregard of binding judgments, boards circular and ignoring documents and evidences filed is very common.

Harassment at car parking space:

It is very difficult to get proper and nearby car parking space near income tax buildings. The car parking charges charged by car accommodators is also very high.

We find that large number of officers and staff buses and cars are parked before and around the income tax departments building and there is hardly any space for parking of cars of tax payers and practitioners. The officers and staff buses come in morning at around 10.00 AM and leaves at about 5.30 PM. They can be parked at some nearby car parking spaces or can go back and come back in evening. Some cars of officers can also be parked at other nearby places, and the officer can call his driver as and when required. This will help to make room for some cars of tax payers and tax practitioners. This will go a long way  in building up good relations if the tax payer and tax practitioner get car parking space easily, nearly and  without hazels and with some respect.   

Official recognition of harassment:

We find official recognition of the fact of harassment from a statement of a senior Finance Ministry Official, in press release dated 07.07.2008  (placed on TMI also) in the following words:

The Central Board of Direct Taxes has decided to relax norms on scrutiny of tax payers whose premises have been surveyed by the officials, a step aimed at encouraging evaders to pay up.

"The decision is likely to provide relief to thousands of taxpayers and it would save them from harassment at the hands of taxmen apart from litigation costs," said a senior Finance Ministry official. The decision has been taken following finance Minister P Chidambaram's assertion that government wanted to send a message that those who comply with the tax laws would not be harassed by the tax officials.

Request for better tax payer service:

It is requested from concerned authorities to make some efforts to provide good service and facilities to make work of tax payers and practitioners easy by providing car parking space, full contact information in notices and communications from officers, notices and requisition should only be  on relevant matters, discontinuing un-necessary and irrelevant enquiries and by passing orders as per law.