Tax Recovery Officer vs. Recovery of Tax Officer

[Harish Chander Bhatia]

Tax Recovery Officer vs. Recovery of Tax Officer

Although tax recovery officer is holding a glorious  position in the tax department in recovery of the tax determined by the assessing officer while assessing the taxpayers. The position and power and its use is loosening the grip against recovery of the outstanding demands. Most of the exercise is performed by the assessing officer, which ought to have been performed by the TRO

As per the statics of the department, the pendency is being piled up for one reason or another, but the higher authorities are ingloriously mute and no efforts are being taken to augment the collection base. Every year new targets are fixed, some amount is recovered, and the balance is merged with the old demands. I give below the admitted statics by the department in the parliament committee direct tax report.

VI. Uncollected Demands

In 2010-11, only 64.1 percent of the total demands cumulatively raised in assessments up to that year had been collected. At the end of 2010-11, as much as Rs.2.9 lakh crore remained uncollected. Certified demand remaining uncollected increased to Rs.1,06,990.8 crore (96.3 percent ) in 2010-11 from Rs. 26,703.9 crore (75.8 percent ) in 2006-07

Explaining the meaning of 'buoyancy value less than one', the Ministry in its written reply stated as under:

"Tax buoyancy elucidates the growth of tax collection, changes in tax legislation and efficiency of tax administration. Tax buoyancy of less than one indicates that the rate of growth of tax collection has fallen below the rate of growth of GDP".

8. Giving reasons for the decline in tax buoyancy during these years, the representative of the Ministry of Finance (Department of Revenue) during evidence deposed as follows:

"Our tax buoyancy started suffering from 2008-09. That is the year when the slowdown in the economy started. When the GDP starts declining, the profits decline at one way and the income may decline at a sharper rate, the income which bears the tax may decline at a sharper rate".

She further added that:

"We agree that tax buoyancy less than one is treated as unhealthy parameter and tax administration has to be alert to that"

the assessee base declined from 340.9 lakh taxpayers in 2009-10 to 335.8 lakh taxpayers in 2010-11.

vi. Approx. 45 percent of the demand pertains to Money laundering and Security Scam cases in Hassan Ali Khan Group [2011 (9) TMI 847 - SUPREME COURT OF INDIA] , Harshad Mehta Group [2009 (8) TMI 696 - SUPREME COURT OF INDIA] , Ketan Parekh Group [2008 (5) TMI 417 - SUPREME COURT OF INDIA] and Dalal Group [2001 (1) TMI 889 - SPECIAL COURT, BOMBAY]. In Hassan Ali Group, the recovery is not possible though all known immovable and moveable assets belonging to the group have been attached. As per the existing guidelines, recovery through sale of attached properties can be made only after the decision of appeal filed before ITAT. Further, the attached assets are inadequate to recover the entire dues. In Securities Scam cases also the recovery is not possible as it pertains to persons notified under the Special Court (TORT Act 1992) and no recovery can be made directly from these persons.

Department has never introspected why the demand is not being realized and percentage of unrecoverable amount is being increased on year-to-year basis and the taxpayers base is getting declined, the department has  given  circuitous reply to the Committee.

The main and foremost reason of the piling of the demand is the impropriety  of issuing the adventurous orders, which are made against the facts of the case and not based on the material available and are totally inconsistent with the assessees' data, these orders are simply an adventures act of the imperfect, novice and infant assessing officer, who has no experience about the judging  the pulse of  taxpayers. Those assessing officers simply satisfy their egoist mind-set.

Why the department does not fix the personal responsibility of the maker of those adventures orders, to recover the demand so assessed. However, the situation is converse, those childish  and neo-educated officers are promoted for their adventurous orders, which is the misnomer as quality assessments, and no one in the department cares whether the order is quashed in the first appellate stage. The department for the sake of face saving, appeals to the higher authorities, knowing it that they are the final losers. In addition, by that, time officers are transferred and promoted, and as such, the accountability of the officer is forgotten

Until the policy of accountability is introduced, and the officer is made answerable to his deeds, no improvement seems to be in the offing. The officers are never penalized, never questioned, never divested of their powers because of the inglorious work, iniquitous behavior  which not only affects the image in the eyes of the taxpayers but also entirely disturbs the financial statics and made unceasingly answerable to the parliament committee.

Tax recovery officer who used to be a hope in recovery of the dues is now a hopeless babus of the department and most of the time he obtain this transfer either to relax or to enjoy the  pre-retirement  period. Who in the department is bothered to make recoveries? In my next article I will give you the detail  of the excuses given by the CBDT to parliament committee for sluggish recovery of the dues.

How efficient is the recovery officers, they must learn something from glorious work of the THEN Tax Recovery Officer.: Here are the facts:

I had the opportunity to read a write up of Sh J.G Pendse, when he was an assessing officer. During the year 1973-74, he was given the challenging job of collection of tax arrears over Rs 50.00 lakh from Shri Changdeo Sugar Mills, a Murarka group company. They had their officer in Bombay and factory in Changdeo Nagar in Ahmednagar district. As the assessee was impervious to the department notices, and Sh J G Pendse planned to use the tax recovery officer Sh R. B.Gade powers to appoint the receiver for the defaulting company. The matter with utmost secrecy was discussed with the then ACIT Sh R.Venkatraman and CIT Sh O.V.Kuruvilla. The plan was chalked out secretly and Sh B.V.Mundkur, CIT, Bangalore, who was about to retire was selected as receiver with the approval of the Board. With the help of ADIT Sh M . S. Thanvi along with other team members S/sh R D Mahadeswar, P.  Hajarnavis, Arun Bhargava, Rama Iyear, and Kulkarni. The receiver was appointed , Sh J G Pendse took over the business of the factory on behalf of the receiver, and Mr. B V Mundkur  ran the mill for three years and not only recovered the amount of the tax but brought back the company in profits. The company management was so impressed that they requested Sh B V Mundkur to continue as the Managing Director for few more years and he obliged.

This was a real adventure and no such adventure is reported after this. NOW, the tax machinery has become a blunt weapon and there is growing lack of application of mind, posting to the TRO is now being considered a punishment.

Now a day, no one will find this spirit and enthusiasm in the officers. The recovery provisions are very much there but now as a blunt and rusty weapon.

The adventures act is to do something remarkable not just passing the adventures orders, the demand of which is never realized. Why these officer are not penalized. Why any favour and immunity to those erring officers. They are the fiscal terrorists who make a cause for economic slowdown and the impact of their ill deed lasts for many years causing lot of harassment, wastage of person-hours and loosing of trust amongst taxpayers.

The department must inculcate the habit of tax friendly behavior. an attitude in the newly inducted officers and they should be taught like a small child that the post granted to them  is not of a public authority but is of a public service .The department  cannot strangulate the tax payers to increase the number of  quality assessments and cannot hack them for all golden eggs, those impudent officers must remember that sooner or later all golden eggs of the tax payers will form the GDP of the economy.

The department, if it wants to improve the functioning, the culture, the character and attitude of the officer who are designated to be the guardian of the august tax laws, it must warn them and come out with clear tax payer friendly common charter, so the trust and faith is not sinked to unfathomable depth.