UNJUST INTIMATION AND ADJUSTMENTS BY CPC – an unexpected, new source and style of harassment of taxpayers.

[CA DEV KUMAR KOTHARI]

Assessment or harassment:

Assessment by way of scrutiny had always been a source of harassment as experienced by author and his friends over a very long period of time. One article written by author and published long ago in CTR was titled like  ‘ Assessment or harassment’ . The same situation still prevails as and when there is scrutiny assessment. High Pitched assessments and then forceful recovery of disputed demands is still prevalent.

Computerized system is expected to reduce harassment:

Computerized systems are expected to reduce harassment. It is common experience that as and when Government Officers have reason to interact with public particularly tax payers or anyone seeking any relief as per law, there is great possibility of harassment. This is reason that scrutiny assessment are considered as tool of harassment. This is also proved by experience of author and his friends that in most of scrutiny cases, assessed income derived by Assessing Officers was found much higher than income as per return, whereas after disposal of appeals the ultimately assessed income was almost equal to income as per return. Some small additions and disallowances were not litigated by assesse otherwise they would also have been deleted.

Most of demands get vacated:

It is ground reality that most of demands raised by scrutiny assessment are vacated even after disposal of first appeal. Above 95% demands are ultimately vacated, small demands remain because either assesse had really made mistakes and then did not pursue matter in appeal.

In many of cases,  as per experience of author and his friends, ultimately assessed income was also lower than income as per Return. This was because:

(a) Some of disallowances were made in Return as issue was contentious and it was allowed in assessment or appeal

(b) Some additional claims were made for consideration of the AO and the same was allowed by AO or appellate authority

(c) some new relief were claimed in course of assessment or appeal and it  was allowed.

Therefore, on allowing such additional relief assessed income was lower than income as per return.

CPC – no human intervention:

It was expected that there will be no human intervention at CPC. However, gradually intervention is increasing by increased communications being issued by CPC.

In proceeding at CPE of Income Tax Department, there was is little involvement of human interaction between tax officer and taxpayer, however, little intervention between tax authority and taxpayer has also started to yield harassment. Though, there is less scope of harassment. Now that little scope of harassment seems to be exploited by tax officers or by the Government .

Recently we have observed that CPC has also adopted tactics of harassment of taxpayers by adopting unfair and sometimes illegal practices. For example:

1. Delaying processing of Return of Income and issue of refunds.  Delay in issue of refunds for alleged reasons like  bank account is not verified.
2. Denying credit of TDS.
3. Making wrong and illegal adjustments for example issuing intimation (with adjustment) after a notice has been issued u.s. 143.2 and the matter is pending before the AO for scrutiny assessment. In such situations AO doing scrutiny assessment and AO at CPC both have no power to make adjustments. However, CPC has adopted practice of making adjustments and increasing income, reducing loss and reducing refund etc. even after notice u.s. 143.2 was issued long ago.
4. There is no jurisdiction and justification for making adjustments u/s 143.1  after issue of notice u.s. 143.2. Such intimation and adjustment order is without jurisdiction and is not as per law. In this regard law is well settled in case of  GUJARAT ELECTRICITY BOARD. However, CPC is illegally making adjustments.

5. Making partial adjustment- by making some additions but not revising set off of loss b/f as per records, which is available for set off. For example,   delayed deposit of employees contribution of employees towards PF etc. (though paid before due date u.s. 139)   is being  disallowed, ignoring judgments of jurisdictional High Court and many other High Courts  which are based on judgment of the Supreme Court in case of Alom Extrusion. CPC wrongly  followed   judgment of Gujarat High Court in case of GSRTC merely because in some cases SLP of revenue has also  been admitted. 

Even if observations in Alom Extrusion, be regarded as obiter dicta, the same are binding on all Courts, however, even AO are not following the same.

CPC also ignored judgment of SC in case of Rajasthan Beverages and State Bank of Bikaner and Jaipur in  which judgments of Rajasthan High Court stood approved that if PF contribution of employees was deposited before due date u.s. 139.1, disallowance or addition cannot be made by applying s. 36.1. va.  Objection of assesse that disallowance is not called for was not cared and adjustment was made.

6. Illegal and time barred very old demand was disputed by assesse. However, unless the same was paid or allowed to be adjusted, refund was withheld. The amount of current  refund was much larger than disputed petty old demands.  Assesse was forced to agree to adjustment of old illegal  demand so that CPC can issue refund. Now it will be very difficult, time consuming and cost involving for assesse to pursue refund of amount retained against illegal and wrong demand.
7. The AO raised huge demand, it was vacated after appeal order- by passing order giving effect to the order of CIT(A) and Tribunal such orders were issued to assess.  However, revised orders are not uploaded and bogus demand is still shown in records Of CPC and refunds are being adjusted. The AO could not help as he is not finding his records. CPC is unable to act without vacating of demand by the AO.
8. Levy of some penalties (though called fees) without any opportunity.

The above are only some examples of such harassment by CPC.

Links of judgments discussed above are not added because they are well known to readers and otherwise can be easily searched on the web including this website.   Readers are requested to send feed-back and share experience on related issues.