TIOL-DDT 1426 · the untouched capture
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd"> <html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body> <p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1426</font><br> 18.08.2010<br> Wednesday</strong></font></p> <p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Direct Taxes – Appeal Process - CAG Study – Performance Appraisal - No credible and reliable data </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AN</strong> aggrieved tax payer has the right to dispute a tax demand with the Income Tax Department through the Commissioner of Income Tax (Appeals). Second appeal against the orders of CIT (A) lies in the Income Tax Appellate Tribunal (ITAT) which functions under the Ministry of Law. On any question of law arising out of an order of ITAT, a taxpayer may appeal progressively to the High Court and the Supreme Court. Analogous right to appeal is also available to the Department against the orders of CIT (A) and onwards. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The dimensions of disputes in income tax are staggering. Rs 2.2 lakh crore is the amount locked up in appeals at various levels, which can almost wipe off the revenue deficit of the Union Government in 2008-09. On an average, 48 per cent of tax demands remain uncollected and disputes account for 45 per cent of uncollected demands. These factors, CAG felt, merited a performance evaluation of the appeal process. This is the first time CAG has attempted a holistic study of appeals. The topic was also suggested by the Central Board of Direct Taxes (Board) during consultations on areas of concern in the Department. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the study covering the period 2006-09, CAG sought an assurance that the processes ensures speedy resolution of disputes; they also identify litigious provisions in the Act for correction; the decisions for escalation of disputes to higher levels in the appellate hierarchy are based on a fair assessment of cost-benefit; the appeals are filed by the Department within the prescribed timeframe to avoid dismissal due to limitation; and the appellate orders are implemented accurately and timely to avoid inconvenience to the taxpayer as well as avoidable payment of interest. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The CAG worked with several constraints. The absence of a centralised database on appeals at the State level, hampered the selection of the audit samples. Audit, had to examine individual assessment records for the selection, which considerably strained the audit plan. Poor maintenance of records across the assessment and judicial wings of the Department, is an area of concern. Non-production of records was a major constraint as well as concern. The Department produced only 49 per cent of the records CAG requisitioned for audit; it was as low as 5 per cent in the case of Delhi Office. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CAG found that despite a steady reduction in number of appeals preferred to CsIT (A), the inventory of appeals with CsIT (A) was building up because of low disposal of appeals. The disposal of appeals was 1/3rd of the targeted level and at the current levels of disposal, the CsIT(A) would take 2.4 years to clear the inventory. The average time taken for disposal of a case by CIT (A) is 14 months, which is substantially longer than the international standards. Low-end appeals (with demand of less than Rs. 1 lakh) constituted 66 per cent of the total appeals. The assessment process evidently is unable to satisfy the small taxpayer, the category of taxpayers which is least equipped to bear the cost of litigation. This must be viewed with the fact that the success rate of the Department at various levels of appeals is low and appeals go decidedly in favour of the taxpayers. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There are some provisions in the Act (like imposition of penalty) that lead to disputes. Deviations from prescribed procedures by the assessing officers (AOs) have also contributed to disputes. CAG found that there is a tendency to escalate the disputes to higher levels even in cases where the Department is on a weak ground, which strains the system and the resources besides causing inconvenience to the taxpayer. On the other hand, CAG also found instances of inaction in such cases where a second appeal would have safeguarded revenue. There is lack of consistency while considering a case for second appeal; divergent actions weakening the departmental stand in appeals. The absence of independent evaluation of decisions for escalation creates unchecked avenues for arbitrary exercise of discretionary powers by the AOs. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">One of the biggest concerns is the lack of credible and reliable data on the volume and impact of appeals. Widely divergent data is compiled by different sources which have not been subjected to reconciliation. Records to monitor filing of appeals and implementation of appellate orders were not maintained properly in the assessment units. Inadequate controls led to time barring of appeals and delays in implementation of appellate orders. AO's work on appeals is not subjected to internal audit, denying the process an independent appraisal. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CAG felt that implementation of appellate orders is placed low in the AOs' priorities. Inadequate attention on correctness in implementation of appellate orders, led to mistakes amounting to Rs. 1,456 crore in 385 cases. 97 per cent of these mistakes in implementation led to under-assessment of tax benefitting the tax payer, which raises doubts on the integrity of the process. </font></p> <p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GST Is Dead? Funeral and Post-mortem soon </strong></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> much hyped GST is almost dead. The BJP is angry with the Central Government for the CBI's audacity in sending a BJP State Minister to jail. So they will not allow GST!!. Eight BJP strong States - Karnataka, Madhya Pradesh, Chhattisgarh, Gujarat, Himachal Pradesh, Uttarakhand, Bihar and Punjab – are all set to oppose GST. Tamil Nadu and UP may also join. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Unless the FM uses all his political acumen, the Bill is not likely to go through in this session and if it doesn't, GST from April 2011 is a distant dream. </font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Perhaps the Centre can go ahead and introduce a Central GST and the States will be gradually forced to join the mainstream. </font></p> <p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Looks like our ST se GST Tak column will continue for some more time! </font></em></p> <p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Jurispruden</font><font color="#FF6633" size="5">tiol</font><font color="#006600"> - Thursday's cases</font></strong></font></strong></font></p> <p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_hammer.jpg" alt="Legal Corner Icon" width="100" height="84" hspace="5" border="0" align="left">Central Excise</font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Penalty under Section 11AC – Tribunal found no mens rea and held penalty was not liable – No substantial question of law – High Court </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN</strong> view of facts found, the liability of duty having been accepted, question before the Tribunal was only of levy of penalty under Section 11AC of the Act, for which mens rea was required under the statutory provision itself. The Tribunal having found that there was no mens rea , which finding was not shown to be perverse, no substantial question of law arises: <strong>Revenue Appeal Dismissed</strong> </font></p> <p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax </font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Sec 28 - Forward contracts - allowability of losses arising out of fluctuation in foreign exchange rates - Date of maturity of contract is not relevant - assessee banker is entitled to claim deduction for losses: ITAT Special Bench </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> issue before the Special Bench of the Tribunal is - Whether in case of forward contracts the date of maturity of contract is not relevant and hence, the assessee which is a banker, is entitled for claims of losses resulting from fluctuation of foreign exchange in relation to contracts entered into with customers for purchase of foreign exchange at a future date. And the verdict is YES. </font></p> <p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs </font></strong></p> <p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mid sea smuggling of Diesel – Confiscation of Vessel – Tribunal's order reducing fine to Rs 5 Lakhs from Rs. 1 Crore upheld – High Court </font></strong></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Tribunal has noted from the records that the purchasers of the said unaccounted diesel had clearly stated that they were dealing with the Chief Engineer. The Chief Engineer is one of the employees responsible for maintaining accurate amount of diesel and shared the common responsibility of managing bunkers. The Tribunal has further noted from the order of the Adjudicating Authority that the Chief Engineer had kept the Master and Owners in the dark for his personal gain. </font></p> <p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Tomorrow for the judgements </font></strong></p> <p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT </strong></font></p> <p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a Nice Day </font></p> <p><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@taxindiaonline.com"><strong>vijaywrite@taxindiaonline.com</strong> </a></font></p> </body> </html>