<p>Nowadays, foreign investors often complain about ‘tax terrorism’ in India. By that, they mostly refer to retrospective taxation and new interpretations of tax laws which are different from the long-standing ones. Finance Minister Arun Jaitley, in numerous media interviews, talks about putting in place a friendly ‘non-adversarial’ tax administration to encourage tax compliance.<br /><br /></p>.<p>Despite all the assurances by the government, the plight of the ordinary taxpayer continues unabated but is seldom highlighted in the media. Let me give some real-life examples. Last year, I duly submitted my income tax return through e-filing before July 31, 2014. I was supposed to get a refund of Rs 1,240. Instead, to my surprise, in January 2015, I got an assessment order/ demand notice of Rs. 12,760. I found that the tax assessing officer had not allowed the self-assessment tax of Rs 14,000 that I had paid on June 24, 2014 at SBI. <br /><br />I checked the My Account section in the e-filing portal of the Income Tax Department which clearly showed, with all details (like date of payment, challan number, bank branch receiving the payment etc) that I had paid that amount. I simply cannot understand how the ITO cannot see this entry which I can see online. Anyway, I asked my income tax lawyer to file a rectification request. After a couple of months, in March 2015, I got a rectified tax computation. I could not believe my eyes at what I saw. This time, the demand notice had gone up to Rs. 92,760. The ITO has now disallowed even the Advance Taxes that I paid (amounting to Rs. 80,000), in addition to the self-assessment tax paid by me.<br /><br />I rechecked My Account in the portal and this time too it clearly showed the advance taxes as well as the self-assessment taxes that I had paid but which were not allowed by the ITO. The most surprising part was that the ITO was now disallowing my Advance Tax payments which it had earlier allowed. This is beyond all comprehension. <br /><br />Either the Tax Department is grossly inefficient or there is some serious miscommunication/mismatch between the computerised information systems of the different offices/branches of the government and the banks. But, whatever it is, the honest taxpayer cannot be held responsible. Again, I had to file a rectification request through my tax lawyer and am still awaiting a response.<br /><br />My question is: why should an honest taxpayer, who meticulously pays all taxes by the due date, be subjected to this kind of repeated harassment for no fault of his? If the bank (which happens to be the public sector SBI) has not transferred my payments to the Income Tax Department, that has to be settled between them and the errant should be penalised. But why should the honest taxpayer suffer? In earlier years, too, I had similar unhappy experiences.<br /><br />Inflated demand notices<br /><br />Several times in the past, I had received wrong inflated demand notices instead of tax refunds due to me, for the simple reason that the ITO computer is apparently not showing the entries of TDS made by banks from my fixed deposit interest. I had to submit original TDS certificates from the banks to the ITO, along with affidavits on court stamp paper through my tax lawyer to prove my case. It took me years of follow up with consequent costs (in terms of money, time and efforts) to get the due refunds.<br /><br />Moreover, until an outstanding demand notice for a year (even if it is wrong) is disposed of, refunds for other years are held back by the ITO. So, after the (wrong) demand notice of a particular year is disposed of and gets converted into a refund, one would naturally expect that the refund held back for another year would be automatically released by the department. But, sorry, things are not so simple. You will again have to apply for rectification and then chase it by several visits to the ITO.<br /><br />Right now, my tax lawyer is still chasing a refund due to me some six years ago. The ITO has agreed, in principle, that I should get a refund. Yet, it is being delayed for various reasons that include reluctance of the ITO to allow refund before the presentation of the Budget (apparently to help the government to present a better fiscal picture), and finally, the wrong demand notice served recently on me for the financial year 2013-14 (as I have already explained) which would now hold back my legitimate refund for an earlier year.<br /><br />I am sure I am not the only taxpayer who has to go through such ordeals. Many people silently suffer such harassment every year. Their tax refunds are held back for no fault of theirs and they have to spend unnecessary time, effort and money (to pay for the services of tax lawyers or ‘fixers’ who do the chasing). Apart from the harassment to the existing taxpayers, such stories and the fear of experiences like these prevent many potential taxpayers to stay out of the tax net as long as possible.<br /><br />The tax revenue of the government ultimately suffers because of the over-zealous/ inefficient tax officers and the mismatch of information between the computerised systems of various government offices including the public sector banks. This is most unfortunate for a country like India whose software professionals are called upon by the rest of the world to set up their information systems.<br /><br /><em>(The writer is former Professor of Economics, IIM-Calcutta)</em></p>
<p>Nowadays, foreign investors often complain about ‘tax terrorism’ in India. By that, they mostly refer to retrospective taxation and new interpretations of tax laws which are different from the long-standing ones. Finance Minister Arun Jaitley, in numerous media interviews, talks about putting in place a friendly ‘non-adversarial’ tax administration to encourage tax compliance.<br /><br /></p>.<p>Despite all the assurances by the government, the plight of the ordinary taxpayer continues unabated but is seldom highlighted in the media. Let me give some real-life examples. Last year, I duly submitted my income tax return through e-filing before July 31, 2014. I was supposed to get a refund of Rs 1,240. Instead, to my surprise, in January 2015, I got an assessment order/ demand notice of Rs. 12,760. I found that the tax assessing officer had not allowed the self-assessment tax of Rs 14,000 that I had paid on June 24, 2014 at SBI. <br /><br />I checked the My Account section in the e-filing portal of the Income Tax Department which clearly showed, with all details (like date of payment, challan number, bank branch receiving the payment etc) that I had paid that amount. I simply cannot understand how the ITO cannot see this entry which I can see online. Anyway, I asked my income tax lawyer to file a rectification request. After a couple of months, in March 2015, I got a rectified tax computation. I could not believe my eyes at what I saw. This time, the demand notice had gone up to Rs. 92,760. The ITO has now disallowed even the Advance Taxes that I paid (amounting to Rs. 80,000), in addition to the self-assessment tax paid by me.<br /><br />I rechecked My Account in the portal and this time too it clearly showed the advance taxes as well as the self-assessment taxes that I had paid but which were not allowed by the ITO. The most surprising part was that the ITO was now disallowing my Advance Tax payments which it had earlier allowed. This is beyond all comprehension. <br /><br />Either the Tax Department is grossly inefficient or there is some serious miscommunication/mismatch between the computerised information systems of the different offices/branches of the government and the banks. But, whatever it is, the honest taxpayer cannot be held responsible. Again, I had to file a rectification request through my tax lawyer and am still awaiting a response.<br /><br />My question is: why should an honest taxpayer, who meticulously pays all taxes by the due date, be subjected to this kind of repeated harassment for no fault of his? If the bank (which happens to be the public sector SBI) has not transferred my payments to the Income Tax Department, that has to be settled between them and the errant should be penalised. But why should the honest taxpayer suffer? In earlier years, too, I had similar unhappy experiences.<br /><br />Inflated demand notices<br /><br />Several times in the past, I had received wrong inflated demand notices instead of tax refunds due to me, for the simple reason that the ITO computer is apparently not showing the entries of TDS made by banks from my fixed deposit interest. I had to submit original TDS certificates from the banks to the ITO, along with affidavits on court stamp paper through my tax lawyer to prove my case. It took me years of follow up with consequent costs (in terms of money, time and efforts) to get the due refunds.<br /><br />Moreover, until an outstanding demand notice for a year (even if it is wrong) is disposed of, refunds for other years are held back by the ITO. So, after the (wrong) demand notice of a particular year is disposed of and gets converted into a refund, one would naturally expect that the refund held back for another year would be automatically released by the department. But, sorry, things are not so simple. You will again have to apply for rectification and then chase it by several visits to the ITO.<br /><br />Right now, my tax lawyer is still chasing a refund due to me some six years ago. The ITO has agreed, in principle, that I should get a refund. Yet, it is being delayed for various reasons that include reluctance of the ITO to allow refund before the presentation of the Budget (apparently to help the government to present a better fiscal picture), and finally, the wrong demand notice served recently on me for the financial year 2013-14 (as I have already explained) which would now hold back my legitimate refund for an earlier year.<br /><br />I am sure I am not the only taxpayer who has to go through such ordeals. Many people silently suffer such harassment every year. Their tax refunds are held back for no fault of theirs and they have to spend unnecessary time, effort and money (to pay for the services of tax lawyers or ‘fixers’ who do the chasing). Apart from the harassment to the existing taxpayers, such stories and the fear of experiences like these prevent many potential taxpayers to stay out of the tax net as long as possible.<br /><br />The tax revenue of the government ultimately suffers because of the over-zealous/ inefficient tax officers and the mismatch of information between the computerised systems of various government offices including the public sector banks. This is most unfortunate for a country like India whose software professionals are called upon by the rest of the world to set up their information systems.<br /><br /><em>(The writer is former Professor of Economics, IIM-Calcutta)</em></p>