STRATEGY TO ADD NEW TAX PAYERS
1. Revenue augmentation through Widening of tax base has been a constant endeavour of the Income Tax Department. Organized data collection in the department is mainly through following methods:
i) Electronic filing of IT returns and forms (e-filing).
ii) Submission of TDS/TCS statements by deductors in electronic form (eTDS).
iii) Making it mandatory for various agencies to furnish Annual Information Return (AIR) for specified transactions.
iv) Collection of information from third parties under Approved projects of I & CI. v) Compulsory quoting of PAN for certain specified transactions.
2. Availability of information in electronic form provided an opportunity to the Department to develop information driven approach to improve compliance.
3. The objective of widening the tax base is effective utilization of information to widen the tax-base and collection of taxes. The potential target segment consists of the following category of persons:
i) Some tax collected but no return filed.
ii) No tax collected, no return filed, some PAN linked information.
iii) No tax collected, no return filed, no PAN linked information, some non-PAN information.
Key Result Areas
4. The key result areas for widening of tax-base are as under:
i) Devise and pursue region specific strategies.
ii) Effective collection of information about high value transactions.
iii) Efficient handling of information without valid PAN.
iv) Improving compliance to TDS/TCS Provisions.
v) Promote voluntary compliance.
vi) Ensuring compliance from identified non-filers through various methods
5. The main action points under above key result areas are discussed in following paragraphs.
Devise and pursue region specific strategies
6. The PCCsIT/CCsIT/DGsIT should devise and pursue region specific strategies to widen the tax base. Action points in this area include the following:
i) Identification and pursuing potential taxpayers – Professionals, Businesses, Employees
ii) Identification of new data sources with widening and deepening potential by PCCsIT/CCsIT/DGsIT and communication of the same to the DGIT(I&CI). This is in addition to data sources identified by the DGIT(I&CI)
Effective collection of information about high value transactions
7. Income Tax Department has been collecting information about high value transactions under AIR/SFT scheme.CIB module is now closed. Data can be collected through Approved projects. Action points in this area include the following:
i) Timely collection and uploading of information/data collected through approved projects by DGIT(I&CI)
ii) Action on AIR/SFT filers by DGIT(I&CI) for non–submission or submission of inaccurate statement
Efficient handling of information without valid PAN
8. One of the main challenges of information collected under AIR Approved projects of I&CI frame-work is inability of the department in making use of information without valid PAN. Action points in this area include the following:
i) Identification and prioritization of reporting entities submitting non-PAN AIR transactions
ii) Follow-up with identified financial institutions for submission of revised data with PAN by DGIT(I&CI)
iii) Migrate dissemination of non-PAN data from CDs to online platform. PCCsIT to decide whether action through Jurisdictional AOs or special units.
iv) Preparation of Pin code jurisdiction mapping directory for bulk dissemination of non-PAN data by Pr. PCCsIT.
v) Bulk Dissemination of non-PAN data (with value based categorization) having sufficient address information using dictionary using online platform
vi) Follow-up with transacting parties for verification
vii) Population of PAN in non-PAN information Improving compliance to TDS/TCS Provisions
9. TDS/ TCS statements provide valuable information about specified payments. Action points in this area include the following:
i) Identification and prioritization of Deductors which have not filed TDS return, by the Systems Directorate
ii) Follow-up with Deductors for submission of TDS Return by TDS AOs
iii) Identification and prioritization of Deductors which have not submitted transactions involving non-deduction/ lower deduction (Form 15G/15H) by the Systems Directorate
iv) Follow-up with Deductors for submission of transactions involving non‑deduction/ lower deduction by TDS AOs
Promote voluntary compliance
10. Income Tax Department has taken several e-Governance initiatives for improving the quality of tax payer services and promoting voluntary compliance. Action points in this area include the following:
i) Display of transactions in TDS/TCS statement and AIR information to taxpayer in 26AS
ii) Sending reminders (E-mail/SMS) to persons who had filed return earlier but have not filed return in the current year
Ensuring compliance from identified non-filers
11. The Non-filers Monitoring System (NMS) was implemented as a pilot project to prioritize action on non-filers with potential tax liabilities. Data analysis was carried out to identify non-filers about whom specific information was available in AIR, data and TDS/TCS Returns. The number of non-filers with potential tax liabilities identified in various NMS cycles is as under:
i) NMS cycle 1 (2013): 12.19 lakh
ii) NMS Cycle 2 (2014): 22.09 lakh
iii) NMS Cycle 3 (2015): 44.07 lakh
iv) NMS Cycle 4 (2015): 58.95 lakh
12. Following steps have been taken:
i) Rule based algorithms were applied to classify the cases as P1, P2, P3, P4 and P5 priority ratings (P1 being the highest priority) for graded monitoring.
ii) Bulk letters were sent to PAN holders communicating the information summary and seeking to know the submission details of Income tax return.
iii) An online monitoring system was implemented to ensure that information related to non-filers is effectively used by the field formation.
iv) Standard Operating Procedures (SOP) was issued to ensure that the field formations maintain consistency in their approach.
v) ‘Compliance’ module was developed on the e-filing portal and information related to non-filers was made available to the specific PAN holder. SMS and email were sent to the target segment asking them to access e-filing portal. The PAN holder is able to provide details electronically and keep a printout of the submitted response for record purposes.
13. Ensuring compliance from identified non-filers with potential tax liabilities is key to widening of tax base. Standard operating procedure to ensure that field formations maintain consistency in their approach in dealing with NMS have been issued vide CBDT Instruction No. 14/2013. The SoP is being revised. However, till such revision, Assessing Officers are required to adopt the procedure prescribed in the above instruction, salient features of which are as under:
i) The Assessing Officer should issue letter to the assessee within 15 days of the case being assigned in NMS, seeking information about the return of income flagged in NMS. Facility to generate such letter has been provided in the NMS module of i-taxnet;
ii) If the letter is delivered, the Assessing Officer should capture the delivery date in the NMS module;
iii) If the letter is not delivered, the Assessing Officer should issue letter to the alternate addresses of the assessee available in the Online Monitoring System or any other address available with the Assessing Officer through field enquiries or otherwise. All addresses used in IT Return, AIR, databases have been made available to the Assessing Officer in the Online Monitoring System to assist the field formations in identification of current address of the taxpayer;
iv) If the return is received, the Assessing Officer should capture the details in AST within 15 days of filing of the return. If the assessee informs that paper return has already been filed which was not captured in AST, the details of return should be entered in AST module within 15 days of receiving such information. The e-filed returns will be automatically pushed to NMS;
v) If no return is required to be filed in a case (non-resident etc.), the Assessing Officer should mark “No return is required” and mention remarks in NMS which need to be confirmed by the Range head;
vi) If the Assessing Officer is not able to serve the letter and identify the taxpayer, he/she should mark “Assessee not traceable” in NMS which needs to be confirmed by the Range head;
vii) In cases where the assessee has been identified and no return has been filed within 30 days of the time given in the letter, the Assessing Officer should consider initiation of proceedings u/s 142(1)/148 in AST;
viii) The cases will be processed every week by the Directorate of Systems and will be marked as ‘closed’ in NMS if one of the following actions are taken:
a. Details of return are available in AST/e-filing
b. Notice u/s 142(1) or 148 has been issued in AST
c. “No return is required” is marked by the Assessing Officer and confirmed by the Range head.
Penalty & Prosecution
14. Action under sections 271F (penalty for non-filing of return of income) and 276CC (prosecution for non-filing of return of income) should be taken in appropriate cases. Systems Directorate has shared the list of cases, for further processing u/s 276CC. The PCIT/CIT concerned has to examine every such case of non-filer to arrive at a decision whether a particular case was fit for prosecution under section 276CC. If so, further necessary action is to be taken expeditiously. This exercise will help in conveying a strong message and assist in improving overall compliance to Direct Taxes laws.
(Above been Republished with Amendments to earlier Article on the Subject)