Since the last seven years, some of the most coveted terms are buzzing in the financial and economic horizon in India, such as rapid data preservation, electronics cum semiconductor revolution, ease of doing business, and a $5 trillion economy by 2027. Now, for ease of doing business, the present dispensation has unfurled the DTC in tune with the crying demand for simplification of the present complex income tax law and the government’s repeated assurances to the citizens, particularly to both domestic and foreign investors, of a totally friendly new direct tax regime free of minimal scrutiny, search, surveys, reopening proceedings, and higher tax exemption limits for the hard-working common people.
To achieve this maverick change from the sovereign age-old hawking face of a revenue hunter to a revenue-liberal, pleasing face, the income tax department in the last three years has evolved the most taxpayer-friendly diplomacy very silently in the high- and medium-demand cases (6 million) pending or languishing mostly in the NFAC for the last six years or more for hearings or orders. Unlike the previous regime’s stapled policy of bank attachments, property attachments, or other coercive measures, now the IT department has evolved a two-fold policy for smooth recovery of pending demands.
The First Approach: Notices Without Recovery Action
One approach is, at first, issuing recovery notices under Section 226 to the high-demand assesses with templated wordings either to pay the demand or to face the recovery proceeding just like in the old days in accordance with the law. However, with the difference of not actually initiating any recovery proceedings, instead, the department, in maximum high-demand cases, appends the outstanding tax demand of particular or different years at the end of the processing order under Section 143(1) being issued to the assesses with a further note of adjusting the refund of the relevant year of 143(1) intimation with the pending demands.
As the first appellate justice dispensation system is near collapse, either releasing the caged hapless assesses from the departmental fetters for seeking judicial reprieves or dispensing minuscule reliefs against the majority of unsubstantial and most illegal assessed tax and penalty demands. As a result, high-demand cases are rendered feeders for refund adjustment under Section 245, deliberately impinging the first appellate justice system for robust growth of direct collection, which will be presumed by the citizens and the outer world as a natural outcome of a fast-growing economy.
The Second Approach: Appellate Relief Evasion
Another newest mode is emerging, although in a nascent stage, in many cases where part reliefs are granted to a handful of very lucky assesses by the limping first appellate system. JAOs, while giving the appeal effect, are copying and pasting the computation sheet of assessment orders against which such appellate reliefs are granted by NFAC and, in this way, keeping the old computation and tax demand as it is in complete derogation and insubordination of judicial hierarchy.
Now the question arises: are these cases, which are growing in numbers, the result of inadvertent mistakes of JAOs? The bona fide answer is a big NO. Had it been so, then the CBDT, in full knowledge of said gross illegalities, would have brought these errant JAOs under the firing line. Actually, it is another taxpayer-friendly recovery mode without resorting to any coercion, like the 143(1) game. JAOs, with clear directions from higher authorities, are indulging in such malpractices by availing of the legal loopholes, which is that an assessee against such illegal appeal effect order will be left totally remediless from approaching a higher appellate forum like ITAT since appeal effect orders are passed under Sections 250/143(3) against NFAC orders, thus depriving the jurisdiction of ITAT.
The only options left are approaching the High Courts under writ jurisdiction, which very few can afford monetarily, or alternatively filing an application under Section 154 before JAOs, which, if rejected (most probably and deliberately), will again put the assessee at the mercy of NFAC with long years of waiting for obtaining justice (if at all). Meanwhile, JAOs will continue to adjust refunds with these tax demands, which are, in reality, no more substantial after appellate relief. This second mode is flourishing quickly as many instances are growing large.
In DTC, these taxpayer-friendly silent recoveries will continue since it is a copy-and-paste of the present income tax regime in a more scattered form. Thus, the ease of doing business mission will continue to get great impetus without any iota of doubt.
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