ASSOCHAM wants correction as FM begins pre-budget consultations
Showing a grave concern over the fact that notices for reopening of assessments by the tax authorities are being issued in thousands in recent times, ASSOCHAM today said returns should not be re-opened beyond three years.
As Finance Minister P Chidambaram has started his pre-budget consultations with different stakeholders, the ASSOCHAM has submitted a detailed memorandum to the Finance Ministry seeking changes in Sections 147/148 of the Income Tax Act . These sections relate to the tax re-assessment on matters already examined or in a blanket manner.
“In recent times, tax reopening notices under sections 147/148 have become a very common occurrence and such notices are being served in thousands across the country, the ASSOCHAM memorandum said. It appears that there is no consideration in following the principles on the subject laid down by the Supreme Court and High Courts over the years, it added.
Simple audit observations, even on points of law, are frequently being used as grounds for re-opening leading to “extreme harassment of all assesses. In fact, the position has become so bad that even for legislations which have become obsolete, like Interest Tax (withdrawn in Finance Act,2001), reopening are being done for very old years since the relevant law permitted reopening without any time limit”, added ASSOCHAM paper.
ASSOCHAM President Rajkumar N Dhoot said the provisions relating to reopening of tax assessments are being misused in different locations, particularly for salaried assesses, where scrutiny assessment is not possible as per the CBDT (Central Board of Direct Tax) guidelines. This has become a breeding ground for corruption and harassment.
“It is suggested that a new proviso to Section 147 should state tall matters which have been examined in the original assessment should not be reassessed,” said Mr Dhoot. He also said the annual income tax assessment/reassessment procedure should be normal and routine and should not provide for excessive powers to harass assesses.
In another recommendation, the chamber has suggested removal of levy of dividend distribution tax (DDT) which has a cascading effect in a multi-tier corporate structure.
“It is recommended that the cascading effect be removed by allowing credit of DDT-borne dividends in all cases of dividends received including those from non-subsidiaries or mutual funds”, added Mr. Dhoot.
The removal of DDT will infuse a huge confidence in the stock market, which will then pave way for several corporate burdened with huge debts to deleverage their balance-sheets through raising of capital in the markets.
Despite some of the successful follow-on offers in the market in the recent few weeks, the retail investors have not fully participated in the rally which is mainly driven by liquidity in the global markets prompting the foreign institutional investors to infuse big funds and sending the Sensex to near 20,000 level.