Original Income-Tax Act, 1961 was well drafted by learned officials in Finance Ministry and it was capable of meeting the expectation of the Govt. in all future events, except requiring amendments for events and changes taking place in this 21st Century. India Central Budget 2017 has made the Income-Tax law still more complicated. One side Income-Tax Deptt. says that only assesses e-mail address should be provided to enable them to file returns voluntarily. On the other hand, CBDT amending Income-Tax law in such a way that compliance of return filing should be given by approaching more than one Tax Professional with their Digital Signature Certificates, who are considered as Super Specialist in Income-Tax law. Cause & effect of complicated Income-Tax law is as under:-

(1) It has become very difficult for Tax Professionals to follow-up the amendments made to Income-Tax law in every budget to support voluntary compliance.

(2) Deptt. officials are using the complicated Income-Tax law as tool for harassment in the course of assessment proceedings

(3) On looking at amendment made in every budget, it is evident that there is no correlation between intent and action of Central Board of Direct Taxes

(4) Scrutiny assessments are concluded by assessing officers keeping in mind that some additions has to be made, if not higher officers will doubt about their work.

(5) Slogan of Income-Tax Deptt. “Simplification of Income-Tax law and Citizen Charter” published in the wall post of Income-Tax Deptt. are only guise.

Canons of Good Tax System:-

The characteristics or qualities of good tax system have been described below as canons of taxation. Taxes should be collected by the Govt. like plucking flower without affecting the whole flowering plant.

(1) Canon of equality and equity

Taxation must ensure justice & the burden of tax must be distributed equally based on the ability of tax payer.

(2) Canon of Certainty

Tax payable by person should be certain and not arbitrary-Presumptive taxation not permissible.

(3) Canon of Economy

Complex & ever changing nature of tax law in India require highly trained personnel involving high administrative cost and inordinate delay in assessment and collection of taxes

(4) Canon of Convenience

Tax should be collected in convenient manner. There should be simple process of payment of tax when it is deducted at source. In India TDS payment is not convenient for the reason that middle man interference is required to appropriate the tax to particular PAN A/c

Ex:- Only in case of TDS on property sale is convenient for the reason tax deducted is directly appropriated to respective PAN A/c

(5) Canon of Elasticity

Taxation should elastic, more revenue automatically fetched when income of person rises, ie, it should have built-in flexibility.

(6) Canon of Productivity

Tax must yield sufficient revenue collection & should not adversely affect economic production.

(7) Canon of Simplicity

Tax law should be simple & should not go beyond the understanding of layman. This is what lacking in Indian Income-Tax law.

(8) Canon of Diversity

In multiple tax system, tax payer will not be burdened with high incidence of tax in aggregate. This may not be in vogue due to implementation of GST in India. Very purpose of GST is to have single Indirect Tax System in India.

(9) Canon of Expediency

Levying tax on agricultural income lacks social, political or administrative expediency in India & hence Govt. of India cannot tax agricultural income

———————

B.S.K.RAOB.S.K.RAO, Tax Advocate, BDKRAO, Beside SBI, Tilak Nagar, Shimoga-577201, Karnataka State

Mo.No. : 9035089036

E-Mail : raoshimoga@gmail.com

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25 responses to “Indian Income-Tax Law Does Not Meet The Norms Of Good Tax System Having Different Canons!”

  1. Adv.BSKRAO says:

    *MODI GOVT. IS BACK ON TRACK*

    Actually, Mr.Modi was fooled by bureaucrats in his Govt. now Modi realised it. Free hands given by Modi ji was misused by beraucrats. This is the reason for drop in GDP. Because these bureaucrats complicated everything. I am happy now bureaucrats are now hearing plea of voters of Mr.Modi. The fact is evident from decision of Finance Ministry to simply GST taken in latest meeting. Hence, I am of the opinion that Modi Govt is coming back to right track for growth of India.

  2. Adv.BSKRAO says:

    *Hon’ble PM Mr.Modi Ji

    Against the allegation of mandatory CA Certificates in Income-Tax Act, CBDT introduced penalty U/s 271J Rs.10,000/- on Chartered Accountants for furnishing incorrect Certificates/Reports in Finance Act, 2017. This action of CBDT is only an eye wash against the allegation made. In reality, now fees for signing Tax Audit Certificate increased by Rs.10,000/- & it has become extra cost burden to the Tax Payer. Problem of approaching two tax professionals & searching empty slot of CA signature during due date for giving compliance, not yet solved by CBDT. Rather Tax Audit Certificate Form No.3CD revised and complicated by CBDT. Recently, on the directions of ICAI, President of Shimoga CA Association gave specific instructions to CAs not to sign for related tax professionals. This intent of ICAI is evident from Page No.4 & 5 of ICAI letter Dt.29.01.2013 addressed to CBDT enclosed to this grievance.*

  3. BSKRAO says:

    Against the allegation on mandatory CA Certificates in Income-Tax Act, CBDT introduced penalty U/s 271J Rs.10,000/- on Chartered Accountants for furnishing incorrect Certificates/Reports in Finance Act, 2017. This action of CBDT is only an eye wash against the allegation made. In reality, now fees for signing Tax Audit Certificate increased by Rs.10,000/- & it has become one more cost burden to the Tax Payer. Problem of approaching two tax professionals and searching empty slots of CA Signature for giving compliance, not yet solved by CBDT. Rather Tax Audit Certificate Form No.3CD revised and complicated by CBDT. Recently, on the instructions of ICAI, President of Shimoga CA Association gave specific instructions to CAs not to sign for related tax professionals. This intent of ICAI is evident from Page No.4 & 5 of ICAI letter Dt.29.01.2013 addressed to CBDT enclosed to this grievance.

  4. BSKRAO says:

    *CIC/CBODT/A/2017/125020 HEARING DATE 22.08.2017 AT 12.15 PM*
    August 28, 2017

    From

    B.S.K.RAO,
    Auditor & Tax Advocate,
    BDKRAO, Beside SBI,
    Tilak Nagar, Shimoga-577201,
    Karnataka State.
    E-Mail : raoshimoga@gmail.com
    Mo No. : 0-9035089036

    To,

    Central Information Commission,
    Room No.329, 2nd Floor, August
    Kranti Bhavan, Bhikaji Cama Place,
    New Delhi-110066

    Hon’ble Sir,

    Sub : 2nd Appeal File No. CIC/CBODT/A/2017/125020 before Mr.Bimal Julka (IC) – Regarding
    Ref : In continuation of arguments made at the time of hearing on 22.08.2017 at 12.15 PM & my written submissions Dt.22.08.2017 sent to CIC copy marked to respondent vide Speed Post Ref.No.EK739776721IN Dt.22.08.2017 acknowledged on 25.08.2017
    -0-

    Respondent took time to file written submissions in the matter of my above appeal & sent a copy of written submissions vide letter F.No.225/293/2016-ITA.II Dt.23.08.2017. (See Exhibit-X). Before furnishing my arguments to the submissions made by the respondent, I would like to convey the fact before Hon’ble Information Commissioner that respondent has not touched any of the point raised in my RTI Application or Grounds of Appeal submitted. However, I here below furnish my arguments to the written submissions of the respondent, furnished in four paragraphs & marked as such by me.

    To Para No.1
    From this para it is evident that information is available with the CPIO & only because it is not readily available, respondent is denying to provide information sought.

    To Para No.2
    In the RTI Application, I have sought to provide statistical data relating to total of section wise wrong claims & amount involved in violation of provisions of Income-Tax law captured in each column No.16, 17, 21, 22, 26, 30 & 31 of Tax Audit Certificate-Form No.3CD separately uploaded to e-filing website of Income-Tax Deptt. in respect of return filed in Form No.ITR-4 & 5 for the Asst. Year 2014-15 & 2015-16

    1. Submissions made by the respondent in Para No.2 is not relevant to my RTI in question, but may confound or mislead the Hon’ble Information Commissioner. It was held by Hon’ble CIC in my own case bearing File No.CIC/RM/A/2013/000460 Dt.11.10.2013 that “information of statistical nature available with the Directorate of Income-Tax (Systems) should be provided to the appellant within three weeks from the date of receipt of the order” (See Exhibit-1)

    2. Here, I am not asking matching or mismatching data separately in the RTI Application Sir, Further, I do not understand what is this, being in Income-Tax Practice for the last three decades. My claim is only about actual statistical data uploaded in Form No.3CD to e-filing website of Income-Tax Deptt. that too not any individual data. I have sought only totals of Colum No.16, 17, 21, 22, 26, 30 & 31 of Form No.3CD uploaded to e-filing website of Income-Tax Deptt. This information can be collected just by pressing one button for each column in the computer system.

    To Para No.3
    The words used by the respondent in the submissions made in Para No.3 that data received is made available to the Assessing officers, clearly indicates that statistical data sought by me is available with the respondent CPIO and only question left to the decision Hon’ble Information Commissioner is about providing such data against my RTI Application.

    To Para No.4
    This para is not relevant to my RTI Application & furnished by the respondent with the main intent to mislead the Hon’ble Information Commissioner. Because, I have not sought or questioned about allowable or disallowable expenses in the return filed. I have sought totals of Colum No.16, 17, 21, 22, 26, 30 & 31 of Form No.3CD uploaded to e-filing website of Income-Tax Deptt. Further, I do not understand why CPIO is confounding the issue in my RTI Application

    *I once again reiterate before Hon’ble Information Commissioner that CPIO has admitted the fact in written submission that statistical data sought by me is available and now only question left before CIC is to decide about providing such data to me. If again CPIO denies to provide the information sought, I give option to CPIO to furnish reply to my RTI as under*:-

    “Statistical data relating to total of each section wise wrong claims and amount involved in violation of provisions of Income-Tax Act has not been captured in Column No.16,17,21,22,26,30 & 31 of Tax Audit Certificate-Form No.3CD uploaded to e-filing website of Income-Tax Deptt. in respect of return filed in Form No.ITR-4 & 5 for the Asst. Year 2014-15 & 2015-16”

    NOTE :- Some of the copies of statistical data provided by CPC, Bangalore about Tax Audit Report-Form No.3CD and return filed enclosed at the end, for the reference of Hon’ble Information Commissioner.

    With Respects,

    Yours faithfully,

    Copy With Respect to:-
    CPIO-DCIT(OST)(ITA-II),
    North Block,
    New Delhi-110001
    Tel No. 011-23095480

    Encl : –
    >Exhibit-X Written submission of Respondent
    >Exhibit-1 CIC Order No.CIC/RM/A/2013/000460 Dt.11.10.2013
    >Documents as mentioned in Note above

  5. Tax.Adv.B.S.K.Rao says:

    I think major Tax Professionals of India have totally desperated from the complicated taxation laws. Hence, no one is commenting on the issue of Govt. Tax Policy matter. In my case, I am not taking any GST work assignments from clients who approaching me for the purpose & also planning to leave out Income-Tax work also.

  6. Adv.BSKRAO says:

    CIC/DGITS/A/2017/115789 HEARING DATE 22.08.2017 AT 12.30 PM
    August 7, 2017

    From,

    B.S.K.RAO,
    Auditor & Tax Advocate, BDKRAO, Beside SBI,
    Tilak Nagar, Shimoga-577201, Karnataka State.
    MO : 9035089036 E-Mail : raoshimoga@gmail.com

    To,

    Central Information Commission,
    Room No.329, 2nd Floor, August Kranti Bhavan,
    Bhikaji Cama Place, New Delhi-110066

    Hon’ble Sir,

    Sub: Written submissions – 2nd Appeal File No. CIC/DGITS/A/2017/115789 before Mr.Bimal Julka (IC)

    In the above 2nd Appeal, I have sought to give hearing through video conferencing, providing me the venue at Zilla Parishat Office, Shimoga. In the notice sent through mail, you have not furnished particulars of venue for the appellant. However, it is prayed to consider the below arguments at the time of hearing, in additions to Statement of Facts, Grounds of Appeal and Relief sought separately enclosed to the appeal form as Annexure-1 & Annexure-2.

    1. In the RTI Application, I have sought to provide total of section wise wrong claims & amount involved in violation of provisions of Income-Tax law captured in each column No. No.16, 17, 21, 22, 26, 30 & 31 of Tax Audit Certificate-Form No.3CD uploaded to e-filing website of Income-Tax Deptt. in respect of return filed in Form No.ITR-4 & 5 for the Asst. Year 2015-16 & 2016-17.

    2. Uploading of Tax Audit Certificate-Form No.3CD has not served the purpose elaborated in Finance Act, 1984 Circular No.387 dated 6.07.1984 (See 1985 152 ITR) since past 3 decades. Instead it is practically causing strict hurdle for voluntary compliance in the revenue collection process under Income-Tax Act.

    3. To take defense against my above assertion, CPIO should either prove utility of Tax Audit Certificate-Form No.3CD uploading to e-filing website of Income-Tax Deptt. by providing specific information sought in my RTI Application or give below admission in writing as reply to my RTI Application.

    “Total of section wise wrong claims and amount involved in violation of provisions of Income-Tax Act has not been captured in No.16, 17, 21, 22, 26, 30 & 31 of Tax Audit Certificate-Form No.3CD uploaded to e-filing website of Income-Tax Deptt. in respect of return filed in Form No.ITR-4 & 5 for the Asst. Year 2015-16 & 2016-17”.

    With Respects,

    Yours faithfully,

    Copy with Respects to:-
    DGIT, Jhandewalan Extenstion, New Delhi-110055
    Encl : Copy of E-Mail Notice

  7. Tax.Adv.B.S.K.Rao says:

    Modi Govt. relaying on IAS/IRS officials, who work for only high class people like Tata, Birla & Reliance. usko middle class people dikta hi nahi hi. If you write to PMO, it will refer the matter to concerned Ministry. If you again write to PMO for no reply through RTI, Again PMO will write to us, saying approach concerned Ministry. Here my question is why PMO banner lagake officials udar bita hi ?

  8. Tax Adv. B.S.K.Rao says:

    Why complicated laws in India only ? Reasons are as under:-
    (1) Persons involved in framing laws in India does not have legal background. Even in Ministry of law who approve the laws does not have persons with legal background.
    (2) Mostly IAS/IRS officials sitting in AC Rooms are involved in framing laws India.
    These IAS/IRS Officials are grown up in the atmosphere of Slaves & dogs in their house. Hence, they do not understand practical problems at gross root level.
    (4) IAS/IRS Officials wants to show their supremacy by turning out the verdicts of High Courts & Supreme Court of India by amending the law as such.
    (5) Indian Politicians are not educated enough to understand the laws framed by IAS/IRS Officials to raise objection in the legislature. Hence, they prefer not to be present in legislature while passing such bills.
    (6) Stake holders suggestions are not considered by respective Ministry, but kept aside blindly.

  9. Tax Adv. B.S.K.Rao says:

    I have also across many instances wherein fees charged to fill-up Tax Audit Report was in the range of 10 to 25 Lakhs resulting in increased cost of compliance. This is because of monopolistic power to sing off Tax Audit Report in Income-Tax Act.

  10. Tax Adv. B.S.K.Rao says:

    Because of more complicated Income-Tax law assesses are forced to pay more for the service rendered by Tax Professionals resulting in higher cost of compliance. This is nothing but indirect black mail on assesses. I have come across many instances wherein in charges paid to Tax Professionals are more than the taxes paid to the Govt.

  11. Tax.Adv.BSKRAO says:

    In practice when money bills are introduced in parliament very less MP attend for voting. Because they do understand it. So whatever drafted by IAS/IRS officials are approved in parliament. Many of the minute amendment to tax law causing undue complications & trouble to assesses & public are not discussed in parliament or challenged in court of law. If we the Tax Professionals knowing the subject question CBDT about its validity in RTI, they simply answer that it is passed in legislature without verifying cause & effects. Therefore CBDT should be scrapped with immediate effect

    • Tax.Adv.BSKRAO says:

      Read it as, because they do not understand money bills. In fact these are all cause for mounting up of appeals under Income-Tax Act. Further, appeals are not disposed in time resulting in unnecessary recovery action on assesses

  12. Tax.Adv.BSKRAO says:

    Tax advisor suggestions are practical & hence considered by all Govt. in all countries. But, India only Govt. is acting like wall whatever suggested will rebound back. I thought Modi Govt. is transparent & hence consider our suggestion, but no Modi Govt is also working for vested interest & influencil people only.

  13. Sanjay Arora Advocate says:

    I agree with Mr BSK Rao that department is making the Income Tax Act more complicated year on year itcwas started in the regime of Mr P Chidambram and now In time of Mr Jailty the process is on rater in more speedy way

  14. GANDHI MOHAN BHARATI says:

    I agree totally with the author. I have repeatedly posted in the forum that there is not enough in depth consideration before the announcement. Examples are –
    Last date of filing and imposition of penalty without exception. Does the Government expect a Soldier fighting Terrorist to lay down his arms, rush to the nearest location with net connection o file his ITR?
    Does the Govt expect a patient in coma in hospital to wake up and file the ITR?
    SORRY THERE HAS BEEN NO IN DEPTH CONSIDERATION
    Linking of Aadhaar to PAN for ITR.
    Immediately they came out with a notification regarding the non requirement to this by NRIs.
    What about so manyu representation from people in Assam?
    ALL ARE IN DEAF EARS. THEY WILL PROBABLY ISSUE NOTIFICATION BEYOND DUE DATE.

  15. Tax.Adv.B.S.K.RAO says:

    Super Specialist in Income-Tax law may not agree my arguments for the genuine reason, they are of the strong view – “if tax law is complicated, they get more scope for their work & also fetch good remuneration for the work done”

  16. Tax.Adv.B.S.K.RAO says:

    To sum-up, if Tax Deptt. impose strict & stringent policies, definitely Govt. will not get legitimate tax to its exchequer. I also suggest the law makers to come & sit in Tax Professionals office to know how compliance in tax laws are given to the Deptt. How we Tax Professionals give shape to the case before submission of returns.

  17. Tax.Adv.B.S.K.RAO says:

    Because of complicated Indian Income-Tax law, Tax Advisors are forced to delete the whole transactions from the books of accounts to escape the client from axes of penalty & prosecution etc. Because he is paid by the assessee. In such circumstances, Govt. will not get the legitimate tax. Ex:- If we grow our children in strict environment, such children will go out of orbit. Law framers should think in this direction.

  18. Tax.Adv.B.S.K.RAO says:

    Because of the highly complicated Indian Income-Tax law, fees recovered by Tax Professionals are more then the amount remitted to Govt. as Income-Tax. Many such instances have come to my sight. Reservation-Even though I am a Tax Professionals, I do not hesitate to give this statement.

  19. Tax.Adv.B.S.K.RAO says:

    Because of the highly complicated Indian Income-Tax law, Tax Professionals are also harassing the assesses, rather helping them to support compliance. Even though I am a Tax Professionals, I do not hesitate give this statement.

  20. RAKESH BANSAL Advocate says:

    Rao sab is a dynamic and great personality of indian tax law and reformer of income tax law. He is doing good work for advocate ferternity.

  21. Tax.Adv.B.S.K.RAO says:

    Income-Tax is a direct tax, paid out of the pocket of assessee. Whereas Indirect tax is a collected tax and the assesses act in fiduciary capacity. Govt. definitely cannot take stringent policy decisions for assessment, inspection, levy and recovery of direct tax in the lines of Indirect taxes. Indian Income-Tax law has become one of the most complicated direct tax law in the world. This is evident on comparing the latest size of the statute book of Income-Tax Act with that published in 1962. Therefore, it is prayed before the Prime Minister and also Minister for Public Grievances to scrap Central Board of Direct Taxes with immediate effect to avoid further tinkering to Income-Tax law.

  22. RAKESH BANSAL Advocate says:

    It is right it has become very difficult for Tax Professionals to follow-up the amendments made to Income-Tax law in every budget to support voluntary compliance.

  23. RAKESH BANSAL Advocate says:

    department officers are using the complicated Income-Tax law as tool for harassment the public.

  24. RAKESH BANSAL Advocate says:

    I 100% agree with Sh. BSK RAO JI,
    Taxation should elastic, more revenue automatically fetched when income of person rises, ie, it should have built-in flexibility.

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