The whole process of assessment and appeals needs to be looked at afresh, with a view to revamp and improve the current circuitous procedure. The following may be considered from this perspective:

i. A system of private rulings could be introduced, whereby an assessee can seek a private ruling on the manner of taxation of a particular item of income/expenditure /transaction, before filing his return of income. The private ruling could be provided by a Zonal Committee of Chief Commissioners, and should be non-binding on the assessee. The private rulings could also be published on a no-name basis on the Income tax Department’s website, which would act as a guidance for other assessees.

ii. A system of mediation in the form of agreed assessments can be instituted, whereby a Zonal Committee of Commissioners could arrive at an agreement with the assessee as to the quantum of assessment. This agreed assessment should be binding on both the department and the assessees.

iii. A provision can be made to refer all potentially high pitched assessments to a Committee before completion of assessment, similar to the existing local Committees for post referral of high pitched assessments.

iv. International best practices in relation to assessments can be considered. Initially, assessments above a threshold or category could be made by a team consisting of the Commissioner, Additional / Joint Commissioner, Assistant / Deputy Commissioner / ITO. This will prevent unwarranted additions in assessments. Since orders would be passed by the Commissioner, appeals would lie directly to the ITAT. This would avoid the current conflict and bias arising due to appeals being decided by Commissioner (Appeals), who are Departmental Officers. The power of revision could lie with the CCIT.

v. A large part of the litigation today is on account of the fact that there is no deterrent on Assessing Officers from making undue additions, as there are no legal costs of such litigation to the Department. A system of awarding costs to assessees should be introduced.


It is suggested that:

i. A system of Private Rulings may be introduced.

ii. A system of mediation in the form of agreed assessments may be instituted

iii. A provision may be made to refer all potentially high pitched assessments to a Committee before completion of assessment.

iv. International best practices in relation to assessments may also be considered.

v. A system of awarding costs to assessees may be introduced.

Source-  ICAI Pre-Budget Memorandum–2018 (Direct Taxes and International Tax)

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June 2021