Taxation is the lifeblood of any government, providing funds for public services. However, tax collection should be fair and rational. Recently, a worrying trend called high-pitch assessments has been disproportionately affecting small taxpayers. This article looks at the details of high-pitch assessments and their impact on small taxpayers and emphasizes the need for a fair and transparent reform process.
This distinction has now assumed importance in view of the fact that additions under sections 68-69C attract tax at 77.25%. The term is not defined in the Income Tax Act, 1961 (the Act).
CBDT in Circular No. 1914 dated 02.12.1993 provided instructions and guidelines for granting stay in High–Pitched assessment. An assessment made far beyond Returned Income is considered a high–pitched assessment.
Relevant cases that accepted the assessments as “high–pitched Assessments” include:
- Dalpatbhai Vasabhai Ukava 108 taxmann.com 265 (Guj.)
- Flipkart India (P.) Ltd vs. ACIT (2017) 396 ITR 551 (Kar.)
- Soul vs. DCIT (323) ITR 305 (Del.)
Page Contents
Understanding High-Pitch Assessments
In high-pitch assessments, tax officials issue orders for taxes and penalties far from the amount legally payable. This often happens because officials are under pressure to meet targets, causing them to go after many smaller taxpayers instead of larger ones.
Devastating Impact on Small Taxpayers of High-Pitch Assessments
For smaller taxpayers, high-pitch assessments can be financially devastating. Faced with huge tax bills, they may struggle financially, hampering their ability to contribute to the economy. Authorities may also impose higher taxes when there is no real liability, increasing tension and reducing trust.
Need for Fairness and Transparency in case of High-Pitch Assessments
Dealing with high-pitch assessments requires urgency, fairness, and transparency. Small taxpayers should be able to challenge unfair assessments through negotiation and review mechanisms based on merit rather than arbitrary targets. Providing accessible information empowers taxpayers to navigate the system.
Need for Holding Officers Accountable
It is important to hold officials accountable. Checks and balances are essential, as well as regular audits and the consequences of unfair evaluations. Rethinking incentives to prioritize accuracy over meeting collection goals could lead to positive changes.
Building Trust between Government and Citizens
The loss of confidence due to high standards of evaluation is serious. Restoring trust is important for healthy government-citizen relations. Reforms emphasizing fairness, transparency, and accountability send a strong message of respect and equality for all taxpayers.
Educating Small Taxpayers
Knowledge is power, especially for small taxpayers. Providing accessible guides, helplines, and resources empowers them to understand their rights and responsibilities and levels the playing field.
Conclusion
In summary, high-pitch assessments pose a serious threat to small taxpayers, causing financial and psychological distress. Addressing this issue requires a comprehensive approach, including fair and transparent processes, officer accountability, and rebuilding confidence. Implementing these reforms ensures that the taxation system serves its purpose without placing undue burden on the least affluent. Small taxpayers deserve respect and fairness, emphasizing the government’s responsibility to create an environment where they can thrive without fear of unjust assessments. Guided by the principles of fairness and equity, we can pave the way for a more just taxation system.
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About the Author: CA Arun Tiwari, a Chartered Accountant and former EY employee, serves as the Chief Consultant of the NRI Desk and Influencer Desk at AKT Associates. He specializes in offering consultancy services tailored for NRIs and is dedicated to creating educational content to raise awareness within the NRI community.
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