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Timely refund is our priority: CBDT chairman

Babar Zaidi     January 23, 2008
Ratneshwar Prasad
Ratneshwar Prasad, CBDT chairman

Q. The Tax Return Preparer scheme is a significant step towards making filing easy for the taxpayer.

A. Yes.

Q. What has been the feedback of this scheme?

A. We cleared 3,737 people. The applications were 90,000. Then they were considered and ultimately 3,737 people qualified out of which, I think, nearly 1,800 were taken. The balance are not good enough.

Q. Was it because of ...

A. Even a housewife became a tax return preparer because not much cost was involved. So, many of them became but just for the heck of it.

Q. But at least 1,800 of them are there. How many tax returns have been filed by them?

A. For the figure which I have, they have submitted about 40,000 returns.

Q. That is a significant achievement.

A. At no cost.

Q. It is a small step, but it will go a long way.

A. Yes.

Q. Is the CBDT considering any more such initiatives in this regard?

A. We may have the tax return preparer scheme this year also.

Q. Is there any other scheme, apart from this scheme? This was a very good idea.

A. It was a good idea. But just now there is no such scheme like that. This is the only scheme which will be continued.

Q. What is the procedure? Was it a window which was opened last year, those who qualified or is it a continuous process?

A. This year again we will ask for applications.

Q. So, it is a window when the application comes or what is the time frame when one can apply for it?

A. We want to put it on the Web. We put it in the records when they apply, then they will have to clear the entrance examination and then we will be keeping certain percentage of marks to be qualified. Then they will go for training.

Q. As an extension, what has been the feedback or what has been the experience of the E-filing for individual returns?

A. E-filing is mandatory only for corporates and 44-AB returns. But it is not mandatory for others. It is optional.

Q. But do you have anything which shows ...

A. But this year, this 44-AB and corporate returns – the total returns have come to 6,25,000 or something like that. But we received over 13,00,000 returns. So, seven lakh people have used the option of E-filing.

Q. And they have E-filed the returns.

A. Yes.

Q. The E-filing thing is another example of how technology is helping.

A. Yes. Technology is also helping in having our database. We are having database.

Q. And improved compliance because it becomes so much easier.

A. No. Once the database is there, then you could utilise it for selection of cases for scrutiny. It is a manual selection. But computer assistance will be fed in the data as to what is the criteria that we have to see. That helps us there.

Q. Will there be an extension to the AIR scheme?

A. The AIR scheme is current, going through well.

Q. But having a database, does that help the AIR better?

A. It does help because there are some people who have, say, invested over Rs. 15 lakh in mutual funds. They are not income-tax payers. We try to locate them.

Q. But how effective has the scheme been?

A. It has been effective. Our personal income-tax collection is up by nearly 46 or 47 per cent.

Q. Has the tax net also increased, the number of people?

A. That is increasing every year, but not by big amounts; say about a million every year.

Q. The biggest problem that most people face is filing of tax return is one thing; it is after filing where you have issues of refund, issues where ...

A. No. For refunds we have another scheme, at least in the metros because most of the returns we receive are in the metros. So, we are able to do a system called Refund Banker.

What happens is the moment the return is processed on the computer, the data is downloaded and sent to the bank. So, there is no interface between the taxpayer and the tax gatherer. The bank issues the refund cheques.

Q. Is it ECS?

A. It is either ECS or plain cheques.

Q. Has this scheme been started from this year only?

A. It was started last year. It is called a Refund Banker. For this year, our officers are working on this that the refunds would be given the first priority. I think, up to now, we have issued about 36 lakh refunds. It is up to now. Last year, we issued 44 lakh in the whole year.

Q. Okay. You mean 44 lakh in the whole year and already you have issued 36 lakh this year?

A. Yes. It is 36 lakh this year.

Q. It is a very fast pace.

A. We have been after it. We have to give good service to the taxpayer. Unless we give service to the taxpayer voluntary compliance will not improve.

Q. What are the services can we expect?

A. . Then we have introduced another scheme called SEVOTTAM. SEVOTTAM is a scheme wherein somebody says ‘I have rectification pending or he has an appeal that had to be given to’ etc. Then, there is a centralised receipt of dak. So, it is all fed in the computer.

There is a pop-in system that after 45 days you have to give that to effect, within two months you have to do the rectification. So, it is there to monitor. So, you do not do stack up of what dak has come.

Q. These are also by metros first or ...

A. No. Just now we started a pilot. Like Refund Banker we started a pilot first in Delhi and Patna because we took a small place and took Delhi then. Once it ran for three-four months in both the places, then we found out the software is working. When the software is working, then we introduced it in Kolkata, Chennai, Mumbai and Bangalore.

Q. Then you ventured into other parts of the country.

A. That will come later. First, you have to change the rules. This is all, just now, on a pilot basis. The SEVOTTAM scheme, we introduced in Mumbai and Udaipur. Then, E-filing your return is one service we are giving. You can sit down in your home and send your return at 11 o’ clock at night without going in the queue.

Q. Yes. But how many people do that? How many of them do?

A. There are. Seven lakh people have submitted their returns. It is optional for them. It is a question of getting used to a system. We have just started the system. You have to get used to it. If there is anything, any changes, we bring it in the first instance. Like, you take the return form.

Earlier, the return form used to be one page and 40-50 pages annexures used to be attached. Now all that is gone. With the return form, you have to attach nothing. You will just fill in the form. People found it very tedious because earlier they used to go to the CA and enclosures were to be kept.

But, it was bulky, took lot of space and you did not get your data. Now, in this, the entire data will be there. We will put it on the Net. Once you put it on the Net, then we can have a better analysis.

Q. Sir, last year, after the forms came requesting for consumption also to be mentioned where ...

A. That form is no more. The form 2-F is gone.

Q. But the annual information AIR return thing is still there.

A. That is because, that helps the database. If you invest in fixed deposit, you invest in mutual fund, you spend a large amount by a credit card, that data was all captured and may be used for selection of these scrutiny cases.

Q. What would be the filter? If you say large amount of transactions through card, will you give some example as to what would it be like?

A. Just now we have kept it at Rs 2 lakh in a year.

Q. Does this also include the transactions made out of India?

A. It will all be there. Simply, you have shown an investment of Rs 5 lakh and your income is only Rs 1.5 lakh, then your case will be picked up. The computer itself will pick it up. There is no manual intervention.

Q. The process of scrutiny is now more computerised, human intervention has gone now. That is what you say.

A. No. We are supposed to do about 2% scrutiny. We are not doing that much. Ninety-eight per cent of the cases are not scrutinised.

Q. Since all mutual fund investments require a PAN card they will all be centralised. Is it so?

A. Yes. Ultimately, the whole idea is this. When the PAN card comes, for every PAN card holder we will have a ledger account. We will have in it, what transactions he enters into. That will go in his ledger.

Whenever his assessing officer wants to see what all the investments and expenditures he made, he can go and see the ledger account.

Q. The moment you say tax notice comes, even if it is for the simplest of explanation, why is it that there is so much of resistance or the mindset is such that – ab fas gaya? Is it because of the practice ...

A. It is like this. The whole process of compliance just now is very tedious. We have to make it simpler. We are trying to do that.

Q. Where would you be on a scale of ten in terms of being from extremely tedious to where we are now?

A. We are in between somewhere. It is much better than what it used to be. But it requires further improvement.

Q. The Kelkar Committee had said that the cost of compliance in India is one of the highest in the world. How well do you think it is being reduced?

A. We are reducing it. All these schemes we have brought, they will reduce the cost of compliance. As it is, 98% people are not scrutinised at all. So, they are out. They have to just file their return. Only in case of 2% or 1.5%, in one year it was 0.8%, we have issued notices for scrutiny.

The way the cost of compliance increases is to be seen. Obviously. The tax base increases, the 2% would also add up more number of people. It is going to add up.

Q. For long, there has been a talk of an all-new Income-Tax Act. Can you tell us what has been the progress?

A. It has been made. We have put it on the website. You can give your comments. Then, after we receive them in the next three or four or five months or six months or whatever the period is, once you raise the comments, we will see what it is. Then we will do it.

Q. Are we not, as a nation, huge taxpayers, we have all kinds of taxes that are included – service tax, cess etc.

A. Tax is something which is necessary for a civilisation. If you do not have taxes, you do not have civilised being. And if you do not have taxes, you will not have democracy also.

Q. But, there are certain exemptions which were necessary; a very small exemption like Section 80-L. Even a bank account where you are earning a very small amount of interest, it will have to be shown. How many people are aware that ‘I have a bank account which is earning interest?’

A. There is some problem there. We will see.

Q. Is it not an easier kind of a thing that it is taken off? What exactly do you think?

A. That has to be considered. What you say is correct. For Rs. 100 you have to get bank account updated.

Q. The chartered accountants say that there has been a spurt in the notices being sent to the taxpayers after the introduction of the AIR clause.

A. It is like this. As I told you, over a year or two ago, only 0.8% cases were selected for scrutiny. This year we are trying to reach the 2% mark. The number of notices will be much more than if it is 0.8 and 2 per cent. The number of notices will more than double up.

Q. On the other hand, your tax base is also increasing. So, that means that the number of scrutiny cases as absolute will shoot up.

A. They will go up. The Parliamentary Committee is saying 3%. We are sticking to 2%. Earlier we were doing 0.8%. We are trying to increase it to 2% because everybody wants more scrutiny to be done.

Q. But, does the tax often increase? The Department does not have that many people who can handle so many cases.

A. We have to change the procedure.

Q. There is also the concern on these notices because you have to achieve a 2% target, often these notices are not really spelling out anything very clearly. It is only that ...

A. It is like this. There are two systems of selection of cases through a computer. One is AIR basis. There, we have given instructions to our officers to look into only whatever …. Suppose he has made an investment in a mutual fund. That is AIR data.

That will come on a screen, the assessing officer’s screen. He can limit himself only for verification at that amount. If he wants to scrutinise further and see other items, then he can take the permission of the Additional Commissioner and scrutinise the other items of his income.

Q. So the filters and checks are maintained that way.

A. That means undue harassment is not caused. The whole purpose is that. Another thing is computer assisted selection scheme.

Q. At random?

A. There is a certain percentage. We call it CASS. Certain cases are taken, certain method is selected. There the case may be selected automatically. That, even the A.O. will not know why the case is selected. If you tell him what is the method on which it is selected, then the assessee will change the role.

Q. In this case, what is the recourse?

A. Then it will go for a normal scrutiny.

Q. But what if a tax assessee is not able to explain? Let us say, you called for some scrutiny, some issue.

A. Suppose there is a claims and expenditure which he is not able to support. Then that expenditure will be disallowed. If he has not shown some receipt, then he has to give an explanation. The whole process is – whatever material we are going to use against the assessee, that becomes the system. You confront the assessee with that.

Q. Sometimes it becomes a case. Let us say, there is some transaction which happened two years ago and he might not have the receipts still. What is the position?

A. Normally when a scrutiny comes it will be two years. But most of the people have some details. It is not like that.

Q. If they do not have, then what happens?

A. If it is not there, some way will be found out. Human mind is very ingenuous.

Q. There is also an argument that once income has been taxed, then the I.T. Department should not have anything to do with the point how it is being spent.

A. No. The I.T. Department does not go into the expenditure. We are only concerned with how much income you have earned. Tax is on income not on expenditure.

Q. But the AIR would be an extension of ...

A. That is a database on which you can estimate how much a person is earning. It is not used for expenditure at all. But, if your expenditure is, say your mobile bill is Rs 10 lakh, and your income is only Rs 3 lakh, then there is something wrong somewhere. That expenditure you will have to touch.

Q. There are so many loopholes. What if somebody goes for a prepaid connection?

A. The loopholes are there. We have to think it over.

Q. On forced investments, what is the rationale for it? If I am given a deduction under some section, I am forced to invest in something which I may or may not want.

A. But the government will lay down a policy. The government never believed in deduction. It is foregoing revenue. We forego the revenue. The revenue is going. Then the Government can say – instead of investing it here, you can invest it here.

Like you can invest in infrastructure companies, infrastructure bonds. There are things for which the government can lay down conditions how you invest.

Q. The income-tax laws are discriminatory when it comes to asset classes. Some asset classes like equity shares have got greater exemptions than say invests in property or fixed deposits.

A. You have to hold the property for three years.

Q. Even after three years, when long-term capital gains are not ...

A. That is only relating to holding gain. But if you put it in equity shares, you have to pay tax. If you put it in property, you have to pay tax.

Q. As an investor, if you are investing in shares, after one year it will be free.

A. It is one year. In equity, the fluctuation is very high. It can go up, it can go down. So, one year is a rational period. But property normally does not fluctuate so much. It is more stable.

Q. That is why the holding is there.

A. There the holding period is three years and here it is one year.

Q. Now I want to ask you a ticklish question. A lot of people also complain that they are harassed and asked for bribes when they go to the income-tax department to settle their cases.

A. Our society is like that. We are not different from the society in which you live.

Q. It is always felt that there is a conniving activity which is being happening. The moment I am sent a notice, it is for some other gains. It is being ...

A. Not always. Whenever a notice is sent, it is not always for it.

Q. It is not always like that.

A. But what happens is, during this process, we have some black sheep who do this. But that does not happen only in the income-tax department. It happens in every department where you have public dealing.

Q. It is the nature.

A. It is a reflection of how the society is functioning at that particular point of time. If the society improves, then everything else will improve. No Government department, nothing is divorced from the society. It is part of the society. That is happening everywhere. If you do not give tips somewhere, then bad food will be given to you.

Q. You are right. Take railways or airports.

A. Everywhere. One reason is there is a shortage. In other places it is a case of harassment. Today the travelling people may be 10,000, but the berths available may be 1,000. So, 9,000 people will have to wait. So, everybody wants to jump the queue. They will pay bribes.

Q. What is being done at the policy level to deepen and widen the tax base?

A. It is like this. As the economy grows, as our salaries increase, business improves, the tax base will increase automatically. Presently, I think about 120 crore people live in this country out of which 70% live in the villages. They are mostly dependent on agriculture.

They cannot come in your tax base. You lose 70% of 120 crore. It comes to 84 crore. So, 120 minus 84 is 36 crore. That includes children also who constitute 40% of our population. So, 40% of 36 crore is 14 crore. We are left with 22 crore. Even in the urban poor, there will be people below the poverty line. So, not much option is left. How much can you increase the tax base?

Q. This has been a question for a long time now.

A. It is a question. But then you see the whole thing ..

Q. It is about taxing the rich farmers.

A. It is like this. There are no rich farmers in this country. On paper there is no rich farmer. You can have 15 or 16 acres of class-1 land under Land Reforms Act which is in every State. There are three types of land known as classified land of sea variety. There you can have 40 or 45 acres. Otherwise it is 15 or 16 acres. Land of 15 or 16 acres in agriculture will not give you much income unless you grow cash crops like tobacco or things like that.

Q. Or some herbs or something like that.

A. Taxation of agriculture, whatever it is, it is a State subject. The State Governments have to decide.

Q. That is always an issue. It is a State subject.

A. Plus, even if you provide it, many State Governments have removed it because the cost of administration is more than the collection involved. Maybe it was not an administered property. I am not saying that.

But, in one or two States where they had, the cost of collection was more than what revenue they were getting. Next, it is a populist measure. But it happens in every country. In the US, seven States do not have State tax. Many States have State tax. For example, Texas does not have a State tax. People would like to have their residence there because State tax is not obtained. But that is a case in every country.

Q. What about the PAN card?

A. We are having about five crore PAN cards. We have outsourced it. We have given it to UTI.

Q. How fast it is?

A. It takes about 15 days to three weeks to issue a PAN card. There may be some hiccups in one or two individual cases. But normally it comes on time. You cannot have a 100% perfect system anywhere.

Q. As you go on, that is when you figure out the issues.

A. We are getting complaints and we are trying to do it. Some people have applied for a PAN card, they have not come. Or, some name is printed wrong. But human errors cannot be prevented.

Q. Can we have some figures on the number of people who have filed returns etc?

A. Last time we received some 2.72 crore returns. There are about three-and-a-half crore or 3.6 crore people on average. Some file returns. Many of them do not file returns. Most of them file them.

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