WRIT OF THE CBDT
Kudos to the Central Board of Direct Taxes (CBDT). We haven't had a more proactive CBDT since many many years. More than thirty administrative circulars and instructions have been issued since the Modi Government took over and the focus has been to reduce litigation and make life simpler for both the tax payer as well as the Department.
However, much more needs to be done and the CBDT, being the apex body, has its role cut out to instill requisite confidence in its officers so that they take decisions objectively and in accordance with well settled principles of law without fear or fervor.
CBDT administers through instructions and circulars. Needless to add, these instructions and circulars are binding on all the income tax authorities below and have to be followed in letter and spirit. Any deviation or refusal to follow can, and in fact must, lead to administrative action against the official concerned.
It is common knowledge that instructions and circulars issued by the CBDT are not being followed in the manner they are expected to be. CBDT has expressed its distress and displeasure at this through many of its communications which, I shall be dealing with in the ensuing paragraphs.
The other issue that generally arises is difficulty incomplying with the instructions and circulars due tothe high degree of subjectivity and lack of clarity. The circular often says "do it" but never specifies "how to do it". Consequently, very little is done.
I shall now be dealing with some of the key circulars issued by the CBDT recently to try and demonstrate how and why the same are not being followed by the departmental officers in the manner they are expected to be.
Instruction vide letter F. No. 312/109/2015-OT dated 02.12.2015 directs the officers to issue refunds expeditiously. The Instruction states that the refunds less than Rs. 50,000/- should be issued "as early as possible". What is the meaning of the phrase "as early as possible"? This instruction merely appears to be an advisory and is in fact, illusory in nature. Should it not have stated that the refunds of less than Rs. 50,000/- must be issued within 30 days and in cases where it cannot be issued, the CCIT must furnish a detailed chart giving reasons for the same before the CBDT and also seeking instructions in the matter.
Instruction No. 17/2015 dated 09.11.2015 deals with formation of Legal Committees to deal with high pitched assessments. This is a very major reform and if implemented, can go a long way in mitigating the long standing grievance of harassment suffered by the tax payers' interalia, due to high pitched assessments.
There are however serious ambiguities and flaws in the said instruction that could consign it to the cold storage, some of which are as follows:-
(i) The instruction states that Committees will comprise of Principle CIT level officers. Why would the Committee not includea professional or a prominent member of the public? Thisinclusion will instill confidence in the mind of the aggrieved that his grievance will be examined from a professional angle and not merely from the Department's stand point.
(ii) The instruction further states that there should be endeavor to dispose of the grievance within two months. Why is the word "endeavor' used? It should simply state that the grievance shall be disposed of within two months. Any reason for the delay must be notified to the CCIT who should in turn report to the CBDT.
(iii) The procedure to be followed in the working of the Committee has not been formulated. How is the grievance petition to be filed? Will the grievance be a complaint? Will the assessee/Assessing Officer be called? Will the case records be examined and an opportunity given to either of the parties? Will any order be passed in respect of the grievance petition and can it be challenged before the Principal CCIT or any other authority? How will the Department react to the orders/directions of the Committee? Will the orders/directions only be advisory or will they have to be mandatorilyfollowed?
Many more issues come to mind and therefore, I would suggest that before such path breaking instructions are issued, lot of ground work should go into the implementation aspect.
Instruction No. 16/2015 dated 06.11.2015 directing the Commissioner of Income-tax (Exemption) to pass an order u/s 12AA of the Income-tax Act, 1961 within six months is salutary. However, it does not state the administrative action which would be taken if the orders are not passed within 6 months. The order u/12AA should in fact be passed much before six months. What is the difficulty in passing such orders earlier? After all, very limited number of documents have to be examined for the purpose of this approval and perhaps, this is the easiest of approvals under the Act. The Instruction should have also stated that CIT (Exemption) must put up on a public portal the number of applications pending decision beyond six months. This would work as a self– regulatory mechanism ensuring the passing of orders within the stipulated period.
Communication No. DGIT(S)/DIT(S)-V/ASK/2015-16/11972 dated 20.10.2015 deals with the manner in which grievances by email from tax payer need to be resolved. The procedure given is extensive but it does not lay down any time lines for resolution of the grievances. Laying of time line is the key without which this instruction becomes meaningless. The instruction is to provide relief to the taxpayer and if there is no cap on the time period, within which the relief ought to be provided, the procedure for providing relief becomes quite meaningless. In this case also, it would have been better if the CBDT had directed that whoever emails a grievance, shall be allotted a grievance number and the same shall continue to be reflected as unresolved in the public portal till it is resolved to the satisfaction of the aggrieved.
Instruction vide letter F. No. 225/267/2015-ITA.II dated 19.10.2015 is an excellent move towards paperless assessment proceedings. This is The Answer to most of the grievances of the tax-paying public. This move must be made successful. Wide publicity should be given and suggestions should be invited from various professional bodies and associations so that a detailed procedure could be evolved for carrying out the paperless assessment proceedings though the electronic medium. Set formats for queries to be raised, manner of preparing order sheets, issuance of show cause notices, opportunity of moving the Additional CIT u/s 144A or approaching the Settlement Commission u/s 245C of the Act etc must be laid down in no uncertain terms. I hope that adequate focus and attention is given to this initiative by the Department to movetowards greater transparency and efficiency in the assessment function.
Instruction vide F. No. 279/Misc/141/2015-ITJ dated 07.10.2015 states that timely effect to orders of CIT(A) must be given. This instruction quite obviously expresses the distress of the CBDT over appeal effects not being given for months or years. This is a very serious matter which constitutes nothing but dereliction of duty. Why should appeal effect not be given within say, two months of the receipt of the order of CIT(A) or the Tribunal? The delay in granting appeal effect, results in payment of interest on refunds which is a loss to the public exchequer solely due to negligence of the officer concerned. It would be apposite to prepare a monthly list of cases where appeal effect has not been given beyond the period of two months. The list must be displayed in a public portal which is perhaps the only way to ensure that the writ of the CBDT is followed in its letter and spirit.
Instruction No. 6/2014 dated 02.09.2014 requests the Pr. CCIT/CCIT to give at least 50 quality orders for publication every year. It is really distressing that even 50 orders out of hundreds of orders of assessment that are annually passed in the Pr. CCIT/CCIT charge cannot be identified. This only proves that the quality of assessments is not up to the mark and quality rather than quantity has to be the focus.
Instruction No. 7/2014 dated 26.09.2014 describes the scope of examination of cases that have been picked up through CASS. It is common knowledge that the assessee’s are rarely informed whether the scrutiny is on a restrictive issue. The instruction of the Board should also have stated that every notice issued by the Assessing Officer in respect of a case picked up must make a mention in Capital and Bold Letters that the same has been taken up under CASS and shall be confined to the queries raised in the notice only. This would provide sufficient ammunition in the hands of the assessee’s to prevent any abuse of power by the authorities concerned.
Instruction vide letter F. No. 225/148/2015-ITA-II dated 05.06.2015 requests the Assessing Officer to dispose of rectification applications at the earliest. What is the necessity of such a vague instruction? The instruction should simply state that all the applications should be disposed of within six months and all those cases where applications have not been disposed of within the said period, their particulars must be submitted to the CCIT concerned for onward transmission to the CBDT giving reasons for the delay.
The latest instructions vide F. No. Dir. (Hqrs.)/ CH (DT)/ 29/2015/2030 dated 15.12.2015 speak of electronic communication with the Department. It states that emails and office numbers of the authorities who interact with the tax payers must be given. It is common knowledge that not many officers operate their emails or respond to any communication with them through that medium. The purpose of this instruction is perhaps to enable the tax payer to communicate with the officers through the electronic medium if he so desires. It is a good step and must be enforced. It is suggested that surprise inspections should be carried out in respect of the communications and wherever the emails and the phone numbers are not listed or if listed, response is not given then administrative action must be taken. This will present a humane face of the Department before the public which is the need of the hour.
A Committee was constituted to study appellate orders and examine filing of appeals before various forums on 17.07.2014. What is the report of the Committee? The same to the best of my knowledge has not been made public. Reports of every Committee should be placed in the public domain and should in fact be sent to key professional bodies so that their valuable comments can be gathered and incorporated. After all, the Department cannot function in isolation and must take into account inputs from the public to improve itself.
A consolidated circular dated 07.11.2014 for moving towards non-adversarial regime is an important one. It deals interalia with the manner in which hearings should be conducted, questionnaires should be issued, grievances of the public should be addressed, indiscriminate issuance of summons should be curtailed and how inspection of the orders of the lower authorities is to be carried out. This consolidated instruction is basically a repeat of the instructions of the CBDT issued time and again to the various income tax authorities in the past.
The reason for repeated instructions on the said issues is quite obviously the fact that the same are not being followed by the authorities below.
Therefore it is imperative and in fact, the need of the hour that a comprehensive instruction ought to be issued delineating the consequences of not following the Instructions and Circulars of the CBDT.
Instruction vide F. No. 225/261/2015/ITA.II dated 28.10.2015 is on poor representation of the Departmental officers before Authority for Advance Rulings. It appears that the problem is serious. It could perhaps be resolved by laying down elaborate rules for representation before the said Authority. The author believes that comprehensive rules for representation by the Departmental Representatives before the ITAT must also be laid down. This will fix responsibility on erring officers and ensure that the representation is of the highest order.
Instructions vide F. No. 279/MISC/52/2014-(ITJ) dated 10.12.2015 talks of frivolous appeals to be withdrawn. The Instruction is very general in nature. How will the Pr CCIT identify the cases which are not prosecutable? How would he know those decisions which have been accepted by the Revenue? To make this instruction effective, it is necessary that there should be uniformity across the country in taking a decision on whether a Judgment should be accepted or not. This is a very important instruction which needs much more groundwork and preparation to be made effective.
The CBDT must be complimented for stating its position in respect of many legalissues relating to various sections of the Income-tax Act, 1961. Circular No.22/2015 dated 17.12.2015 directing that the decision of Hon'ble Supreme Court in the case of Alom Extrusion u/s 43B, UCO Bank decision u/s 194A that no tax ought to be deducted at source, oninterest, where the fixed deposit receipt is with the Registrar General of the Court, are to be followed, are some such decisions.
There are two other Circulars; Circular No. 24/2015 dated 31.12.2015 and Circular No. 23/2015 dated 28.12.2015 on certain sections where the CBDT has directed the authorities to withdraw cases and has accepted the judgments of the Supreme Court/High Courts. This is an excellent step and the Department must endeavor to state its stand as soon as a judgment is delivered by the Supreme Court/High Courts so that the wasteful exercise of filing of appeals and then withdrawing the same can be obviated.
The above are some of the circulars which the author thought it necessary to highlight the inherent difficulty that arises in following the same.
CBDT must not be dependent on the tax payer or professionals to complain against officers in order to take action. This is a defeatist approach. The CBDT must put in place a fool proof mechanism whereby anybody, not following the instruction or circular, must either give credible reason or face action.
The CCIT incharge must organize meetings with the entire staff and discuss every instruction/circular of the Board thus ensuring that everybody is aware and mindful of the same. In fact, all the persons under his jurisdiction must sign an undertaking of having understood the import of the circular/instruction.
Regular workshops/ conferences/ study group meetings must be organized to discuss various instructions/circulars and legal developments. Officers must be encouraged to attend seminars organized by professional bodies so that they become aware of the tax payers' perception of the Department and also the developing law on the subject.
There should be a monthly Journal, categorizing instructions/circulars under various heads such as assessment procedures, legal issues, manner of interacting with the tax payers etc.
A lot more is desired in the manner of passing assessment orders and in many cases, appellate orders as well. Although the Assessing Officer as well as the CIT(A)’s are quasi - judicial authorities but broad guidelines on how the facts relied upon and the case laws cited should be addressed while drafting orders must be articulated.
The aforesaid are some of the views suggested for further improvement. Unless and until the CBDT brings about more objectivity in its instructions and also prescribes the punitive action to taken in cases where the instructions are not followed, this praiseworthy endeavor of communicating and administering through instructions and circulars may remain at best, an academic exercise.
Ajay Wadhwa Advocate