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As you know, most returns are currently accepted summarily, ie, without making a scrutinised assessment. Only a small percentage of the total returns are to be selected for a scrutinised assessment and the rest are to be accepted summarily.
There has been a recent amendment to the tax laws according to which even prima facie adjustments are not to be made to the returned income where they are being accepted summarily.
The department has now decided that the method of selection of cases for scrutiny should be made transparent and there ought to be accountability introduced in the system. To this end, it has introduced a new system for selection of cases for scrutiny.
In this system, the cases to be picked up for scrutiny are to be selected by the assessing officer, not alone but in a joint meeting with his next superior authority. That is, the officer and his immediate boss will together decide on the cases in the charge of the officer which ought to be scrutinised.
The basis of selection is to be 'credible information' and after 'recording the reasons in writing'. That is, the selection is to be on the basis of information – credible information at that – of the case. The reasons which form the basis of the selection are also to be recorded in writing in the files of the department. Undoubtedly, when implemented, this will make the selection more objective and fair.
The entire process of selection is to be completed all over the country by September 30, 1999.
This is to be followed by individual letters to the taxpayers whose cases have been selected.
Then the Chief Commissioner will issue a press note specifying the fact of completion of the selection process and that the concerned taxpayers have been intimated.
Even after September 30, the Chief Commissioner (alone) may pick up some exceptional cases for scrutiny – the department's hands are not tied down by the initial selection. Here also, it is necessary to record reasons in writing.
All assessments relating to search cases, survey cases and reopened assessments will continue to remain scrutiny assessments.
The last paragraph of the press note makes interesting, and eerie reading:
The department expects that the assessing officer justify why he selected a given case for scrutiny by end results and findings. Unless he shows results, he would be answerable to his superiors.
What does this mean? It means that every taxpayer will now be scared to have his case selected for scrutiny because his officer will have to justify the selection. This justification can only be done by sizable additions to the income and equally sizable tax demands.
Admittedly, the press note says that the justification is to be done 'against specified norms' – a very nebulous issue and no one knows these norms.
The intention of the condition of justifying is perhaps to bring about accountability. Unfortunately, the condition is obnoxious and puts every taxpayer whose case is selected for scrutiny in scare. The worst part is that this is an openly stated fact. There is nothing that now can stop assessing officers from making unjustified assessments to justify the selection for scrutiny assessments.
While there is an attempt to bring about accountability from the department's point of view, how about accountability to the taxpayer? What does the department intend to do in case the assessment made by the officer is found to be unjustified, erroneous and untenable? How is the officer to be made accountable for the wrong done to the taxpayer, for his agonies?
I do think the approach of the department is not welcome. The right thing to do is fine-tune the audit process to find out if the assessing officer has erred in making assessments, and if it has to take action against him.
Many organisations have made donations to the National Defence Fund and other funds set up by the Central Government and the Armed Forces as a matter of help to the army jawans in the recent war. Such donations are eligible for 100% deduction under section 80G.
In most cases the amounts are collected by the employer from a large number of employees (as their share) and a single amount is sent as donation. To take the benefit of tax deduction, the donor has to produce original receipt from the donee. In the case of collective donation, only the organisation would get a receipt and not all employees.
The government has now clarified that the employer or DDO can issue a certificate of the employee's contribution. If so, such certificate will enable the employee to claim the benefit of the deduction.
This is a most welcome step. If it had come earlier, many split donations which went would have been avoided. Welcome it still is.
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