The letter, dated February 7, admonishes his colleagues, officials of the rank of chief commissioners and director general, for their lack of success in bringing in money. "I have taken over as chairman at a time when revenue collections seem to be far away from the Budget target, with less then two months at hand."
Dass outlines a carrot and stick policy to get the situation back on track. "Among the parameters of performance in your area, achievement of revenue collection target will obviously be given the highest weightage while writing your APAR and (it) will also be a major factor while considering placements during AGT 2012." APAR is the annual performance appraisal report and AGT is annual general transfer.
The aggressive stance of the tax authorities has caused dismay among some experts. "India is the highest tax jurisprudence producing country in the world. Every day at least two or three international tax decisions are being taken by either the courts or the tribunals," said Daksha Baxi, executive director at Khaitan & Co, a law firm that provides legal counselling to corporates.
A chief commissioner who does not want to be identified said: "Though it is a fact that one's performance is taken into account for promotions and transfers, a letter from the chairman is unprecedented." Dass declined to comment on the letter.
Tax head of Deloitte India, Lakshmi Narayanan told ET that assigning collection targets to officers is not a practice in developed countries. He said the CBDT chairman's letter could result in "high-pitched" demands.
"Officers are now compelled to make high-pitched demand on large corporates, which cannot be sustained at the appellate level. The excess demand get refunded next fiscal. What are they trying to do? Just deferring the problem, as it gets into litigation for five to six years." Under pressure from the top, tax officials often force assesses to pay tax - even if there is a dispute over it - threatening them with the prospect of a raid or its softer version, the so-called survey, many taxpayers complain.
The tax department, going by the feedback from the ground and collections by way of tax deducted at source ( TDS), securities transactions tax (STT) and so on, is facing a likely shortfall of Rs 50,000 crore in tax collection. The government has raised its target to Rs 5.80 lakh crore, but in all likelihood the collection will border the original target of Rs 5.35 lakh crore, sources said.
The letter from the chairman of the board is seen as a desperate step to meet the higher target, a senior tax official said. Another senior income-tax official said: "Authorities should know that tax collection is closely linked to the performance of the economy. If some sectors do badly, tax collection from the sector too will be affected."
INCREASING UNCERTAINTY
Baxi said the letter would only add to the air of uncertainty prevailing in companies.
"Corporates are not sure about certain transactions because of the unpredictability of the tax department," says Baxi. "This is creating a lot of uncertainty. They are not comfortable in ploughing back profits while the GDP growth has slowed down. This is a major factor for the slowdown," she said.
Baxi laments that tax officers refuse to acknowledge court orders. "What is increasingly been seen is the tax officer refusing to acknowledge the decisions or precedence of a higher body. They simply disregard the tribunal decisions or another jurisdiction which supports the views of the taxpayer," she said.
There is also a drive to raise revenue from demands disputed at the appellate levels such as Commissioner, Income Tax, Appeals (CIT-A) and Income-tax Appellate Tribunal (ITAT).
The CIT-A has the power to direct the taxpayer not to pay the tax until it decides on the correctness of the demand, or to direct him to pay 50-100% of the disputed amount, depending on the merit of the case.
Though it is a quasi judicial body, the CIT-A is headed by an official of the Income-tax department, who will be promoted or transferred after his tenure ends. Taxpayers are complaining that the appellate commissioners too appear to be part of the drive to enhance tax collection.
Senior chartered accountant TP Ostwal said, "Appellate commissioners are deliberately asking taxpayers to pay up at least 50% of the disputed tax. In several other cases they are asking taxpayers to pay the full amount. On the other hand, the assessing officers tend to make wrong assessments in order to meet the targets assigned to them. My clients have been affected by this unusual drive to meet the target."
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