DIRECTORATE General of Vigilance of CBEC would hereafter shift to a more proactive, preventive approach to curb the menace of corruption and in this regard identified several areas. These steps were listed as a part of the Vigilance Action Plan and approved by the Finance Minister.

The DG, Vigilance, in a recent letter to the Chief Commissioners and Commissioners, had stressed the need for scrutiny of adjudication orders passed by various adjudicating authorities from a vigilance angle. In view of this, henceforth, the Committee of Chief Commissioners and Commissioners would also scrutinize the adjudication orders from vigilance angle and refer cases of recurring nature or involving substantial duty to the Zonal offices of the Directorate of Vigilance.

Also frivolous SCNs are being issued to harass the assessees. Hereafter all SCNs involving a duty evasion of Rs. 2 lakhs shall be scrutinized by the Chief Commissioners/Commissioners from a vigilance angle. Further, cases booked based on intelligence for clandestine removal/irregular availment of CENVAT credit etc should be invariably looked into by the Commissioners before a final decision is taken not to issue the SCNs. Any irregularities noticed during such scrutiny should be notified to the regional offices of vigilance directorate.

As per the Second Administrative Reforms Commission's fourth report, it was emphasised that proactive vigilance measures are primarily the responsibility of the Head of the Department, the DG adds.

Now what happens?

One reason cited for frivolous SCNs and unreasonable orders, is fear of Audit and vilgilance. Many officers who do not have the guts to be fair and right openly tell the assessees – “we don't have a strong case, but I am helpless – you will surely win in the Tribunal”

Now with the DG openly suggesting vigilance scrutiny of Show Cause Notices and adjudication orders, even the very few officers who occasionally indulged in the fantasy of passing a fair judicial order will shy away. After all who wants a vigilance inquiry for being fair to the law and assessee? A quasi judicial authority is always subject to judicial supervision in appeal and he should not be subject to vigilance inquiry.

In the celebrated ZB Nagarkar case, 2002-TIOL-130-SC-CX, the Supreme Court observed, “The entire system of administrative adjudication whereunder quasi-judicial powers are conferred on administrative authorities would fall into disrepute if officers performing such functions are inhibited in performing their functions without fear or favour because of the constant threat of disciplinary proceedings .”

However, in the Dulichand case, 2006-TIOL-78-SC-MISC-LB, the Supreme Court over ruled Nagarkar. This became an additional incentive for Departmental Officers to routinely confirm all demands, flouting the law and all higher judicial authorities including the Apex Court. There are Assistant Commissioners passing orders, “the learned tribunal erred ....”

With the Damocles' sword of vigilance hanging over their heads, now officers will vie with each other in passing orders favourable to Revenue, which will only be quashed in the higher forums. Only consultants will benefit.

And what about such adjudication orders passed in favour of the revenue which are grossly against the provisions of law and soon to be set aside by the higher forums? Will they also be probed from vigilance angle by the Committee of Chief Commissioners as it is nothing but harassment to the tax payers?

This only means more trouble for the assessees.

National Taxpayer Advocate files Annual Report – Damns IRS

THE National Taxpayer Advocate [of USA] filed the annual report in which it warned that increased demands on the IRS have eroded its ability to meet taxpayer service needs and expressed concern that the collection practices of IRS are harming financially struggling taxpayers without producing significant revenue gains.

The key issues that were identified for discussion in the annual report are as follows:

Customer Care: The report highlights the IRS's declining ability to answer telephone calls as the most serious problems facing taxpayers. In Financial Year 2010, it had set a target of answering only 71 percent of calls from the taxpayers seeking to speak with a customer service representative about their issues which was termed as unacceptable.

Collection Practices: The report contains a detailed assessment of IRS's examination and collection practices, concluding that many practices have been developed piecemeal and that the IRS lacks an effective overarching strategy to maximize voluntary compliance. The report also concludes that IRS collection practices often harm taxpayers without producing revenue.

Irregularity in Data reporting: The report expresses concern that the IRS does not maintain sufficient reliable data to assess the effectiveness of its collection practices in several respects. The report states that the quality of IRS's data reporting is uneven. The report states that there is an astonishing lack of transparency as to what is included in the revenue figures and how they are computed.

Tax Returns Processing: Under the current procedures, the IRS processes income tax returns before it processes most information returns. The report states that this makes little logical sense.

From the taxpayer's perspective, this sequence actually leads to millions of cases where taxpayers inadvertently make excess claims that the IRS does not identify until months later, exposing the taxpayer not only to a tax liability but to penalties and interest charges as well.

From the government's perspective, this sequence creates opportunities for fraud and requires the IRS to devote resources to recovering refunds that should not have been paid and that it often cannot recover.

This sequence also prevents the IRS from making pre-populated returns available as an option to taxpayers. The report recommends that legislative steps should be taken to allow the IRS to receive and process information reporting documents before it processes tax returns.

These are the excerpts of the annual report submitted by the National Taxpayer Advocate to the US Congress on the state of affairs in the IRS.

The Taxpayer Advocate Service (TAS) is an independent organization within the US IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels or who believe that an IRS system or procedure is not working as it should.

This is an annual exercise undertaken in the United States of America where the US Federal Law requires the National Taxpayer Advocate to submit an Annual Report to the US Congress each year identifying at least 20 of the most serious problems encountered by taxpayers and to make administrative and legislative recommendations to mitigate those problems. 

Do you see any similarities of such an exercise undertaken in India? Yes, of course, but with an altogether different mandate under the Constitution of India. In fact, we have the Comptroller and Auditor General, a Constitutional Authority, who heads an organization which undertakes an arduous task of auditing the revenue receipts of the Government (both Union and States) and submits an annual report to the Parliament/State Legislatures with critical observations and recommendations on the corrective steps to be taken legislatively or administratively.

Shouldn't we also have something like the Taxpayer Advocate Service (TAS)?

Jurisprudentiol – Tuesday's cases

Income Tax

Indo-Mauritius DTAA - PE - non-resident carries out three different contracts in India - AO for aggregation of time periods of all projects to treat it as PE - Aggregation may be allowed only if all three contracts are inextricably interconnected and form a coherent whole, geographically and commercially: ITAT

IN the domain of international taxation, the concept of Permanent Establishment (PE) plays a critical role. Whether an income which is business profit for the non-resident is going to be taxed in India or not, will depend on the existence of a PE. The concept of PE itself is interestingly a complex architecture. For certain types of business activities like construction, engineering projects and supervisory works, the 'duration test' substitutes the elements of permanence in the PE. India has applied different time slots like six months, nine months and one year in different DTAAs as 'duration test' for taxing business profits of non-resident companies.

Customs

Anti Dumping – challenge to findings and Notification – alternate remedy - Investigation not proper at writ stage – CESTAT not empowered to decide validity of Rules: High Court

THIS petition takes exception to the final findings no.14/2/2007/DGAD dated 26th August, 2009 and the consequent customs notification No.116/2009 dated 8th October, 2009 issued by the Ministry of Finance and implementing the recommendations contained in the said final findings with further prayer ordering and directing respondent nos. 1 and 2 to withdraw and/or cancel the said impugned final findings together with the notification with further prayer to restrain them from acting upon the said order and notification and from collecting anti dumping duty levied in terms of the said notification dated 8th October, 2009.

Sales Tax

High Court required to pass reasoned order - Reason is very life of law: Supreme Court

THIS appeal under Article 136 of the Constitution of India is directed against the Judgment dated 29th February, 2008 passed by the High Court of Judicature for Rajasthan Bench at Jaipur in S.B.Sales Tax Revision Petition.

See our columns Tomorrow for the judgements

Until Tomorrow with more DDT

Have a nice day.

Mail your comments to vijaywrite@taxindiaonline.com