NOVEMBER 18, 2019

By M G Kodandaram

THE tax authorities are always feared on account of the notices and communications they issue to the taxpayers, for variety of reasons. Most of the times, such communications fetch nothing to the Government, but they very much create anxiety and stress in the minds of the taxpayers. These communications are neither regulated nor monitored. These are being issued in the traditional way from the files, whose authenticity could not be known to the assessees or to the registered taxable persons or to the recipient of such correspondences. The genuineness of such communication is not verifiable as they have never been properly numbered and supervised by the department. Also, if they are authentic, actions taken in pursuance of such communication till it meets its logical end are never made known. No tax administration had ever maintained proper records in all such matters for a review of the results of such communications. These records could also disappear, most of the times, without further actions as these records are not properly managed or stored. Most of the time, this is one of the root causes for corruption in working places.

The Government is always aiming for bringing in transparency in all its e-governance and functions. This is needed as an irrefutable Rule in matters concerning the levy and collection of taxes. Any room provided for a bad law and procedure will make room for a fraudster to flourish and an honest taxpayer to suffer. The cyber criminal's phishing activities have added further misery in such matters with tax authorities. In this regard, the decision by the Central Board of Direct Taxes [CBDT] and the Central Board of Indirect taxes and Customs [CBIC] as measure to implement the mandatory use of electronically generated document identification number (eDIN) in certain category of correspondences to the taxpayers and others is a welcome step in this direction.

The CBDT has issued a press note that with effect from October 01, 2019, the Income tax Department will have a computer generated Documentation Identification Number (eDIN) in all the notices, letters, orders & summons or any other correspondences, issued by them. Any communication without an eDIN, would be treated as invalid or deemed to be as if it has never been issued. The DIN system is implemented to ensure greater accountability and transparency in tax administration. The Circular No. 19/2019 dated 14th of August 2019 issued by CBDT, has detailed the modalities to be adopted in implementing the said procedure. Similarly by issue of circular No. 122/41/2019-GST dated 5th November 2019, the generation and quoting of eDIN on any communication issued by the officers of the Central GST and Central Excise and Service tax authorities to tax payers and other concerned persons have been made mandatory w.e.f 8th November 2019. The Customs department has also issued a Circular no. 37/2019 dated 5th November 2019, describing the change over to the generation of electronic generation of eDIN in all its communications.

Now generating an eDIN is mandatory for every specified type of communication with the entire Central Revenue Departments, without which, such document or communication will be deemed to be invalid. In the absence of eDIN, the recipient is not bound to respond to such communications as they are treated as illegal. This is expected to bring in some transparency and accountability in the actions initiated by the Authorities. But the author feels that the present proposed system is only a halfhearted attempt and could be deviated unless some checks and balances are built into the administrative mechanism through a Rule in place.

Some of the suggestions by the author in support of his observations are listed hereunder.

1. In the traditional way of office management, of earlier period, say during or up to 1995, it was mandatory to have a robust 'outward correspondence [OC] register' and 'inward correspondence [IC] register', maintained by every office, for recording of all the correspondences, both inter-departmental communications as well as with the tax payers and others. Every entry in the OC register needed to be tallied with corresponding entry in the IC register, to be noted down in the register before closing such a correspondence. These registers were being scrutinized every month by the supervisory officers and an abstract of action taken in each instance was being recorded therein. This was a major part of the regular inspections conducted by the senior supervisory officers, who used to make stringent observations on any deviations or misuse noticed. Even in many instances, vigilance proceedings were to be initiated, to bring in transparency in day-to-day functioning of the Administration. But as times passed, the values of this mechanism got eroded, even though they remain intact in the office procedure manuals. This should be modified and  replicated in eDIN regime as a part of backend management of all correspondences by a department, without any room for any deviation.

2.   The generation of eDIN should not become an end in itself, but should be taken forward so as to take it to its logical end, by recording trail of the later communications and activities, and duly reconciled for better performance and results. In other words, these correspondences are to be regulated and monitored by the supervisory officers on periodical basis. As these are electronic records, proper management of the same will be much easier, if suitable software is developed. The eDINs issued should be analyzed and accounted for at fixed mandated intervals. Unless there is proper back end system of verification and scrutiny in place, mere generation of eDIN will have only cosmetic touch to the administration.

3. Another aspect to be noted is that as of now the eDIN has to be followed by CBIC officers as the circular does not cover the state GST Authorities, who are also the proper officers for levy and collection of GST. Therefore, GST council should take immediate steps on priority to make the required recommendations for implementation of similar procedures by all state GST authorities. For a uniform GST, a uniform office management mechanism is essential. The GST Network could be used to carry out the generation of all e-DINs, so that we remain united in implementations of procedures also. Necessary amendments need to be made in the CGST/SGST Rules so as to provide a uniform and robust legal basis for such a measure.

The author believes that there should a law in place to usher a regime wherein labeling every correspondence with e-DIN, may be inter-departmental correspondences, correspondences with other departments/authorities, the taxpayers and others are mandatory so that such a measure is effective. Such eDINs generated are to be enabled for verification of authenticity by the recipients and any communication, without adherence to such stipulations should be treated as illegal. The officers who continue with their old habits have to be warned and disciplined. Hoping for that day, when the much awaited uniform and robust eDIN brings in an era of transparency and accountability in the tax administrations.

(The author is IRS, Assistant Director (Retd), NACIN, Advocate and Consultant and the views expressed are strictly personal.)