ADVANCE TAX PAYMENTS – letters from income tax authorities and suggested reply and observations by taxpayers in appreciation and also as grievance, if any.

[DEV KUMAR KOTHARI]

There are some good changes in behavior and attitudes of tax officers:

Recalling past experience from time to time  and looking at developments during last few years we find that there are positive changes in behavior and attitude of many tax officers.

Some polite  and appreciative messages and concern about profitability and tax paying capacity  of assessee  are now-a-days found  in communications from AO, when there is better collection by way of advance tax. However, in case of short fall in advance tax , harsh  words and attitude of disbelieving tax payers are continuing with preset mind that tax payer is not making full and  honest  compliances.

Still  use of words like  “sorry’ or “very sorry” are found rarely even if tax officer committed blunders and made high pitched assessment and forced tax payers to pay huge excess tax which  is found  refunded by department. There must be an apology by tax officers if they have put on assessee to feel harassed.

Harsh measures:

It is also experienced that to meet target of advance tax collection tax officers also adopt some pressuring practices verbally , by calling assessee , by visiting  assesses premises and by  surveys also. Many times these result in excess tax collection which later is refunded.

Advance tax related correspondence:

During last few year some changes have taken place and we find some appreciating words, sentences and  paragraphs in communication from tax officers. For example:

Example 1. appreciation as well as doubts expressed in  letter dt. 13.12.22 concerning next installment due on 15.12.22 and low payment:

“ I feel privileged to inform you that you/your concern had been one of our top Advance Tax Payers/ Assessee for the Financial Year 2021-22.

We appreciate your contribution to the National exchequer as well as towards the development of our Nation. You must be aware that in your case, the tax payment for the current year shows low growth and downfall. As per the departmental database, following chart is describing the picture  (in Crores)

( Xxxxx table  not given)

Considering the above facts & figures, you are hereby requested to convey the reason w.r.t. low growth and downfall in the advance tax payments along with audited/unaudited report to justify such for the year under consideration at the earliest.

(In the table obviously advance tax paid on 15.12.22 has not been considered besides amounts  of  TDS and TCS have been ignored, although the officer could have seen them on a click of mouse.)

Example 2 letter dt. 13.12.22 concerning next instalment due on 15.12.22:

Sub : Payment of Advance Tax Installment due by 15/12/2022 – request for enhancement of Advance Tax for the Financial Year 2022-23 relevant to Assessment Year 2023-24 – matter regarding. I feel privileged to inform you that you had been one of our Advance Tax Payers/Assessee for the Financial Year 2021-22. We appreciate your contribution to the National Exchequer as well as towards the development of our Nation. You are aware that the third quarter installment of Advance Tax for non-corporate tax payers will be due for payment on or before 15/12/2022. As per amended provision of section 211 of the Income Tax Act, 1961, minimum 75% (seventy five percent) of your Advance Tax liability of the whole of the current year is required to the paid on or before 15/12/2022. You are requested to enhance of your Advance Tax payment for the Financial Year 2022-23 in comparable to Finance Year 2021-22. You are also requested to furnish the details of the Advance Tax paid on or before 15/12/2022 within 19/12/2022 either in person or through mail to the office of the undersigned. You may also furnish the same at the email address  ....

As an esteemed tax payer, falling in the jurisdiction of the undersigned, you are always welcome to the office of the undersigned in case, if you necessitate any co-operation from us or if you have any suggestion for us. Thanking you, in anticipation.

With best wishes

Example 3 – simple letter dt. 13.12.022

The due date of Advance Tax payment, second installment in your case, is 15th December, 2022. In this connection you are requested to please pay your Advance Tax in time to avoid last moment rush. It is further submitted that your contribution in terms of timely payment of Advance Taxes contributes towards nation building. In case of any query please feel free to contact through official email id.

 With best wishes

The above are some illustrations.

However, we notice that letters are few days before next installment falling due on 15.12.22. Therefore, the information gathered is not up to mark.  Reminding just few days ago is not good. Amount of TDS and TCS have not been considered.

Suggested letter in response:

In response to such letters of AO suitable reply can be filed.  For example:

General letter:

LETTER HEAD OF ASSESSEE FOR TAX PURPOSES  including CIN,  PAN , TAX, GST NUMBERS ETC.

To,

The Assessing Officer,

THE  INCOME TAX  .....  

By email and

Submission  in my account, if link has been provided.

Sub: Advance tax for AY 2023-24

DIN & Letter No :       about advance tax payments.

I am  / we review   my / our  present position and  make  reasonable estimates for income and tax payable by way of advance tax,  TDS, TCS  during FY  2022-23 relevant to AY 2023-24. Accordingly payment of advance tax is paid from time to time.

I / We have paid advance tax installments as follows:

Installment due date	Advance tax paid
15.06.2022
15.09.2022
15.12.2022
15.03.2023 Not yet due
Total installments paid
TDS/ TCS expected
Total

Till 15.12.22  payment made is Rs.      as against last years  Rs.  

I / we hope to pay further advance tax, if payable by 15.03.2023 after review of position about income, tax already paid, TDS, TCS  etc.

I /  we  fully understand my / our  obligations to pay installment of advance tax and I/ we  will pay further instalments, if required, in due course to comply with requirements of law  keeping in mind reasonable estimates of income, tax, TDS, TCS,  advance tax paid earlier paid  and further  payable at that time and in view of various expectations and  contingencies prevailing from time to time.

In case of normal as well as  speculative business, and capital gains an estimate cannot be made merely by considering last year’s income statement. Current position and expectation for rest of period are to be considered while estimating income. In view of so many factors changing rapidly, estimates for entire year while paying any of installments is not possible. Even when we estimate for installment payable on March, 15 there remain uncertainty which causes either short fall or excess payment by way of advance tax. Last 16 days of previous year are more important because various ascertainments and estimates about business completed, business in progress, inventory positions and valuation, ascertainment of liabilities and receivable , bad debts , inventory write off   or reduction  etc.  during course of preparation of  final accounts and auditing can widely impact estimates and cause differences in estimates and actual.

In case of any short fall in payment of instalments of advance tax assesse is liable to pay interest for such short fall and balance tax is payable by way self-assessment tax. Therefore, department should be reasonable and different unfair practices to create pressure for more payments of advance tax should be avoided by department. This will go a long way in improving good relations between tax officers and taxpayers.

Therefore, I / we request you that my / our compliance for payment of advance tax   be accepted , and any coercive steps be avoided to avoid harassment of tax payers which causes reduced capacity and time  to earn and pay tax.

I / we hope you will find above information ,explanation and suggestions  useful and satisfactory. In case you require more information and document, please inform to me / us  and allow time to furnish the same.

Assuring my / our best possible compliances and cooperation.

Yours sincerely

Assessee

Addressing special points in letter of AO:

1.  We are thank full to you for your request for enhancement of Advance Tax. This we consider as good wishes from tax department to tax payers. We also wish to pay taxes increasingly from time to time because this will be possible only on  improvement in volumes and profitability of business.

We review   our  present position and  make  reasonable estimates for income and tax payable by way of advance tax,  TDS, TCS  during FY  2022-23 relevant to AY 2023-24. Accordingly, payment of advance tax is paid from time to time.

2. I am thank full to you for your observations and concern  that ,

”  the tax payment for the current year shows low growth and downfall.”

 This observation of yours is for period till 13.12.2022 and without considering TDS/ TCS and  payment made thereafter .

I consider your expectation of growth and more tax payment   as good wishes from tax department to tax payers. We   taxpayers also wish to pay tax  increasingly from time to time because this will be possible only on  improvement in volumes and profitability of business. Thanks for such expectations.

However, I am pained to read your statements like

“Considering the above facts & figures, you are hereby requested to convey the reason w.r.t. low growth and downfall in the advance tax payments along with audited/unaudited report to justify such for the year under consideration at the earliest.”

My painful feeling is because this shows that tax department is not appreciating voluntary compliances being made by me from time to time and is continuing habit of doubting.

I  review   my   present position and  make  reasonable estimates for income and tax payable by way of advance tax,  TDS, TCS  during FY  2022-23 relevant to AY 2023-24. Accordingly payment of advance tax is paid from time to time.

Taxpayer must appreciate and also express displeasure if any:

On good aspects showing positive feelings tax payers must appreciate officers  for pleasant words used.

And  must also convey their feelings of being doubted , harassed and pressurized.

These will have positive impact on attitudes of officers may be after a long time.