LOSS OF VALUABLE TIME OF TAX AUTHORITIES BY CALLING UN-NECESSARY DOCUEMTNS AND EVIDENCES LEADING TO HARRASMENT OF PUBLIC

[CA DEV KUMAR KOTHARI]

Scrutiny assessments:

Generally during course of scrutiny assessment the Assessing Officers harass not only his assessee but also other parties with whom his assessee had entered into transactions. For verification of transactions, notices are issued calling for information, documents, evidences  and sometimes for personal appearance as well.

Calling of information cannot be questioned. However, when un-necessary information are called for it is a clear case of harassment. Many information which are available to the AO at a click of mouse and can be verified online or with reference to AO of other party should not be called for from the third parties.

Many information which have nothing to do with the transactions of assessee should not be called from third party.

Wastage of time of tax authorities:

Calling for unnecessary information, evidences, and verification of same result into lot of wastage of time of tax authorities and un-necessary piling of documents. The conclusive documents are enough so there is no need to just collect so many documents to make files bulky. This causes wastage of valuable time of tax authorities and staff. This also make work of higher authorities tough, because what is relevant is lost amongst irrelevant information and documents.

Harassment practices:

Harassment practices can be in different forms like:

1. Very short time is allowed.
2.  Unnecessary information are called for.
3. Information which are available with the department and now -a-day on a click of mouse are called for in form of hard copies of such bulky documents like ITR, annual report etc.
4. When personal appearance is required, lot of time is taken in waiting and in hearing.
5. During personal appearance, un-necessary questions are asked and there is risk that tax authorities may threaten parties by un-necessary and prematurely showing provisions of penalty and prosecution etc.
6. Even when transactions are reflected in TDS returns,  AIR return with PAN, details are asked for which are available or have been furnished to the authorities by other party.

Example:

In the following table in the left column,  examples of information called for by some assessing officers for verification of loan / deposit taken by his assessee are given.

	Information asked by AO of debtor		Remarks
1	Proof of existence of M/S. …..  (loan giver- third party)/ notice,  like Trade Licence, Electricity Bill, Telephone Bill.		Why to have so much doubts. Why AO cannot rely on his assessee who has furnished information?
2	Copy of ITR for the A.Y. 2012-13 relevant to the F.Y. 2011-12 along with Computation of Income and Tax there on.		No purpose of these documents because for loan verification other documents are relevant. In any case ITR is available at a click of mouse.
3	Copy of Audited books of accounts - P/L account , Balance Sheet and Audit Report for the A.Y. - 2012-13.		No purpose of these documents because for loan verification other documents are relevant. In any case in ITR, which is available at a click of mouse, most of relevant information are provided. In case of companies, in balance sheet consolidated amounts appears and any individual loan given cannot be verified from balance sheet. So there is no purpose of collecting balance sheet.
4	Copy of Ledger accounts of M/S. ….. (my assessee) in the books of M/S.  …. Third party.		This is also not much relevant when information provided by assessee are sufficient and which are checkable with reference to TDS return, TDS claims, and ITR of both parties.
5	Details of All Bank Accounts with Bank Statement and Bank Reconciliation Statement for the A.Y. 2012-13.		In fact this should also not be required. When the assessee/  party receiving money has shown his bank statement showing money received by way of cheque/ e-cheque and credited to his account by bank after realization of funds on cheque/ e-cheque issued by the loan creditor. Now-a-days bank statements , generally shows the manner of credit and party from whom funds have been received. In any case: Why all bank accounts? Why Bank reconciliation statement? Copy of relevant Bank Statement can be sufficient, if at all one require to satisfy source of capital provided.
6	Duration of functioning from the present premises.		This is not at all relevant. In case of companies, and other assessees filing returns,  in ITR date of birth /  incorporation is available.
7	Nature of Business / Brief description of Profession activity / Office Premises.		This is also not at all relevant. In any case these information are available in ITR which is available at a click of mouse.
8	Scale of your Business.		This is also not relevant.
9	Principal Person of the Company, Details of Deirectors and contact address/ mobile No/ Phone No.		These are also not much relevant. In any case these information are also available in ITR which is available at a click of mouse.
10	Mode of Quantum of Loan to M/S.  .. (my assessee) Ltd. PAN -    )		These information are already provided by loan debtor ( assessee)
11	Source of Loan Given.		This is relevant, and can be asked for.

Enquiry should be relevant to the purpose of enquiry:

The collection of information should be restricted to the extent required for the purpose of enquiry and un-necessary documents should not be collected. For example, if the  purpose of enquiry is to examine genuineness of transactions  like  loan given or taken, this  can be prima facie verified, if one find that the assessee company has deducted tax, which has been claimed by the creditor on income disclosed by him to his AO. This information is available in his ITR.

Discussions to this article

[Padmanaban M]

I fully agree with you, what is solution to stop this? I am also getting lots of letter in this connection.