Decisions of the Conference in case of reduction of tax arrear. - Income Tax - 983/CBDT

INSTRUCTION NO. 983/CBDT Dated : July 21, 1976 Attention is invited to paras 78,81,82 and 84 to 86 of the Minuted of the Commissioner's Conference, 1976, sent vide Board's Circular F. No. 395/16/76-ITCC, dated the 2nd June 1976. The decisions of the Conference indicated in those paras are reiterated and amplified below so that you may take urgent and appropriate action to accelerate the pace of the reduction of tax arrears. 2. All-out efforts should be made to reduce the tax arrears substantially during the current year. At the all-India level, such arrears are to be brought down by 1/3rd during the Financial Year 1976-77. You are, therefore, requested to ensure that the tax arrears of your charge are reduced by 1/3rd, if not more, and the arrears to be carried forward as on 31st March 1977 do not exceed 2/3rd of those as on 31st March 1976. For reaching this target, if the objective of reduction in current and arrear demand laid down for your charge in the light of the All-India objective of the reduction of 85% of the current demand and 45% of the arrear demand set in the Action plan for 1976-77 needs any upward revision, you may please take urgent steps to do so. 3. It will considerably help in achieving the above target, if in respect of the arrear demand, attention is particularly focussed on the collection/reduction of outstanding demand raised during the preceding year, i.e., during 1975-76. Analysis of the existing arrears has shown that 35-40% of the total tax arrears pertain to demand raised during the immediately preceding year and, there also, the bulk of the amount relates to the demand raised during its last quarter and not fallen due for payment till the end of that year. This component of the tax arrears is, therefore, like current demand and a high target of collection/reduction can be fixed. In recent years, the percentage of collection/reduction of outstanding tax raised in the preceding year has shown a decline, though in some years in the past, about 60% or more of such tax used to be collected/reduced in the following year. With some systematic efforts, right from now, it should not be difficult to reduce, by 31st March 1977, 70 to 80% of the arrear demand relating to the preceding year i.e. 1975-76. An added advantage of adopting this strategy would be a significant decline in the number of Tax Recovery Certificates required to be issued before 31st March 1977. 4. Another area in which efforts are required to be made with renewed vigour is the prompt disposal of applications u/s 146,154, giving effect to the appellate orders and giving credit for pre-paid taxes. You may kindly impress upon the officers and staff in your charge that the Board attaches very great importance to this area of the Department's work because any instance of delay in giving credit for pre-paid taxes or effect to appellate orders etc. not only spoils the fair name of the Department, but also retards the pace of collection/reduction of tax arrears. In this connection, while the question of keeping a separate record for prepaid taxes awaiting adjustment/credit is being examined by DI (O MS), the Board desires that whenever an assessee submits a claim for allowing credit for prepaid taxes, it should be treated like an application u/s 154; entered in a separate part of section 154 Register and dealt with accordingly. You are also requested to constitute one or more Special Squads depending upon the requirements of your charge, for reduction of tax arrears from out of your existing sanctioned strength of staff. Each such squad, consisting of energetic and experienced officials, should be manned by one Inspector and two or three UDCs. Commissioner of Income-tax, Nagpur who constituted a Special Squad during 1975-76 in his charge was able to achieve significant reduction of tax arrears. He had got letters issued to the principal I.T.Os at stations outside the Commissioner's headquarters intimating the dates of visit of the Squad to their offices and requesting them to render all help to the officials of the Squad. Based on his experience and after further consideration of the matter in the Board, it has been decided that the Squad should be assigned the following work in connection with the reduction of tax arrears:- (i) Arrear sheets on the Register of assessees with arrear demand of Rs. 5,000 and above (such limit may be raised for the entire charge or for some I.T.Os if considered necessary, but not beyond Rs. 25,000) should be got prepared in the first instance by the staff of the ITO, if not already done so, in your charge. The Sheets or the Register should, inter alia, indicate the details assessment year-wise, of the tax outstanding against each assessee. (ii) Such Arrear Sheets/Register should be made available to the Special Squad and the tax arrears outstanding against each assessee should be verified by it from individual assessment records to see if any rectification, application u/s 146, adjustment for prepaid taxes, on appeal effects etc. are pending. (iii) The adjustments for prepaid taxes, appeal effects should be given immediately with the help of the Ward staff. The consequent reduction of demand should be entered in the D CR. in the prescribed manner and communicated to the assessee by the I.T.O/his staff. The Inspector of the Squad should personally ensure that the needful has been done in all respects in every such case. (iv) With regard to the pending applications for rectification, the draft orders should be put up by the officials of the Squad to the ITO where they can be disposed off with out granting a hearing to the assessees. After the orders are passed by the I.T.O., the revised tax should be calculated by the Squad. It should also ensure that the reduction in tax is entered in the D CR and the reduced demand communicated to the assessee by the I.T.O./his staff. (v) The rectification applications requiring the grant of hearing to the assessees and the pending applications u/s 146 may be got fixed for hearing in consultation with the I.T.O. so that they are expeditiously disposed of. (vi) In all cases referred to in para 4(i) above, letters on the prescribed form should be prepared by the Squad and got issued to the assessees with the request to verify the correctness or otherwise of the arrears from their records. It has to be ensured that when the Special Squad withdraws, the work started by it must be continued and completed by the staff of the concerned ITO. The Board desire that you may also impress upon the ITOs of your charge that the collection/reduction of tax arrears is solely their responsibility and of their staff. This duty should be performed with dedication and earnestness continuously throughout the year rather than relegating it towards the close of the financial year. The Squad would only act as a catalyst so as to accelerate the momentum of work relating to reduction of tax arrears. The Squad would also submit report to you, ITO-wise, about the work done by it and the laxity if any, noticed on the Special Squad. They will also help you to identify the Income-tax Officers where this work is not a very high priority. Quick remedial action including initiation of disciplinary proceedings in suitable cases, should be taken. The objective should be to motivate the officers and the staff by every method so that the work relating to collection/reduction of tax arrears is attended to regularly and promptly by them throughout the year. 5. As mentioned in para. 82 of the Minutes of the Commissioners' Conference in cases where total arrears against an assessee exceed Rs. 5,000 or such higher limit as you may consider suitable for your charge not beyond Rs. 25,000, an entry containing details of those arrears should be made in the order sheet of the miscellaneous folder for the assessment year for which the assessment is taken up for disposal during the current year. The entry would not be a certificate of the correctness or the completeness of the arrears due from the assessee. It will serve as a reminder to the I.T.O., when the assessee or his representative comes before him for hearing of his case, that an urgent action is called for in liquidating those arrears. In other words, the entry will furnish broad basis for discussion between the ITO and the defaulter and will enable the ITO to take, expeditiously, such action including stringent corrective steps for recovery as may be required for collection/reduction of those arrears. The recording of tax arrears in the order sheet before the date of hearing should not pose any problem because, at present, a dossier is required to be maintained for such assessee against whom tax demand of Rs. 1 lakh or more has been outstanding. Besides, the arrear sheets/register would be required to be maintained for assessees against whom tax of Rs. 5,000 (or such higher limit not beyond Rs. 25,000 as may be considered appropriate by the CIT) is outstanding in terms of para. 4(i) above. 6. Lastly, as decided in para. 85 of the minutes of Commissioners' Conference all demands outstanding for 10 year or more should be taken up for scrutiny as potential arrears for write off. A list of cases in which demand is outstanding for 10 years or more as on 31st March 1976 should be prepared for your Charge. Action for write-off, wherever required, should be completed on a priority basis. For this purpose, full use of the enhanced powers given to the Commissioners of Income-tax should be made. The powers of the IACs/ITOs to write off irrecoverable tax arrears are also being enhanced separately. Each I.T.O is required to certify by 31st March 1977 that every entry of demand outstanding for 10 years or more as on 31st March 1976 in his D CR, has been scrutinised in the light of instructions of the Board relating to write off of irrecoverable demand and that all irrecoverable tax arrears have been written off or proposals sent to the higher authorities for their write off. 7. Board desire that a meaningful report, detailing, inter alia, the extent of collection/reduction of tax arrears and indicating separately, the amount written off as irrecoverable, should be sent to the Board by 30th April 1977.