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The Annual Information Reports (AIR) under Income Tax Forms is meant for high value transactions but these limits at present are too low especially in view of continuing inflationary trends beyond the control of government and manifold increase in salaries due to implementation of 6th Pay Commission etc.

The Cases for Income Tax Scrutiny are selected on AIR information such cases are just not fit otherwise for scrutiny -for example many salaried persons or even senior citizens are getting scrutiny notices just because of their funds invested under these AIR criteria their sources are past investments matured / liquidated and for a salaries person / retired/ senior citizens few lakhs of rupees investment is natural. Such an exercise results in wastage of time and cost of income tax department and assessees both.

I-T scrutiny is not feared by most assessees that they have done something wrong or evaded taxes but because of harsh and unfriendly attitude of tax officers in scrutiny cases. I T scrutiny cases opens more opportunities for tax officers to become corrupt-not again because of tax evasion but long time duration of I T cases being carried out and harassment (feared?) and very personal questions being asked by tax officers.

I suggest to the Income Tax department to have the required information on AIR subject through E-Mail / letter of reply to be deposited with necessary proof of documents attached/ enclosed / scanned only. Do not ask for questions beyond these AIR proof like household expenses / drawings etc. Have Scrutiny only for more information or evidence beyond AIR information or if no satisfactorily replied is evidenced through required documents etc.

Also as per Press Reports in the recent past India is likely to keep income tax rates moderate to boost revenues, but may tighten scrutiny to prevent evasion. ...With voluntary tax compliance ., direct tax collection are growing up .The I-T tax collection is growing not just because of moderate rates but more on voluntary tax compliance-without being fear of scrutiny .

 If I-T scrutiny shall go up in percentage, definitely tax compliance and tax revenue, both shall go down like anything. The best course of action for I T department is to have minimum tax scrutiny cases and small assesses a limit may be fixed by the tax department of small assessees and spare them cent percent from tax scrutiny. Also tax exemption limit be raised to a reasonable amount which is a must to live in a Metro / big cities by middle class to meet their minimum standard of expenses than common men who just meet their expenses out of current income - shall be out of income tax net.

(Mahesh Kapasi)

Chartered Accountants Phone: 26868147
  B-49, Gulmohar Park,

New Delhi-110 049
M. Com., LL.B., FCA, FICWA, FCS  
Ex Member: AMIMA, AMIBM, ACEA (London), MIIA (U.S.A.)  
Reference No: Dated: August 9, 2009

Published by

Mahesh Kapasi
(Practising CA)
Category Income Tax   Report

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