10 January 2008

Experiences with the Income Tax Department -- 1
[A single-page version of this blog can be seen here]

I do not know if you have been subject to an income tax scrutiny.

It is an interesting process, interesting in the sense that the Chinese are said to have meant when they invented the curse, “May you live in interesting times”.

Thinking of the Chinese also puts me in mind of a dragon eating its own tail and endlessly going round and round in circles. An income tax scrutiny has no end. It goes on and on. I filed my return in 2001. The income tax officer concerned passed an adverse assessment. I went to the Income Tax Commissioner of Appeals which decided in my favour. The Income Tax Department filed an appeal, and in August 2007 it was again decided in my favour by the Income Tax Appellate Tribunal, which had pretty damning things to say about the substantive part of the assessment.

There you would have thought the matter would end. But yesterday I learnt that an income tax commissioner had recommended that the department appeal again to the next authority. I or a representative was given time until 5 pm the same day to explain the matter.

Why, I asked myself, does the income tax department or certain officers in it feel free to harass honest tax payers without fear of recrimination. Shakespeare may have been right when he had Cassius say about Caesar: “He would not be a wolf, but that he sees the Romans are but sheep”.

Conducting a business is a precarious activity at the best of times. The threat of competition, changes in the business environment, new technologies, currency movements and the like mean that the businessman has to constantly keep his eye on the eight ball. Taking it off for a moment could mean the extinction of his business. Little wonder that the average businessman who has the threat of a long litigation hanging over his head chooses to settle rather than fight a case, which as my example shows, could go on forever. Knowing that few businessmen will fight encourages the tax official to do as he pleases.

The second important reason is lack of information. A, B, C and D may be harassed in the same way, but because they do not know each other, they have no way to share information. If they could, patterns would be clearly seen, both in the actions of certain officers and in techniques used to exert pressure on tax assessees.

I find it surprising that in this age of Web 2.0 no one has thought of using the networking possibilities of the Internet to share information of their experiences with the income tax department. This series of blog entries is an attempt to start off the process and encourage others to “open source” the income tax department.

More in the next.

Category: Income-Tax


Philip George
Debunker of Keynesian, monetarist and Austrian economics

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