 |
IMPORTANT EVENTS 1962-1974
Revenue
NEW INCOME-TAX ACT Period 1962-1974
The period 1962-74 was a period of stress and strain, improvisation, innovation and experimentation. The Department was faced with three major problems, viz. (i) frequent changes in law; (ii) ever increasing number of assessees and (iii) a formidable fight against tax evasion.
The laws of a country and its other institutions are the product of the socio-economic objectives of the Government of that country. During the period under consideration, the Direct Taxes Laws came to be increasingly used for conflicting purposes. On the one hand, there was the traditional demand that Direct Taxes Laws be used as instrument for raising revenue for the needs of the state, on the other hand, the legislature started using them for channelised investment in certain predetermined areas as a result of the policies of the Government, and for various objectives, which though socially laudable, could not be called revenue yielding objectives. The period under consideration also witnessed a remarkable increase in the number of tax-payers and a growing trend of tax evasion. This chapter is not the appropriate place for a detailed discussion of the causes of tax evasion. Suffice it to say that massive investment by the Government and consequent bumper profits, a dual economic policy based on levies and controls on one side and a free market on the other, contributed largely to tax evasion.
The growth of the Department during this period was determined by the factors mentioned above. They made it imperative for it to grow in size as also to experiment, adopt, reject and modify several strategies to cope up with the challenges.
In making both legal and administrative changes, the Government was largely guided by the recommendations/observations of the various Commissions which were appointed during this period. The following Commissions and Committees made their reports on the subject of Tax Administration.
Direct Taxes Enquiry Committee : (Wanchoo Committee). Functional Scheme
Several experiments to handle the avalanche of work were tried, the most notable being functional scheme, action plan and Summary Assessment Scheme. An experiment tried by the Department and given up during this period was the functional scheme of work also referred to as the American Scheme. This scheme was an example of specialisation ; it typified effort by the Department to streamline the work. Briefly put, this scheme provided that the various stages to work would be looked after by different officers and officials so that each one could look after a limited area of work to be handled by him more efficiently. This method of work was brought from the USA but it failed to take into account the prevalent circumstances and the ethos of our people. As a result, this Scheme created confusion only. It was finally given up in 1974. Management by objective & Action Plan Shortly after the introduction of functional scheme, in 1973 the Department adopted concept of MBO or Management by Objectives. Under this method, which has yielded very good results, the Central Board of Direct Taxes was able to identify through action plans, areas where particular attention was required during the year. The targets in each area were fixed for one year only. This scheme had all the flexibility required for earmarking areas of importance from time to time and afforded involvement of the officers at all levels, because the targets to be achieved could not be fixed by the Commissioners for any I.A.C without discussing with him/her and for any I.T.O without the IAC discussing these with him. This line of thinking has enabled the CBDT to ensure percolation of their annual thinking all along the line of gazetted officers and for this very reason, has stood the test of time. If handled properly, this highly maneoverable system of functioning can prove, in coming years, a very great aid to the management of its affairs by the Department. Introduction of Summary Assessment Scheme The growing pendency and the lack of manpower pointed to the need for selectivity, i.e. segregation of assessment work into two categories viz. Cases for detailed investigation and cases that should be disposed of without investigation. Till 1968, the Department continued to follow antiquated assessment procedures. Whether it was a big revenue yielding case or a small one, the drill followed for assessment work was the same. The obvious casualty in such a situation was investigation. The desirability of speeding up assessment work had also been recommended by the Administrative Reforms Commission in 1968. This need brought into existence the procedure which is now referred to as Summary Assessment Scheme. The idea of introducing this scheme was that a certain amount of assessment work should be disposed of without any scrutiny, thus leaving the officers free to devote time for investigation. Introduction of the Summary Assessment Scheme was a water shed in the growth of the Department. It marked a major change in the outlook of the Department in more ways than one. It not only took the sting out of assessment in a majority of cases, it also tended to create a climate of trust. For the first time, an effort was made by the Department to give a feeling to the assessees that if the return was complete in all respects, the taxpayer filing such a return would not be called to Income tax office and he could thus avoid the attendent irritations. During early seventies, mass meetings all over the country were held in successive years, where the officers of the department tried to educate the tax payers about their rights and responsibilities and tried to emphasize that if they attended to their obligations properly, the departmental officers would do every thing they could, to reduce their procedural problems in assessment and recovery of taxes. The slogan was "Trust me to trust you". Pan introduced Even while taking these steps, the administration was conscious of their inadequacy to meet the future challenge. The rapid expansion of work left no alternative to computerization of certain areas of work on a future date. If any part of the work was to be computerized, the first step to be taken was to give a specific code number to each assessee which would be ‘his’ for all times. Thus came the PAN into existence. In 1970-71, PAN was introduced. Since then, the programme has been limping along. For whatever reasons, its importance was not properly explained. The Board approved a numerico-alphabetic code for use in the issue of permanent Account Numbers. An actual PAN consisted of 9 digits and 2 letters from the English alphabet. The first of the alphabets indicated the status of the assessee. The second alphabet was a code to ensure he correctness of the Permanent Account Number. Below this numerico, alphabetic number, a line was to be drawn and beneath the line, the area and the ward in which the assessee was being assessed, was indicated by means of abbreviations. Tax Evasion and Black money If the Department was engaged in simplifying assessment work and creating a climate of trust, it did not ignore the fight against tax evasion. Powers of search had been provided in the 1922 Act and again in the 1961 Act. However, these powers were seldom used. Besides, there was no specialised agency within the organisation to carry out surveillance or to organise searches. In early 1966, Intelligence Units were created in the 4 metropolitan towns, Calcutta, Bombay, Madras and Delhi. Each of these Units was placed under a Deputy Director. All these Units formed a part of the Directorate of Inspection (Inv.).
Whereas the Summary Assessment Scheme aimed at creating a feeling of trust in the honest Tax-payers, the creation of Intelligence Units was aimed at striking terror in the heart of the tax evaders and make it known that their activities would not go unnoticed, and the Department will catch up with their nefarious activities. The success of this double edged functioning can be judged from the thumping success of the Voluntary Disclosure Scheme of 1975. Voluntary Disclosure Schemes were earlier launched by the Government in 1951 and 1965 also. Resort to Voluntary Disclosure Schemes has been disapproved by the Tyagi Committee in 1959 and later, by the Wanchoo Committee. Both the Committees were quite clear on the subject. Yet, in 1975, the Government announced another Voluntary Disclosure Scheme because the proper climate had, by then, been created, as a result of a large number of searches conducted during 1974-75 and the message sent home that the honest tax payer will be helped by the Department and dishonest identified and exposed.
Functioning and Expansion of Directorates
Another aspect which deserves mention is the functioning of the Directorates during the period under review. In 1961 there were only three Directorates viz., Directorate of Inspection (IT & Audit), Directorate of Inspection (Inv.) and Directorate of Inspection (RS & P). The role of the Directorates had generally invited criticism because their functioning and utility has never been properly appreciated. Initially the officers posted to head these Directorates were Senior Commissioners. Owing to haphazard personnel policies, the Directors of Inspection and the Deputy Directors came to be picked up not on the basis of seniority and merit but by other factors. This naturally affected the quality of supervision, control and guidance which the Directorates were expected to provide. The working of the Directorates was examined in great detail by the Wanchoo Committee. It recommended that the Directorate of Inspection (Inv.) be abolished and the work relating to investigation should be directly overseen by a Member of the Central Board of Direct Taxes. It was also recommended by the Wanchoo Committee that the Directorate of Inspection (Research, Statistics & Publication) be split up into two Directorates ; one to deal with Research and Statistics and the other to deal with Publications and Public Relations. The Wanchoo Committee had come out with a scathing criticism of the Directorate of Inspection (RS & P) for not carrying out any research and not bringing out any worthwhile publications and for out of date statistics brought out by them. As a result, sometime thereafter Directorate of Printing & Public Relations was carved out of it and shortly thereafter Directorate of Recovery was created.
In 1972 the Directorate known as the Directorate of Organisation and Management Services was also created.
Training of officers & staff
A very important development of early seventies was the emphasis on training. Right from the inception of the Department, adequate attention had not been paid to training. The importance of training in producing more efficient personnel at all levels came to be recognised very late. Till 1972, there were hardly any training facilities for the non-gazetted staff, though in 1957 a regular training establishment was started in Nagpur for training of officers. With the realisation of the importance of training as a tool for better performance, Regional Training Institutes were set up at Bombay, Calcutta, Lucknow and Bangalore. These Regional Training establishments were placed under Assistant Commissioners. All the training establishments were put under the Director (Training), who was also the head of the Training Establishment at Nagpur. |
|
