Respected Finance Minister, Please merge Income Tax Department & GST Department rather than asking details in Clause No. 44 of the TAR


Respected Finance Minister, Please merge Income Tax Department & GST Department rather than asking details in Clause No. 44 of the TAR

There are times when you don’t know whether to cry or laugh?

Whether to complain or thank?

Whether to be happy or sad?

Whether to do business or just do paper work?

Whether to earn or stop doing business?

The same is the case with Clause 44 in the Tax Audit Report.

Let us have an interesting observation or points which may be relevant for the discussion here. Few taxpayers who are in business are required to get the books of accounts and audited and submit the Tax Audit Report (TAR) within the due date. Not in TAR alone, there are various provision in the Income Tax Law which has been incorporated just to make the taxpayers to keep on doing the compliances & clerical work. The clause No. 44 is just one point here to iniate the discussion and bring to the kind considedraiton of the law maker, taxpayers and the professionals as to how are moving forward.

Clause 44 of the TAR has made me move forward the discussion & concept which is much needed and which need to be taken forward by all the industries association, professional organization, law administrator and the taxpayers. Let us ponder some of the thoughts over it.

  1. First of all, Clause 44 has nothing to do with the Income Tax Act-1961.
  2. Claus 44 is pertaining to the GST law and the reporting in that clause may not impact the computation of tax under the income tax law. It is just a reporting requirements and mere information without any implication on the tax computation.  Let us have a look what clause 44 of the Tax Audit Report (TAR) reads.44. Break-up of total expenditure of entities registered or not registered under the GST:
Sl No Total amount of Expenditure incurred during the year Expenditure in respect of entities registered under GST Expenditure relating to entities not registered under GST
Relating to goods or services exempt from GST Relating to entities falling under composition scheme Relating to other registered entities Total payment to registered entities
(1) (2) (3) (4) (5) (6) (7)
  1. Before reading further, the taxpayers may just check and think over as to what benefit the income tax department will get from just above time consuming reporting requirements imposed on the business. Auditors ultimately have to just ask the businessmen to give above details to them. Only after it is given by the taxpayers, auditor can check it. The ultimate burden of this will be upon the taxpayers and no the auditor. For example, consider the example of NBFC or bank with 200 branches or Corporate with presence in 40 citieis of India, and just imagine the level & system they would be require to implement for its proper reporting.
  1. Income Tax Act itself is too voluminous and bulky. Income Tax Authorities are expected to ensure the compliance with the provision of the income tax law alone.It may not be proper to for income tax law to ensure the compliances of the businesses with the provision of Foods & Drugs Act.
    Similarly income tax law is not supposed to ensure the compliances of the businesses with the provision of FEMA. It may not be appropriate for income tax law to ensure the compliances with the provision of Shop & Establishment Act.

    Same is the case with
    i. Money Laundering Act
    ii. Benami Property Act
    iii. Companies Act
    iv. Indian Penal Code
    v. State Profession Tax Act
    vi.  Various Succession Act
    vii. Indian Contract Act
    viii. Negotiable Instruments Act
    ix. ….

    and so so.

    There are enough machineries, manpower, and infrastructure under the respective law to ensure its compliances. They can work independently and make independent decision.

    The question arises, why Income Tax Act or provision need to encroach in other areas and check their compliances at least when there is no impact in the income & tax computation. Income Tax Act and Rules may not be the “Father Law” to all other Acts & Law.

    Is it not funny to ask the entire details which may not be relevant from income tax perspective just because someone is doing a business?

    Doesn’t it mean that the tax audit report can ask for the following details as well in the TAR:

    a) Number of members in the family and the house hold expenditure of each and every member in the family?

    b) Whether the assessee has availed the loan from the bank and regular in submitting the stock and book debt statements? Whether the drawing power is correctly computed and the assessee is eligible for the bank limit? Whether the fund has been correctly utilized by the assessee in its business?

    c) Whether the assessee has timely paid the amount to its creditors and is ensuring the payment as per the terms and condition of the purchase?

    d) Whether the assessee has any cheque bounce proceeding under the Negotiable Instruments Act or taken action against its debtors for cheque bouncing?

    e) Whether the assessee has any proceeding in the civil court for violation of any provision in India?

    The list and illustration can be exhaustive and unending. However, the reporting requirements in the Income Tax Law have to be restrictive for EASE OF BUSINESS. Asking the entire information of the world may not be the right way of using the power.

  2. There are already other provisions for which Income Tax Act is doing the “police” service despite the fact that there are enough powers under other respective Acts as well.It’s like “ONE” slap by EACH Department for the error or mistakes committed “ONCE” by the Assessee. Few of the instances could be as under:

    a)Non-payment of PF/ESIC dues within the due date which attracts disallowance U/s 36(1)(va). One may note that the labour authorities have enough power to call, penalize and make a hard slap for such cases.

    b) Non-payment of Government dues, Bank EMI, etc which attracts disallowance U/s 43B. The receptive agencies are well equipped to ensure their compliance but still Income Tax law is policing the same.

    Again, we can go on discussing various such provisions. But the idea is just to give an idea of how we complicate the things whenever we talk more about ease of business and so called simplification.


  3. An easy solution and real ease of business could be there for all.Why not merge the Income Tax Department and GST department. The same information is required to be given again and again to both the department now.

    For example, GST requires the monthly bill-wise, date – wise & party wise details of sales & purchases and ITC is based on this.

    Same is again required by the income tax department for TDS/TCS compliances by introducing the provision in the form of 194Q & 206C(1G).

    The real ease of business could be the merger of the Income Tax Department with the GST Department.

    It will be like just one slap for any default and not multiple slap by multiple agencies for just one default.

  4. The sudden question arises, why the information as sought in clause 44 is required by the department from the assessee. Why not use the feature of Rs. 4242 Cr software developed by the Infosys for the Income Tax Department (cost of GST software is excluded).Government has Financial statements of the assessee & the GST sale / purchase data, ITC Data of various input and output.  Just simple run of the software can give the broader idea of purchase from registered and unregistered data (and also from composition dealer)  of each and every assessee.  Interest and salary data is obviously available in the financial statement which is one of the key components of expenses.

    Why not use just Rs. 1 Cr of Rs. 4242 Cr amount for the betterment and ease of the taxpayers.

  5. Whether it is logical to impose the law just because it has power to do so.Whether commercial expedience, practicality & logical ideas can be of some help for the taxpayers.

    Whether we want India to be the country of Innovation or country of clerks & papers working?

    What we want our taxpayers to do?

    Every businessmen is complaining about the unwanted paper work they are required to do. The independent survey bythe Government agencies may reveal the shocking fact that MSME are even afraid of doing expansion because of the unending paper work or unwanted compliance activities.

    On the one side, everyone trust, faith & confidence in the transparent, honest & genuine administration of the Modi Government, there is nothing to give the real EASE OF BUSINESS which is the main thrust area of Hon’ble & Respected PM Shri Narendra ji Modi.


  6. On a lighter note, the taxpayers may thanks the Professionals for not doing the clause wise reporting in the TAR. But certainly, the TAR fee is going to be an additional burden on the taxpayers only.
  7. Hope that the above discussion, concept, idea is taken forward and the Government do something which make India the next most powerful Economic Hub of the World.
    To begin, let us merge Income Tax Department and the GST Department.

From One Nation – One Tax
One Nation- One Tax – One Tax Department.