Livemint: National: Thursday, May
26, 2016.
Around a
month ago, the government released statistical data regarding income tax
returns filed for the financial year 2011-12. Such data was released after a
long gap of more than a decade, during which time no such data was being made
public.
The data
provides revealing insights into the status-wise number of taxpayers at various
ranges of income, and similar data for each head of income. For instance, it
shows that there were 37,248 taxpayers having taxable income exceeding Rs.1
crore in that year, of whom 1,000 had taxable income exceeding Rs.10 crore. The
largest number of individual taxpayers fell within the taxable income range of
Rs.1.5-2 lakh, in a year in which the basic exemption limit was Rs.1.8 lakh.
This shows that the largest number of taxpayers filed their returns with income
just around the basic exemption limit. The data also shows the number of
corporate and non-corporate taxpayers in each type of business or profession.
Similar data
for other years could help in understanding taxpayer return filing trends,
which is important in a country like India, where tax evasion has been rampant.
This will also help taxpayers understand the rationale behind various steps
taken by the government or the tax department in the field of income tax. But
is this alright so far as broad statistics go? What about disclosure of
information relating to individual taxpayers?
One reads
news reports that the tax department will be making public the list of taxpayers
whose tax arrears amount to more than Rs.1 crore during this financial year, as
an attempt at naming and shaming such individuals. But is such publicity really
justified given the ground realities?
Any person
who is familiar with the ground reality regarding the working of the income tax
department can testify to the fact that high-pitched assessments, completely
disproportionate to the level of actual income, were the norm till recently.
Taxpayers have had no option but to file appeals against such high-pitched
assessments, and obviously do not have the funds to pay such unrealistic
demands. Many such arrears are, therefore, really paper demands, awaiting
judicial determination of the correct level of tax liability. A classic case
reported in the public domain is that of the Pune-based businessman Hasan Ali
Khan, where a demand of Rs.1,65,665 crore was raised on the basis of a forged
bank statement found in his possession, only for the demand to be reduced to
Rs.3 crore by the Income Tax Appellate Tribunal.
In many
cases, the recovery of the demand has been stayed by the higher authorities
pending disposal of the appeal of the taxpayer. Under such circumstances, is it
proper to treat such persons and publicise their names as large tax defaulters?
If the name
of a taxpayer is published as a large tax defaulter pending adjudication of his
appeal by the appellate authorities, and subsequently, it turns out that the
demand was completely unjustified, the damage to his reputation would already
have been done, which cannot be undone. Would the tax authorities be equally
willing to name and shame the tax officers who have raised such fictitious
demands, which do not stand the test of judicial scrutiny, and publish an
apology exonerating the taxpayer?
One has
already seen the damage caused by the disclosure of names found in the Panama
Paper leaks, where people who have legitimately invested their post-tax income
in offshore companies by remitting funds from India, have been tarred with the
same brush as tax evaders in the public domain, without appreciating the
difference.
In the
context of the Right to Information Act (RTI Act), the Supreme Court has taken
the view that the details disclosed by a person in his income tax returns are
personal information, which stand exempted from disclosure under section
8(1)(j) of the RTI Act, unless it involves a larger public interest, which
justifies the disclosure of such information. Therefore, normally the
information contained in the income tax returns of a person cannot be disclosed
to any other person, even under the RTI Act.
Worldwide
also, the controversy is raging, particularly after the Panama leaks, as to
whether the information in income tax returns can be made public, particularly
in the case of politicians and government employees, given the involvement of
politicians in some offshore companies. In some countries, such as Sweden,
Norway and Finland, such disclosures are the norm, and all tax returns are
publicly available. The only safeguard is that the taxpayer whose return is
viewed by another person gets the information as to who has viewed his tax
return.
Ultimately,
it is a question of balancing the right to privacy with the benefit of public
disclosures that should determine whether and what tax information should be
made public. Would the naming and shaming of alleged tax defaulters, whose
appeals are pending, benefit the public by inducing them to pay up their taxes,
or would it really backfire on the tax authorities by showing up their irrational
behaviour in raising unrealistic demands? In any case, greater transparency on
the part of the tax department, particularly disclosure of cases of reduction
or deletion of large tax demands at the appellate stages, is certainly a must
in the public interest of all taxpayers. Would the tax department ever be
willing to do that?
(Gautam
Nayak is a chartered accountant.)
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