Professional Empowerment Series – Tips to Avoid Corruption – Article -8A

This article follows the earlier chapter on Professional Ethics – Art. 8 as a part of the empowerment of professionals seeking to practice in the chosen area. To be read with Articles 8 the link is as under:

Today we see the extensive use of information technology in taxation in India. In advanced countries the compliance is easy and the businessman himself can file the returns. There the compliance is also very high with several nations requiring the citizens to pay taxes as a responsibility and duty. In India, it is not a duty but slowly we are moving towards enabling that by making all tax laws including GST simple, fair and transparent using the technology.

Faceless assessment, e-invoicing, e-hearing, use of the internet for communication, GST network increasing the number of utilities and features in the last few years indicate the Government’s resolve to reduce interface as well as hardships in compliance.

It goes without saying that the operation of the grey economy would be restricted and the identification of errant using data analysis of data on movement & identifying patterns would reduce and slowly stop the parallel economic activity.

The existence of evaders in the system, use of fake bills, always misusing the law has led to draconian provisions for preventing/ identifying, and avoiding them. Unfortunately, the deep-rooted level of graft in the tax administration sometimes leads to use of these provisions against genuine tax compliant assesses.

In this background, we have also seen that corruption in GST has decreased as compared to the earlier regime- not stopped. The State GST officers have not been really educated/ trained in services or even in GST law (its genesis and basis) which they also administer. Most of them are inclined to corruption though there are some honest officers. This is a serious gap that has led to 10,000’s crores of tax being evaded in connivance with the tax officers.

The important role of refund without delay/ intervention of the Officers (to control erroneous refunds) could also be bought back in full once the leakages are substantially plugged. It is a reasoned fact that no compliant taxpayer would be interested in graft as it eats into his profit other than loss of self-respect. He indulges in bribes only when he faces delays, stands to lose business or competitiveness or is forced to do so.

Even today we observe certain activities where high handedness of some officers is seen even with genuine taxpayers in the form of: repeated seeking information (already with the dept.), last-minute flurry of activities in time-barred cases, unwarranted rejection of application- sometimes on the last day, delays, oral threats of closure/ arrest, never-ending search, unnecessary seizure of record/ good for long periods, unreasonable demands, writing unnecessarily to the customer, threat of freezing the bank account/ credit ledger, summoning the MD/ CEO etc. 

Here is where the taxpayer assuming that this is the only way accedes to the illegal demands being made, buys peace and concentrates on his business. In this article, we examine what could be actions (way forward) to avoid or counter such action specifically & provide a few general best practices to counter this menace.

Specific Preparedness/ Actions:

1. Taxpayer / consultant to ensure that books are substantially clean and there are no skeletons in the closet. We also know that 80% of the GST comes from around 10% of the taxpayers. The suppliers to these need not cut corners as far as tax on supply is concerned. To support this a regular review of compliances and optimisation of the tax credit could be considered by bigger entities. Errors detected to be corrected in real-time and benefits missed availed.
2. Pay the correct tax after due reconciliation on monthly basis. File the return in time.
3. Declaration of records along with the logic followed for payment of tax, credits and any activity and treatment that may have doubt or the department’s view is different on record. This removes mala fide as well as puts moral pressure on the officers even if they come with a preconceived notion that one is an evader.
4. No letter / email/ information on common portal (need to check on regular basis) received, to be ignored. If not understood, seek clarity on record.
5. Check whether the information sought is validly sought. There are 1000’s of notices which are just fishing exercises looking at some percentage approaching the tax officer who would then see whether he can extract something for himself.

GST being a procedural law- dept. cannot causally seek information. They need to follow the set-out procedures. If in doubt of proper reason for enquiry, share that concern with the jurisdictional officer in writing.

In case of oral follow up, put down the conversation in writing and share with the officer on record. In case of visits by officers do similarly. CCTV recording if normally there can be archived. Avoid unnecessary visit to their office, insist on VC and record the same.

Do not self-medicate unless you have the requisite updated knowledge & expertise. Provide information to extent sought only. Provide only that which is not available with them. Ensure communication includes the lack of DIN if not there. 

6. In case of attending summon care should be exercised: It is an evidence which can be used against the taxpayer. There are many best practices there provided thru Ann -1.

7. In case the officers are getting unreasonable or aggressive, whether in the conversation, visit, recording of statement etc we all being in a democratic country we need to escalate. This is powerful tool for the compliant. Write on fact without emotions to higher officer asking them to intervene. Further escalate to Commissioner with facts. Seek appointment to explain.

8. In case of refund, in every letter highlight that interest would be claimed for the delays. In case delayed refunds do not have interest, apply for the same. If ignored approach writ court who would provide proper direction.

9. In case of audit – confirm that it provides enough time and is legally valid and get ready by getting a pre audit done by competent professionals if felt necessary.

10. Seeking information using Right To Information Act. This is a powerful tool for hastening/ starting/ fast tracking action or refund as also collection of evidence of inaction/ lack of authorisation when needed information is not provided by the department. More in Annexure 2.

11. In case of unfairness, inequal treatment, excessive delegation, the reliance of circulars (which are not in line with the law), attempts to sabotage the business by freezing bank accounts, credit ledger, cancellation of registration, unnecessary pressure on the customers, illegal demands without jurisdiction one can complain to the vigilance with CC to Commissioner and if still pressure exerted approach the Courts in a writ.

12. In case of few issues being suffered by many, the matter can be represented by the Associations to multiple State and Central authorities. In case of delay in action newspaper/ social media could also be considered.

Ann – 1 Best Practice in Summons

1. A short note on the issues and taxpayers’ point of view, his interpretation and basis of that can be shared in advance.
2. The person summoned could take a diary and go to meet the officer.
3. He could ask politely before the statement is taken whether he could note all the questions and answers in the diary/notebook.
4. If not agreed, ensure that before signing on the recorded statement, the person asks to allow to read the statement before signing it. Only then sign it.
5. The person being summoned has the right to ask a copy of the statement being recorded. ( preferably in the start)
6. Ask for a copy of the statement, before signing it.
7. He should read through and ensure it matches with his own statement which he has recorded in his personal notes taken during summons.
8. Refreshing memory by going through the points noted in notebook, if available, is allowed.
9. The statement should be in writing and signed by the maker, as it safeguards the interests of the maker as well as departments.
10. Then keep copy safely for future documentation.

  11. If a copy of signed statement was asked but not given, then soon after coming out of the room, he should write down all the questions and answers when fresh in his mind. Especially those aspects which are not recorded!!

He could immediately send in writing an account of questions asked and replies given by RPAD letter, while making very clear in the letter that though requested copy of statement was not provided.

The statement is legally binding once given unless it is retracted or additional information provided immediately thereafter. Therefore if there are any discrepancies in statement vis a vis what was said then on a priority retract statement given within next 24 hours.

Send across by RPAD letter in detail the deposition proceedings including questions asked and answers given, while making clear that the earlier statement was incorrectly recorded in the statement taken by officer.

12. Sometimes the statement could be taken under extreme pressure, such as summoning person at 11 am, but statement being recorded at 4 am next morning. Threats of arrest , closure of business are also unfortunate practices which are used by errant officers.

In case of such unacceptable behavior, the person could seek permission and leave. Immediately send RPAD letter conveying circumstances when he has left and asking to fix alternate date and time for summons

Ann- 2 - Possible Use of RTI as a tool

RTI applications can be made in the following circumstances:

1. To Understanding the proper procedure – In certain type of cases (e.g. SVB) the procedure of moving of file is not available in public domain. The lack of information in this regard, may enable department officer to take advantage. Department’s internal protocols [regarding officers, internal timelines, escalation authority] may be sought through RTI. Through these internal protocols, the assessee is better equipped to deal with the officers assertions.

2. Escalation – Emailing the higher officer and then the Commission can be substantially effective with the Name, address and email of authorities who are not easily approach-able [North block, DOR, MOC, GSTN] In most cases, email to these authorities would invariably resolve the problem.

3. Targeted department/ office System, Division or Person* – Company can ask details like the officer’s past conduct, details how many times he has been reported for seeking bribe. If timely RTIs (within reasonable intervals and only the relevant information) is made, even if no satisfactory answer is returned), the person might feel that he is watched and may deter before taking any nefarious means. If harassment/ nuisance continued this communication can be used when making a compliant on the errant officer.

4. Collection of data as evidence – Corruption/ Bribery/ Complaint statistics can be sought, which can be utilized in a representation before appropriate authority or in a matter before the court.

5. Highlight a particular office/ department – Through an RTI, jurisdictions of most dispute can be found out. To certain extent, this fact can enable an assessee in deciding his place of jurisdiction where he wants to get registered.

Conclusion:

It is said that it is not ONLY the wrong doer who is responsible for the degradation we see in society- but the population which keep quiet and sits in the stands is as guilty. My 33 years of successful practice has indicated that being consistently compliant, firm on not compromising, earns the respect of the tax administrators, gets work done soon and avoids too many interventions. The above article also gives many actions which can enable this option of avoiding bribery and indulging in corruption. These practices can also be converted into a powerful habit that can be used as an armour against the excesses of some errant officers. GST had a hidden- unstated objective which was to reduce interaction to speed up transactions as well as graft.

Mahatma Gandhi taught us to fight for freedom. In this case from corruption which we can fight by the non-violent processes like keeping a record of all conversations, knowing our rights, escalation, using RTI as well as complaining in rare cases. Feedback – [email protected]