The provision, announced in the budget for 2021-22 on Monday, along with limiting the time to three years from six years for opening cases for re-assessment, will provide tax certainty to assessees, Mody said in a post-Budget interview.
Assessing officers will be able to begin inquiry based on third party information from audit or agencies, rather than anonymous information, which will reduce harassment of taxpayers and lead to reduced litigation, Central Board of Direct Taxes (CBDT) chairman PC Mody told ET.
“Earlier, the provision for that (beginning inquiry) was that if the assessing officer has reason to believe, and that reason to believe was a very nebulous concept. Now, we are trying to straitjacket into certain situations… now it will be information-based,” said Mody.
The move is aimed at simplification and providing compliance certainty to taxpayers, said Mody. The provision, announced in the budget for 2021-22 on Monday, along with limiting the time to three years from six years for opening cases for re-assessment, will provide tax certainty to assessees, Mody said in a post-Budget interview.
The two provisions will contribute to reducing tax litigation, as the number of disputes relating to the reopening of assessments formed a huge chunk of overall disputes.
Mody further said that the clarifications on equalisation levy have been provided since certain issues were “agitating the minds of the taxpayers”. However, he said, the law has been the same since the introduction of the levy.
The Budget defined ‘liable to tax’ under the levy. Mody said the definition has been given since sometimes taxpayers may be liable to tax but by a supplementary position or later on, they may be exempted. “There is a very fine distinction between the two situations. You are obliged to file but you are exempt and that is why you are not liable. But the original liability still remains. It’s not that I was originally not liable to tax and that that’s a very subtle distinction,” he said.
Mody said the revised estimates for direct tax collections pegged at Rs 9.5 lakh crore for FY21 were realistic, even though current proceeds totalled nearly Rs 6.64 lakh crore net refunds, which are 7% higher year-on-year. He expressed confidence in surpassing the revised estimates.
“Now the business is back on course and collection figures in the last quarter have always been a significant portion of the total realisation, so put together I think I would be reasonably confident in achieving the target, perhaps even (overshooting it),” said Mody.
On further extending Vivaad Se Vishwas scheme till February-end, Mody said that while the direct tax dispute resolution scheme could not be endlessly extended, the decision was taken after representations from several quarters.