“There is no question of celebrating Diwali this time. Almost every chartered accountant (CA) in the country is struggling to meet the demand for e-filing returns and cope with an income tax website that crashes every single day or is debugged frequently without informing people,” says Ameet Patel, a senior partner at the well known accountancy firm of Kanu Doshi and Company.
He is among tens of thousands of CAs who are angry at yet another example of the Union finance ministry’s many unilateral orders that cause hardship and frustration among tax assessees and their accountants. This time, the cause of anger is the fatwa to e-file tax returns. Some numbers underline the problem. The CA associations reckon that at this time last year, 3.75 lakh companies had filed their returns; this year the number is a mere 8,000.
That is because the e-filing system, which is a step in the right direction, has been hastily introduced without rigorous testing and debugging. The e-filing form itself was notified only in August and the software has been provided at the end of September. Add to this the increase in information mandated by the income tax (IT) department and you have a regular nightmare. Effectively, the government has turned CAs and their tax paying clients into guinea pigs. We learn that the e-filing system does not open because of the heavy load, crashes every day, refuses to upload specific forms, or gives error messages.
The software designers have been quietly debugging the system and changing the software in response to complaints by installing new ‘patches’; but these are not properly announced to the assessees. In fact, Patel says that a patch uploaded on October 13 has created further accessibility problems for those who filed their returns earlier.
The finance minister (FM) now operates under the assumption that every tax assessee is a cheat and disclosures demanded from them are tailored accordingly. This has led to a huge increase in sheer data entry alone even as there is an acute shortage of clerical staff around the country, because the BPO and services sectors absorb everybody that is employable at high salaries. If that were not enough, tax returns due in July were postponed to October, with the result that the work load on the October returns has increased tremendously.
It is not as though the government does not know about the problem. The industry has made several representations but, typical of this regime, the government refuses to listen. All complaints are dismissed on the assumption that assessees are protesting against transparency, rather than the government’s sloppy and arrogant imposition of new systems. For instance, The Institute of Chartered Accountants (ICAI) has pointed out to the ministry that the balance sheet which is part of the Form no 1 is not the same as the Schedule VI format of the Companies Act, 1956. This entails regrouping the figures and takes a much longer time.
The e-filing system, although a constructive step, was introduced without rigorous testing and debugging. Complaints are dismissed on the assumption that assessees are protesting against transparency
In addition, details to be verified and certified for the Fringe Benefit Tax, as well as the revised 3CD, which was notified only in August 2006, have increased the work load on accountants. This ultimately affects smaller assessees, because accountants want to optimise their efforts by dealing only with larger clients. The big four accounting firms are refusing to take on new clients, while the smaller firms also don’t want to deal with individuals at the lower end of the income chain, especially if it involves diverse and multiple sources of income.
If that were not enough, the IT department has increased the number of cases of detailed scrutiny, which again needs professional help. Members of ICAI say that at an interaction on October 9 with a joint secretary of the finance ministry, CAs pointed to the time and effort required in ‘data entry’ of accounts alone, due to the phenomenal increase in information required. His answer: It is not the CAs’ job to enter data, ask your clients to do it. But smaller companies simply do not have the ability to cope. Expecting taxpayers to deal with a new system, when it does not enough have enough of trained officials to answer queries or sort out difficulties, smacks of high-handedness. Especially since the last week for filing returns is bang in the middle of the festive season.
What stands out in contrast to the finance ministry’s lack of empathy for the Indian taxpayers’ genuine difficulties in coping with the large number of disclosure and verification rules, is its attitude to non-transparent foreign money flowing in through Participatory Notes (PNs). The government’s stated objective is to choke off cash generation and black money by increasing electronic filings and disclosures and stringent Know Your Customer norms. Consequently, it now takes around five days to open a bank account, a depository account or get a phone connection. Besides the harassment of chasing the IT department to issue PAN Cards (many investors have still not received cards, while lakhs of duplicate ones are floating around).
All this would be most laudable if the government did not leave gaping holes in precisely those areas which are known as the largest concentrations of unaccounted wealth, namely, real estate, the cooperative banking sector, portfolio investment coming into the country through PNs and, finally, the large-scale and open corruption among government officials, especially in the revenue, investigation and enforcement departments.
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