A F Nesaruddin, FCA :
Collection of tax revenue is undoubtedly essential for the running of any government and economic development. So, it is natural for government to try constantly to increase their tax revenue. During the last few years Bangladesh's tax revenue has gone up significantly. During the last 05 years average growth in annual collection of tax revenue (NBR revenue) has been 14.28%. In financial year 2012-2013, total collection had been Taka 109,152 crore while in financial year 2016-2017, the figure rose to Taka 185,004 crore. Contribution of direct taxes (mainly income tax) in this collection was 37.17% in average. During this period, our GDP also grew at an average rate of 6.5%. Such a growth rate is not bad at all. And productive activity in various sectors of our economy including industry, trade and commerce have also shown steady growth. This steady growth of Bangladesh have also been recognized internationally by way of recommending Bangladesh's entry into the middle-income group of countries.
In this scenario of increase tax revenue and overall economic growth of Bangladesh tax payers play a very significant role. Because they are the ones who pay the increased amounts of tax and contribute directly to the growth of revenue. Improvement in tax administration and expansion of tax base also has a role in this matter. Currently, the number of electronic TIN (e-TIN) holders is more than 32 lakhs and the number of tax returns submitted this year is more than 15.5 lakhs. This is a significant improvement compared to last year's figures of 27.5 lakhs and 12 lakhs respectively. Ultimately, tax payers undoubtedly play the central role in our revenue growth. So, they naturally expect fair and decent treatment from the concerned government agencies, namely the National Board of Revenue and the Taxes Department. They expect that provision of law would be applicable objectively without any bias and discretion would be applied judiciously; so that they are not subjected to unnecessary harassment. But, unfortunately, it is sometimes found that tax officials behave irrationally and apply their discretionary powers on the basis subjective consideration rather than on objective handling of available information. This causes immense suffering and harassment to tax payers, which is undesirable in the greater interest of our national economy. In the following paragraphs, efforts have been made to try to give some examples of such arbitrary actions of tax officials which cause harassment and sufferings to the tax payers.
a. Arbitrary attachment of Bank account
In section 143(2) of the Income Tax Ordinance 1984, there is the provision for attachment of an assessee's bank account as a measure for collection of 'Undisputed' arrear tax. This is obviously a harsh measure and is intended to be a 'last resort' for collection. But now-a-days this measure is quite commonly used by tax officials. While resorting to bank attachment the DCT is required to check a few things in order to be sure that the step taken is not unjust or unlawful. But they often failed to do this. Noted below are some of the points the tax officials often overlook:
1. Issuance of Demand Notice under section 135 are not ensured.
2. Whether the demanded amount are correct or not, that is not ensured (According to the language of notice under section 143 can be issued only to the defaulters, but in practice it is not followed.)
3. Appeal of the Assessee for deferment of tax realization are not considered from judicial point of view.
4. Instead of issuing the copy of bank attachment notice to the Assessee, sending of Tax Inspector to the bank to create pressure on the Bank Manager for realization of the demanded tax is contrary to the basic principle of Aritcle-42 (Rights to Property) of the Constitution.
5. Attempts are made to encash the Fixed deposit of the Assessee maintained with the bank through notice under section 143 but the instrument itself (FDR) is held by the Assessee.
6. There is a tendency to issue attachment notice well before the expiry of the time limit for submission of Appeal in the case of a disputed demand.
7. Good intention of the Assessee to pay the tax is not generally taken into consideration.
Such unjust and unlawful activity of tax officials obviously causes great inconvenience and harassment to tax payers. There should be strict administrative monitoring to ensure that the extreme measure of bank attachment is not applied whimsically or unlawfully, rather it is applied with proper caution and judiciousness.
b. Arbitrary disallowance of expenses
It is a common practice among the assessing officers that, while making a tax assessment, they arbitrarily make disallowances from genuine business expenses on unsound grounds. They also, at times, reject shown sales or receipts and make whimsical, excessive estimate of sales or receipts. Consequently, tax burden of the tax payers is largely enhanced. There would be little reason for grievance if these action were taken by the assessing officers on genuine and lawful grounds. But, unfortunately, in most cases these disallowances do not have any legal grounds or justifiable basis. They are done totally on the basis of subjective assumption or guess work. Such unjust and arbitrary action of the DCT simply creates great hardship and unnecessary harassment for tax payers and give rise to a series of litigations. Ultimately, these arbitrary action do not make any positive contribution towards tax collection. They only increase and intensify the feeling of mistrust and misunderstanding between tax payers and the taxes department. It is true that some tax payers with the intension of evading tax, do submit accounts which are not correct and which do not make an honest presentation of the affairs of the business. Those accounts may be disregarded. But to treat all tax payers in the same manner using the same standard is very unfair for those honest tax payers who submit genuine and reliable audited accounts which are easily verifiable and correctly reflect affairs of the business. In this regards tax official should try to make some distinction between genuine or good tax payers and tax evaders in treatment depending on a realistic point of view.
The NBR should effectively intervene and provide for close monitoring to stop such undesirable and unjust practices. This is absolutely essential for maintaining a friendly relation between tax payers and tax officials.
c. Unfair selection of cases for tax audit
Sub-section 3 of the section 82BB provides that a return filed under Universal Self-assessment may be selected for audit by the NBR, or any subordinate authority, if so authorized by the NBR, according to guidelines given by the NBR. In practice, audit cases are actually selected by the circle (DCT) and approved by the higher authorities. In this selection process tax officers often act arbitrarily and are guided by subjective considerations. This often causes unnecessary harassment to the tax payers. Such practice is also against the basic principle of auditing tax cases. And ultimately this does not help in tax collection.
The NBR should give realistic and useful guidelines for selection of audit cases and enforce close monitoring to ensure that tax officials do not misuse the power of auditing. Such measures will minimize harassment of tax payers and establish a better relation between the tax payers and taxes department. This will ultimately contribute to better tax administration and improvement in tax collection.
d. Misuse of Section 120 by the IJCTs or IACTs
Section 120 of the Income Tax Ordinance 1984 empowers the IJCT/IACT to revise an 'Order' passed by the DCT. Recently, the IJCT/IACT's have been passing orders under section 120 in respect of cases completed under universal self-assessment (Section-82BB). Under Section 82BB the DCT does not pass any assessment order, the acknowledgement receipt of return is only 'deemed' to be an assessment order. Therefore there is no scope to apply section 120 in this case. But ignoring this legal and factual position, the IJCT/IACT's are applying section 120 in these cases and making absolutely fresh and arbitrary assessment instead of revising any order. This is causing great harassment to assessees and giving rise to unnecessary litigations. There must be some administrative intervention from the NBR to stop this unjust and unlawful application of section 120 by the IJCT/IACT.
The present government of Bangladesh has repeatedly made its policy-declaration that tax offices will be tax-payer friendly. But the unjust activity of the tax officials as discussed above will certainly not make any positive contribution towards achieving this declared policy-goal of the government. In fact, such unreasonable behavior of tax officials will only create a strong negative feeling among the tax payers and widen the gap in trust and good-will between tax payers and tax officials. Moreover, in the ultimate analysis, such arbitrary and unjust measures do not help in tax collection. Rather, they give rise to prolonged litigations and act as hindrances to smooth tax collection. Therefore, for the sake of collection of tax revenue as well as for the greater national interest of administrative fairness, the NBR should take effective steps to ensure that tax officials refrain from behaving unjustly with tax payers and always try to be fair and lawful in their attitude towards tax payers, so that, honest and innocent tax payers are not subjected to undue harassment and suffering.
(A F Nesaruddin, FCA is practicing chartered accountant and the Senior Partner in Hoda Vasi Chowdhury & Co, Chartered Accountants)