Honest taxpayers partner in India’s growth, let them correct bona fide errors, says FM

They should address genuine grievances fairly and within defined timelines. Sitharaman told the officers that they should reflect on the root causes of grievances using complaints as an opportunity for institutional learning.

The FM also said that the officers should also reform the processes, systems and procedures continuously so that similar grievances become increasingly rare.

“So, our approach should ensure convenience for the honest taxpayer, and opportunity to correct bona fide errors and firm consequences for deliberate evasion. But sometimes we make the error of treating honest taxpayers with deliberate evaders and everybody goes home unhappy with this. We have to be intelligent. We have to be discreet…the authority conferred by tax law must always be exercised with humility,” she said.

Sitharaman said a taxpayer is left with a bitter taste in his mouth when tax officers “slightly exert that empowerment that the tax law has given”.

“And that bitter taste in the mouth of the taxpayer is something which only we can redress and we can redress only if we approach it with humility,” she said, adding that a taxpayer is “not merely an assessee” but a citizen and a partner in India’s growth and development.

“We have to give him that space and respect. Please do not overdo. At the same time, please do not be laidback. There is a fine balance to maintain,” she said.

The finance minister said the shift towards litigation prevention should rest on pillars of three Cs — clarity in taxpayers’ obligations through timely circulars in simple language, whether English or Hindi; consistency of interpretation across juridications; and continuous institutional learning from appellate orders to inform future reforms.

“Together these principles produce avoidable disputes, while improving certainty for honest taxpayers. On this dimension, I appreciate that there has been progress…a total dependency declined by over 34,000 cases to 5.4 lakh appeals now. No good. We should pause here. Are we doing this consciously? The appeals despite your efforts to bring down the number by 34,000, it’s such a big number that on reading that number, I would have thought that the pending appeals would have come down to less than a lakh. We still have 5.4 lakh appeals,” she said.

Three years ago, Sitharaman said the tax department had discussed a blueprint on reducing the pending appeals but now the mounting appeals are being allowed to keep coming up even as the reduction is happening at a slower pace, she added.

“I appeal to the CBDT to have one more review on how to handle this,” she said.

Commenting on the current return filing season, Sitharaman said the e-filing portal has significantly strengthened this season with expanded computing capacity, storage, bandwidth and also network infrastructure.

The portal handled more than 1 crore taxpayer interactions in a single day, with daily interactions reaching around 1.6 crore at peak, she said.  As on July 21, more than 3.2 crore income tax returns have been filed, nearly 94% verified, and 60% processed, she said. On this, over 1.3 crore refund claims have been received, 96% verified and 40% processed, she said, adding that the tax department must continue reducing processing timelines.

“Prompt refunds strengthen confidence in the fairness of the tax administration and improve liquidity for taxpayers,” she said.