Income Tax refunds being held back so that stiff collection targets are met, allege CAs

Tax collection targets were revised upwards by Rs 50,000 crore in the interim budget, and CAs claim officials are also withholding refunds for previous years.

A vendor hands Indian rupee notes to a customer at a stall in Chauta Bazaar in Surat, Gujarat (representational image) | Photo: Karen Dias | Bloomberg

New Delhi: Chartered accountants have alleged that the Income Tax Department is withholding refunds of taxpayers, especially corporate taxpayers, because it is under pressure to meet tax collection targets this fiscal.

In the interim budget presented earlier this month, though the government revised the GST collection downwards by Rs 1 lakh crore for 2018-19, the total direct tax collection targets were revised upwards by Rs 50,000 crore to Rs 12 lakh crore.

Of this, while the personal tax collection targets were retained at the initially-budgeted levels of Rs 5.29 lakh crore, corporate tax collections were increased to Rs 6.71 lakh crore from Rs 6.21 lakh crore.

The tax collections were revised upwards despite the fact that in the first nine months of the current fiscal, direct tax collections were substantially short of targets. Net direct tax collections were at Rs 7.43 lakh crore, as of December-end — 65 per cent of the budgeted targets and 62 per cent of the revised targets — reflecting the uphill challenge for tax officials.

A CA who is part of the Institute of Chartered Accountants of India’s southern region council said that the shortfall in the GST collections is posing a problem for the exchequer.

“Inflows are not adequate and hence the government is trying to control the outflows to address the monetary crunch. This is the reason refunds are being withheld till March,” said the member, adding that the refund process has always been notorious.

“The government forgets it’s the taxpayers money that is due to be returned and not its own money.”

However, revenue secretary Ajay Bhushan Pandey denied stopping refunds.

“We don’t do that. If a refund is due, it should be given. This year, we have given as much as Rs 1.5 lakh crore already to taxpayers as refunds — both individuals and corporates. Holding back refunds to meet revenue targets is not a good idea and we will never support it,” Pandey told ThePrint.

Past refunds

Speaking to ThePrint, chartered accountants said tax officials were withholding refunds for previous years, as well as adjusting past refunds against the complete outstanding demand, much more than what existing rules permit.

“Our client’s refund is pending for the assessment year 2010-11 and the department has adjusted the entire amount against existing demand,” said a chartered accountant working at a New Delhi firm, adding that as per CBDT rules, refunds can be adjusted only up to 20 per cent of the existing demand.

“Tax department officials are saying that internal instructions have been issued by CBDT (The Central Board of Direct Taxes) to delay refunds till after 31 March,” the accountant said.

ThePrint could not independently verify the issuance of such instructions.

Chartered accountants pointed out that there are no provisions in the Income Tax Act that stop the tax department from delaying refunds. They did not want to be identified on account of their dealings with the tax department.

Ground reality is different

Another CA who works in one of the network firms of a global consulting company said the ground reality is very different from the government’s claims.

“We approached the assessing officer for a refund and were told by him to come back in April-May for the refund. While a small amount of refunds have come in over the last few months, larger refunds are being held back,” this CA said.

“Though the interim budget announced steps to quickly process returns and issue refunds, the ground reality is very different.”

Finance Minister Piyush Goyal, in his interim budget speech on 1 February, had announced the government’s plan for a more taxpayer-friendly tax regime.

“All returns will be processed in 24 hours and refunds issued simultaneously. Within the next two years, almost all verification and assessment of returns selected for scrutiny will be done electronically through anonymised back office, manned by tax experts and officials, without any personal interface between taxpayers and tax officers,” he had said.

In the entirety of 2017-18, the government had processed refunds amounting to Rs 1.49 lakh crore.

With inputs from Ruhi Tewari