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finance standing committee has reversed the onus of proving that tax has not been evaded from the person or entity being assessed to the taxation officials in its proposals on the Direct Tax Code (DTC).
While finalizing its draft on the DTC, the committee has seen merit in the criticism that the general anti-avoidance rules (GAAR) have been framed in a manner that is too sweeping and empowers tax authorities to intervene if they feel that the motive behind a transaction is to obtain a tax break or avoidance. As reported by TOI earlier, the committee has decided to recommend that exemption limit for personal income tax be raised from Rs 1.8 lakh to Rs 3 lakh.
Tax benefits should be made available for life, health, and education up to Rs 1 lakh. Insurance incurred on dependent seniors, not just parents but also grandparents, to the extent of Rs 50,000 should also be given tax benefits.
The panel also felt the senior citizen age be reduced from 65 to 60. Meanwehile , BJP said that it would supoort government on DTC.
Committee sources said the GAAR provisions could apply to just about anyone, including a transaction like the controversial Vodafone-Hutchison merger where the Supreme Court recently set aside a Rs 11,000 crore tax demand on the ground that India lacked jurisdiction over a deal concluded in the tax haven of Cayman Islands.
Committee felt provisions of DTC were skewed in favour of authorities while the assessee was disadvantaged as he was "guilty unless proven innocent". The panel has suggested that officials must prove that there is a case of avoidance and the assessee be allowed opportunities to argue his case.
An independent body with one judicial and two technical members could hear arguments put forward by an assesee who has to be heard by the dealing officer as well. If his arguments are rejected and a notice is served for tax avoidance, the assessee will be free to approach a regular court.
The draft report is also likely to suggest that the government fix a threshold to take up a tax avoidance case and also introduce strong checks to ensure that frivolous cases are not filed and assesses do not have to put up with undue harassment. The GAAR has attracted objections from several quarters although the government has argued that such rules are being implemented in several countries.