Union Finance Minister Nirmala Sitharaman. File
| Photo Credit: K. Murali Kumar

Finance Minister Nirmala Sitharaman on Wednesday (August 21, 2024) asked tax officers to use simpler words in notices or letters they sent to taxpayers and exercise power bestowed upon them judiciously.

Addressing the 165th Income Tax Day celebrations, Ms. Sitharaman said that after adopting the faceless regime, the tax officers must now aspire to be more “fair and friendly” in their dealings with taxpayers.

The tax notices should not trigger a “sense of fear” among the taxpayers and instead, it should be simple and straightforward, she added.

The notice should make it “crystal clear” to the assessee the reason for which a notice was being sent to him/her, the minister noted.

Ms. Sitharaman also said there was room for improvement in issuing refunds faster.

Asking taxmen to avoid “ham-handed ways” in dealing with taxpayers, the minister said that the action taken should be proportionate to the issue at hand.

She also asked taxpayers to use enforcement measures only as a last resort, and the goal of the department should be to encourage voluntary compliance.

The minister also underlined that when she says that the tax department should be more friendly and transparent, it does not mean that the tax officers were unfair all these years.

“Can we explore issuing simple and easy-to-understand notices? Explain the reason behind why the action was taken and why the notice was being sent,” Ms. Sitharaman said.

Stating that she would stand with the tax department, the minister said that tax officers should continue to perform their sovereign duties.

Income Tax Day, observed on July 24, honours the establishment of income tax by Sir James Wilson in 1860, a significant turning point in India’s fiscal history. This first tax was intended to tax income from different sources, as stated in the Income Tax Act’s Section 2(24).

The nation’s tax system was genuinely revolutionised by the Income-tax Act of 1922, despite the fact that the 1860 implementation laid the foundation. This extensive Act created a methodical administrative framework that still serves as the foundation for modern tax administration in India, in addition to formalising the organisation of income tax authorities.

As per a release by the government of India, in 1924, the Central Board of Revenue Act further strengthened this structure by constituting the Board as a statutory body responsible for administering the Income-tax Act. This period saw the appointment of Commissioners of Income Tax for each province, supported by Assistant Commissioners and Income Tax Officers.

The IRS Staff College was established in 1957 to further boost professional growth. Group A officers were recruited in 1946 and had their initial training in Bombay and Calcutta. In order to process electronic challans, computerization was introduced in 1981. In 2009, the Central Processing Centre in Bengaluru was established to facilitate effective bulk processing. Income Tax Day is a celebration of these advancements and continuous attempts to update India’s tax system.

Key Milestones in the Indian Income Tax System

• Year 1860: Introduction of Income Tax by Sir James Wilson
• Year 1922: Comprehensive Income-tax Act established
• Year 1924: The Central Board of Revenue Act constituted
• Year 1946: Recruitment of Group A officers
• Year 1957: IRS (Direct Taxes) Staff College started, later renamed National Academy of Direct Taxes
• Year 1981: Initiation of computerization in the Income-tax Department
• Year 2009: Establishment of a Centralised Processing Centre (CPC) in Bengaluru
• Year 2014: Launch of the new national website of the Income Tax Department
• Year 2020: Introduction of the “Vivad se Vishwas” scheme to reduce litigation and generate government revenues
• Year 2021: Launch of the new e-filing portal

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