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Income Tax Department - Cadre Review
Income Tax Department - Cadre Review
Income Tax Department - Cadre Review
Table of Contents
Chapter Page
1 Executive Summary
2 Introduction
2.3 Methodology
3 Functional Requirements
2.3 METHODOLOGY
During the course of deliberations, the Committee examined a large
amount of information from multifarious sources. Information was
gathered from the following sources:-
Guidelines on Cadre Review provided by the DOPT
Recommendations of the Sixth Pay Commission and earlier pay
commissions
Structural ratios and growth avenues in other services
Meetings with IRS officers
Opinion survey of IRS, GP and GP C—Annexure A
Meetings with Senior CCsIT
Meetings with group B and C officers
Cabinet Note on restructuring
Earlier cadre review reports
Study of systems in similar organisations e.g state revenue appeals
department, advocate general setup
International best practice USA, Australia, Philippines etc
Keeping in view the information gathered as above, the present scenario,
future projections of revenue, litigation and other growth parameters the
requirement of IRS cadre in the next five years has been worked out.
Wherever feasible, growth in workload is recommended to be absorbed
through state of the art technology. Data used in this report has been
sourced from the various annual reports of the Comptroller and Auditor
General of India.
Strategic Vision
2.4.1 The overall vision of the I-T Department can be stated to be the
following:
To Promote Compliance with Direct Tax Laws through Professional & Responsive
Administration and Standardized Quality Taxpayer Services Encouraging
Voluntary Compliance.
2.4.2 Tax administration has a crucial role in determining the real (or effective)
tax system, as opposed to the statutory tax system. Maximizing revenue is only
one dimension of the task of tax administration. How the revenue is raised - the
effect of revenue-generation effort on equity, its impact on attaining economic
welfare, etc - may be equally or more important in some contexts. In fact, the
"best" tax administration is simply not that which collects the most revenues;
rather it also has to pay adequate attention to facilitating tax compliance and
oversee that the efforts of the tax administration results into an outcome
commensurate with the objectives of the tax laws.
2.4.3 While tax policy and tax laws create potential for raising tax revenues, the
actual amount of taxes flowing into the government treasury, to a large extent,
depends on the efficiency and effectiveness of the revenue administration.
Improvement in tax administration would seek to secure maximum tax revenue
effectively and efficiently given the tax rates. Thus no tax policy can be successful
unless there is an efficient tax administration. Weaknesses in tax administration
could lead to inadequate tax collections. Experience shows (including those from
other countries) that how a tax system is administered affects the revenue yield,
its incidence, and its efficiency. A weak tax administration could lead to
uncertainty and, may be, shrinkage in budgetary resource envelope, thereby
affecting the government’s ability to implement its policies & programmes and
provide public services. Thus many countries have undertaken tax reform to
adopt their tax systems to reflect changing socio-economic needs &
circumstances. So it may not be enough to do only tax policy reforms. It is
imperative to simultaneously carry out tax administration reforms so that tax
policies could be effectively and efficiently implemented.
2.4.4 The consistent rise in direct tax collections over the last few years is no
doubt due to changes in tax policy, notable among them the lowering of tax
rates, rationalizing the rate structure and broadening the tax base. But some
part of it is also due to effective reforms in tax administration with introduction
of technology bringing automaticity in digital functioning, facilitating the speedy
allotment of unique taxpayer identification number (PANs), providing facilities
for online preparation of tax returns and their filing, electronic clearing of refund
payments, launching of Tax Return Preparer Scheme (TRPS), and so on. If we
consider that the tax elasticity is 1.4, a back-of-the-envelope calculation would
suggest that close to 11 per cent increase in the tax receipts can be attributed to
the growth in the economy; economy growth being about 8 percent per year.
Since the inflation during these years has been around 6-7 per cent on an
average, the increase in tax receipts due to the efforts of the tax administration
can be roughly attributed to be around 8-10 percentage points. Thus, one-third
of the recent growth in tax collections can be attributed to the efforts of the tax
administration.
2.4.5 The question, therefore, that may be relevant in the above context is
whether this has been able to increase the voluntary compliance, which is one
of the key goals to achieve for any tax administration? Reply to this may not be
easy and would need further exploration; not only in terms of improving
voluntary compliance but also in achieving other objectives of the tax
administration like equity, transparency, predictability and certainty. Such
exploration would also enable us to define the long-term role and strategic
vision of the I-T Department . This exploration is particularly important as I-T
Department carried out a major restructuring in its administrative set up in
2001, which brought in efficiency and effectiveness in tax administration with
unprecedented revenue growth. While the present efforts at reforming the tax
administration could continue, it is time to set higher goals and establish
methods to achieve them . It is also time to think and explore how the prevalent
socio-economic limitations could be overcome to achieve at a macro level more
competitive fiscal environment - an environment which encourages investment,
risk-taking, entrepreneurship and provides increased jobs; an environment
which provides transparency, predictability and certainty with the tax
administration; an environment which lowers the cost of compliance; etc. No
doubt some of these may require reforms in tax policy, but it may not be
enough to do only tax policy reforms. Unless reforms of the administrative
dimension of tax, viz, on how the tax policy is actually implemented are not
carried out, it may not achieve the desired outcome. Periodic Cadre Reviews are
therefore necessary, and can be very effective tools for creating the manpower
structures to drive and enable effective tax administrations.
2.4.6 No tax administration can play the policeman for every potential
taxpayer. Partly for this reason, tax systems all over the world have over the
years tended to move toward a regime in which taxpayers themselves
determine and report - in other words, “self-assess”- their tax liability and pay
the amounts due without any special prodding from the tax authorities. But
such self-assessment will result in high levels of compliance only if
accompanied by actions that lend credibility to the sanctions prescribed in the
law against non-compliance. Effective tax administration requires establishing
an environment in which citizens are induced to comply with tax laws
voluntarily, while efficient tax administration requires that this task be
performed at minimum cost to the community. This may not be a simple task.
2.4.7 The task is particularly difficult in India with large informal sector, low level
of literacy and public morality, etc. Despite such handicaps, recent experience
shows that substantial improvement can be achieved with determined effort
and an appropriately designed strategy. Facilitating compliance have so far
involved improving services to taxpayers by providing them clear instructions,
understandable forms, and assistance (such as tax preparers and help-lines) and
information as necessary. Simultaneously, monitoring compliance has also been
part of the strategy. This monitoring compliance mechanism has been non-
obtrusive and intended to promote “voluntary” compliance. These monitoring
compliance mechanisms include establishment and maintenance of taxpayer
accounts, management information systems covering both ultimate taxpayers
and third-party agents, such as banks, i-tax intranet to detect and follow up on
non-filers and stop filers, etc. A judicious mix of both these measures -
facilitating compliance and monitoring compliance, as well as additional
measures to deter non-compliance such as establishing a reasonable risk of
detection may be an ideal approach to maximize their effect on compliance.
The Revenue’s Compliance Pyramid would show that the general strategy for augmentation
of Revenue in India cannot be very different from this Revenue compliance pyramid
borrowed from the Australian Tax Office. We need to encourage those taxpayers who are
well informed and willing to comply; educate and support those who are resigned and
uninformed; persuade those who are resistant; and show our enforcement might on those
who simply refuse to comply.
2.4.10 The vision of the I-T Department emphasizing the responsive and professional
delivery of quality taxpayer service by strengthening, creating and separating existing
structure towards that end. This is intended to promote voluntary compliance, without
compromising on the role of enforcement. It needs to be re-emphasized that both sides
have equal importance as there is a “feedback effect” between “encouraging voluntary
compliance” and “enforcing compliance”. But to achieve that there is need to create new
support structures in alignment with people, process, technology and business so that a
robust and responsive administrative structure takes shape. But this is not at the cost of
strengthening the existing core and support functions with proper emphasis on neglected
core areas. One such area which may deserve mention here is the area of research. I-T
Department has had a structure for research and data collections, given that it needs to
continually explore new and emerging economic activities for devising appropriate law for
their inclusion into the tax net. This research and data collections is not only in terms of
formulating tax policy but also for creating a tax administration structure (creation of
transfer pricing structure is one such example).
2.4.11 The opportunity of cadre review this time is to build on the 2001 cadre restructuring
exercise. The restructuring gave an organizational structure which has delivered on the
enforcement compliance – more of “front-line” compliance functions, even though, as
would be seen from the succeeding portions of this report, the substantial growth in
workloads, information and challenges have severely stretched the resources of the
Department cadres. The natural requirement therefore would be for this exercise to
strengthen both “front-line” functions and “back room” functions, without compromising on
the gains so far along with strengthening the corporate support functions. Such exercise
would in a way strengthen the palm and the fingers, instead of fingers alone so that the
delivery of I-T services to the taxpayers is professional, standardised and of good quality.
2.4.12 In its broad sense, a cadre review encompasses such operational tasks as actual
recruitment, training, placement, etc. and attempts to bring about congruence between
functional needs and legitimate aspirations of the members of Services. It has been
observed that the proportion fixed for promotion and direct recruitment in the various
cadres were not adhered to strictly with the result that interests of the departmental
officers in some cadres and direct recruits in some other cadres were affected adversely.
In view of the deficiencies in the management of the various cadres, the Administrative
Reforms Commission recommended that "for all service advance projection should be
made of the requirements of personnel for 5 years at a time" and that these should be
followed by mid-term appraisals where circumstances warrant it with a view to making
necessary correctives. It was felt that a permanent machinery should be set up for a Cadre-
review every three years to make cadre management and review an ongoing exercise so as
to gear up for the future challenges.
Restructure the cadre as to harmonize the functional needs with the legitimate career
expectations of its members taking into account the relative deprivation vis-a-vis
other services
The analyses employed in the review that follows include analysis of structural ratios and
threshold analysis.
3.1.2 From the table above, it can be seen that the workload has been steadily
increasing and has reached 319.73 lakhs in the year 2006-07 (the latest year for
which C&AG figures are available). It can also be seen that from a level of 8.00%
scrutiny in 1997-98, the percentage of cases selected for scrutiny has fallen to
1.65 in 2006-07. It has been found that as a result of examination of returns,
majority of the additional tax demand raised relates to incorrect/fraudulent
claims made by taxpayers. It is apparent from the table that whenever the
Department has increased the scrutiny workload, it has been able to collect more
regular tax in subsequent years. This is because the assessments are completed in
the month of December of March and the tax on the demand raised is collected in
the subsequent financial year. Such wrongful claims can be detected only if a
sufficiently large proportion of returns is subjected to scrutiny. The present level
of scrutiny (1.65%) is too low. If more than 98% of returns are accepted without
examination this would encourage a feeling among tax payers that they have a
high probability of escaping detection if wrongful claims of deduction are made in
their returns. The figures in column 7 of the Table above shows that there is a
decline in the contribution of tax collected on regular assessment in relation to
the total tax. While this may indicate an improvement in tax compliance by the
assessees, it is also indicative of the fact that the department’s ability to curb
leakages of revenue is severely compromised due to manpower constraints.
Another disturbing trend is that a large number of taxpayers, who had filed
returns in the past have stopped doing so. This anomaly needs to be investigated
and such stop filers identified and notices issued to them to bring them back
within the tax net. Failure to do so results in very large loss of revenue. In 2006-07
the direct tax revenue was Rs 230,181 crore. On a base of 3.19 crore assessees
during this year, the average amount of tax paid by each taxpayer amounted to Rs
72,157/-. Hence the tax lost during the year due to failure of 16,89,901 assessees
to file their returns and pay tax would amount to a staggering Rs 12,193.82 crore.
It is therefore of utmost importance that speedy action the initiated to redress
this situation.
TABLE 2
Disposal of Workload
1 2 3 4 5 6 7 8 9
Year Scrutiny Disposal % Scrutiny Processing Disposal % Process Total Disposal
Workload during the Work- Workload during the ing Workload during the
year load year Work- year
disposed load
disposed
99-00 553,637 316,223 57.12 268,46,956 140,43,850 52.31 274,01,593 143,60,073
00-01 360,141 225,730 62.68 310,46,331 186,33,110 60.02 314,06,472 88,58,840
01-02 217,450 168,010 77.23 365,08,234 198,58,558 54.67 367,25,774 201,26,568
02-03 894,415 172,410 19.28 369,00,040 337,92,795 91.58 377,94,455 339,65,205
03-04 338,275 197,390 50.83 269,78,376 213,80,490 79.25 273,66,651 215,77,880
04-05 439,258 210,866 48.00 262,98,066 204,92,965 77.93 267,37,324 207,03,831
05-06 425,225 230,698 54.25 328,21,007 226,49,070 69.00 332,46,232 228,79,768
06-07 527,005 241,983 45.92 314,45,896 209,98,629 66.78 319,72,901 212,40,612
3.1.5 At present (as on 31.03.2008) there are 336,62,802 registered tax payers in
the country which is roughly 3% of the population. A number of factors together
have the effect of keeping large sections of the population out of the tax net.
Some of these factors are non-taxability of agricultural income in a primarily
agrarian economy, demographic profile of the population, high exemption limit
relative to per capita income, etc. However, even allowing for such factors, there
is considerable scope for further widening of the tax base. If the tax base is
widened, it follows that the revenue of the government would be enhanced while
at the same time the burden on each taxpayer can be reduced.
3.1.6 Studies have shown that there exists a gap between the income reported in
the I.T. returns and the national income estimates. For example, a study
conducted by the National Council for Applied Economic Research (NCAER)
examined the income distribution of households in India during 1995-1996, 2001-
2002 and 2005-2006. A comparison of NCAER figures with the I.T. Department
statistics reveals the following:
Income Range Financial Year 2001-02 Financial Year 2005-06
(in Rs )
NCAER (No. of Income tax (No. of NCAER (No. of Income tax (No. of
households) individuals and households) individuals and
HUF) HUF)
3.1.7 Although the comparison cannot strictly be made between households and
individuals, considering the fact that even a household having income upto Rs 5
lakhs may not have any income-tax liability, if the income is earned by two or
three members such that they are each below the taxable limit. However, this is
not likely to the case in respect of households having income of Rs 5 lakhs or
more. Yet it can be seen that the department’s ability to capture the taxable
entities has declined from 49.79% in 2001-02 to 39.65% in 2005-06.
3.1.8 Another study conducted by the Indira Gandhi Institute of Development
Research has estimated the black money in the country at 18.21%. This implies
that incomes of the order of Rs 8,58,264 crore are not accounted for, and
consequently there is a tax gap of approximately Rs 1,71,653 crore (assuming
taxation at the median rate of 20%). The potential tax loss thus amounts to more
than 50% of the tax actually collected during 2007-2008. Department’s ability to
curb tax evasion is positively correlated to the manpower available for
investigation, intelligence, assessment, etc.
3.2 New functions / Schemes likely to be undertaken.
In addition to the normal assessment work, the department is faced with the
challenge of tackling complex issues relating to taxation of e-commerce, mergers
and acquisitions, special economic zones, international movement of capital, off-
shore transactions, etc. As a result, the pressure on the available manpower is
enormous. It is evident that with the existing manpower it is becoming impossible
to handle the workload. The number of officers available for assessment has not
kept pace with the growth in the number of assessees, revenue and complexity of
tasks.
3.3 Requirement of additional manpower in ASSESSMENT
Function/Division
3.3.1 Circles and Wards are manned by Assessing Officers at the level of Assistant
Commissioner/Deputy Commissioner in Circles and ITOs in Wards. Assessment of
correct income of tax payers is the primary function of the Assessing Officer.
Besides assessment function, the Assessing Officers are also charged with
responsibilities in various other areas as well. This includes recovery of tax
demand raised consequent to assessment made, processing of returns in all cases
even where not selected for scrutiny, dealing with audit matters and other
commitments made by the Department to the taxpayers in its Citizen’s Charter
etc. In addition, a large amount of judicial work has also to be performed by the
Assessing Officer. Appeal effects have to be given to the orders passed by the
Commissioner (Appeals) and the ITAT. A scrutiny report of such appellate orders is
also prepared for enabling the higher authorities to take a view as to whether
further appeal is to be filed against the appellate orders. This requires deep study
of the file and the legal and factual issues involved. In case appeal is to be filed,
completion of various procedural requirements must be ensured and
Departmental Standing Counsel properly briefed. Apart from this, the AOs must
participate in surveys and searches, which take up a lot of time. Further, work
relating to Fringe Benefits Tax (FBT) returns and assessments, Securities
Transaction Tax (STT), Parliament Questions, MIS reporting, etc. also require
attention.
Workload Management Approach
3.3.2 The more time is available to the AO for examining the returns, books of
accounts and other documents relating to a case picked up for scrutiny, the more
accurate assessment of taxable income would be possible. It is therefore
internationally accepted that the Assessing Officer must not be burdened with un-
manageably large number of assessments, as this proves to be counterproductive
since proper scrutiny cannot take place due to paucity of time. About 150
assessments in a year have been felt to be the maximum an AO can be expected
to handle without losing control over the entire gamut of functions he is required
to perform. Table below shows the work load of scrutiny assessments since 2001-
2002 to the present, and the projection for the year 2013-2014:
Year No. of No. of Assessee Scrutiny Scrutiny
assessees AO per AO Workload workload per
AO
2001-02 262,26,000 3,616 7,253 217,450 55
2007-08 336,62,802 3750 8977 527,005# 141
2013-14 430,88,640 3750 11490 861,773* 230
3.3.3 From the table above it can be seen that the Department is constrained to
keep the percentage of scrutiny assessment/audit at a very low percentage at
1.65% so as to maintain the per Assessing Officer figure of scrutiny assessment
below 150. This is, however, at the cost of reduction of ‘tax gap’ in respect of a
large number of taxpayers. The Government insists that a minimum scrutiny
percentage of 2% should be maintained by CBDT to optimize collection of regular
taxes and to reduce tax gap in a large number of cases. While maintaining scrutiny
at 2% has been difficult even at the level of present workload, the same is likely to
become much worse in the next 5 years, given that the number of taxpayers is
expected to grow even further.
3.3.4 With increase in computerization and the benefits of technology induction,
the future rate of growth, both in number of tax payers and revenue would be
higher than in the past. Even assuming the historical growth rate between 2001-
2002 to 2007-2008, the number of taxpayers is expected to grow 1.28 times to
430,88,640 in 2013-2014. Similarly, revenue has grown 4.55 times from Rs 69,198
crore in 2001-2002 to Rs 3,14,468 crore in 2007-2008. Similar rate of growth can
yield revenue of Rs 14,30,829 crore in 2013-2014. If the number of Assessing
Officers remains unchanged, the assessees per AO would increase to 11490 and
the scrutiny workload would increase to 230. No department can function under
such punishing workload. The efficiency and effectiveness of the department is
bound to suffer, and certain proportion of income would inevitably escape
detection/assessment. It is imperative that the number of AOs be augmented.
Based on the norm of 150 scrutiny assessments per AO the additional
requirement of AOs in 2013-14 would be as follows:
No. of scrutiny assessment for disposal 861,773
No. of Assessing Officers 3750
No. of Assessing Officers required for disposing scrutiny workload @ 150
5,745
assessments per AO
Additional requirement of 1995
(a) AO of which,
1 Inspector 3724
2 STAs/TAs 7714
3 Stenos/DEOs 1948
Total Direct Taxes 68.3 69.2 83.2 105.1 132.7 165.2 230.2 314.4 337.00
Even if some of the growth in Direct tax collection is attributable to growth in the
economy and the price index as well as increased efficiency, growth of 460% in
direct taxes collection since the time of last cadre review should mandate at least
doubling of the existing strength. This will lead to an increase of 4192 officers in
the cadre strength of IRS alone and an overall increase of approximately 61000
officers and staff in the Income Tax Department as a whole.
3.3.7 In another exercise, requirement of additional manpower on the basis of
PANs allotted was also worked out. Growth chart of PAN allottees is as follows:-
IT is observed that total number of PAN allottees has gone up to 700 lakhs in the
year 2008-09. All these PAN allottees are potential taxpayers and a majority of
these allottees will actually start paying tax in the next few years. If the number of
PAN allottees is deemed to be a precursor to their conversion to taxpayers in next
3 to 5 years, then it will be safe to assume that number of taxpayers in the year
2013-14 would have increased to 700.37 lakhs. As per the prescribed norms in the
last cadre review wherein one post of administrative CIT was created for every
one lakh taxpayers, 700 posts of administrative CITs will be required in the year
2013-14. Thus, an additional 448 posts of administrative CITs would need to be
created under this model. In accordance with the prescribed staff strength for a
model Commissionerate, this will also result in creation of 1344 additional posts
of Range heads in the grade of Additional/Joint CIT, creation of 6720 additional
posts of Assessing Officers in the grade of DCIT/ACIT/ITO along with creation of
12544 additional posts of ITIs, 25984 additional posts of TAs/STAs and 6563
additional posts of Stenographers /DEOs.
3.3.8 In each of the three scenario, the number of additional manpower required
to handle the increased workload and cater to the expected level of taxpayer
services is very large. The following table summarises the number of additional
posts required at different level of IRS officers, Group B officers and support staff
as well as the financial implication (per annum) involved with these additional
posts:-
Total
The Proposal
3.3.7 The three models discussed above were resulting in an inordinate increase
in the cadre strength on the assessment side. Such an increase would place a
huge financial burden on the Government. The Committee has, however,
followed a policy of not creating additional posts in the higher grades. Instead,
posts in the higher supervisory grades have been given additional responsibilities
and suitably upgraded. This process also automatically addresses the existing
anomaly in the IRS cadre where no posts exist in the highest two grades of HAG+
and the Apex Scale. Additional posts have only been created in the grade of CIT
and lower grades. While working out the revised cadre strength, the span of
control of Range heads has been increased by giving six Assessing Officers to a
Range as against the present five and the number of taxpayers per Range has
been increased to 48900 as against 33000 at the time of last restructuring. This
will result in increased work for all the higher posts as well since the existing
norms of 3 Ranges to a Commissionerate are not being diluted despite a
substantial increase in the number of taxpayers which. The span of control of
administrative Commissioners will increase from 21 Group A or B assessing
officers/supervisors to 24 Group A or B assessing officers/supervisors. The
number of taxpayers per administrative Commissioner will increase from 100,000
to 146,724 at the present and to 188,200 in 2011-12. If the earlier formula of 1
CIT per one lakh taxpayers had been followed, it would have entailed doubling of
the existing number of administrative CIT to 504.
3.3.8 Jurisdiction of CCsIT is also being substantially enhanced with 3.03
administrative Commissionerate as against 2.6 at present and 3.03 Commissioner
(Appeals), as against 2.6 at present. The Chief Commissioner will now be
responsible for 442,300 taxpayers as against 300,000 taxpayers earlier, which will
further go upto 569,600 taxpayers in 2011-12.
3.3.9 Cadre Controlling CCsIT – In addition to the sphere of control of 6.06 CsIT
and 72 group A and B assessing officers/supervisors as proposed for other CCsIT,
the Cadre Controlling CCsIT (Principal CCsIT) has also been made responsible for
CIT(TDS) (supervising 21 Group A and B assessing officers/supervisors); CIT(Audit)
(strength of ___ Group A and B officers); CIT (Helpline); CIT (Hqrs), CIT(Judicial)
and CIT (CO). The Cadre Controlling Chief Commissioner (Principal Chief
Commissioner, as proposed) is also responsible for cadre management of all
Group B, C and D posts in the entire region.
3.3.10 Further, CCIT (CCAs) /(Principal CCsIT) have control over the entire cadre, spread
usually over more than one state. For example, the CCIT (CCA) (Principal CCsIT) / of North-
West Region would have oversight and administrative span of control over five states, i.e.,
Punjab, Haryana, Himachal, UT of Chandigarh and J&K. The same geographical area will
have five DGPs from the Police and five PCCFs from Forest Service. Similar will be the case in
the North-East Region. In fact, barring two regions, in every other region, the CCIT. (CCA)
/(Principal CCsIT)’s span of control would extend beyond one State. Similar would be the
case with DGIT (Inv.).
The CCIT (CCA)/ (Principal CCsIT) would oversee vigilance, establishment, finance,
deployment of manpower, staff unions interface and other matters relating to
administrative and financial control in respect of the cadre for the entire region. The CCIT
(CCA)/ (Principal CCsIT) would also coordinate for their region with the CBDT as the CBDT
very often interacts with the field formations only through CCA’s.
Hence, the role and functions of the Principal (CCA) and DGITs would be functionally distinct
and separate from those of other CCITs, involving higher and expanded levels of
responsibility as already discussed in the foregoing paragraphs.
Creation of these additional posts will need to be done in a staggered manner so
that all this manpower is in position by 2013-14. The revised number of posts for
assessment division is accordingly recommended as under:-
Gone are the days when the data was stored in files and registers. Today is
the era of computers, which have revolutionized the data storage
procedures. The computers can store huge data in a single small chip,
safely ensconced away from the eyes of the taxmen. With new ready to
use softwares being available, and accounting procedures also being
revamped, computers are being rampantly used everywhere for the day-
to-day functions and data storage for their ease of operations and hassle
free working. The Investigation Wing is ill equipped, both in terms of
manpower and technical ability, to analyze the data contained in digital
form.
Searches confined to major cities whereas heavy growth/potential
growth has also spread to midsize cities where scale of evasion is high.
With the opening of economy, and saturation of metros, it is seen that
development has shifted to midsize cities with all big business houses
setting up offices in these areas to cut down their costs as well as to reap
the benefits of infrastructure development. However, inspite of their
potential, the Investigation Wing is either non existent in these areas or is
woefully short of resources. Thus, tax evasion in these areas is high for
want of effective vigilance machinery.
New channels of information – volume of AIR, FIU, CIB, BCTT, TEP
In the recent times, new channels of information have come up, which
regularly send huge information on the investments, and potential tax
visionary practices. Annual Information Return (AIR) of ‘high value
financial transactions’ is required to be furnished under section 285BA of
the Income-tax Act, 1961 by ‘specified persons’ in respect of ‘specified
transactions’ registered or recorded by them during the a financial year.
The CIB charges are entrusted with the responsibility of receiving and
disseminating the voluminous information contained in the AIR.
The BCTT was levied through Fiance act 2005, and accordingly the Union
Cabinet had sanctioned 7051 additional posts for this work. The scheduled
banks were required to furnish a retrun giving information relating to
taxable banking transactions. These retruns contained valuable
information for tracking unaccounted expenditures, investments etc made
out of cash withdrawals from bank accounts. However, the BCCT is being
repealed wef 1/4/09.
India established the Financial Intelligence Unit, India (FIU-IND
www.fiuindia.gov.in) on 18 November 2004, which reports directly to the
Economic Intelligence Council headed by the Minister of Finance,
Government of India. The FIU-IND receives and analyses cash and
suspicious transaction reports and disseminates valuable financial
information to intelligence and enforcement agencies and regulatory
authorities in India and foreign financial intelligence units. It also
exchanges information with foreign financial intelligence units in respect
of suspicious transactions. However, in spite of the vigilance machinery in
place, hawala transactions are on the rise, and are being transformed
from simple to complex ones.
TEPs and CIB charges also contain voluminous information on tax evasion
and investments. However, due to limited manpower available to the
Department, the information contained is not being unlocked for effective
monitoring.
3.6.2 This division will function under DGIT, NADT, Nagpur and will be headed by
an officer of the rank of Director(Systems) in the pay band of Rs. Rs 37400-67000
with grade pay of Rs 8900. The main functions of this Division would be as under :
(a) to ensure necessary hardware/software infrastructure at NADT, RTIs
and MSTUs
(b) to ensure availability of necessary training material at each Training
site.
(c) to ensure availability of latest ITD application software at each Training
site.
(d) to ensure that the trainers at all the levels have up-to-date knowledge
of the software.
Further, the post of ADG in NADT is proposed to be upgraded to the level of Sr.
CIT as they perform an important role in coordination of the training activities
across various RTIs. Six additional posts of Jt./Addl.DITand six posts of DDIT/ADIT
are also proposed to be created.
3.7.1 Every Organised Group A cadre has Reserve for officers posted on
Deputation, those on Leave and those on Training and Probation. The prescribed
ratio in IAS for these Reserves is as under:-
Deputation Reserve 20% of posts in STS and above
Leave Reserve 3.5% of posts in STS and above
Training & Probationary Reserve 16.5% of posts in STS and above
The IRS Cadre does not have any Reserves at all at present . This is a totally
unacceptable situation.
The absence of Reserves in various cadres under the administrative control of
various central Ministries and the need to rectify the situation was one of the
“raison-d’être” for making the process of cadre review an essential feature of
cadre management and planning in Government after a Study Team on
Personnel Administration. (Personnel Planning etc.) (1967) (1) had pointed out
certain deficiencies in the management of cadres under the administrative
control of various central Ministries. For instance, the Team observed that no
deputation reserves were provided for in a large number of cadres and where
they had been provided for, they proved to be chronically inadequate. It further
pointed out that the provision made for training and leave reserves was equally
unsatisfactory. Since no cadre could be considered viable without an adequate
provision for various reserves, the Study Team recommended that reserves of
suitable proportions should be built into every service/cadre. This also found
mention in the recommendations the Administrative Reforms Commission in its
Report on Personnel Administration released in 1969 which impressed upon the
need for cadre reviews and further, such reviews to include the element of
Reserves.
It is in the light of the above and the various existing guidelines on the nature
and strength of reserves that the various reserves have been proposed for the
Cadre.
1: Probationers Reserve
Direct recruits to the IRS are normally given initial training for a period of 18
months . The posts against which they are shown during the training period,
which includes post-entry institutional as well as on-job training is required
to be shown separately as probationers reserve. As the period of training of
a probationer is one and a half years, the size of probationers reserve would
be equal to 1.5 times the size of one batch of direct recruits. Further, as the
size of recruitment to the IRS varies from year to year, the maximum
recruitment in one year , i.e. of 150 that is the probationers who joined in
December 2008 is being taken as the basis for determination of size of
reserve, which is being proposed as 225.
Deputation Reserves: Over the last few years the number of officers from
IRS who have been on Deputation has hovered at around 200, even though
there are a large number of organizations where the expertise of the officers
is required given their specialization in taxation and financial matters, and a
large number of officers cannot be released for deputation in spite of their
being suited for the same and in spite of demands from Government
organizations because of the total absence of any reserves in the Cadre.
Keeping in view the existing instructions in the matter, the Cadre size, the
needs of the outside (or ex-cadre) agencies for the services of IRS officers ,
having regard to the experiences and expertise developed, and the need
that reserves should bear a reasonable proportion to the duty posts in the
cadre, the number of deputation reserve is being pegged at 250.
ii) Training and Leave Reserve: The IRS being a technical service, dealing with a
gamut of specialized functions requiring continuous skill upgradation through
training, the need for adequate training reserves cannot be overemphasized.
Based on the above need that has been elaborated elsewhere in this report, the
Training reserve is being pegged at 422, and Leave Reserve at 42 related to its
actual utilisation.
3.7.2 The absence of any Reserves at present is against the established norms.
In fact, CAT, Lucknow Bench in their decision dated 10.01.208 in OA 123/2003
had directed that the rules of IRS should be so amended so as to provide for
Reserves and other factors on par with other All India Services/ Central Services.
This issue has already been taken up in the ongoing revision of RRs that is
presently in an advanced stage of consideration. In the interregnum, some posts
would be needed so as to immediately address the mismatch between the
requirements and availability of manpower in the Department. The Committee
accordingly recommends that reserve of following post should be created for
the cadre:-
Deputation Reserve = 7% of posts in STS & above = 296 posts
Training Reserve = 10% of posts in STS & above = 422 posts
Leave Reserve = 1% of posts in STS & above = 42 posts
1 CIT/Equivalent 167
3 Additional/Joint 283
CIT/Equivalent
4 DCIT/ACIT/Equivalent 588
5. ITOs 1826
6 AOs 250
7 Inspectors 3002
8 DPAs 308
9 STA/TAs 3002
TOTAL 8965
4 INTER-SERVICE COMPARISON
4.1 Threshold analysis - One of the major objectives of a cadre review
exercise is to “bring about congruence between functional needs and
legitimates aspirations of the members of a Service.” The manpower
requirements of the Indian Revenue Service based on functional aspects
have been examined in Chapter-5 earlier. In this Chapter, we examine the
position of the IRS in relation to other organised Group A Services, with
special reference to Central Services.
The Fifth Central Pay Commission, while dealing with the model cadre
structure for Group A Services, recommended the following timelines for
promotion to various levels:
STS 4 yrs
JAG 9 yrs
NFSG 14 yrs
SAG 17 yrs
HAG 25 yrs
As per the Recruitment Rules of the Indian Revenue Service, the following
eligibility criteria for promotion to various levels have been prescribed:
4.5.1.10 There is an acute stagnation at all levels in almost all Cadres of the
Directorates. Each Cadre has its own Recruitment Rules for Group ‘B’, ‘C’ & ‘D’
posts and there is no provision of inter-charge transfer between them. As a result,
once a person is appointed in a particular Directorate, he has to remain in the
same Directorate during his entire length of service. Apart from blocking the
scope of upward mobility, working in the same office for a long time also results
in monotony and loss of interest in the official duties. This monotony can be
broken if the staff and officers of the Directorates are allowed to move between
the Directorates on Inter-charge transfer.
4.5.1.11 The other problem being faced by the new Directorates emanate from
acute shortage of manpower. The staff strength for the new Directorates has
been provided by CCIT, Delhi. In the case of three Directorates posts required for
functioning of the Directorates were sanctioned, while the others are drawing
staff from the existing cadre strength of the CCIT, Delhi. It has not been possible
for CCIT, Delhi to provide full component of staff to these Directorates due to
various constraints.
4.5.1.12 A Committee was set up by CBDT under the Chairmanship of the Director
General of Income Tax (Admn) for restructuring of the Directorates attached to
CBDT. The Committee, after examining the Recruitment Rules and the eligibility
criteria/qualifying service etc. for promotion to different levels found that the
Recruitment Rules do provide for two or more promotions during the career of an
employee subject to availability of vacancy. The Committee found that the
employees of these Directorates as per their eligibility have been extended the
benefits of the Assured Career Progression Scheme which grants financial
upgradation only, but does not extend regular promotion as the same in linked
with occurrence of vacancy. As such, the problem of stagnation faced by the
employees of the Directorates continues. The Committee considered various
measures to overcome this problem of stagnation and decided upon the strategy
of restructuring to provide better avenues for promotion. The Committee was of
the considered view that various cadres of the Directorates need to be
restructured and merged in order to provide better promotional avenues to the
employees.
4.5.1.13 The Committee was of the view that the cadres of the Drivers and
Stenographers did not require any restructuring as these cadres were already
restructured in accordance with DOP&T (Estt. 'D') O.M. dated 15.02.2001 and
11.04.2001. However, after restructuring, separate cadres of the Stenographers in
different Directorates will also merge to form a single cadre. It would improve the
promotional scenario for this cadre also. The cadre of drivers already stands
merged.The Committee noted that there was acute stagnation in all the cadres of
the Directorates. Further, it noted that stagnation was not on account of non-
availability of eligible candidates for promotion to higher grades but on account of
shortage of vacancies in the higher grades. The Committee, therefore, was of the
view that only amendments to the existing set of Recruitment Rules of various
grades would not succeed in removing stagnation. Creation of better promotional
avenues by restructuring the cadres will provide opportunities for promotion.
4.5.1.14 The Committee noted that in some of the Directorates the cadre strength
was very small because of which adequate promotional avenues did not exist and
even by restructuring such small cadres, not much would be achieved. The
Committee, therefore, recommended that the single cadre control for all the
Directorates be created by merging the respective cadres followed by
restructuring of these cadres on the broad pattern adopted in the Income-tax
Department. The cadre control of the merged cadre could be with DGIT (Admn). It
was noted that this may be a feasible proposition. In case of creation of unified
cadre control of the Directorates the promotional avenues would get increased.
4.5.1.17 The office of DG (Inv) Delhi is an attached office of the CBDT. It has
separate cadre strength of its own which is supplemented by the staff from the
office of CCIT, Delhi. However, all the other Directorates of Investigation in the
country are subordinate offices, not attached to the CBDT. The members of the
Committee were of the view that this is an anomalous situation. The Committee,
therefore, recommended that the office of DG (Inv) should be a subordinate office
of CBDT. In its place the newly created offices of Directorate of Vigilance,
Infrastructure, HRD, Directorate of L&R and BPR may be given the status of
attached offices.
4. Superintendent Junior Sr. Technical Assistant PB-2 50% by way The post of
Rs.9300 of Superintende
-34800 promotion nt (Jr.) may
with Gr. from UDC be merged
pay of and 50% by with the post
Rs.4200 way of of Sr.
Direct Technical
Recruitment Assistant
4.5.1.19 After restructuring, direct recruitment quotas have been fixed in the
grades of TA (Rs.4000-6000) and Inspector (Rs.5500-9000). Similarly, in the
Directorates also, there should be provision for induction of direct recruits (DR) in
the grade of Assistant (Rs.5500-9000). At lower level, DRs may, as of now,
continue to enter the grade of LDC. Induction of DRs at the level of Assistant is
necessary to man posts at higher levels as LDCs cannot be expected to raise up to
the level of Sr. A.O.
4.5.1.20 The post of DGIT (Admn.) is in the rank of Addl. Secretary to the
Government of India. The Cadre Review Committee is elsewhere recommending
that this post should be upgraded to the level of Secretary to the Government of
India. While it would be appropriate to merge all the cadres in the attached
Directorates of Income Tax to form a combined cadre under DGIT (Admn.), he will
still need assistance of an HOD and his Secretariat to function as Cadre Controlling
Authority. Since DIT (PR PP & OL) is the largest Directorate in terms of manpower
and resources and has its own administrative unit, the DIT (PR,PP&OL) can be
designated as HOD and his administrative unit can provide the Secretariat for the
combined cadre.
4.5.1.24 In Directorates like L&R and HRD where services of ITOs are required,
these posts may be designated as AAD and these may be filled up on deputation
basis from amongst the ITOs. In other Directorates, these posts may be converted
into AO Grade II (at present AADs) to be filled up on promotion by secretarial staff
of the Directorates. Similarly, wherever required, the post of Inspectors may be
converted to STAs. This would bring parity of designations between the old and
the new Directorates and ensure smooth transfer of manpower from one
Directorate to the other.
4.5.1.25 The posts of Addl. Asstt. Director and Private Secretary are group ‘B’
gazetted posts and therefore, these posts should be put in higher pay scales. The
Sixth Pay Commission had recommended that where it is not feasible to merge
the pay scale of Rs. 5000-8000, 5500-9000 and 6500-10500 on functional
consideration, the posts in the pay scale of Rs. 5000-8000 and 5500-9000 should
be merged, with the post in the scale of 6500-10500 being upgraded to the next
higher grade in pay band PB-2 i.e. to the grade pay of Rs.4600 corresponding to
the pre-revised pay scale of 7450-11500. This needs to be implemented.
4.5.1.26 Four Directorates in DG (Systems), two in BPR and one each in
L&R and TDS do not have any sanctioned post of subordinate officers. 25
posts of subordinate officers (up to AAD level) need to be created for
these Directorates as per the chart given below:-
2. PS 1
3. AO 1
5. O.S. 2
6. Stenographer 4
7. Sr. T.A. 1
8. T.A. 4
9. Daftary/Peon 5
Total 25
2. PS 1
3. AO 1
5. O.S. 2
6. Stenographer 4
7. Sr. T.A. 1
8. T.A. 4
9. Daftary/Peon 5
Total 25
4.5..1.34 With the adoption of a new approach i.e. centralised processing and
consolidation of databases, certain activities of the Regional Computer Centres
and Computer Centres, particularly basic operations, are done away with while a
few other specialised technical jobs are included. Moreover, as a result of
outsourcing of some of the activities to intermediaries like NSDL and UTISL
coupled with the engagement of various service providers viz System Integrator,
Network Services Provider and Data Centre Service providers, there is a
paramount need to put in place appropriate management, monitoring and
evaluation mechanism to achieve optimum functional efficiency as also to ensure
the security of database and network. Thus, it will be necessary for the
Department to have a strong and capable EDP force which could shoulder the
responsibility of privacy and safety of this classified and confidential data of
National importance in order to keep away every potential threat; be it from Man
or Machine.
4.5.1.35 Total number of additional posts required in the EDP cadre is as under:-
5. SUMMARY OF RECOMMENDATIONS
o Introduction of the Apex Scale and HAG+ Grade in the with 42 post
being created in two Apex Scale of Rs. 80,000 (fixed) and 74 posts
being created in the HAG + Scale of Rs. 75,500 – 80,000 along with
simultaneous abolition of 116 posts in HAG grade (PB-4 plus Grade
Pay of Rs. 12,000).
o Status of Administrative Commissioners of Income Tax to be
elevated to HAG (PB-4 plus Grade Pay of Rs. 12,000) Higher status
for the posts of DIT(Inv.); CIT(Central); DIT(Training); DIT(Vigilance);
DIT(Int’l Taxation) [to be redesignated CIT(Int’l Taxation)] as well.
346 posts to be placed in this higher grade.
o No change in the status of other posts.
o Additional posts to be created on functional considerations in other
grades as under:-