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Too Straight Too Fast

Hasmukh Adhia’s punitive push for reforms gets stressed taxmen into a mutinous mood

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Too Straight Too Fast
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The Minor Mutiny

  • A protest resolution is passed by Mumbai-based IRS officers on July 22 over punishment transfer orders to two senior members and ­interference of Department of Revenue (DOR) in operational matters
  • The punishment transfer was on account of demands made on the state-run SBI to pay up advance tax to help bridge the shortfall in ­revenue collection
  • Pushing to meet revenue targets, the DOR had been holding weekly int­eractions with field staff, which was perceived by tax officials as overstepping and undermining the Central Board of Direct Taxes (CBTD)
  • On July 31, the Joint Council of Action, representing different tax workers’ cadres, got assurance from the Finance Minister of early action on their grievances. After that, the protest was withdrawn
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  • In October 2015, the IRS officials held a one-day strike to protest ­service conditions, including delay ­in promotions and disparity in pay compared to other services

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They’re calling it the Group-A Mutiny from Mumbai. An unp­recedented protest by a section of bureaucrats—Indian Revenue Services officers—last week was the first sign that not all are enamoured by the Narendra Modi government’s style of functioning. This is the first challenge to the narrative that “Modi might make bureaucrats work hard, but he has their support in getting things done”.

What is even more significant is that, in this instance, the target of ire was revenue secretary Hasmukh Adhia, a 1981 batch Gujarat cadre IAS officer who is the eyes and ears of Narendra Modi. This proximity stems from Adhia having worked with the then Gujarat CM Modi as principal secretary between 2004-06. Adhia was among those handpicked to work at the Centre as part of Modi’s core team.

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Punishment transfer orders issued to two senior IRS officers in Mumbai recently sparked off protests, which quickly found support from others in the service. The finance minister, who had initially taken a critical view of the transgression of central services rules by the protesting officers, agreed to hear them out. The outcome of the FM’s intervention is that Adhia has agreed to stop his weekly interaction with tax officials in the field, a practice that was started to help the government achieve its ambitious revenue collection targets. New CBDT chairperson Rani Singh Nair has taken charge of field monitoring. Also, with the punishment transfer orders having been kept in abeyance, the IRS off­icers in Mumbai have stopped wearing black badges of protest.

A question that arises is whether Adhia, who has a reputation for strictly following the rule-book and delivering on official targets, had erred in taking disciplinary action against the senior officers. They had raised a demand of Rs 10,000 crore as advance tax against the State Bank of India (SBI) on March 30, 2016, a day ahead of the fiscal year closure. The SBI paid Rs 4,900 crore. Only Rs 1,200 crore was taken into consideration, however, and a penalty of Rs 5,800 crore was levied for non-payment of full dues. Acc­ording to sources, on April 1, two days later, a rectification order was passed by the officer concerned for refund of amount—Rs 9,500 crore—to SBI.

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While income-tax officials see the above incident as ‘standard operating practice’ or an accounting issue, a former revenue secretary dubs it as an instance of “targetitis”. But the action initiated by Adhia is being questioned too. “Where is the loss to the government or enrichment of any ind­ividual or complaint of harassment or wrongdoing? It was just an accounting issue,” says Jayant Misra, secretary general of the IRS Association.

In fact, it is this accounting or book-­keeping jugglery to show higher revenues to meet the government tax revenue targets that Adhia objected to. There are many who support Adhia’s attempt to curb a practice that has been in vogue for more than a decade. Ironically, the buzz is that in March 2015 a call from the finance ministry had made the SBI help the government considerably bridge the revenue deficit. This year in March, sources claim the tax officials merely followed up the ministry lead.

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As a former bureaucrat puts it, “In the last 15 years or so, to achieve the tax target, it had become a norm to apply pressure on individuals, businesses and public sector enterprises between March 20 and 31 to pay up advance taxes with the promise of refund of excess amount in April or May.” For instance, in FY 2015-16, according to official data, the net tax collections totalled Rs 7,44,426 crore while the refund issued by the I-T Department during the fiscal year was Rs 1,22,425 crore or 16.44 per cent. Tax officials clarify that the refunds inclu­ded excess tax and interest payable to self-ass­essees, TDS and others. Conservatively, tax officials peg the target-led advance tax collections at less than one per cent, but there is no clear data to support it.

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Official sources stress that, leaving personalities aside, it is high time this practice of starting the financial year with a negative balance is stopped. The tax off­icers lobby, on the other hand, has alleged that the fear that the government may not achieve its ambitious tax target may be leading them to target the officers—the flashpoint for the understaffed cadre.

Ajoy Goyal, president of the Inc­ome-Tax Gazetted Officers’ Association, says that since 2011, while the work of the dep­artment has increased to include services to tax-payers, like speedier ref­unds, there has been no commensurate upgradation of training, technology or infrastructure. Furthermore, the 20,000 posts sanctioned in 2013 have only been partially filled. The result is that at the higher levels, a lot of posts are lying vac­ant. For instance, as against 91 chief commissioner posts, only 31 have been filled; 113 of the 300 posts of principal commissioner are lying vacant; there are 30 per cent vacancies in joint commissioner posts and in the supporting staff and inspector level posts, there are up to 50 per cent vacancies.

Officials point out that Adhia is not the first to have ventured into the field—the previous revenue secretary Shaktikanta Das too had spent considerable time in the field last year to motivate officers to improve tax collection. “But it worked to the contrary as on no occasion did he want to discuss our problems,” official sources exp­lain. “In Adhia’s case there was more willingness to discuss and address the problems. But the policy of interfering with the working of the department is creating problems as there is lack of awareness of our issues and the actual working.”

Tax officials cite the shorter time prescribed now for rectification of errors or remedies compared to the provisions in the I-T Act, that too at a time when officers are holding more than one charge spread over large areas. “How do you achieve such artificial deadlines without proper infrastructure?” a senior official asks.

Urging the implementation of reforms mooted by various government-appoin­ted committees, including the one hea­ded by Parthasarathi Shome, IRS Ass­ociation representatives sought a clear delineation of CBDT’s role during an interaction with Arun Jaitley last week without the revenue secretary acting as a via media. They sought parity with the railway board’s direct link with the railway minister.

The unhappiness within the I-T workforce is such that last year in October, the Joint Council of Action reported 97 per cent participation during a one-day strike. The grouse is that while trying to please the tax-payers and the business class, the government is cracking the whip on “non-performers” among the I-T workforce. Now with the Seventh Pay Commission linking increments and promotions to performance, there is real fear among I-T officials that they may be victimised for not achieving targets, which are in turn under attack for being set “arbitrarily”.

It remains to be seen whether displeasing Adhia would work in favour of taxmen. After all, Adhia has his reputation to guard (as stated on his website) of having ‘delivered’ on major social security and banking reform programmes for the Modi government as secretary, financial services. Tax matters (and the drive to curb black money) are a major poll plank of the NDA government. As this latest episode reveals, the pressure to perform has underlined the cracks in the bureaucratic version of achhe din.

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