I am Director of Company in Pune which is having a peculiar problems in scrutiny. The IT officer is insisting on the company effectively changing its method of accounting from Mercantile method to Cash accounting, He is asking the method of revenue recognition to be made on Cash receipts than on revenue recognition based on period matching concept of accounting. These are so very well established concepts of Accounting that they should not be questioned. I discussed with CAs and I was told that is illegal for Companies to follow cash accounting and yet the Scrutinising officer is pursuing this line of investigation. I was informed that it is a waste of time and the company will win th case at all higher stages as this is the universally accepted method as per GAAP, Company law and also prevailing methods of accounting standards for software industry.
I was introspecting what is the Root cause of the problem and a positive way of handling such problems.
In my opinion the root cause of problems is that the IRS officers come from a wide variety of disciplines and have varying skills and aptitudes. I can understand that they make make mistakes.
They also have to quickly learn everything and give proper judgements on a vast scale of matters. This is quite a task for people say from History or Arts or Medical background.
I was thinking how do we solve this problem at the root without wasting time of Appellate Courts etc ?
I got an idea came to me when watching Wimbledon this year.
Wimbledon situation
The ball moves at very high speed upto 200 km/hr and the line umpires have to make spot decisions. They have a thousand things on their mind and humans even the best of them are prone to making mistakes due to the mechanism of the mind. These mistakes can make or break a player's career. So Wimbledon a place which values tradition has come up with a solution which uses technology in a restricted manner using Review option. The player calls for a review and a higher technology which is less error prone is used to instantly settle the dispute ! The Review lapses if the player loses the review so he/she can't abuse the system.
Based on this I would like to propose an idea for tax reform for CBDT.
During every scrutiny the Assess should be given 1 or 2 Scrutiny Review Options so that any thing technical like Revenue recognition etc can be reviewed by a technical panel based on whose expert opinion the scrutiny can be completed, The online portals can be used for the Review so that time is not wasted in movement of papers.
Lastly if the Assessee wins the Review he should still have reviews left.
This measure will use the Adminstrative experience of the IRS officers with the Technical experience of the Central panel which can deliver Reviews that will eliminate wastage of time of Appeals and Appellate Tribunals and High Courts and Supreme Courts. Higher salary can be given and highly accomplished people can be kept on these panels so that these disputes can be resolved at the time of creation. The time of the august institutions can be freed up to use for serious cases so that the series offenders are dealt with harshly and severely thereby deterring people from breaking the law.
I request readers of this blog to take this idea to as many decision makers as possible so that we can add another mechanism to make Improve Ease of doing business across various government ministries.
