She said the creation of such a mechanism is imperative in order to nurture the successful ventures of semi-skilled first time untrained entrepreneurs from a below the tax-free threshold to incomes above this level.
"These upward movements in incomes, I am aware, are first noticed by the Tax Administrator (Assessing Officer ) where deposits in bank accounts or other visible markers of financial success qua a new player in the market are first noticed in the system," the ITAT member said. A mechanism to guide these brand new assessees through the tax and the bureaucratic maze must be made available by the State, she said.
"Their first brush with their financial success must not be so stunning that it poses a seemingly impossible hurdle of compliance that they ultimately crumble and unfortunately vanish in the teeming masses who instead of utilizing the State’s opportunities of growth believe in ridding piggy-back on the enterprise of a few perpetually clamouring for free financial packages and depending only on State affirmative actions," the member said.
Secondly, she advised the department to identify the new successful businesses, however small as the agents of economic change. The ventures, it is noticed generally do not have any advise, experience or knowledge to fall back on and it has been noticed that unknowingly there may be transgressions of the tax laws etc. Even if these are bonafide, they need to be legally addressed, she said.
Thirdly she suggested a tax compliance scheme especially created for the benefits of these new ventures so as to address their past lack of compliance.
In order to assist these new ventures to come within the fold of the law for their past actions or inaction and carry on their businesses ensuring future compliance, past transgressions need to be first addressed through clear concessions under tax compliance scheme/voluntary disclosure scheme for such small enterprises, she said.
Commenting on the suggestions, Amit Maheshwari, managing partner of Ashok Maheshwary & Associates, said the suggestions show that ITAT is also in sync with the government's resolve to cut down on litigation and make a non-adversial tax regime for the tax payers.
The ITAT member said, small businesses with innovative ideas, who are agents of economic change in India, need special treatment.
"The fact that business opportunities can be visualized only by the formally educated is also well accepted to not be a necessity. The oft-quoted successful ventures of semi-skilled women (Lijjat Papad); semi skilled family business (Haldiram, MDH etc), non-expert-need based venture (Rajah Spice [UK]), high-end tailoring services provided by Tamil Nadu fishermen powering Savile Row tailors can be some of the Indian examples which demonstrate that it is the passion and the vision which is the spark," she said.
The ITAT member said, generally the violations of tax laws by new assessees do not occur because they are so desired but because of sheer lack of proper advice. "Instead of letting these sparks of economic change stifle and die due to fear of compliances, I firmly believe that they be urgently assisted in the interests of the state," she said. Such sparks may be reflected at times in part time enterprising housewives, illiterate, semi-skilled men/women or teenagers.
"I would seriously exhort and urge the State through the tax administration to provide a platform specially created to assist these ventures to remain relevant and tax compliant," the tribunal member said.
Singh made these proposals in a case related to an assessee carrying on the business of boutique who was asked to shell out Rs five lakh as he was not able to explain certain deposits in her HDFC account, according to tax officials.