Write-off of Arrears of tax demand

The arrears of tax demand have gone up many folds and are piling up year after year, despite several provisions [Chapter XVII-D consisting of Sections 220 to 232 and second schedule of the Act.] in the Income Tax Act, 1961 and instructions issued by CBDT regarding recovery of tax demand. As on 31 March 2014, the total arrears of tax demand pending was Rs. 5.75 lakh crore which included Rs. 2.21 lakh crore (38 per cent) as certified demand (The demand issued by TRO through a notice in form 57 under Rule 2 of the second schedule of the Act.). The Income Tax Department instituted a specialised mechanism as Tax Recovery Officer (TRO) to monitor and recovery of arrears of tax demand by allocating one TRO exclusively for each PCIT charge (After the recent restructuring of the ITD in November 2014, one TRO is provided for each CIT instead of each Range under any CIT). When tax demand remained irrecoverable inspite of exercise of power of recovery by TRO, writing-off of arrears of tax demand is to be considered.

Legal provisions and procedures

There is no specific provision in the Income-tax Act or in any of other Direct Tax Acts for writing off the tax arrears, which become irrecoverable. However Rule 31 of the General Financial Rules, 1963, provides for remission of claims to revenue with the proviso that “a claim to revenue shall not be remitted/ abandoned save with the sanction of the competent authority “In pursuance of this, powers to sanction Write-off of revenue have been delegated by the Central Government as per Rule 13 read with Schedule VII of the Delegation of Financial Power Rules, (DFPR) 1978, to the Chief Commissioners of Income-tax and Commissioners of Income-tax/ Wealth Tax/ Gift Tax/ Expenditure Tax/ Interest Tax, to Write-off irrecoverable balances of Income-tax/Wealth Tax/ Gift-tax/ Expenditure-tax & Estate Duty demands, subject to a report to the next higher authority.

The Rule 13 read with schedule VII of Delegation of Financial Powers, 1978 confers on the Commissioners of Income Tax (CsIT) has powers to write-off irrecoverable tax demands subject to approval of competent authority. Manual of Office Procedure 2019 issued by CBDT, contains the provisions of law relating to write-off of arrears of tax demand. The Public Accounts Committee (PAC) in its 29th Report presented to Lok Sabha on 11 August 2006 and Tax Administration Reform Commission (TARC) in 2014 also raised concern over process of recovery and write-off of arrears of tax demand.

Rule 13(3) of DFPR delegate’s powers to subordinate authorities as follows:

Subordinate authorities can exercise same financial powers in respect of capital expenditure
also on matters covered by Schedule II to VII unless specifically restricted - In so far as mailers covered by Schedules II to VII are concerned, subordinate authorities can exercise the same financial powers irrespective of revenue expenditure, except in the case of those items where the powers may be specifically restricted to revenue expenditure (e.g. Item 17 of the Annexure-10 Schedule V).
(G.I., M.F., O.M. No F. 12(80) E. l/(A)/60, dated the 23rd December, 1965.}

Note No. 1 of Schedule VII further provides that:
“The powers specified in this schedule may be exercised by a subordinate authority provided that -
(a) the loss does not disclose a defect in the rules or the procedure, the amendment of which requires the orders of a higher authority in the Finance Ministry;

(b) there has not been any serious negligence on the part of any Government servant which may call/or disciplinary action by a higher authority”.

In other words, the powers of Write-off rest only with the Finance Ministry in cases where there are such defects.

It is further stipulated in Schedule VII of the DFPR as follows:
(a) “In the matter of Write-off. The procedure/instructions issued by the Department of Revenue
       from time to time shall be observed.
(b) The exercise of powers for scaling down of irrecoverable amount of Income-tax/Wealth Tax/
      Gift Tax/Expenditure Tax and Estate Duty shall be regulated in accordance with the

      provisions of the Income-tax Act. 1961/Wealth Tax 1957/Gift Tax Act 1958/Expenditure

      Tax Act 1987 and Estate Duty Act 1953, as the case may be, and the instructions issued by

      the Department of Revenue from time to time”.

 

Administrative set-up

The administrative set-up vis-a-vis monetary limits (CBDT’s Instruction No. 7 - Dated 19.08.2004)  for write-off of arrears of tax demand as prescribed by CBDT is shown as under:

 

Administrative set-up of write-off of arrears of tax demand

(i)	Finance Minister	Approves cases above Rs. 50,00,000;
(ii)	CBDT	Approves cases between Rs.  25,00,000 and Rs. 50,00,000;
(iii)	CCIT	Zonal Committee consisting of three CCITs approves cases between Rs.  10,00,001 and Rs.  50,00,000; CCIT passes order (a) above Rs. 10,00,000 to Rs. 25,00,000 with report to CBDT, (b) above Rs.  25,00,000 to Rs. 50,00,000 with approval of CBDT, and (c) beyond Rs.  50,00,000 with approval of Finance Minister.
(iv)	CIT	Regional Committee consisting of three CsIT, approves cases above Rs. 1,00,000 and upto Rs. 10,00,000; CIT passes order for amounts above Rs. 1,00,000 to Rs. 10,00,000 with report to CCIT.
(v)	Addl./Jt. CIT	Local Committee consisting of three Addl. CsIT approves cases between ` zero and Rs. 5,000 (ITO/TRO),   Rs.  5,001 and Rs.  25,000 (AC/DC), Rs.  25,001 and Rs. 1,00,000 (Addl. JCIT);   Addl./Jt. CIT passes order for amount between Rs. 25,001 and Rs. 1,00,000
(vi)	AO (ITO/AC/DC)	TRO receives outstanding demand for drawal of certificates and issues 'Irrecoverability Certificate' Assessing Officer passes order for amount upto Rs. 5,000 (ITO/TRO) and Rs. 5,001 to Rs. 25,000 (AC/DC)

 

Fit for write-off

  (i)         Cases where units have been closed.

(ii)         Cases in which defaulters are not traceable.

(iii)         Cases where directors of a company are available but the assets of the company are not available.

(iv)         Cases in which all types recovery action have been exhausted.

 

Procedure for Write-off
Tax arrears may be written off by any one of the following procedures:
(a) Regular procedure for Write-off.
(b) Ad-hoc procedure for Write-off.
(c) Summary Write-off.

 

(a) Regular procedure for Write-off
As per regular procedure for write-off, arrears of tax demand can be considered for write-off that are over three years old and have become “ clearly irrecoverable” due to following reasons:

(a) The assessee has died.
(b) The assesse has become insolvent.
(c) He is not traceable.
(d) He has left India.
(e) The company has gone into liquidation.
(f) The firm is dissolved and its business has discontinued.
(g) The assessee has no attachable assets.

      (h) When all the modes of recovery in accordance with the rules laid down in the Second

            Schedule to the Act including the recourse to civil imprisonment of the defaulter are  

            exhausted and the arrears still remain.

            Before recommending a case for Write-off, the concerned authority should satisfy itself

      as to whether adequate and timely steps were taken for recovery in the case.

            If, after scrutinising the records and conducting enquiries, the Assessing Officer is satisfied that it is a fit case for Write-off, a self-explanatory note indicating the steps taken for recovery and justifying the need for Write-off should be prepared. A certificate of irrecoverability should also be taken from the TRO. If the arrears have to be written off by the authorities other than the ACIT or ITO, Form B should be filled in and submitted to the CIT/ Addl. CIT with a self-explanatory brief. Tax arrears upto Rs. 10,000 can be written off by the CIT without examination by the Local Committee.

     LOCAL COMMITTEE AND ZONAL COMMITTEE
In case of tax arrears exceeding Rs 10,000 but below Rs. 1 lakh, the proposal for Write-off of such demand will have to be referred to the Local Committee consisting of the CIT, the Addl. CIT/ DCIT and the Assessing Officer within the CIT’s charge.

      Where the tax arrears exceed Rs. 1 lakh in any case, a Zonal Committee consisting of the CIT concerned and 2 other Commissioners of Income-tax of the same zone will have to scrutinise the proposal for Write-off of tax arrears with suitable recommendations. Zonal Committees are as constituted by the Board in Instruction No. 1840 dated 15/03/1990 in F. No. 375/13/89-IT(B). The Zonal Committee has to meet at least once a month and ensure continuous review of the unrealisable demand.

      In cases of the tax arrears exceeding Rs. 15 lakhs, reference has to be made to the Board through the DIT(Recovery) for according administrative proposal. Comments of the concerned Chief CIT should be sent along with the recommendations of the Zonal Committee. Complete assessment records together with the recovery folders should be sent to the Board.

      While sending the proposal to the Board through the DIT(Recovery) the CIT should personally look into the enclosures to be sent with the minutes of the meetings of the Zonal Committee. The proposal should contain a brief chronological history of the case.

      After detailed scrutiny, if it is found that the case is fit for writing off of the tax arrears as irrecoverable, the administrative approval of the Board will be communicated to the CIT. The CIT should proceed to pass an order sanctioning the Write-off of tax arrears as irrecoverable in the prescribed proforma.

      After passing the order for Write-off, the Assessing Officer should ensure that the arrear’s are actually stuck off from the Demand and Collection registers. Wherever recovery certificates have been issued, intimation should be sent to the TRO for the withdrawal of the recoverability certificates. However, the Assessing Officer’s should not communicate the Write-off of arrears to the assessee.

      Each competent authority while passing the order for writing off the tax arrears as irrecoverable, should add the following words at the appropriate place:

     

     “The above Write-off will not lead to release or waiver by the Government of its claim but will be written off in the departmental books. The Government will have the right, at any time, during the next 30 years (thirty years) from the date of the claim to recover the amount if it appears to the Government that the defaulter has assets or means to pay.”

 

      FORM - B : Proposal for Write-off of irrecoverable demand in respect of ……….
Questionnaire
1.  Full name and address of the assessee (with PAN No.) and Status.
2.  Amount and nature of the outstanding demand which is proposed for write-off and for

           which assessment year – give details separately.
3.  Are there any connected cases (e.g. firm and partners, company and its controlling  

           persons, relatives having common or connected sources of income etc). If so, what is the

           present position in regard to recovery of tax in these cases.
4.  What was the returned income, assessed income and tax demand in respect of the years

           referred to in item 2? (In this connection please mention the Section under which the  

           assessment was completed and the date of service of notice of demand).
5. What is the nature and quantum of the main addition made in the assessment years under
    consideration?
6. Did the assessee contested these assessments in appeal, revision or reference? If so, with  

          what results?
7. Where an order of rectification, appeal, revision, or reference resulting in increase or  

          decrease of demand for any assessment year has been passed, has effect been given to it?  

          If not, will the quantum shown in item 2 requires any consequential change?
8. Was the assessee granted instalments for payment of tax under Section 220(3) or  

           postponement of tax under Section 220(6) in respect of the demand raised for these years?   

           If so, to what extent did the assessee abide by these arrangements?
9. When was the last recovery made and how? (i.e. was the amount collected through    

            Coercive processes or was it paid voluntarily by the assessee?)
10. What were the steps taken for the recovery of the balance of demand from the date of last

             recovery? If coercive proceedings were taken, please give results achieved, in

            chronological order with dates?
11. Are there reasons to believe that the assessee is a benamidar of some other solvent

            persons? If so, kindly give particulars of such persons.
12. Are there any assets, whether transferred by the assessee to his close relations,  

            benamidars, trust, etc. or acquired by them out of assessee’s fund, which could be taken  

            into account for the purpose of recovery proceedings?
13. What are the sources of the income of the assessee (or of his legal representatives and  

            children) at present?

      14. What was the total value of the assessee’s assets as at the end of the previous year for the  

             Last assessment year for which write-off is proposed? What is the explanation for the  

             subsequent loss of assets or determination in their value (i.e. capital loss not allowed in

             Income Tax assessments like loss in speculation business, heavy bad debts, normal

             household expenses and any extraordinary expenses etc.). Please analyse the loss of  

             assets claimed, indicating the nature of each assets and offer comments on the  

             acceptability of each losses and/or determination in the value of each asset.
15. Any other remarks.
                                                                                                                 Assessing Officer

      Forwarded to the CIT with the following comments: ……..……………………..……………………..
……………………..…………………………………………………………………………….…………..
JC/Addl. Commissioner
Commissioner’s Comments:

      1.  Reg. Item 5 – Have the assessments been properly made; if not, is any action now  

           possible or necessary?
2.  Reg. Item 11 and 12 – Is it possible to effect recovery from any connected persons either

           by starting fresh assessment proceedings or through coercive processes for recovery

           (including suits in Civil Courts)?
3.  Reg. 13 and 14 – Is the explanation acceptable, and are you satisfied that there are no
     substantial assets of the assessee from which recovery can be affected?
4.  General Comments.
                                                                                               

                                                                                                       Commissioner of Income-tax

 

(b) Ad hoc Procedure for Write-off
Besides the regular procedure under which tax arrears can be written off, arrears of tax may
also be written off under the ad hoc procedure. Under this procedure, small demands upto Rs. 10,000 may be written off, provided they have been outstanding against each assessee for non-availability of assessment records and detailed addresses of the assessees for more than 5 years immediately preceding the financial year during which they are proposed to be written off.

 

      CONDITIONS

      The following conditions should however, be satisfied before such Write-off is effected by the JCIT and Assessing Officer within their existing powers:
(i)  The demand has been outstanding for at least three years preceding the financial year in
      which the same is to be written off and that there has been no recovery during the said    

            three years.
(ii) The Assessing Officer should certify that the assessment records of the assessee have not

            been traceable for the last three years preceding the financial year in which the demand is  

            proposed to be written off. The JCIT/ Addl. CIT should certify that the responsibility for

            the loss of records cannot be fixed.
(iii) The address of the assessee has not been available for the said three years in the records
       available with the Assessing Officer or the TRO. Even where the last address is

             available, the assessee has not been available at that address during the last three years.
(iv) In case the demand outstanding is Rs. 2,000 or less in each case, the certificate of

             irrecoverability from the TRO need not be obtained. For demands over Rs. 2,000,  

             however, the TRO should certify that either no recovery certificate has been pending  with him or that he has not been able to recover anything during the said five years.

      Demands under the ad hoc procedure should not be written off on account of loss of records
unless the following details have been collected:
(a) Name of the assessee.
(b) Address.
(c) Date of issue of recovery certificate.
(d) Amount of demand.
(e) Amount recovered by the TRO.
(f) Balance.
(g) Present whereabouts of the assessee.

 

(c) Procedure for Summary Write-off
Small demands not exceeding Rs. 1,000 in each case, can be summarily written off by the Assessing Officer without any further enquiry if the following three conditions are satisfied:
(a) the amount outstanding is Rs. 1,000 or less in each case.
(b) the amount is outstanding for more than 3 years.
(c) the amount does not relate to any live case.

      The following remarks should be made against the relevant entries in the D&C Register where arrears are written off summarily: “Ignored, as obviously irrecoverable”.

      

      Procedure for Writing Off the Tax Arrears of Rs. 500 and Below
(Excluding those Falling under Summary Write-off)
Where a demand in any case is outstanding for more than 8 years, an Inspector of Income-tax may be deputed to enquire into the assets of the defaulter and chances of recovery. In case, his report indicates that the demand has become irrecoverable, the Assessing Officer may straight away Write-off the demand without waiting for a normal certificate of irrecoverability from the Tax Recovery Officer. TRO should be immediately informed about such Write-off and the relevant recovery certificate withdrawn.

 

      Board OM F. No. 375/01/2015-IT(B) dated 10.08.2017

     

      Subject : Revision of Monetary Limit and Guidelines for Write-off of Low Value

                      Arears of Demand

      In partial modification of earlier Instruction No. 14/2003 dated 6th November, 2003 on the above subject, the undersigned is directed to say that the Board has revised the Ad-hoc Procedure for Write off of irrecoverable dues of direct taxes, raised the monetary ceiling under Ad-hoc Procedure of Write off and modified the conditions required to be satisfied for Write-off under Ad-hoc Procedure.

      2. The Ad-hoc Procedure has been revised as under:
     (i)   The monetary ceiling for the ad hoc procedure of Write-off of irrecoverable arrear  

                  demand is raised to Rs. 10,000/-
     (ii) The age of irrecoverable arrear demand is reduced to at least three years.
     (iii) The irrecoverability certificate from TRO is no longer required, and
     (iv) It has been prescribed that any information regarding the assessee should not be   

                  available in AIR or 26AS statements of at least 3 years and no return of income

                  should have been filed for at least 3 years for consideration of arrears demand to be  

                  written-off under Ad-hoc Procedure.

      3. The Board has also reviewed the Summary Procedure for write-off of irrecoverable dues of direct taxes and decided to submit it in the revised Ad-hoc Procedure.

      4. All other conditions and requirements under the Ad-hoc Procedure would remain unchanged.

 

 

CBDT letter F. No. 1(324)/DIT(R)/Write Off/Special Cell/2017-18/630, dated 10.07.2017

 

Subject : Write-off of Arrear Demand of Rs. 25 Lakhs and  above – regarding –

 

Kindly refer to the above mentioned subject.

 

2. Write Off of Arrear demand is an area of Direct Taxes which has not received its due attention in the past. The Public Accounts Committee (PAC) in its 29th Report presented to Lok Sabha on 11 August 2006, the Tax Administration Reform Commission (TARC) in 2014 and the C&AG in its Report No. 3/2016 also raised concern over the slow progress in write­ off of arrears of tax demand.The direness of the situation is further reflected by the fact that only one case of high value demand has been written off till date.

 

3. In order to expedite the reduction of bad debts of the Government and the Department, the Directorate of Recovery has compiled a list of a total of 186 cases pending for Write- Off of Rs.25 lakhs and above as on 01.04.2016 in different Charges across India. The current status in each of these cases is duly indicated in the list. The assessee wise list is being sent/emailed to each Pr. CCIT separately. Consolidated position is enclosed as Annexure -‘A’.

 

3.1 The Pr. CCIT may like to issue appropriate directions to their field formations in respect of the cases of their Region so as to ensure that the process of removal of deficiencies and Write-Off by their respective Zonal Committee/ Board is expedited.

 

4. In respect of the Zonal Committees for Write-Off , the exercise of re-constitution of the same has been completed. Proposals for re-constitution of the Zonal Committees, as received from the CCsIT Regions have been considered and the Zonal Committees re­ constituted for the Pr. CCsiT Regions from where such proposals were received (Annexure­ B). It is assumed that no change in the Zonal Committees was required by the Regions from where no proposals/requests were received.

 

4.1 In respect of the frequency of meetings of the Zonal Committees, it is brought to your kind notice that as per CBDT’s Instruction No. 16/2003 dated 18.11.2003, the Zonal Committees are required to meet at least once a month. Further, the senior-most CCIT among the permanent members of the Zonal Committee is required to send a brief report of the Meetings of the Zonal Committee every month to the Directorate of Recovery & TDS and endorse a copy thereof to the Board.

 

5. The Central Action Plan for the F.Y. 2017-18, also has laid down the following targets in respect of write-off of demand.

 

Submission   of   replies to   queries raised by the Board, 01 (Recovery) and   Zonal, Regional and Local Committees in cases already referred	31.08.2017
Identification of fresh cases for write-off	30.09.2017
Write-off of arrears under ad-hoc and summary procedures	31.10.2017
Submission of proposals for write off to the Board  or committees in the cases identified as above	31.12.2017

 

5.1  It is requested that appropriate  action in this regard may kindly be taken and the targets as outlined in the Central Action Plan for F.Y. 2017-18 be met.

Sd/-

ADG (Recovery & TDS), CBDT

 

CBDT’s Instruction No. 7, Dated 19.08.2004 - Raising the Monetary Ceilings for Write-off and    

Reconstitution of Committees.

 

Subject : Raising the Monetary Ceilings for Write-off and Reconstitution of Committees

 

The Monetary ceilings with respect to the powers of various Income-tax authorities to write-off irrecoverable dues of income tax were enhanced and the level of authority whose administrative approval would be required for write-off was re-defined by instructions No. 14/2003 dated 06.11.2003. In partial modification of the said instruction, the Board has revised the prescribed monetary ceilings for write-off of recoverable dues of Direct Taxes by the various income-tax authorities.

 

2. The revised monetary ceilings for write-off have been mentioned in column 5 of the following Table :

 

Committee	Constitution	To be Notified by	Order of Write-off by	Monetary ceilings for write-off
Local Committee	3 officers of the level of Addl. CIT	CCIT	ITO/TRO	Demand upto Rs.5,000/-
			DCIT/ACIT	Demand over Rs.5,000/- and upto Rs.25,000/-
			Addl. CIT/JCIT	Demand upto Rs. 1,00,000
Sub-zonal or regional committee	3 officers of the level of CIT	Cadre Controlling CCIT (under intimation to Board)	CIT Subject to report to the next higher authority	Demand over Rs.1,00,000 and upto Rs.10,00,000
Zonal Committee	3 officers of the level of CCIT	CBDT	CCIT Subject to report to the next higher authority	Demand over Rs.10,00,000 and upto Rs.25,00,000
			CCIT with the approval of Full Board	Demand over Rs.25,00,000 and upto Rs.50,00,000
			CCIT with the approval of Full Board and the Finance Minister	Demand over Rs. 50,00,000

 

3. It is further clarified that any proposal for write-off of irrecoverable demand, which has already been recommended by a Zonal Committee or a Local Committee constituted as per the provisions of the earlier instructions/guidelines would not be required to be re-considered and recommended again by a Zonal Committee or Regional Committee or Local Committee, as the case may be, constituted as per the new instructions (Instruction No. 14/2003) dated 06.11.2003 and 16/2003 dated 16.11.2003). However, the new monetary ceilings as per column 5 of the Table on pre-page would apply for determining the authority that would pass the order for write-off.

 

4. As regards the monetary ceilings for write-off of irrecoverable dues of Wealth Tax, Gift Tax, Expenditure Tax, Interest Tax and Estate Duty, the revised scheme of write-off is summarized in the following Table

 

Committee	Constitution	To be Notified by	Order of Write-off by	monetary ceilings for write-off
Regional Committee	3 officers of the level of CIT	Cadre Controlling CCIT (under intimation to Board)	Commissioner of Wealth Tax /Gift Tax/Exp. Tax/ Intt. Tax/ Estate Duty	Up to Rs. 5,00,000
Zonal Committee	3 officers of the level of CCIT	CBDT	Chief Commissioner of Wealth Tax /Gift Tax/Exp. Tax/ Intt. Tax/ Estate Duty	Up to Rs. 10,00,000

 

5. It may be clarified that writing-off of recoverable dues of revenue would not lead to a release or waiver by the Government of its claim but would be only a write-off in the Department’s books. The Government shall have the right at any time during the next 30 years, counting from the date of the claim, to recover the amount by a Civil Suit, if it appears to the Government that the defaulter has got some assets or means to pay.

 

6. It is reiterated that all procedures and conditions pertaining to writeoff of irrecoverable demand, other than those mentioned herein, shall remain in force. All proposals to be sent to the Board and the Minister for write-off shall continue to be routed through Directorate of Income Tax (Recovery) as per the existing guidelines.

 

These Instructions will come into force immediately.

 

CBDT.’s Instruction No. 14 Dated 06.11.2003

Subject : Raising the Monetary Ceilings for Write-off and Reconstitution of Committees.

 

In partial modification of earlier instructions on the subject, the Board have revised the prescribed monetary ceilings for write-off of irrecoverable dues of Direct Taxes by the various income-tax authorities. At the same time, the Board have reviewed and modified the existing structure of the Committees for recommending write-off. The revised procedure in this regard would be as follows:

 

Regular Procedure.

2. A three-tier structure of Committees (as against two at present) to consider and recommend write-off has been approved as under:

     – Zonal Committee

     – Regional Committee, and;

     – Local Committee

 

2.1. Accordingly, the monetary ceilings with respect to the powers of various I.T. authorities to write-off irrecoverable dues have been enhanced and the level of authority whose administrative approval would be required for write-off has been re-defined. Further, the respective jurisdiction of the three Committees over write-off proposals has been re-delineated.

 

2.2. The revised scheme for write-off under the Regular Procedure is summarized in the following Table:

Committee	Constitution	To be Notified by	Order of Write-off by	monetary ceilings for write-off
Local Committee	3 officers of the level of Addl. CIT	CCIT	ITO/TRO	Demand upto Rs.5,000/-
			DCIT/ACIT	Demand over Rs.5000/- and upto Rs.25,000/-
			Addl. CIT/JCIT	Demand over Rs.25,000/-
Sub-zonal or regional committee	3 officers of the level of CIT	Cadre Controlling CCIT (under intimation to Board)	CIT Subject to report to the next higher authority	Demand over Rs.1 lakh and upto Rs.10 lakhs
Zonal Committee	3 officers of the level of CCIT	CBDT	CCIT Subject to report to the next higher authority	Demand over Rs.10 lakhs and upto Rs.25 lakhs
			CCIT with the approval of Full Board	Demand over Rs.25 lakhs and upto Rs.50 lakhs
			CCIT with the approval of Full Board and the Finance Minister	Demand over Rs.25 lakhs

 

2.3 All other conditions and requirements under the Regular Procedure would remain unchanged.

Ad-hoc Procedure:

3. Under this procedure, the overall monetary ceiling has been raised from the present level of Rs.2,0000- to Rs.5000/-. Presently, irrecoverable demand exceeding Rs.500/- requires issue of Irrecoverability Certificate by the Tax Recovery Officer (TRO). Such Certificate will now be required only in cases of irrecoverable demand exceeding Rs.2,000/-

Summary Procedure:

4. The monetary ceiling under this procedure has been raised from the present level of Rs.25/- to Rs.1,000/-

4.1 All other conditions and requirements under the Summary Procedure would remain unchanged.

5. These instructions shall apply to irrecoverable dues under all Direct Tax enactments. It is reiterated that all procedures and conditions under the existing guidelines pertaining to write-off of irrecoverable demand, other than those mentioned herein, shall remain in force. All proposals to be sent o the Board and the Minster for write-off shall continue to be routed through Directorate of Income Tax (recovery) as per the existing guidelines.

These instructions will come into force immediately. Instructions regarding constitution of the various Committees are being issued separately.

  

 

CBDT letter F. NO. 375/10/95-IT(B), dated 25.09.1995

Subject : Stringent measures for recovery of outstanding demand and consideration of
                Write-off proposals – regarding.

The Public Accounts Committee has expressed concern in their 1st Report (10th Lok Sabha) &
93rd Report (1994-95) over the pendency in disposal of tax recovery certificates and slackness in
departmental action in dealing with habitual tax defaulters.

In this connection, attention is invited to Board’s Instruction No. 1670 dated 05.12.1985 regarding consideration of Write-off proposals. It is reiterated that more and more resort should be made to the following modes of recovery in accordance with the rules laid down:
(i)   Attachment and sale of assessee’s movable property.
(ii)  Attachment and sale of assessee’s immovable property.
(iii) Arrest of assessee and his detention in prison.
(iv) Appointing receiver for the management of the assessee’s movable or immovable
       properties.
(v) In the case of tax evasion, recourse to the prosecution should also be considered.

The question of writing off of the arrear demand should be considered only when the amount remains irrecoverable inspite of the exercise of powers given under the Act.

 

It should be impressed upon all the concerned officers that stringent deterrent measures should be taken to discipline the habitual tax defaulters. The PAC has observed that the evasion/ avoidance is no less an offence than any other under the law of the land and should be dealt with accordingly with the seriousness it calls for. The mode of arrest and detention is a very effective deterrent instrument in the hands of habitual tax evaders and to bring down the arrears of tax. The Public Accounts Committee have stressed that the provisions of law relating to the aforesaid modes of tax recovery should be invoked in deserving cases. You are requested to ensure that the PAC’s observations are borne in mind by all the officers working in your region.

 

Sd/-

Director (Budget)

 

Instruction No. 1670, dated 05.12.1985

Subject : Consideration of Write-off Proposals

When an assessee is in default deemed to be default in making payment of tax, the Income-tax Officer forward to the Tax Recovery Officer a Tax Recovery Certificate and the TRO on receipt of such certificate shall proceed to recover from such assessee the amount specified therein by one or more of the following modes in accordance with the rules laid down in the IInd Schedule:
(a)  Attachment and sale of assessee’s movable property.
(b)  Attachment and sale of assessee’s Immovable property.
(c)  Arrest of the assessee and his detention in prison.
(d)  Appointing a receiver for the management of the assessee’s movable or immovable properties.

2. It is thus imperative that all efforts should be made to recover the outstanding demand by

    exercising the power given in the Income-tax Act. The question of writing off the arrear

    demands would normally arise only when the amount remains irrecoverable in spite of the

    exercise of the powers given under the Act.

Recently, while considering the write-off proposal in a case the Finance Minister minuted as under:
1. When evasion was detected in books why was not prosecution launched? Who were the
    officers then concerned with the case?
2. If attachment was not yielding result recourse to civil prison should be resorted to.
3. Unless the recourse of civil prison is also exhausted we should not normally Write-off.

It is therefore, impressed on all Commissioners of Income- Tax that recourse to committing the
defaulter to civil prisons should be pursued vigorously wherever possible to the extent possible
under the law. Unless this mode of recovery is also exhausted, it is not morally correct to term
the outstanding demand as irrecoverable. The action taken in this regard may be brought out
specifically in the. Minutes of the Zonal Committee which consider the proposal for Write-off
if for any reason, this mode of recovery could not be resorted to in any particular case, the
reason therefore may also be recorded in the said minutes. These instructions may be brought
to the notice of all officers working under your charge.
(CBDT letter F. No. 375/25/85-ITB dated 05.12.1985.)

 

 

CBDT Instruction No. 1560, dated 04.05.1984

Subject : Write-off - Recommendation of the PAC at Para 1.61 of its 157th Report (1982–83)
                 Disclosure of Deffects in Rules or the Departmental Systems, Procedure etc,                                      Resulting in Non-Recovery of Tax Demands.

The Public Accounts Committee in its recommendation at para 1.61 of its 157th Report (1982- 83) Seventh Lok Sabha has inter alia emphasised that before approving the write-off proposals it’s should be carefully examined whether the case has disclosed any defects in departmental systems and procedures or in their actual implementation resulting in non-recovery of arrears.

2 As you know the exercise of the powers delegated to the subordinate authorities is subject to the satisfaction of the following conditions as provided in Note I and II of Section VII of the D.F.P.R. read with rule 13 thereof:
(a)  The loss does not disclose a defect in rules or procedure the amendment of which requires  

       the orders of the higher authority or Finance Ministry.
(b) There has not been any serious negligence on the part of any Government servant which may
      call for disciplinary action by a higher authority.

This has been already brought out in the introductory portion of the brochure on “Write-off” Copies of which have been supplied to you by the Board. While you may be keeping these provisions in mind in dealing with Write-off case, the Board desires that the finding in this respect should be specifically recorded in the minutes of Local Committees, Zonal Committees, etc.
(F. No. 385/83-1T(B) dated 04.05.1984 from Central Board of Direct Taxes.)

 

Total arrears of tax demand (Rs. in crore)

 

S. No.	Particulars	FY 2012-13	FY 2013-14	FY 2014-15
(i)	Total arrears of tax demand	2,77,770.80	2,90,011.60	3,27,722.08
(ii)	Arrears of tax demand difficult to recover due to Pending Write-off (PWO)/Assessees not traceable (ANT)/No asset and inadequate resources (NAR)	34,962.26	34,782.28	74,077.78
(iii)	Write-off during the period	1.49	0.66	0.06

 

Source: Central Action Plan (CAP) Report and Quarterly Progress Report of ITD of selected PCsIT/CsIT

 

The writing off of the demand does not prevent the Department from taking recovery action subsequently – [H.R. Laxman v. ITO (1958) - 34 ITR 113 (Punj)]