Chapter 9 - Indian Revenue Service- Income Tax (IRS-IT) | A Bouquet of Services by IPS Lohit Matani and IPS Vishal - UPSC PDF Download

Indian Revenue Service- Income Tax (IRS-IT)

Contributor: Mr. Lokender Singh, IPS 2014 Batch

9.1 Cadre Structure and Overview

9.2 Roles and Responsibilities

IRS-IT serves the nation through discharging one of the most important sovereign functions i.e., collection of revenue for development, governance and security. An IRS officer performs the following roles and responsibilities:

I. Revenue Assessment and Collection:

IRS officers, mainly up to the level of DCIT, perform the role of AOs (Assessing Officers) in quasi-judicial capacity in the circles allotted to them. The Income Tax Returns (ITRs) filed by various individuals, Hindu Undivided Families (HUFs) and Corporations are processed, by automatic software, on the basis of various parameters and some percentage of cases are chosen for scrutiny; these cases are centrally distributed to all AOs for assessment. AOs from ITO level to DCIT level get cases according to their jurisdiction and amount involved in ITR. Then an AO does an in-depth scrutiny of these cases by serving notices and verifying claims made by the assessee through documentary proof. Then based on the amount of undisclosed income unearthed, an AO makes addition or deletion in the taxable income of the assessee. Then he/she passes the final assessment order. JCIT, Addl. CIT and CIT supervise these final orders at their levels and give necessary guidelines.

The AOs also do mini surveys to physically verify the undeclared stocks in godowns of companies, jewelers, factories, and so on.

At the JCIT level, the main function of an IRS-IT officer becomes that of administrative and managerial nature. Apart from other tasks, CIT gives permission to various trusts and organizations of charitable nature to be exempted from paying tax. There is also a position of CIT (Appeal) to whom a person can appeal against the order of an AO.

II.  Investigation Function

An IRS-IT officer, in the Investigation Wing, is responsible for conducting search and seizure operations (commonly known as ‘Income Tax Raid’). The equivalent designations held in this wing are ADIT (Assistant Director of Income Tax), DDIT, JDIT, etc. Their work requires intelligence collection and subsequent reports generation; reports like STRs (Suspicious Transaction Reports) and CTR (Cash Transaction Reports), and inputs from LIU (Local Intelligence Unit) and FIU (Financial Intelligence Unit) are prepared by an IRS-IT officer. After the raid all the undisclosed cash, jewelry, artifacts and other valuables are seized and a proper assessment report is prepared.

III. International Functions:

IRS-IT officers negotiate International Agreements with other tax jurisdictions to plug the misuse of international financial processes for tax evasion and avoidance. They are also posted in various foreign missions to handle tax matters and agreements.

IV. Policy Formulation:

IRS-IT officers are instrumental in preparation of taxation policies which are dynamic and keep on changing with the emerging needs of economy and the country. These policies provide incentives and disincentives in the target areas/ segments of the economy. Officers are able to make appropriate policy interventions based upon their experience in field formations and on the basis of relevant inputs from various sources submitted to the Government through the CBDT.

V.  Other Functions:

Apart from the above functions, an IRS-IT officer performs the following functions:

1. They administer the Direct Taxes Law through the Income Tax Department (ITD).
2. They lead the regional level field offices in the role of Principal Chief Commissioner of Income Tax.
3. They help in detecting and curbing the circulation of black money in the country.
4. They hold responsibility of managing office administration and personnel matters of staff.
5. They play a vital role in the implementation of the Prevention of Money Laundering Act.

9.3 Normal Growth Profile

We will be discussing about the various career opportunities an IRS-IT Officer has in a separate topic. However, this topic only deals with various ranks an IRS-IT Officer holds during his professional life. These ranks are held when he/ she is working in his/ her main line department.

9.4 Recruitment

The recruitment into IRS-IT happens through two channels:

1. People are inducted into IRS-IT after qualifying in the Civil Services Exam conducted by UPSC.
2. The Income Tax Officers (Class II grade) are promoted to the IRS-IT grade after 8-10 years of service (50%.) For this (junior level) level entry into the revenue service, one has to pass the Combined Graduate level examination by the Staff Service Commission (SSC).

9.5 Training

The training structure of the IRS-IT is divided in to five phases as mentioned below.

The majority of this training is conducted at National Academy of Direct Taxes, Nagpur. The training is held in diverse areas of revenue and non - revenue matters at various places and institutes like SEBI, Central Processing Centre (CPC), Bangalore, private industries visit, parliamentary attachment, army attachment, and Income Tax institutes of different countries.

In Service Training: Apart from the above formal training structure, various in service courses are conducted by NADT in order to impart expertise in certain specialized fields. They include courses on use of technology, Transfer Pricing, International Taxation, bilateral and multilateral taxation agreements.

9.6 Variety of Opportunities for IRS-IT Officers

Apart from the usual work profile in the State government, IRS-IT Officers have ample opportunities to serve in organizations of State, national as well international level.

9.7      Perks, Privileges and Advantages for an IRS-IT Officer

1. The job of IRS-IT provides sufficient time for maintaining work life balance. It is a regular 9am to 5pm job providing 2 days leave in a week.
2. It provides sufficient opportunities for IRS-IT spouses to shift to the place where their better halves are working (if he/ she is in another government service).
3. Postings are mostly in big cities.
4. For the above reasons, IRS-IT is known as a female friendly service.
5. Political interference and pressure is very less in this job.
6. As seen in the previous topic, the number of national and international deputation opportunities is very high in this job.
7. IRS-IT also provides a high number of post-job opportunities like tax consultant, company adviser, Chief Financial Officer (CFO) in private firms, and so on.
8. Officers gain professional excellence in fields like taxation, economics, revenue, and so on.
9. This job also provides sufficient autonomy to innovate and work on new and important things. For example, an officer was given a chance to design and start the Financial Intelligence Unit (FIU) for India.
10. IRS-IT officers deal only with people from educated and well-to-do class.

9.8 Occupational Hazards

This job has less public interface and thus less power, as the amount of direct tax payers are only 2% of the total population. There are certain issues in getting a good accommodation in cities. The organization is middle heavy and bottom light. Thus, the numbers of subordinate staff are lesser than some of the other services. The job does not hold the charm held by some other services having extensive public interaction. Sometimes, officers are also known as ‘glorified clerks’.

9.9    Case Studies Indicating the Work, Challenges and Dilemmas Faced by an IRS-IT Officer

9.9.1 Threats in Line of Duty

Income tax raids for enhancing revenue collection may become life threatening in some difficult areas. Mr. Ramesh was posted as JDIT in Varanasi subdivision. The amount of tax evasion by local businessmen was increasing every day. To cure this problem, Ramesh planned to send a team to conduct a raid on a powerful politician cum businessmen, who was leading this practice of tax evasion. However, when the subordinate officers’ team raided the house they were manhandled and beaten up by the local goons at the behest of the politician.

Due to this incidence, whole work force got demoralized and the opportunity to seize hoard of cash before the crucial elections was lost. Now, Mr. Ramesh is in a dilemma.

Q.  Should he submit to the threats of the politician and save the lives of his subordinates or he should motivate the subordinates to work for the nation? What else he should do to get success in his work? Answer in reference with the work profile of an IRS-IT officer.

9.9.2 Legal Hindrance in Excellence

Mr. Suneil Sharma is an able IRS-IT officer holding great professional competence and excellence. He was posted in the Transfer Pricing Wing of CBDT. A case of Vodafone acquisition of Hutch Telecommunication came up before him for scrutiny. As acquisition was done by a subsidiary of Vodafone (which was functioning in a tax haven country), Vodafone was able to avoid capital gains tax in this acquisition deal. The amount of tax evaded was very high considering the GDP and economic condition of India at that time. When IT department demanded Vodafone to pay the evaded tax, it challenged this order. The whole deal was painstakingly investigated by Mr. Suneil. He scrutinized all the documents to elicit the nature of transfer of ownership in this deal. In conformity with international rulings on transfer pricing and country shopping, the IT department clearly showed that Vodafone has avoided tax liability.

Mr. Suneil prepared a strong body of evidence to support his case and prove tax liability beyond reasonable doubt. The case reached up to the Supreme Court after the company failed to garner positive response at internal appeal and ITAT level. Even after so much hard work by the officer and the IT Department, Supreme Court exempted Vodafone from this liability.

This Supreme Court ruling disheartened the officer who decided to resign from the service. He thought he was being punished for working in national interest. IRS-IT as a service deals with collection of revenue. The job satisfaction one gets in netting the big fishes vanishes if they lose out in the case at higher levels due to administrative and political connivance.

Q. What should Mr. Suneil do to motivate himself? Is leaving the job a good option considering his professional excellence and great number of after job opportunities in IRS-IT? How should he reconcile with his failure and return back to his professional life?

9.9.3 A Great Soldier in the Demonetization Drive

The demonetization drive to curb black money, corruption and money laundering could have never been a success without the support of the Indian Revenue Service. The service has played an instrumental role in raiding businesses and corporate houses holding black money and unaccounted wealth. The service truly holds the credit of creating equality in India in redistributing wealth from the rich to the poor.

One great soldier in this war against poverty is Mr. Vishal Nagraj, a young IRS-IT officer posted as ACIT in Delhi. Once the demonetization step was taken by the Prime Minister, Vishal took it as an opportunity to teach a lesson to people holding black money. He immediately made 10 teams of subordinate officers and asked them to conduct raids in various jewelry shops and big businesses. He led the teams by accompanying them in their work. He checked the stocks in each organization and compared it with their declared source of revenue. The unaccounted wealth was declared black and thus extinguished.

He also started monitoring banking transactions happening in his region and started scrutinizing all the suspicious transactions. He took help of his fellow officers to hinder any individual trying to use the banking channel in laundering money. His good work was well recognized by honest businessmen and the general public. However, he did not receive due appreciation from the political class. Moreover, the pressure from opposition started building on him for harassing all the businessmen and shop keepers. He was falsely accused of taking money from shop owners. A very negative image of him was projected in the local media. As a result, the young officer got very depressed and he was under the constant fear of even losing his job or getting suspended.

Q. How should Vishal remain resilient in this situation? Should he step back to save himself from any negative criticism or disciplinary enquiry by the department? How should he manage this situation?