CHAPTER – 1

INTRODUCTION
 CHAPTER – 1

INTRODUCTION

“In this world nothing can be certain, except death and taxes” –
(Benjamin Franklin, 1789)

1.1 Introduction

Socio-Economic development of any country depends on the capability of the

government in policy formulation and implementation. In India, the role of the
Government in achieving the developmental objectives in general, and socio-
economic objectives in particular, has increased over the decades. The government’s
traditional functions (defense, maintenance of law and order) as well as welfare and
developmental activities such as health, education, rural development, sanitation and
water and environment protection require huge public finance. In fact, the public
finance is required throughout the journey of the country’s economic planning and
implementation. Tax policy helps the government in raising revenue required for
achieving various socio-economic objectives. The revenue can be raised by way of
taxation while the spending of revenue is the outcome of a proper and sound policy of
public investment. The spending of money by the Government instead by the people
usually increases the social welfare to a maximum extent (Rajni Bedi, 2007, P.3). In
this context Taxation is considered as an essential tool of Public finance.

Tax is an important source of public finance which is raised by the

Government for public spending. Taxes include Direct tax and Indirect taxes. Direct
tax includes income tax, and tax on profit of companies. Income Tax is an important
part of Direct Taxes and a major source of revenue to the government. A tax structure
should have the qualities such as simplicity, feasibility, effectiveness, anti-
inflationary, and should have the characteristics of incentives for output of basic
necessities. Moreover, the tax structure should be less costly, easy to understand, easy
to comply with by the people and easy to administer by the authorities. Income tax
satisfies all the canons of taxation and helps the government achieving socio-
economic objectives. Income tax helps bringing distributional justice through
differential tax rates between rich and the not so rich people and it can also be used as
a tool for controlling inflation (Navjoth Dhingra, 2005, P.14). Income tax, with all

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these qualities, has assumed a greater significance in the structure of direct taxation in
all politically advanced countries across the world.

The Tax structure in developing countries suffers from the serious drawback
of difficulty in defining and measuring the tax base, assessing and collecting taxes
where population is dispersed, largely illiterate, and engaged in producing
subsistence. The successful use of the direct taxations requires conditions such as
existence of predominantly monetized economy, higher level of literate tax payers,
maintenance of honest and reliable accounts, a large degree of voluntary compliance
by the tax payers, healthy political conditions and honest and efficient tax
administration. These conditions are not available to the desired level in developing
countries. Developing countries rely more on indirect taxes due to the difficulty in
reaching tax payers through direct taxes (Goode, 1981). Like in many other
developing countries, tax structure in India suffers from serious shortcomings. Tax
structure in developing countries is highly complex, presence of high business tax
rates, multiplicity of tax and cascading of taxes, widespread exemptions and
concessions on various items as well as specific or group of manufacturers. Income
tax concessions are very extensively granted to certain types of activities. Exemptions
and concessions without cost benefit analysis may counterproductive (Lahiri in
Aggarwal and selvaraju, 2002). Radian (1980) commented on the progressive system
of taxation thus, “the poor are asked to pay very little, the rich are required to pay
high rates of taxes but allowed to escape out of the tax net through back door.
Everyone is happy except the national treasury, which stays empty.” Therefore, it is
pertinent that the taxation system needs a frequent overhauling.

Reforms are necessary strategy in any field for achieving the predetermined
objectives according to the changed socio-economic conditions. Reforms in taxation
are the need of the hour to make it effective, easily administrable and assessee
friendly. As such reforms in taxation assume much importance in making Taxation
system compatible in the globalized economy, and in redesigning it according to the
changing socio-economic situation of the country.

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1.2 EVOLUTION OF INCOME-TAX IN INDIA

1.2.1 Taxes in ancient India

There are evidences to show that Income tax was levied in ancient period also.
Taxation was considered as a sacred duty in Vedic times. There are references in
‘Manusmriti’ and Kautilya’s ‘Arthashasthra’. Manu writes on the methodology and
system of levy and collection of taxes by king. Kautilya’s Arthashastra is considered
as the first authoritative text of public finance, administration and fiscal policy. The
necessity of taxation is recorded by ‘Kalidasa’, greatest Sanskrit scholar of ancient
India in his work ‘Raghuvansa’. (Kunwar Deo Prasad, 1987).

1.2.2 Taxes during Mughal Period

Various tax system during Mughal rule are found in contemporary court
chronicles, particularly Ain-i-Akbari compiled by Abul Fazl, one of Akbar’s
courtiers. In fact, Babur was the founder of the Mughal Rule in India, had no tax
policy as such. The main source of income was plundering. Land revenue was one of
the sources of income of Mughal ruler. The Jizya on the non-Muslims abolished by
Akbar, was reintroduced by Aurangzeb in 1679 in the form of a digressive income
tax. For the levying of Jizya, a special service with new collectors of taxes was
created. It is worth noting that the discriminatory tax policy based on religion adopted
by some of the Mughal rulers was a contributory factor to the decline of Mughal
Empire after the death of Aurangazeb in 1707. (K.D. Prasad, 1987).

Kannada Emperor Krishnadevaraya of Vijayanagar originated the system of

progressive taxation. The Mughal emperors granted land revenue rights to a
Munsabdar in exchange for providing the services of the soldiers in war time. Records
from the history depict the treaty of 1765 that gave Britishers the right to collect taxes
on behalf of the emperor. The British system of District Collectors of land revenue is
an example of income tax administration by British before the dissolution of the
Mughal Empire in 1857.

1.2.3. Taxes during British Rule

The tax system of British India reflected traditional agricultural economy of

the three countries before the partition. Revenues of the central government were
dominated by custom duties. Another important source of tax revenue was excise
duty. Among the direct taxes important source of revenue was the Income Tax.

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 Income tax in modern form was introduced by Sir James Wilson in 1860 to
overcome financial crisis due to Sipoy mutiny of 1857. The most comprehensive
income tax law was brought about through the Income Tax Act of 1922 that laid the
foundation for the growth of Income Tax Department.

1.2.4 Taxes after Independence

The present law of Income Tax in India is governed by a separate Act Indian
Income Tax Act of 1961 that came into force on 1st April 1962, which is amended
from time to time by the annual Finance Acts, and other legislations pertaining to
Direct Taxes. This Income Tax Act 1961 has replaced the pre-independence Indian
Income Tax Act 1922, and had been in force for almost 52 years.

Income tax being a comprehensive legislation, has 23 chapters, 298 sections,

various sub sections and 14 schedules. Since 1962 Income Tax Act has been subjected
to numerous amendments by the Finance Act to cope with the dynamic economic
situations in India. Central Board of Direct Taxes (CBDT) is empowered to amend
rules and clarify instructions when the need arise.

1.3 SCHEME OF INCOME TAX IN INDIA

The Constitution of India provides for two layers of Government one at the
center and another at state level. The Constitution describes detail legislative powers
and functions of the two tiers of Government. As per constitutional provisions
Taxation of Income in India are classified into two broad categories a) Taxation of
non-agricultural income, (a central subject) and b) Taxation of agricultural income (a
state subject). Income Tax played an important role not only in Central finances but
also in the finance of State Government. Income Tax is chargeable on a person on his
total income of the previous year. Income tax rates are determined in the Finance Act
of every fiscal year. Income tax includes personal Income Tax and tax on the income
of companies. Income Tax is levied on individuals, Hindu Undivided Families, firms,
Association of Persons (AOPs), Body of Individuals (BOIs), local authorities, and
Artificial Juridical persons. Income Tax levied on the income of companies is called
Corporate Tax. The incidence of income tax on any person depends upon the place of
origin of income and the residential status of the Tax-Payer. Residential status of
persons is classified as Resident, Resident but Not Ordinary Resident, and Non-
Resident. Residential status of an assessee is determined for the previous year. A

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Non-Resident is required to pay tax on the incomes received or deemed to be received
in India, accrue or deemed to be accrued in India. A resident of India has to pay tax on
Income received, deemed to be received, accrued or deemed to be accrued in India
and outside India, Income of Indian origin and business income from other countries
are included for tax purpose in case of resident but not ordinarily resident.
Total income is computed by aggregating the sources classified under five
different heads. Heads of income under the Income Tax Act are; Income from salary,
House property Income, Income under the head business and profession, Capital gains
and Income from other sources. Incomes under each head are computed as per the
provisions of the respective head after Clubbing of income and set off and carry
forward of losses. The income so computed is called Gross Total Income (GTI), and
deductions under chapter VI-A are allowed and the balance is called Total income on
which income tax slab rates prescribed in the Finance Act are applied to compute the
amount of tax liability. From the tax payable for the relevant assessment year tax
rebate under section 89(1), rebate under section 87(A) are allowed to be deducted.
Section 87-A was effective from Assessment Year 2013-14 for those cases where
total income does not exceed Rupees Five Lakh, and has been changed to Rupees
three lakh fifty thousand from the F.Y. 2017-18.
Every individual and Hindu Undivided Family firm has to file the returns
of income if his Gross Total Income exceeds the maximum income which is not
taxable. Indian Income tax system provides various tax incentives to ensure savings,
intensive development of particular industry, areas, and to increase exports. Income
taxes are levied at a flat rate in case of companies, partnership firms, and body of
individuals. In case of individuals and HUFs, income tax is levied on slab rate system.
The applicable tax rates increases, up to 30% as the income increases, as India
adopted progressive tax system.

1.4 Organization Structure of Income-Tax Department

The Department of Revenue, under the Ministry of Finance, Government of

India, has two statutory Boards - the Central Board of Direct Taxes (CBDT) and
Central Board of Excise and Customs (CBEC). Each Board is headed (Figure 1.1) by
a chairperson with six members in the rank of special secretary, and the officers
working in the CBDT and CBEC are ex-officio officers of the Department of
Revenue, holding equivalent ranks. There are a number of Directorate Generals (DGs)

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under each Board handling specialized functions working as attached offices of the
Boards. DGs carryout functions such as publication, public relations, inspections,
audit, systems, infrastructure development, vigilance, training, etc. The Directorates
like Inspection, Audit, Organization and Management, Vigilance and Recovery, carry
out the function of supervision and compilation of reports etc., on the activities
performed by field offices and report and assist the Board in evaluating and
monitoring the performance of field formations. Other Directorates, such as systems,
printing, publication and public relations, examination, infrastructure, etc. carry out
support functions for the entire field departments- a) income tax department or b)
customs, central excise and service tax departments.

The administrative set up of the two Boards has been criticized by various
committees from time to time. Unlike the statutory boards like the Postal Board and
Railway Board, the CBDT and CBEC have not been declared a separate department.
The role of the department of Revenue according to the Government of India
(Allocation of Business) Rules, 1961, is restricted to only dealing with matters
concerning the CBDT or CBEC. The Department of Revenue has no powers to
exercise any supervision, control or administration over the functions of CBDT or
CBEC or any of their attached offices. However, the Department of Revenue has been
conferred with the functions of only replying to questions raised in parliament.
Further, the power to issue instructions to income tax authorities statutorily vests with
the CBDT, as per the Income Tax Act, 1961.

1.4.1 Central Board of Direct Taxes (CBDT)

CBDT is the apex body administering the laws relating to Direct Taxes. The
CBDT was created under the Central Board of Revenue Act, 1963 (54 of 1963), with
effect from January 1, 1964. Prior to this, the central Board of Revenue was looking
after the administration of both direct and indirect taxes. The primary task of CBDT is
to collect direct taxes in the form of income tax, whereas the secondary task of it is to
provide estimates every year for the policy and planning for direct taxes to the
Ministry of Finance.

The Income Tax Department has a three-tier organizational structure (Figure

1.1). The CBDT, the apex body, Chairman and six members at the first level,
Attached Officers of CBDT with eight Directorates and DGITs and DITs at the

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second level and Field Formation of CBDT (Figure 1.2) consists of three Directorates
with Chief Commissioner of Income Tax (CCITs), Additional Commissioner of
Income Tax (ACITs), Assistant Commissioner of Income Tax (ACITs) and Income
Tax Officers at the third level. The eight Directorates work as liaison between the
field formations and the Board. These directorates are headed by the director generals
of income tax (DGIT) The chief Commissioners report directly to the concerned
members of the Board as far as assessment and investigation work is concerned. The
Director Generals of Income Tax (DGITs) and are directly under the administrative
control of the CBDT. Directors of Income Tax (DIT) heads these directorates. They
work under DGIT and report through them to the Board. This Department administers
Direct Tax laws under the control and supervision of CBDT.

The department’s task is to educate and assist tax payers in filing tax returns,
assessing tax liability, demanding pending taxes, penalizing dishonest tax payers and
disposing of tax disputes if any. The role of this department in Indian Tax system is
rapidly increasing as the share of direct tax revenue of the country has been
registering a steady increase after the globalization. Today, the overall responsibility
for the administration of Income Tax lies with the Department of Revenue,
Government of India which functions through the Income Tax Department.

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 Figure 1.1: The Organizational Structure of CBDT

Chairperson
CBDT

Legislati Member CIT

Member Member Member on & Member Foreign CIT
Income- Investgat Personnel & (Media &
Audit & Compute Revenue Tax (Coordination
Tax ion Vigilence Technical
Judicial risation & System)
Policy)

CIT CIT CIT JS JS JS CIT JS JS

(ITA) (INV) (A&J) (TPL-I) (TPL-II) (ADM) (V&L) (FT&TR-I) (FT&TR-
II)

Source: www.incometaxindia.com

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 Figure 1.2: Field Level Organization Structure in CBDT

CCIT

DC/AC ITO
Hq Tech

CIT CIT CIT CIT(A) CIT(A) CIT(A)

DC/AC ITO DC/AC ITO DC/AC ITO

Hq Tech Hq Tech Hq Tech

Addl/Jt Addl/Jt Addl/Jt Addl/Jt Addl/Jt Addl/Jt Addl/Jt Addl/Jt Addl/Jt

CIT CIT CIT CIT CIT CIT CIT CIT CIT

DC/AC DC/AC DC/AC DC/AC DC/AC DC/AC DC/AC DC/AC DC/AC

ITO ITO ITO ITO ITO ITO ITO ITO ITO

ITO ITO ITO ITO ITO ITO ITO ITO ITO

ITO ITO ITO ITO ITO ITO ITO ITO ITO

ITO ITO ITO ITO ITO ITO ITO ITO ITO

TRO TRO TRO TRO TRO TRO TRO TRO TRO

Source: www.incometaxindia.com

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1.4.2 Staff Strength

The Income Tax Department has a network of 745 offices in 510 cities and the
overall sanctioned staff strength is around 78552 after the approval of cadre
restructuring in May 2013, by creating 20751 additional posts. However, the working
strength of the staff stood at 45045 and the vacancy position of 33507 (42.65%) posts,
and the sanctioned and working strength of officers1 is 11052 and 9200 respectively
as on 31-03-2016. The number of assessment units (AUs) is increased by 1080 from
3420 to 4500 to strengthen the tax administration. It is estimated that this would bring
net additional revenue of `25,756.04 Crore per annum against an additional
expenditure of `449.71 Crore per annum. Each range is to have one more assessing
officer. The number of Administrative CITs deployed on assessment related functions
is also advised to increase from 228 to 250 and special ranges were to be created with
adequate supporting manpower so as to bring more focus on assessment. It was also
advised to have a separate Directorate for Risk Management; other important areas
such as international tax, investigation, and TDS were to be expanded. It is also
proposed to strengthen the appellate structure by increasing the number of CIT
Appeals and providing them supporting manpower. The cadre restructuring has not
been completely implemented yet.

1.5 A BRIEF PROFILE OF KARNATAKA STATE

Karnataka is one of the industrialized and fastest growing states in the country
contributing to the rapid growth of India’s economic growth. Karnataka as a
knowledge hub and a rapid growing economy is credited to its peaceful industrial
relations. With just five per cent of the country’s population, the state contributes to
six per cent of GDP, seven per cent of Fixed Capital and 13 per cent of India’s
exports.

Today, Karnataka is driving domestic growth and creating wealth through a

potent mix of resource-based, skill-based, technology-based and knowledge-based
products and services. Karnataka is a leading IT hub of the country. Bengaluru as the
second largest technology cluster in the world after Silicon Valley. Currently, 3500 IT
companies contribute over 38 per cent of the IT exports in the country with Karnataka
being the largest software exporter registered a 33 Billion USD IT exports in the year
1
Officers in the Income Tax Department include Authorities such as Pr. CCIT/Pr. DGIT, C.CIT/DGIT,
Pr. CIT/Pr. DIT, CIT/DIT, Addl. CIT/Addl. DIT/JCIT

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2014-15. More than 400 out of Global Fortune 500 companies outsource their IT
services from Bengaluru. Presence of almost all leading IT companies of the world,
including Infosys, Wipro, Tata Consultancy Services, Oracle, Dell, IBM, Microsoft,
Accenture, Cognizant, etc. There are about 22 universities, 200 Engineering Colleges,
200 Polytechnics and 300 Industrial Training Centers in Karnataka. Bengaluru has the
highest number of R & D centers in India. With all these potential as the leading state
in the country, it is quite imperative to study the functioning of Income tax
department in the State. It is also pertinent to study the Taxpayers attitude towards the
income tax system and administration. Karnataka state’s Income tax revenue growth,
increase in the number of assessees, states Income Tax revenue to states NSDP also
have been presented for reference.

Table 1.1: Growth of Income Tax revenue of Karnataka State

Income Tax Number Avg. Tax
% of Income
Year Collection of Collection Per
Tax To NSDP
(` in Crore) Assessees Assessee
2000-01 3548.9 3.68 NA -
2001-02 4004.58 4.05 NA -
2002-03 5323.43 5.03 1858999 286
2003-04 7326.97 6.41 1896731 386
2004-05 10452.43 7.64 1848359 565
2005-06 13610.85 8.33 1706756 797
2006-07 18362.34 10.51 1672434 1098
2007-08 29754.63 14.61 1801395 1652
2008-09 27311.2 9.81 1795300 1521
2009-10 29220.9 9.72 1796407 1627
2010-11 35824.8 9.73 1781292 2011
2011-12 40956 7.42 1777091 2305
2012-13 49047.8 7.78 1781888 2753
2013-14 59769.8 8.18 1785606 3347
2014-15 60595.22 7.29 2030958 2984
2015-16 72040.94 7.66 2501037 2880
EGR 22.84
Source: Obtained from Income Tax Department Bengaluru.

Table 1.1 highlights that the income tax revenue of the state shows a
consistent growth at an EGR of 22.84 per cent and registered as the third highest state
in the tax revenue. While percentage of Income tax to NSDP increased from 3.68 per
cent from 2000-01 to 14.61 per cent in 2007-08 and started declining thereafter, came

11
down to 7.66 per cent in the year 2015-16. However, the number of Assessees
showing an increasing trend throughout the period under study. It can be observed in
the table that the average tax collection per assessee increased from `286 in 2002-03
to `2880 in F.Y. 2015-16. It is increased almost 10 times in about 13 years.

Table 1.2: District-wise share of Net State Domestic Product at current market
price
District NSDP (` at current price) Rank % Share in NSDP
Bengaluru Urban 255257 1 33.92
Dakshina Kannada 43691 2 5.81
Belagavi 34481 3 4.58
Tumkuru 29125 4 3.87
Mysuru 26593 5 3.53
Bellari 25949 6 3.45
Shivamogga 22029 7 2.93
Udupi 20269 8 2.69
Mandya 20191 9 2.68
Bagalkote 19818 10 2.63
Dharwad 19145 11 2.54
Hassan 17944 12 2.38
Chikkamagaluru 17363 13 2.31
Kalaburgi 16911 14 2.25
Davanagere 15512 15 2.06
Vijayapura 15290 16 2.03
Uttarakannada 14090 17 1.87
Raichuru 13677 18 1.82
Kolar 13648 19 1.81
Chithradurga 12772 20 1.70
Ramanagara 12383 21 1.65
Haveri 12027 22 1.60
Bengaluru Rural 11940 23 1.59
Bidar 11106 24 1.48
Chikkaballapur 10583 25 1.41
Koppala 9740 26 1.29
Chamarajanagar 9375 27 1.25
Gadag 8704 28 1.16
Yadagiri 7530 29 1.00
Kodagu 5400 30 0.72
TOTAL NSDP 752543 100
Source: Computed from the data of Economic survey of Karnataka-2016

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1.5.1 Staff strength in Income Tax Department of Karnataka

The total number of 1401 income tax authorities working in Karnataka as

against 2875, excluding supporting staff and tax assistants in 44 offices established in
Karnataka including 11 offices in Bengaluru city, the capital of Karnataka.

Table 1.3: Sanctioned and Working Strength in Income Tax Department,

Karnataka

SL. Sanctioned Strength On Working Strength

Rank
NO. 31-3-2016 On 31-3-2016
1 PR.CCIT 1 0
2 CCIT 6 7
3 PR.CIT 17 9
4 CIT 41 39
5 ADDL.CIT/JCIT 99 66
6 DCIT/ACIT 156 132
7 JD(SYSTEMS) 0 2
8 DD(SYSTEMS) 1 3
9 AD(SYSTEMS) 3 3
10 DD-OL 1 1
11 AD-OL 5 1
12 PR.AO 1 0
13 ITO 346 346
14 ITI 835 572
15 AO-II 24 20
16 AO-III 59 53
17 SPS 24 21
18 PS 41 12
OS 218 49
STA 750 28
Executive
19 SG-1 83 1
Assistants
SG-2 164 36
TOTAL 1215 114
TA 772 328
SG-2(DR) Ta/Steno-III 148 16
20
SCD-II /Driver 12 11
TOTAL 932 355
LDC 11 6
NS NS/LDC/ 208 112
21
SCD(OG) DRIVER 7 0
TOTAL 226 118
22 MTS 672 165
TOTAL 4033 1874
Source: Income Tax Department Bengaluru

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 For the administrative purpose, Karnataka-Goa region of Income tax has been
classified into four jurisdictions (Figure 1.3), namely Bengaluru, Mysore, Hubballi,
and Panaji. The Authorities consists of one Principal Chief Commissioner of Income
Tax (PR. CCIT) and Five Chief Commissioner of Income Tax (CCIT) working under
PR. CCIT, 14 Principal Commissioners of Income Tax (PR.CIT), Commissioners of
Income Tax (CIT/DIT), Additional Commissioner of Income Tax (ADDL/JT CIT),
Income Tax Officers (ITO), and Inspectors of Income Tax (ITI).

Each PR.CIT heads Three Ranges. Thus, the total number of ranges are 42.
One Range consists of One Circle and Four Wards headed by Additional
Commissioner of Income Tax and Income Tax Officers respectively and assisted by
Income Tax Inspectors. Each Range consists of Five to Fifteen Assessment Units
which are either Wards or Circles. Each Ward corresponds to a specific sub-
Jurisdiction, and includes all tax payers from that sub-jurisdiction who declare Total
Income below `20 Lakh. The Assessees declaring income `20 Lakh or more are
assigned to a corresponding circle. Each assessment unit is headed by a single
Assessing Officer aided by a number of supporting staff, comprising of Inspectors,
clerks, Tax Assistants and stenographers.

1.6 Role of Income Tax Administration

Maximizing Income Tax revenue is an important task of Tax administration.

However, Revenue outcomes may not always be the most appropriate basis for
assessing administrative performance. The efficiency of the administration lies in the
quality and in the way revenue is raised. How revenue is raised is more important than
how much revenue is raised (Bird. R.M: 2008). Vito Tanzi, (1991) notes that tax
administration has a crucial role in determining the effective tax system, and not the
statutory tax system. One of the essential preconditions for reform in tax
administration is to simplify the tax system to ensure effective application in the low-
compliance countries. Tax Administration efficiency cannot be assessed without
taking into account the environment in which it has to function, the legal framework,
and institutional infrastructure with which it has been equipped.

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 Figure 1.3: Organizational structure of Income Tax Department - Karnataka –Goa Region

Principal CCIT

CCIT CCIT CCIT DGIT (Inv). CCIT CCIT

Bangalore-I Bangalore-II Bangalore-III Bangalore Bangalore-I Bangalore-I

CIT – I CIT – III CIT – V CIT (Central) CIT – Hubli CIT – Panaji

CIT – II CIT – IV CIT – Mysore DIT (INV) CIT – Gulbarga CIT – Belgaum

CIT (CO) CIT (A) – III CIT (IIAT)–I CIF (A)–VI CIT - CIT–Mangalore
Davanagere
CIT (TDS) CIT (A) – IV CIT (IIAT)–II ITAT – Panaji

CIT (Audit) CIT (IIAT)–III CIT (A) Panaji

CIT (A) – I CIT (IIA)–IV CIT (A)

Belgaum
CIT (A) – II CIT (A)–V

CIT (A) Mysore

Source: Income Tax Department Bengaluru

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 The degree of Complexity in Tax law and its implications for tax
administration are also very crucial in determining the effectiveness of tax
administration. Successful administrative reform requires simplicity and simplicity is
equally important in procedure for taxpayers. If the tax laws are simple, the
Administrators can concentrate on the main tasks of facilitating compliance,
monitoring compliance, and dealing with non- compliance. Drastic developments are
seen in the Tax offices. Partially reorganized and computerized. Many
recommendations of Task Force committee were implemented, though not
completely, to a greater extent. The department has designed its web site and
facilitated for e-TDS, e-filing of returns etc. However, successful computerization
requires a fundamental reorganizing and streamlining both basic systems and
procedures. Even the best computerized system will not produce useful results unless
there are real incentives for tax administrators to utilize the system properly. With this
background, the present research attempts to study the problems of Income Tax
System and Administration in India.

1.7 CONCLUSION

This chapter briefly enumerated the evolution of income tax in India, scheme
of income tax in India, organizational structure of the Income Tax Department. It also
articulated a brief profile of Karnataka state, the growth of Income Tax Revenue and
the number of Assessees from 2000-01 to 2015-16. This chapter also described the
staff strength and the role of Income Tax Department, and the pre-requisites for an
effective administration of Income Tax System. An analysis of relevant review of
literature has been presented in the forthcoming chapter to find the research gap and
to proceed with this research endeavor.

REFERENCES

Aggarwal, P.K, and Selvaraju. V. (2002). ‘Discriminatory Tax Treatment of Domestic vis-a-
vis Foreign Products: An Assessment, National Institute of Public Finance and Policy,
New Delhi.
Bird.R.M. (1993). “Tax Reforms in India”, Economic and Political weekly, Vol. XXVIII, No.
50.
__________ and Zolt, E.M. (2008). “Technology and Taxation in Developing Countries:
From Hand to Mouse”, National Tax Journal, Vol. 61, No. 4, December 2008, pp.
791-817

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Goode (1981). “Some Economic Aspects of Tax Administration”. IMF Staff Papers, Vol.28.
Kunwar Deo Prasad (1987). ‘Taxation in Ancient India’. Mittal Publication, New Delhi.
Novjoth Dhingra (2005). Tax Reforms and Administration, Deep & Deep Publications Pvt.
Ltd., New Delhi, 2005, P.14
Radian, Alex (1980). ‘Resource Mobilisation in poor countries: Implementing Tax Policies’,
Transaction Books, London.
Rajini Bedi (2007). ‘Personal Income Taxation-Performance, Reforms, and Incentives’.
Regal Publications, New Delhi. P.3.

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