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CHAPTER - V
PRESENTATION OF THE DATA AND ANALYSIS
5.1 Introduction:
The present study is being carried out with the objectives to study
overall growth of income-tax consultancy as a profession, to discuss
various services provided by tax consultants to the assessees, the
difficulties faced by them in providing such services and the difficulties
of various types of assessees (i.e. individual, firm and company only) in
getting the services from income-tax consultants. In view of these
objectives the researcher has collected huge amount of primary data by
presenting and circulating separate questionnaire for each type of
assessees i.e. individual, firm and company. The tax authorities directly
and indirectly related with income-tax consultancy services are contacted,
the formal and informal discussions are held with them and relevant data
is elicited. The secondary data is collected by using available secondary
sources.
In this chapter an attempt is being made to present, analyze and
interpret the data under the following two main parts-
I. Income-Tax Consultants, their Services and Difficulties
II. Different types of assessees and their difficulties in getting tax
services.
This part is again divided into three sections, viz.
1. Individual Assessees
2. Partnership Firm Assessees and
3. Company
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PART-A
Income-Tax Consultants, their Services and Difficulties
In India, income-tax services are mainly provided by the
professional Chartered Accountants, who are the members of their
professional body, the Institute of Chartered Accountants of India and
abide by their professional code of conduct. Some law professionals and
those who have completed their degrees or diplomas in taxation,
accountancy or commerce also provide such services. All these services
providers provide their various types of services according to their
professionals’ rules and regulations, code of conduct, rules and
regulations provided by the Government under various taxation acts, rules
and customs followed in this regard. The professional charges vary from
case to case depending on number of services provided, volume of
transactions etc. generally per case lump sum or on percentage basis.
They mainly face their professional difficulties such as their staff,
location of office, time management etc. Difficulties on the part of clients
arise because of various tax collection departments, their official practices
and the implementation of the rules and regulations framed under the
Income-Tax Act, 1961 by them.
5.A.I General Information:
As far the income-tax consultants are concerned they differ from
each other as to their qualification, seniority in the profession, age,
strength of their staff, training to them, their social status, public
relations, office location, other infrastructural facilities provided by them,
service promptness etc., which affect their client base, quality of services
provided by them and their efficiency and difficulties in providing
68
services. As such a detailed enquiry is held in this regard which revealed
following things:
5.A.I.(1) Academic and Professional Qualifications
Academic and professional qualification plays very important role
in service providing task. It mainly affects the quality and performance of
the service provided. The highly qualified and professionalized
consultants can provide maximum tax services under one roof. Naturally
the clients prefer such consultants. The academic and professional
qualifications of the studied tax consultants are as under:
Table No. 5.1
Academic and Professional Qualifications
Qualification No. of Tax Consultants Percentage
B.A 1 3.33%
B.Com., M.Com 5 16.67%
LL.B 4 13.33%
D.I.T. & S.T. (Diploma in
Income-tax & Sales Tax)
2 6.67%
G.D.C. & A. 3 10%
Chartered Accountant 15 50%
Total 30 100%
Source: Primary Data
69
From table no. 5.1 it can be observed that the tax consultants
under study are of varied qualification such as B.A., B. Com., M.
Com., D.I.T.& S.T., LL.B. and Chartered Accountant. There are no
restrictions on the part of Income-Tax Department as to the
qualifications of the tax consultants but generally those who are
graduated in commerce, law and have a special knowledge of taxation
law provide these services.
There is only one tax consultant having qualification B.A., 5 tax
consultants are B. Com., M. Com., 4 tax consultants are LL.B., 2 tax
consultants are D.I.T. & S.T., 3 tax consultants are G.D.C. & A. and
15 tax consultants are chartered accountants. 50 % of the total studied
tax consultants are chartered accountants. As far qualifications of the
consultants are concerned up to 95% of them are found to be well
qualified in taxation. Graphical representation can be shown as under:
Figure. No. 5.1
In case of income-tax consultancy, people having commerce back-
ground or taxation or law back-ground can provide better service to
their clients. It is also observed that with academic qualification,
70
experience in this field is also equally important. Some well-known
tax consultants in the studied area are not from commerce or taxation
background yet with experience and devotional work they are
providing better quality services to their clients.
5.A.I.(2) Office Location
Generally assessees select tax consultant whose office is near from
their house or office or business place. Company assessees may prefer
to select tax consultant whose office is in MIDC area for their
convenience.
A survey is carried to know the criteria of the assessees in selecting
a particular tax consultant in relation to office location of tax
consultant. The details in this regard are as under:
Table No. 5.2
Office Location
Office Location No. of tax consultants Percentage (%)
Prime area 10 33.33%
Central area 8 26.67%
Remote area 9 30%
MIDC area 2 6.67%
Income-Tax Office area 1 3.33%
Total 30 100%
Source: Primary Data
71
Figure 5.2
Office Location
Central area,
26.67%
Prime area,
33.33%
Income-Tax
Office area,
3.33%
MIDC area,
6.67%
Remote area,
30%
From the table no. 5.2 it can be observed that office places of 10
(33.33%) tax consultants are in prime area, 8 (26.67%) tax consultants
are in central area, while offices of 9 (30%) tax consultants are in
remote area. 2 (6.67%) tax consultants have selected MIDC area for
their office. One tax consultant’s office is in Income-Tax Office area.
Though the above table gives statistical data, it is observed that it is
not necessary for the assessees that the office place of tax consultant
must be in prime area or in central area. It is also observed that ‘trust
of assessees on tax consultant’ and ‘services provided by them’ are
only important things in selecting tax consultant, office place is not so
important for assessees.
5.A.I.(3) Assistants’ Strength:
Assistants or office staff of the tax consultants play vital role in tax
consultancy services. They assist tax consultants by performing
majority of clerical work required for assessees. An enquiry is made to
review the size of the income-tax consultancy firms based on their
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strength of the employees. The following table no. 5.3 shows the staff
strength of the income-tax consultants:
Table No. 5.3
Strength of the Assistants
No. of assistants No. of tax consultants Percentage (%)
No assistants 3 10%
1 to 5 21 71%
6 to 10 4 13.33%
More than 10 2 6.67%
Total 30 100%
Source: Primary Data
Figure 5.3
Strength of the Assistants
From the above table no. 5.3 and Figure No. 5.3, it is observed that
3 (10%) out of total income-tax consultants have not appointed any
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assistant. These income-tax consultants are doing all the work
themselves.
21 (70%) income-tax consultants have appointed less than 5
assistants. Table no. 5.3 shows that majority of the income-tax
consultants require maximum 5 assistants. 4 (i.e. 13.33%) income-tax
consultants have appointed assistants in the range of 6 to 10. Only 2
income-tax consultants have appointed more than 10 assistants. One of
them has appointed 18 assistants. This shows that the most of the
income-tax consultants in this area are small sized and operate on a
small scale.
5.A.I.(4) Selection of Assistants / Staff
Well qualified and experienced assistant is the asset to the
tax consultancy firm. He can provide quality service efficiently to
the clients. In tax consultancy service, assistants who are from
commerce and/or law faculty are preferred to provide service
efficiently. As such every tax consultant takes maximum care in
selection of these assistants.
A survey is conducted to know the selection criteria by the
income-tax consultants in selecting the assistants. The following
table shows different criteria used for selecting the assistants.
74
Table No.5.4
Selection Criteria for Assistants
Particulars No. of Tax consultants Percentage (%)
Educational qualification
(at least B.Com.)
19 63.33%
Computer education
(especially Tally)
10 33.33%
Knowledge of accounting
& auditing
6 20%
Experience 4 13.33%
Loyalty to organizations 2 6.67%
Source: Primary Data
The table no. 5.4 shows that the tax consultants in selecting
their staff have given maximum 63.33% emphasis on their
educational qualifications while only 33.33% and 20% emphasis is
given to their skill oriented education i.e. computer literacy and
knowledge of accounting and auditing respectively. Much
importance has not been given to experience (13.33%) and loyalty
(6.67%) of the candidate. Majority of the consultants expect that
their assistant should be a commerce graduate.
However, the informal discussion by the researcher with the
income-tax consultants revealed that the group of friends and
relatives of tax consultants are also playing important role in the
selection of staff by the tax consultants.
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5.A.I.(5) Training to Assistants / Staff
Business environment is ever changing. It requires up to date
knowledge and information. The services rendered by tax
consultants are technical by nature. Technical service requires
constant and regular training to the staff. Assistants should up
dated with current tax matters by providing training to them.
A survey is taken to enquire the adequacy of the training
given to the staffs by the income-tax consultants in this area. The
following table shows the details relating to training given to the
assistants:
Table No.5.5
Training to Assistants
Particulars No. of tax consultants Percentage (%)
Training Provided 25 83.33%
Training Not Provided 2 6.67%
Not applicable 3 10%
Total 30 100%
Source: Primary Data
It is expected that the professional service provider should render
satisfactory services to his clients. Tax consultant is a professional and
therefore his services to his clients must be satisfactory. For this
purpose, tax consultant must be with well equipped office and with
trained staff.
76
Figure No.5.4
Training to Assistants
Training Not
Provided,
6.67%
Training
Provided,
83.33%
Not
applicable,
10%
The issue of training to staff is discussed with the tax consultants
interviewed by the researcher. From the table 5.5 it is noticed that out
of 30 tax consultants interviewed 25 (83.33%) tax consultants provide
training to staff and only 2 tax consultants in the selected area have
not provided training to their staff and 3 tax consultants are rendering
services to the clients without the help of assistants.
5.A.II Services Provided by Income-Tax Consultants
Income-tax consultants provide various types of services to their
clients, which mainly include book-keeping, taxation, cost accounting,
auditing etc. The quality of service provided mainly depends on the
infrastructural facility available as well as qualification of the
consultants and the number of services provided by them.
5.A.II.(1) Taxation Services
The study of different services provided by the income-tax
consultants revealed that the major services pertain to income-tax
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issues, tax planning and compliances. The following table shows the
different services and the number of income-tax consultants providing
these services.
Table No.5.6
Various Taxation Services
Particulars No. of tax consultants Percentage (%)
Income-Tax 30 100%
Value-added Tax 20 66.67%
Service Tax 16 53.33%
Central Excise 5 16.67%
Customs Duty 2 6.67%
Tax Planning 30 100%
Tax Compliances &
procedural work
30 100%
Source: Primary data
Figure No.5.5
Various Taxation Services
78
The table no. 5.6 shows that all the income-tax consultants
provide the services of income-tax issues, tax planning and tax
compliances and procedural work. Tax planning is the service which
tries to ensure that the tax liability is minimum. It is different from
evasion of tax. In tax planning due care is taken to get the benefit of
exemptions and deductions allowed by the Income-Tax Act, 1961.
The compliances and procedural work aims at making sure that all
necessary forms and payments are appropriately submitted.
Apart from the core areas of practice, approximately 20 (66.67%)
and 16 (53.33%) of the income-tax consultants provide the Value
Added Tax consultancy and Service Tax consultancy services to their
clients respectively. Other taxation services such as Central Excise and
Customs are not provided by most of the income-tax consultants. Only
5 (16.67%) and 2 (6.67%) of the income-tax consultants provide these
services respectively.
5.A.II.(2) Book-keeping Services
Maintaining of accounts according to the legal provisions of the
law is prime necessity in taxation. This requires specialized staff.
Many small scale businesses, individuals do not afford to employ such
staff. They take the help of their tax consultants in this regard. As such
most of the income-tax consultants provide such book-keeping
services to their clients. The following table no. 5.7 shows the details
of the book keeping services provided by the income-tax consultants:
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Table No.5.7
Book-keeping Services
Particulars No. of Tax consultants Percentage (%)
Service Provider 24 80%
Service Not-
provider
6 20%
Total 30 100%
Source: Primary data
The above table shows that the 24 (80%) of the income-tax
consultants provide the services of book keeping to the clients. Only 6
(20%) of the income-tax consultants do not provide this service to
their clients.
5.A.II.(3) Cost Accounting Services
Cost accounting services are not so common in this area. Generally
cost accounting services are availed by manufacturing companies
which are less in number in this area. The following table no. 5.8
shows the details of the cost accountancy service provided by the
income-tax consultants:
Table No.5.8
Cost Accounting Services
Particulars No. of Tax consultants Percentage (%)
Service Provider 5 16.67%
Service Not-provider 25 83.33%
Total 30 100%
Source: Primary Data
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The above table shows that only 5 (16.67%) of the income-tax
consultants provide the services of cost accountancy. Other 25
(83.33%) of the income-tax consultants do not provide this service to
their clients. Informal discussion with the income-tax consultants
revealed that this service is not generally demanded by the clients and
hence are not provided.
5.A.II (4) Audit Services
Audit is another service provided by the chartered accountants’
firms and certified auditors along with taxation services to their
clients. Under Companies Act, Trust Act and many other Acts, it is
mandatory to the business to get their accounts audited by a competent
authority. Cost audit, Tax audit, VAT audit, Financial audit etc. are
various audits required under various Acts.
Audit services are provided only by the income-tax consultants
who are chartered accountants and who are competent to conduct such
audits under the respective law (certified auditors). A study of ‘the
income-tax consultants who can conduct the audits for assessees’ is
done to understand the different types of audits conducted by them.
Table no. 5.9 reveals the different types of audits and income-tax
consultants providing these audit services to their clients:
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Table No.5.9
Audit Services
Particulars No. of Tax consultants Percentage (%)
Statutory Audit 16 53.33%
Cost Audit -- --
Tax Audit 19 63.33%
VAT Audit 17 56.67%
Internal Audit 16 53.33%
Financial Audit 4 13.33%
Environmental Audit 2 6.67%
Information System
Audit
6 20%
Source: Primary Data
The table no. 5.9 shows that maximum tax consultants 63.33% are
providing tax audit services to their clients while 53.33% (16), 56.67%
(17) are providing statutory audit and VAT audit services to their
clients. Only 4 out of 30 are providing, financial audit services while 6
(20%) are providing information system audit facilities to their clients.
Except 2 (6.67%) none of the consultant provides environmental audit
service to their clients. Cost audit services are not provided by the
income-tax consultants in this area.
5.A.II.(5) Consultancy Services
The income-tax consultants also provide the consultancy services
to their clients. Such consultancy services include the management
accountancy, project planning and financing, project improvement or
82
turnaround studies, arrangement for the sources of finance, etc. The
following table no. 5.10 illustrates the different types of consultancy
services provided by the income-tax consultants:
Table No.5.10
Consultancy Services
Particulars No. of tax consultants Percentage (%)
Management
Accountancy/Internal Audit
16 53.33%
Project Planning & Finance 20 66.67%
Project improvement or
turnaround studies
4 13.33%
Arrangement for the sources of
finance
11 36.67%
Source: Primary Data
The above table shows that most of the income-tax consultants, i.e.
20 (66.67%) provide the project planning and financing services. Other
major consultancy services include management accountancy / internal
audits and arrangement for the sources of finance that are provided by
approximately 16 (53.33%) and 11 (36.67%) of the income-tax
consultants. Only 4 (13.33%) income-tax consultants provide these
services. The services of project improvement or turnaround studies are
not provided by the most of the income-tax consultants as there is no
demand from clients for these services.
5.A.II.(6) Timely Notification of Amendments, Decisions of
Supreme Court to the Assessees
Timely intimation of amendments in Income-Tax Act and decisions of
various courts, save the time, money and efforts of the assessees. They
83
can plan or arrange their financial matters according to amendments and
judgments etc. The position in this regard can be seen from the following
table no. 5.11:
Table No. 5.11
Intimation of Amendments, Decisions of Supreme Court to Clients
Particulars No. of Tax consultants Percentage (%)
Intimating 27 90%
Not-intimating 3 10%
Total 30 100%
Source: Primary Data
Table No. 5.11 and its graphical representation shows that the 27
(90%) of the income-tax consultants intimate the amendments, judgments
to the clients. Only 3 (10%) of the income-tax consultants do not intimate
such changes.
The informal discussion with the income-tax consultants revealed
that sometimes it is not possible to intimate all the clients regarding the
amendments, judgments. Time and technical support system and non-
availability of trained staff are the major problems in intimating the
amendments or the judgments to the clients.
5.A.III. Filing of Returns of Income
Under the tax compliance and procedural work, income tax
consultants have to file return of income of assessee on behalf of him /
her. It is a form which includes detailed information regarding income of
the assessee and the tax thereof. It is filed under section 139 of the
84
Income-Tax Act, 1961. All the documentary evidences are required to
attach with it.
5.A.III.(1) Mode of Filing the Returns of Income
Previously returns of income were filed in paper form only. Now-
a-days Online Tax Accounting System has been introduced. It has
made e-filing of returns and e-payment mandatory for the assessees
who are tax audited. In case of other assessees it is on tax consultant to
select the mode for filing the return of income. A study is conducted to
know the mode of filing the return of income selected by different
income-tax consultants. The following table shows the details in this
regard:
Table No. 5.12
Modes of Filing the Return of Income
Particulars No. of Tax consultants Percentage (%)
E-filing 4 13.33%
On paper 3 10%
Both 23 76.67%
Total 30 100%
Source: Primary Data
From the table no.5.12 it can be observed that 4 (i.e. 13.33%)
income-tax consultants use only e-filing mode for filing the returns of
income. On the contrary 3 (i.e. 10%) income-tax consultants file the
returns of income in paper form only. 23 (i.e. 76.67%) income-tax
consultants use both the modes i.e. electronically and in paper form
for filing the returns of income.
85
It is observed that income tax consultants from new generation use
e-filing mode comfortably. On the contrary senior tax consultants are
not so comfortable with such electronic devises. They need to take
help of their assistants in e-filing the returns.
There are some benefits of e-filing of returns of income and some
technical problems too. These benefits and difficulties discussed as:
5.A.III.(2) Benefits of Electronically Filing the Returns of Income
The study is conducted to know the benefits enjoyed by the
income-tax consultants in electronically filing the returns of income. It
is observed by the researcher from the total 27 income-tax consultants
who file the returns of income electronically that the most common
benefit is quick and time saving. It is possible to file return any time
and from any where. Less paper work is required.
The following table shows the details of different benefits enjoyed
by the income-tax consultants:
Table No. 5.13
Benefits of Electronically Filing the Return of Income
Particulars No. of Tax consultants Percentage (%)
Quick-time saving 15 50%
Paperless-Paper saving 10 33.33%
Anytime submission 8 26.67%
Easy automation calculation 7 23.33%
Accurate 6 20%
Money saving 1 3.33%
Source: Primary Data
86
From the table no. 5.13 it can be seen that 50% of the tax
consultants feel that e-filing is quick and time saving. 33.33% tax
consultants consider it as paperless - paper saving mode. 26.67%
income-tax consultants feel that anytime submission is possible with it
and 23.33% income-tax consultants feel that easy automated
calculations are possible with it. 6 (i.e. 20%) tax consultants feel that
accuracy is achieved easily with e-filing. Only one tax consultant
(3.33%) feels that it is a money saving mode.
5.A.III.(3) Difficulties in Electronically Filing the Returns of
income:
The discussion by the researcher with various income-tax
consultants (4 out of 30) who opt for electronically filing the returns of
income or 23 income tax consultants who opt for either electronically
filing the returns of income or in paper form filing the returns of
income revealed that the 37% of the income-tax consultants face the
difficulties in electronically filing the return. The following table
shows the details:
Table No. 5.14
Difficulties in Electronically Filing the Returns of Income
Particulars No. of tax consultants Percentages (%)
Facing difficulties 10 37%
Not facing difficulties 17 63%
Total 27 100%
Source: Primary Data
87
Figure 5.6
Difficulties in Electronically Filing the Returns of Income
Not facing
difficulties ,
63%
Facing
difficulties,
37%
From the table no. 5.14 it is clear that 63 % tax consultants have no
problem in e-filing the returns. But e-filing return creates some
technical problems.
In case the return is digitally signed, on successful uploading of e-
Return, ITR-V Form would be generated which needs to be printed by
the tax-payer. This is an acknowledgement. Tax-payer has to fill-up
this ITR-V Form, duly verify and mail to Income-Tax Department,
Bangalore within prescribed time limit by ordinary post only. If
assessee fails to do so, it will deem that the return in respect of which
the Form ITR-V has been failed was never furnished.
Submission of Form ITR-V is not acknowledged by the concerned
office at Bangalore. Therefore tax consultants can not make it sure
whether Form ITR-V submitted is received by the Income-Tax
Department or not. There is also chance of miscarriage of it in transit
or misplacement in the office. This procedure makes the funky
position of income-tax consultant.
88
The other difficulties faced by the income-tax consultants are
summarized as under:
- Electricity failure.
- On-line system failure / site block.
- No access to proper sites.
- Technological knowledge and updating of information.
- No access of data due to server problem.
- The uploading system does not give the list of errors. Returns of
income are accepted with errors.
- Acknowledgements are not received in time.
- Slow working on web-sites.
- No verification of e-payments through cross check.
Further it is observed that the most of the senior income-tax
consultants in this area are not updated with the computer system and
are dependent on the assistants for electronically filing the returns of
income.
5.A.IV Other Difficulties Faced by Income-Tax Consultants
5.A.IV.(1) A study is conducted to assess the overall knowledge of
accountancy and taxation matters to the clients. The study is
restricted only to the individuals, firms and the companies. It is
observed that the knowledge of the accountancy and taxation
matters is higher with companies in the area of research work
followed by firms and then individual assessees. The following
table shows relative opinion of the income-tax consultants about
the awareness / knowledge of the accountancy and taxation matters
to their clients:
89
Table No. 5.15
Elementary Knowledge of Accounting and Taxation matters
to Clients
Individuals Firms Companies Knowle-
-dge
Range No. of tax
consultants
% No. of tax
consultants
% No. of tax
consultants
%
75 – 100 9 30.00 8 30.77 6 37.50
50-75 3 10.00 8 30.77 7 43.75
25-50 3 10.00 6 23.08 3 18.75
0-25 15 50.00 4 15.38 -- --
N.A. -- -- 4 -- 14 --
Source: Primary Data
Note: The Income-Tax consultants having no such clients are
marked as N.A. (not applicable) in the above table.
Figure No. 5.7
Elementary Knowledge of Accounting and Taxation matters
to Clients
0
2
4
6
8
10
12
14
16
75 – 100 50-75 25-50 0-25
Individuals
Firms
Companies
The above table and the graphical representation show that
awareness / knowledge of the accountancy and taxation matters are
higher in case of the companies. 6 income-tax consultants admit
90
that 75-100 % company clients have knowledge of accountancy
and taxation matters. Approximately 31% (8) income-tax
consultants believe that knowledge of the subject is adequate with
partnership firms. The percentage is further lower to 30 % in case
of individuals. 50 % Tax consultants believe that individual
assessees are unaware about accountancy and taxation matter. This
reveals the fact that the awareness / knowledge of the subject
matter are lower with individuals.
Assessees are required to be aware of some tax provisions at
least relating to their business or profession, tax obligations, due
dates regarding tax compliances etc. If they are unaware of this
basic knowledge, it creates problem for tax consultants. In such
cases tax consultants have to call / remind these assessees
frequently.
5.A.IV.(2) Further study is conducted to understand the availability of
the trained staff with the clients. Untrained staff or assessees who
are unaware of book-keeping and accountancy may make errors in
book-keeping or may use wrong methods for book-keeping, etc.
which creates problem in service providing task by tax consultants.
The following table gives the details of clients having trained
staffs:
91
Table No. 5.16
Trained Staff with Assesseess
Individuals Firms Companies Range
No. of tax
consultants
% No. of tax
consultants
% No. of tax
consultants
%
75 – 100 7 23.33 13 50 14 87.5
50 – 75 4 13.33 5 19.23 1 6.25
25 – 50 -- -- -- -- -- --
0 – 25 19 63.33 8 30.77 1 6.25
Total 30 100 26 100 16 100
N.A. 4 14
Source: Primary Data
Note: The income-tax consultants having no such clients are marked
as N.A. (not applicable) in the above table.
Figure No. 5.8
The table no. 5.16 and figure no. 5.8 shows that 14 (ie.87.5%)
income-tax consultants believe that their 75 to 100 % corporate clients
92
have trained staff. 50% of the income-tax consultants believe that
their 75 to 100 % clients–partnership firms have trained staff.
However, 7 income-tax consultants believe that their 75 to 100%
individual clients have trained staff. On the contrary 19 (63.33 %)
income tax consultants believe that their individual assessees do not
have trained staff.
4 tax consultants have no partnership firm client and 14 tax
consultants have no company clients.
The informal discussion with the income-tax consultants revealed
that cost involved in appointing the trained staff is high and hence
most of the individual assessees do not have the trained staff with
them. On the contrary majority of the companies appoint the trained
staff.
5.A.IV.(3) Correctness of the accounting records maintained by the
clients is highly determined by the knowledge and experience of the
staff of the clients. The informal discussion with the income-tax
consultants revealed that generally corporate assessees appoint trained
staff to record transactions undertaken. But the cost involved in
appointing trained staff is high and is not affordable to individual
assessees and hence the accounting records maintained by them may
not be fully correct. It is a cumbersome work for tax consultants to
find out errors and make the books of accounts correct and proper.
The following table shows the relative opinion of the income-
tax consultants regarding the correctness of the accounting records
maintained by their clients:
93
Table No.5.17
Details of Correctness of the Accounting Records
Maintained by the Clients
Individuals Firms Companies Range
No. of tax
consultants
% No. of tax
consultants
% No. of tax
consultants
%
75 – 100 12 40 15 57.70 14 87.5
50 – 75 8 26.67 1 3.85 1 6.25
25 – 50 3 10 4 15.38 -- --
0 – 25 7 23.33 6 23.07 1 6.25
N.A. 4 14
Total 30 100 26 100 16 100
Source: Primary Data
Note: The income-tax consultants having no such clients are marked as
N.A. (not applicable) in the above table
The table no. 5.17 shows that 14 (i.e. 87.5 %) income-tax
consultants believe that the accounting records maintained by their
75-100% corporate clients are correct. 15 (i.e. 57.70 %) income-tax
consultants believe that the accounting records maintained by their
75-100% partnership firm clients, are correct. In case of individual
clients, however, only 40% of the income-tax consultants are
confident of their accounting records.
Table No. 5.17 shows only the most of the corporate clients
have the trained staff and accordingly, the accounting records
maintained by these clients are most correct.
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PART - B
Different Types of Assessees and Their Difficulties in Getting Tax
Consultancy Services.
As discussed earlier there are seven types of ‘person’. Every
person can become an assessee if he comes under the situation as
mentioned in the definition of assessee. The present study deal with only
three assessees i.e. individual, firm and company. The data collected and
analyzed is grouped under three headings:
I. Individual Assessees
II. Partnership Firm Assessees
III. Company Assessees
5.B.I INDIVIDUAL ASSESSEES
An ‘individual’ means a natural person i.e. human being.
Individual includes a male, female, minor child and insane. The details of
information collected from individual assessees are discussed as under:
5.B.I.(i) Sources of Income
Any economic activity which earns a surplus is a source of income.
The term ‘income’ is discussed earlier. For study purpose all the
income activities can be classified as under:
1. Classification of Income Activities
Under Income-Tax Act all types of income of an assessee is
taxable. As considered to be the income of an individual, there is
variety of economic activities that lead to income which mainly
includes business, profession, employment and vocation. The
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following table no.5.18 shows the sources of income of individual
assessees under study.
Table No.5.18
Sources of Income
Particulars No. of Individuals Percentage (%)
Business 112 37.33%
Profession 96 32.00%
Employment 71 23.67%
Vocation 21 7.00%
Total 300 100%
Source: Primary Data
Above table shows that out of randomly selected 300
assessees 112 individuals are doing business, the activities mainly
include any trade, commerce or manufacture or any adventure or
concern in the nature of trade, commerce or manufacture.
Percentage of individual assessees engaged in doing business in
selected area, is 37.33%. 96 (32%) individuals are professionals
like doctors, lawyers, auditors, engineers, etc. and are engaged in
the field of professions. 71 (i.e. 23.67%) individuals are employees
serving in government, semi-government and non government
organizations. 21 Individuals are engaged in vocational activities
like, brokerage, insurance agency, music, dancing etc. Percentage
of individual assessees engaged in vocational activities is 7%.
96
Figure No. 5.9
The study of the table no. 5.18 and graphical representation
shows that out of total sample surveyed, majority individual
assessees 208 (69.33%) are dependent on either business or
profession for their income, while rest 30.67 % are dependent
either employment or vocation for their income source analysis
shows highest 112 (37.33%) have shown business income as their
source of income while 96 (32%) showed profession as their
income source. 71 (23.67%) have shown employment and 21 (7%)
shown vocation as their income source.
It’s a good sign for economic development that numbers of
individuals are engaged in business or profession.
2. Income Heads under which Income of Individual
Assessee is Taxable
Under the Income-Tax Act, 1961, the taxable total income is
computed and assessed under five heads viz.
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• Income from salary
• Income from house property
• Profits and gains from business or profession
• Capital gains
• Income from other sources
Income of an assessee is assessed under that income head which
is his main source of income head when he or she earns income
under more than one head. Accordingly he or she will have to file
his or her return of income in Form 'Saral D' for salary income
while Form No. ITR-4 for profits and gains from business. Income
from remaining heads are computed and assessed under appropriate
heads of income.
Table No.5.19
Income Heads wise Taxability of Assessees
Sr. No. Main Source of Income No. of Individuals
1 Income from salary 71
2 Income from house property 7
3 Profits and gains from business or
profession
208
4 Capital gain 5
5 Income from other sources 9
Source: Primary Data
It is observed that the individual assessees falling under
category ‘Income from Salary’ or profits and gains from business
and profession have other sources of income such as income from
house property, income from other sources and capital gains.
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The above table shows that 208 (69.33%) assessees’ main
source of income is ‘profit and gain from business and profession’.
71 (23.67%) assessees’ main source of income is ‘salary income’.
Very few i.e. 9, 7 and 5 persons earn income through ‘income from
other sources’, ‘income from house property’ and ‘capital gain’
respectively.
As majority of individuals are engaged in doing business or
profession, their main source of income is ‘profit and gain from
business and profession’. Individuals who are employees earn
income under the head ‘Income from Salary’.
‘Income from other sources’ includes income which is not
exempt from income-tax under the Act and which does not fall
under any other head e.g. interest on bank deposits, dividend
received, winning from lottery etc.
3. Income Range
Every person whose total income exceeds the maximum amount
not liable to the income-tax, shall be taxed under the Income-Tax
Act at the rate or rates prescribed under the Finance Act relevant to
the assessment year, considering his residential status. Such
maximum amount not liable to tax changes every year according to
the provisions in finance bill of each year. This maximum amount
not liable to tax is different for women, men and senior citizens.
Presently the tax rates for A.Y. 2009-10 are as follows:
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---------------------------------------------------------------------------------
Income Range Slab Rates
---------------------------------------------------------------------------------
Income from NIL to Rs.1,50,000/- NIL
Rs. 1,50,000/- to Rs. 3,00,000/- , 10%
Rs. 3,00,000/- to Rs. 5,00,000/- and 20%
more than Rs. 5,00,000/- 30%
----------------------------------------------------------------------------------
For each slab, percentage of tax is different. Tax is calculated at
the rate applicable to income range of assessee. The following table
No. 5.20 shows income range of the individual assessees under
study.
Table No. 5.20
Income Range
Income Range (Rs.) No. of Individuals Percentage (%)
Less than Rs. 3 lakhs 163 54.33
Rs. 3 lakhs to 5 lakhs 83 27.67
More than Rs. 5 lakhs 54 18.00
Source: Primary Data
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Figure 5.10
Above table no. 5.20 and its graphical representation shows that
163 (i.e. 54.33%) individual assessees examined fall under the first
income group i.e. who earns income above Rs.1,50,000/- but below
Rs. 3,00,000/-. 83 (i.e. 27.67%) individual assessees are earning
income more than Rs. 3,00,000/- but below Rs. 5,00,000/-.
Remaining 54 (18%) individuals earn income more than Rs.
5,00,000/- .
5.B.I.(ii) Qualification and Services Availed from Tax Consultant
1. Qualifications of Tax Consultants
In the early stage of the tax consultancy profession any person
having basic knowledge of taxation, can start tax consultancy
profession. Now-a-days frequent changes in tax laws, amendments
to it and the competition in the profession have lead to acquire
minimum competency in it. As such only graduates from
commerce, law faculty, D.I.T. & S.T, G.D.C. & A. diploma holders
and mostly Chartered Accountants are in the profession. The
101
choice of highly qualified tax consultants automatically leads to
quality and efficient services to the assessees, as such now a days
generally chartered accountants are preferred by the assessees. In
the selected area there are some senior tax consultants who are not
chartered accountants still their services are preferred by the
assessees considering their experience in this field. The following
table shows academic qualification of the tax consultants from
whom services are availed by the assessees under the study.
Table No. 5.21
Qualifications of Tax Consultants
Particulars No. of Individuals Percentage (%)
Chartered Accountant 202 67.33
G.D.C.&A. 6 2.00
D.I.T.&S.T. 13 4.34
LLB 42 14.00
B.Com., M.Com 37 12.33
Total 300 100%
Source: Primary Data
Table No. 5.21, shows that 202 (67.33%) individual assessees
have chosen their tax consultant having qualification of chartered
accountant, 6 (2%) individuals have selected persons having
G.D.C&A. qualification, 13 (4.34%) have preferred tax consultants
having the degree of D.I.T. & S.T. 42 (14%) individual assessees
have selected law graduates as their tax consultants and remaining
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37 (i.e. 12.33%) individual assessees have selected B.Com.,
M.Com. degree holders as their tax consultants.
Majority of the individual assessees have selected C.A.s as their
tax consultants as they can provide maximum tax services at single
window. The degree of chartered accountant from Institute of
Chartered Accountants of India is itself a landmark in this
profession.
This can be presented graphically as under.
Figure No. 5.11
2. Services Availed
The services that can be demanded by the individual assessees
from their tax consultants can be divided in to two i.e. i) Taxation
services and Non-tax (allied) services, which are as follows.
103
Table No. 5.22
Availing of Different Types of Services
Taxation Services No. of Individuals Percentage (%)
Taxation Services 300 100
Allied Services 91 30.33
Source: Primary Data
Individual assessees avail only taxation services from tax
consultants. Small traders, professionals, vocational etc. generally
avail both types of services i.e. tax services for all types of taxes
and non-tax services like book-keeping, various types of audits,
consultancy services regarding profit maximization, cost control
etc.
a. Taxation Services
Each and every assessee tries to minimize his/her tax burden by
proper tax planning, as such they demand tax planning services
from their tax consultants. The tax planning tries to ensure that the
tax liability borne is (within the frame-work of law of course)
minimum. Other service provided by tax consultants is the tax
compliance and procedural work which aims at making sure that all
necessary forms and payments are appropriately submitted. This
service saves the client from lot of headache and helps to make the
whole ‘deal’ more attractive to the client.
The individual assessees avail mostly income-tax consultancy
services from income-tax consultants but some assessees may avail
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consultancy services for other taxes too. These taxes include VAT,
Service tax, Central Excise, Customs duty etc.
The following table shows the number of individual assessees
availing different services provided by the tax consultants.
Table No.5.23
Taxation Services Availed
Particulars No. of Individuals Percentage (%)
Tax issues
Income-Tax 300 100
Value added Tax 40 13.33
Service Tax 11 3.37
Central Excise 3 1
Custom Duty 3 1
Tax Planning 282 94
Tax Compliances &
procedural work
296 98.67
Source: Primary Data
Above table shows that all (100%) individual assessees avail the
services of income-tax issues, 282 (94%) individual assessees avail
tax planning service and 296 individual assessees avail the service
of tax compliances and procedural work from income-tax
consultants. Apart from the core areas of income-tax consultancy
services, approximately 13.33% and 3.67% of the individual
assessees avail the Value Added Tax consultancy and Service Tax
consultancy services respectively. VAT is paid on inter-state sale
or purchase of goods and Service Tax is paid on services provided,
105
covered under the Finance Act. Other taxation services of Central
Excise and Customs are availed by 3 (1%) individual assessees.
Central Excise Duty is paid on manufacturing of goods and
Custom Duty is paid on import and export of goods. Only 1% of
the individual assessees avail these services.
b. Allied Services
Along with taxation services, assessees avail services like
book-keeping services, cost accounting services, internal audit,
management consultancy and financial consultancy services etc.
from tax consultants. For study purpose these services are grouped
under the heading ‘allied services’. Table No. 5.24 provides the
data in this regard.
Table No. 5.24
Allied Services Availed
No. of Individuals
Services Availed
services
(%) Not availed
services
(%)
Book-keeping 21 7% 279 93%
Cost Accountancy 3 1% 297 99%
Audit 14 4.67% 286 95.33%
Consultancy services 53 17.67% 247 82.33%
Source: Primary Data
106
Figure No. 5.12
Allied Services Availed
The above table 5.24 and figure no. 5.12 depicts that only 21 i.e. 7
% individual assessees avail book-keeping services while 279 i.e. 93%
individual assessees are maintaining required books of accounts
themselves. Only 1% individual assessees avail cost accountancy
services. 286 i.e. 95.33% assessees get their accounts audited from
their tax consultants. 82.33 % assessees avail consultancy services too.
The audit and consultancy services are varied in nature. The following
data clears the picture in this regard.
� Audit
Audit is a systematic examination of books of accounts and records
carried on in order to ascertain whether the financial statements give
true and fair view of the financial position as at the year end and of the
financial results for that year. Tax audit is mandatory for the assessees
having business turnover in excess of Rs.40,00,000/- (for A.Y.2011-
12 Rs.60,00,000/- ) or gross receipts from profession in excess of Rs.
10,00,000/- (for A.Y. 2011-12 Rs.12,00,000/-). VAT audits are
107
mandatory in cases of sales in excess of Rs. 40,00,000/-. The
following table explains the different types of audits conducted by the
individual assessees.
Table No. 5.25
Auditing Services Availed
Particulars No. of Individuals Percentage (%)
Cost Audit --- ---
Tax Audit 1 0.33
VAT Audit --- ---
Internal Audit 8 2.67
Financial Audit 2 0.67
Environmental Audit --- ---
Information System Audit 3 1
Total 14 4.67
Source: Primary Data
The above table shows that out of 14 (4.67%) assessees availed audit
services, 8 (2.67%) assessees availed internal audit service, 3 (1%)
information system audit, 2 (0.67%) financial audit and 1 (0.33%) tax
audit services respectively from their tax consultant. Generally
manufacturing companies requires ‘cost audit’. None of the individual
assessees availed cost audit service.
� Consultancy Services
Individual assessees also avail the consultancy services from their
tax consultants. Such consultancy includes management accountancy,
project planning and financing, project improvement or turnaround
studies, arrangement for the sources of finance, etc. The following table
illustrates the different types of consultancy services availed by the
individual assessees.
108
Table No. 5.26
Consultancy Services Availed
Particulars No. of Individuals Percentage (%)
Management Accountancy 4 1.33%
Project Planning & Finance 17 5.67%
Project improvement or
turnaround studies
5 1.67%
Arrangement for the sources of
finance
27 9%
Total 53 17.67%
Source: Primary Data
The above table shows that out of total 53 assessees availing
consultancy services maximum 27 (9%) assessees availed financial
services, 17 (5.67%) project planning services, 5 (1.67%) project
improvement services and 4 (1.33%) management accountancy
services.
3.Behavior of Staff
General behavior of staff of the income-tax consultants is
polite with the clients. They are courteous and helpful to clients.
They avoid behave rudely with them. The details in this regard are
as follows:
109
Table No. 5.27
Behavior of staff
Particulars No. of Individuals Percentage (%)
Polite 144 48%
Co-operative / Helpful 143 47.67%
Non-cooperative 10 3.33%
Irresponsible 2 0.67%
Rude 1 0.33%
Total 300 100%
Source: Primary Data
From the table no. 5.27 it can be observed that 144 (48%)
individual assessees stated that behavior of the staff of the tax
consultants is polite, 143 (47.67%) individual assessees stated that
its co-operative while 10 (3.33%) individuals stated that staff of tax
consultants are non-cooperative. 2 (.67%) individual assessees
complained that they are irresponsible and 1 (0.33%) individual
assessee complained that they are rude.
4. Timely Notification of amendments, decisions of Supreme
court etc. by Income-Tax consultants
Every year budget proposals in the form of finance bill are
presented to Parliament for consideration and approval. When the
bill is passed by the Parliament and the President of India gives his
/ her consent, it becomes Finance Act of the Financial Year. The
respective provisions of Income-Tax Act are also change with
changes in the Finance Act of the year.
110
Some tax cases are also decided by the Supreme Court during
the financial year. The decisions given by the Supreme Court in tax
matters become a law.
All the amendments / changes made in tax laws as above are
important matters for assessees for tax planning. Therefore timely
supply of such information to assessees by the tax consultants is
necessary. The following table gives the details of supply of such
information:
Table No. 5.28
Intimation Relating to Amendments, Decisions of Supreme
Courts from Income-Tax Consultants
Particulars No. of Individuals Percentage (%)
Intimated 272 90.67%
Not-intimated 28 9.33%
Total 300 100%
Source: Primary Data
The table no. 5.28 shows that the 90.67% of assessees get
timely information as to the amendments, judgments etc. from their
tax consultants. Only 9.33% of assessees do not get such intimation
from their consultants.
5.B.I.iii. Tax Awareness:
In taxation matters tax awareness plays very important role.
Assessee has to make provision to minimize tax burden in time
(within the framework of law). At the same time assessee should
know tax compliance and procedural work because failure to
111
comply with the statutory provisions of the Act attracts some kind
of penalties.
1. Sources of Tax Information
The respective provisions of the Income-Tax Act, 1961 are
changed every year with the changes made in Finance Act.
Frequent changes are also made intermittently in the provisions of
Income-Tax Act due to decisions given by Supreme Court. These
changes have bearing upon assessees' tax liability and his / her
other obligations under the Act. Therefore it is important for
assessees to have up-to-date knowledge of all the changes made in
the Act.
Assessees may get such information through 3 different
sources, viz.
• Tax consultants
• Friends and relatives
• Media i.e. newspapers, magazines, television, internet etc.
It is possible that assessees may get the information through
more than one mode. Following table shows the position in this
regard.
Table No. 5.29
Modes of Tax Information
Particulars No. of Individuals Percentage (%)
Tax Consultants 266 88.67
Friends and relatives 83 27.67
Media 238 79.33
112
Source: Primary Data
The assessees generally use multiple sources for getting tax
information. They consult their tax consultants. Media also
provides such information through news, advertisement in
newspapers, articles in ‘taxation and commerce’ journals,
advertisement and discussions on television channels etc. The
friends, relatives also provide such information to each other. The
table no. 5.29 shows that maximum assessees 266 (88.67%) got the
information from tax consultants and also 238 (79.33%) from
media. Only 83 (27.67%) assessees got the information through
friends and relatives. Majority of them used multiple sources for
the purpose.
2. Awareness of Tax Provisions
For minimizing tax burden and taking benefit of the changing
provisions, clauses of Income-Tax Act, the assessee must be aware
about it. Generally the provisions regarding incomes exempted
from tax, clubbing of income, various deductions allowed from
income, tax rates, change in minimum taxable income etc.,
assessee must know for his benefit. Assessees’ awareness in this
regard can be seen from following table:
113
Table No. 5.30
Awareness of Tax Provisions
No. of Individuals Particulars
Knowing
Provisions
% not-knowing
Provisions
%
Awareness of changes in
Finance Act
275 91.67 25 8.33
Items exempt from tax 75 25 225 75
Computation of taxable
income
196 65.33 104 34.67
Clubbing of income 54 18 246 82
Deduction under chapter
VI-A
199 66.33 101 33.67
Charging procedure of
Income-Tax
232 77.33 68 22.67
Rates of taxation 235 78.33 65 21.67
Source: Primary Data
According to data collected, table no. 5.30 shows that 275
(91.67%) individual assessees know that Income-Tax Act
undergoes changes every year with the changes in Finance Act.
Remaining 25 (8.33%) assessees are unaware of changes in
Finance Act and impact of it on their tax liability.
75 (25%) individual assessees know various items exempt from
tax under section 10. In this category some assessees are advocates
and some are professors of commerce faculty. 225 (75%)
individual assessees are ignorant about it.
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Assessees have tendency to minimize their tax liability. If they
can reduce their tax liability, even by Re. 1/-, they try to minimize.
For that purpose they are interested in knowing the computation of
taxable income. They try to verify whether the tax consultants have
computed their taxable income properly or not. Above table no.
5.30 indicates that 196 (65.33%) individual assessees are aware of
computation of taxable income and 104(34.67%) assessees are
unaware.
Sections from 60 to 65 of the Income-Tax Act, 1961 are the
sections dealing with the provisions of clubbing of income of
another person with the income of assessee. If there is a case of
transfer of income of the property without the transfer of asset to
another person receiving the income, the income of transferee is
clubbed with the income of the transferor. Only 54 (18%)
individual assessees know these provisions of clubbing of income.
Other 246 (82%) assessees are unaware of these provisions. On the
contrary, they are under wrong impression and ask the question,"
Why should I pay tax on income of other person?" However under
the following cases clubbing of income provisions of the Act are
attracted:
i. Transfer of income where there is no transfer of asset
ii. Revocable transfer of asset
iii. Remuneration of spouse from a concern in which the other
spouse has substantial interest
iv. Income of asset transferred to the spouse
v. Income from asset transferred to son's wife
vi. Income of a minor child etc.
115
These are some examples where income of another person is to
be clubbed with the total income of assessees.
The aggregate of income computed under each head after giving
effect to the provisions of clubbing of income and set off of losses
is known as "gross total income". In computing the total income of
an assessee certain deductions from Gross Total Income are
permissible (under chapter VI-A) under sections 80 C to 80 U of
Income-Tax Act, 1961. The table no. 5.30 shows 199 (66.33%)
individual assessees know these deductions and 101 (33.67%) are
unaware of these provisions.
Without the authority of law, tax can not be levied and collected
in India. Section 4 of Income-Tax Act gives such authority to levy
and collect income-tax. It is a charging section. Where any Central
Act enacts that income-tax shall be charged for any assessment
year at any rate or rates, income-tax at that rate or those rates shall
be charged for that year, in accordance with and subject to the
provisions (including provisions for the levy of additional income-
tax) of this Act, in respect of the total income of the previous year
of every person. The base for levy of tax in any assessment is
normally the income of previous year. However, in some cases,
income-tax may be charged in respect of the income of a period
other than the previous year. Though the income of the previous
year is assessed in the relevant assessment year and tax is levied,
the tax is deducted at source or paid in advance wherever it is
deductible or payable.
As the table no. 5.30 shows that 232 (77.33%) individual
assessees are aware of charging of income-tax and other 68
(22.67%) assessees don't.
116
On total income, tax is calculated according to the rates
prescribed under the relevant Finance Act. Rates of income-tax are
different for female assessees and senior citizen. According to
above table, it is clear that 235 (78.33%) individual assessees know
these rates of income-tax and 65 (21.67%) assessees have no
knowledge of these rates of income-tax.
It is observed that some assessees try to know each and every
provision relating to calculation of their income and all the details
about calculations made by tax consultants, on the other hand some
assessees blindly signs the returns of income filled by the tax
consultants.
3. Discussion of Annual Budget
Annual Budget presented in the Parliament contains various tax
proposals. Some of the proposals may be relating to the individual
assessees. It is expected that the assessee should study these
proposals. It helps them in tax planning. Generally they alone are
unable to understand these provisions. In this matter tax
consultants guide them properly and explain provisions in detail, if
assessees discuss with them.
Table No. 5.31
Discussion of Annual Budget
Particulars No. of
Individuals
Percentage
Discussion with Tax consultants 90 30%
No discussion with tax consultants 210 70%
Total 300 100%
Source: Primary Data
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Above table no. 5.31 shows that 90(30%) individual
assessees discuss the annual budget provisions with the tax
consultants before hand. And 210 (70%) individuals don't hold
such discussions regarding provisions of annual budget with tax
consultant, but they explained that whenever they do so, their tax
consultants help them in understanding such provisions. But they
do not explain until assessees ask.
In personal interview it is observed that majority of
individuals (out of 70% who don’t hold discussions regarding
annual budget provisions) believe that it is very difficult task to
understand such provisions and so that they have entrusted this
work to their tax consultant.
5.B.I.iv Filing of Return of Income
As per the Income-Tax Act, 1961, an individual if his total
income or total income of any other person in respect of which he
is assessable under the Income-Tax Act, during the previous year
exceeds the maximum amount not liable to income-tax, have to
furnish a return of his income or the income of such other person. It
is mandatory. The details in this regard are as under:
1. First Return of Income:
Though the Income-Tax Act provisions compile the person
whose income is taxable to file his return of income, it is observed
that the first return of income is generally filed by assessees to
claim refund of Tax Deducted at Source (TDS), to carry forward
loss, to provide copy of return of income to the financial
institutions or banks etc. Very few individuals file return of income
118
voluntarily on their own accrual. Table no.5.31 shows the position
in this regard:
Table No. 5.32
First Return of Income
Particulars No. of Individuals Percentage (%)
Regular provision 275 91.67
Refund claim 22 7.33
Voluntary 3 1.00
Source: Primary Data
The table no. 5.32 shows that, 275 (91.67%) individual
assessees filed their first return of income for fulfillment of regular
provisions of Income-Tax Act, 1961. It means their income
exceeds the maximum limit of income which is not liable to tax or
they have losses to carry forward or they have to provide copy of
return of income to the financial institutions or banks etc. 22
(7.33%) individual assessees have filed their first return of income
for refund purpose. It means their amounts are deducted at sources
for tax but they are not liable to pay tax. So to get back these
amounts they have filed returns. 3 (1%) individual assessees have
filed returns voluntarily without any reason.
2. Preparation for Filing of Returns of Income
In case of individual assessees, the return of income must be
filed in a prescribed form or by specified computer readable media
and verified in the prescribed manner, on or before 31st July of the
assessment year. Each and every assessee starts preparation as to
119
completing of accounts, getting necessary certificates, collection of
documents to be attached to the returns etc. The preparation period
varies according to the assessee. Early preparation avoids many
difficulties and inconvenience at the point of filing up of returns.
The assessees studied shows following position in this regard.
Table No. 5.33
Preparation for Filing of Returns of Income
Particulars No. of Individuals Percentage (%)
1 month before due date 241 80.33
1 week before due date 40 13.33
2-3 days before due date 14 4.67
After due date 5 1.67
Total 300 100
Source: Primary Data
The table no. 5.33 table indicates that 241 (80.33%) individual
assessees are punctual in filing of returns of their income. They
start preparation 1 month before due date. They fulfill all tax
obligations, collect required documents and approach to their tax
consultants for further process. As they get sufficient time for
compliance the percentage of mistakes in returns of income filed
by them is lesser.
40 individuals do prepare for filing the return within 1 week just
before due date i.e. 31st July of the assessment year. This time
period is still sufficient for salaried individuals or individual
assessees requiring less documents to attach with return of income.
120
14 (i.e. 4.67%) individual assessees start preparatory work just
2-3 days before 31st July of the assessment year. As the period for
preparation is very short and the chances of mistakes in their
returns of income are more.
5 individual assessees wake up after 31st July. They are
penalized. However, as per sec.271F, the Assessing Officer may
waive the penalty on proving reasonable grounds for delay in filing
the return of income. Interest u/s 234A/B/C is however, mandatory
and can not be waived.
3. Time Lag for Filing of Returns after Documentation
Tax consultants demand required documents to file the return of
income of the assessee. When assessee provides such required
documents the tax consultants start preparing his return, for the
purpose some time lag is required to him. The minimum time lag in
filling the return is the sign of efficient service. The time lag taken
by the tax consultants after receiving documents in filling up
returns in the cases under study are:
Table No. 5.34
Time Lag for Filing of Returns after Documentation
Particulars No. of Individuals Percentage (%)
Within 1 day 17 5.67
Within a week 208 69.33
Within a month 71 23.67
More than a month 4 1.33
Total 300 100
Source: Primary Data
121
The table no.5.34 shows that after providing all the required
information and documents to tax consultants, in case of 17 (i.e.
5.67%) individuals, their tax consultants have filed returns of
income within one day. In case of 208 (69.33%) individuals, within
a week, in case of 71 (23.67%) individuals, within a month and in
case of 4(1.33%) individuals they required the time period of more
than one month.
4. Belated Returns of Income
Generally, 31st July of each assessment year is treated as last
date of filing of return of income for individual assessees under the
law. Returns filed after due date are called as ‘Belated Returns’.
The position in this regard is as follows:
Table No. 5.35
Belated Returns of Income
Particulars No. of Individuals Percentage (%)
Filed return in time 295 98.33
Belated return 5 1.67
Source: Primary Data
Table no. 5.35 depicts that out of total cases surveyed 295
(98.33%) individual assessees have filed return of income in time
i.e. on or before 31st July. Only 5 (1.67%) assessees are late in this
regard.
122
5. Penalization for Delay
According to sec.271F of Income Tax Act, if a person who is
required to furnish a return of his income, as required u/s 139(1)
or by the provisions to that sub-section, fails to furnish such
return of income before the end of the relevant assessment year,
the Assessing Officer may direct such person shall pay, by way
of penalty. 5 individuals have failed to file returns before due
date. Details of penalty levied to them are as under:
Table No. 5.36
Penalization for Delay
Particulars No. of Individuals Percentage (%)
Fined for late submission 5 100
Not fined for late --- ---
Source: Primary Data
Above table no. 5.36 indicates that 5 individuals who failed to
file return on or before due date are penalized. It means all the
individuals who are late in filing return of income are penalized.
6. Responsibility for Delay
For delay of filing return either assessees or tax consultants
remain responsible. On the part of assessee such delay arises due to
non-submission of documents in time, non- payment of advance
tax etc. while reasons arise on the part of tax consultants are work
pressure, omission etc. Some other reasons of offices remaining
closed on due date or other uncontrollable reasons arise.
123
Table No. 5.37
Responsibility for Delay
Particulars No. of Individuals Percentage (%)
Assessee himself 2 40
Income-Tax consultant 2 40
Other reasons 1 20
Total 5 100
Source: Primary Data
Figure No. 5.13
Responsibility for Delay
Out of 5 individual assessees who have filed belated returns of
income, 2 individuals considered themselves responsible for such
delay. 2 individuals (40%) hold tax consultants responsible for
such delay. Only 1(20%) individual assessee considered some
technical matters responsible for late filing of return of income.
124
7. Period of Filing Returns of Income
A survey is conducted as to how many years the assessees are
filing tax returns continuously year after year. The assessees
surveyed are of various age groups and they are filing return of
income from number of years. The position in this regard is:
Table No. 5.38
Continuity in Filing of Returns of Income
Particulars No. of Individuals Percentage (%)
0-5 years 78 26%
5-10 years 69 23%
10-15 years 66 22%
15-20 years 48 16%
more than 20 years 39 13%
Source: Primary Data
The above table no. 5.38 shows that out of total cases studied
78(26%) assessees started filing their returns of income since 5
years, while 69 (23%) assessees are filing since 10 years, 66 (22%)
assessees are filing the returns since 15 years, while 48(16%)
assessees are filing the return since 20 years. Only 39(13%)
individual assessees are filing the returns of income since more
than 20 years.
From table no. 5.38, it is also observed that the number of
individual assessees are increasing consistently.
125
5.B.I.v. Change of Income-Tax Consultant
1. Change of Income-Tax Consultant
Generally amount of income earned by one is very personal
thing for him. So assessees try to keep their earnings confidential.
For the same they select their tax consultant very carefully and
hardly change tax consultant. But due to some reasons assessees
may change their tax consultants. Following table no. 5.39 gives
information in this regard.
Table No. 5.39
Change of Income-Tax Consultant
Particulars No of Individuals Percentage (%)
Changed tax consultant 10 3.33%
Not changed tax consultant 290 96.67%
Total 300 100%
Source: Primary Data
Above table shows that only 10 i.e. 3.33% assessees have
changed their tax consultant.
2. Reasons for Changing Tax Consultant
As discussed above, assessees are very particular about their tax
consultant. But due to some reasons it happens that they have to
change their tax consultants. These reasons and the details are
discussed as under.
126
Table No. 5.40
Reasons for Changing Tax Consultant
Particulars No. of Individuals Percentage (%)
Change in office place of tax
consultant
3 30%
Change in office place of assessees 2 20%
High charges 2 20%
Dissatisfaction 1 10%
Death of tax consultant 1 10%
Conflicts with consultant 1 10%
Any other reason --- ---
Source: Primary Data
Out of 10 assessees who changed their tax consultant, 3
assessees have changed their tax consultant due to change in office
place of tax consultant and 2 assessees have changed due to change
in their own office place. It is observed that in the situation when
really it is very difficult to go to tax consultants’ office, then only
assessees tend to change their tax consultant. 2 assessees have
given the reason for change in their tax consultants as high fees
charged by them. One assessee has changed his tax consultant due
to dissatisfaction. Due to death of tax consultant one assessee has
to change his tax consultant. And one assessee has to change his
tax consultant due to conflict between him. The reason for conflict
is not disclosed.
127
3. Period of Filing Returns of Income with Serving Tax
Consultant
A survey is conducted as to how many years the assessee is
availing the services continuously from the same tax consultant.
The data is as follows:
Table No. 5.41
Continuous Availing the Services from the Same Tax Consultant
Particulars No. of Individuals Percentage (%)
0-5 years 83 27.67%
5-10 years 71 23.67%
10-15 years 65 21.67%
15-20 years 46 15.33%
more than 20 years 35 11.66%
Source: Primary Data
Figure 5.14
Continuous Availing the Services from the Same Tax Consultant
128
Table 5.41 and figure no. 5.14 shows that 83 (27.67%)
individual assessees have filing returns of income from same tax
consultants since 5 years. 71 (23.67%) individual assessees are
filing returns of income with same tax consultants since last 10
years while 65 individuals since 15 years. 46 individuals have
filing the returns of income with the same tax consultant since 20
years and 35 individuals since more than 20 years.
5.B.I.vi. Scrutiny of Returns of Income by Income-Tax Department
If the low income than reasonable income is shown in the
return of income by assessee or to confirm the genuineness of
source of huge investments made in the business by assessee,
Income-Tax Department may call that assessee for scrutiny. With
this Department randomly selects some cases for scrutiny. The
details in this regard are as under:
Table No. 5.42
Scrutiny
Particulars No of Individuals Percentage (%)
Scrutinized --- ---
Not Scrutinized 300 100 %
Total 300 100 %
Source: Primary Data
129
As per norms laid down by the Income-Tax Department for
selection of scrutiny cases, no single case out of 300 individual
assessees examined is selected for scrutiny.
5.B.I.vii. Fees Charged
Tax consultant renders services to the clients. He computes his
taxable income and quantifies the amount of tax payable by him.
The expectations of the clients from the tax consultants are also
reasonable. They expect that the tax consultant should render
services on time to avoid last minute services, the paper work done
by him should be accurate. On the ground of this they decide the
reasonability of the fees charged by the tax consultant.
Factual data collected through questionnaire reveals the picture
as under:
Table No. 5.43
Fees Charged
Particulars No. of Individuals Percentage (%)
Reasonable 287 95.67%
Higher 7 2.30%
Lower 6 2.00%
Total 300 100%
Source: Primary Data
Above table no. 5.43 indicates the impression of assessees
regarding fees charged by income-tax consultants. 287 (95.67%)
individual assessees feel that the fees charged by income-tax
130
consultants are reasonable. But 7 (2.30%) individuals are
complaining that fees are higher. Contrary 6 individuals i.e. 2%
individuals are saying such fees are lower. Obviously they have no
problems. But problem may arise to them who are saying that these
fees are higher. In personal discussion, it is another point comes
ahead that such assessees are not ready to change their consultant
though they have complaint regarding fees charged by them.
5.B.I.viii. Satisfaction of Individual Assessees
A survey is conducted as to measure the satisfaction level of
the assessee about the services rendered by tax consultant to him.
The picture in this regard is as follows:
Table No. 5.44
Satisfaction of Individual Assessees
Particulars No. of Individuals Percentage (%)
Fully satisfied 251 83.67%
Partly satisfied 48 16.00%
Not satisfied 1 0.33%
Total 300 100%
Source: Primary Data
131
Figure 5.15
Satisfaction of Individual Assessees
251 (83.67%) individuals are fully satisfied with the services
provided by their tax consultants. 48 (16%) individuals are partly
satisfied and 1(0.33%) is not satisfied with the service provided by his tax
consultant.
5.B.II. PARTNERSHIP FIRM ASSESSEES
5.B.II.i. Introduction:
Partnership is a relation between persons who have agreed to share
the profits of the business carried on by all or any of them acting for all.
This is one of the important forms used in India for carrying on business
activities.
This is a separate entity assessed under Income-Tax Act, 1961.
Separate deductions, exemptions are allowed while computing the taxable
income of the firm. The income of the firm even if it is of Re. 1/-, is taxed
at the flat rate of 30%.
For the registration of the firm under the Income-Tax Act, 1961, a
copy of Partnership-Deed evidencing the number of partners, profit
sharing ratio etc. are required to be submitted to the Income-Tax Office
having jurisdiction over the case. In case there is change in number of
132
partners or in the profit sharing ratio the same are required to inform to
the Income-Tax Office by filing the amended copy of Partnership-Deed.
5.B.II.ii. Registration and Sources of Income
1. Registration of Firms
Indian Partnership Act, 1932 provides registration facilities to the
firm. Partners register their partnership under the Act to take the
benefits of recognition of separate entity thereby they can sue the
partners or third parties and can act as an artificial person in all its
economic activities. The position in this regard is as follows:
Table No. 5.45
Registration of Firms
Particulars No. of firms Percentage (%)
Registered 50 100%
Un-registered --- ---
Total 50 100%
Source: Primary Data
Table No. 5.45 shows that all the firms surveyed are registered
under the Indian Partnership Act, 1932 and are getting full benefits of
registration. Unregistered firms cannot sue the partners or third parties
against any mischief but others can do so against firm. The consequences
of non-registration of firm are separately mentioned in the Partnership
Act, 1932. No partnership firm can bear such type of risk.
2. Liability to ‘Tax Audit’
Though all the partnership firms are assessed under the Income-
Tax Act and have to pay income-tax accordingly, some of them have to
carry out their tax audit for deciding their tax liability.
133
Under section 44AB of Income-Tax Act, 1961 the partnership
firms having business turnover in excess of Rs.40,00,000/- (for
A.Y.2011-12 Rs.60,00,000/- ) or gross receipts from profession in
excess of Rs. 10,00,000/- ( for A.Y. 2011-12 Rs.12,00,000/-) are
liable for compulsory tax audit. The remaining partnership firms are
not liable for tax audit. The position of the partnership firms surveyed
in this regard is as follows:
Table No. 5.46
Liability to Tax Audit
Particulars No. of firms Percentage (%)
Liable to Tax Audit 22 44%
Not liable to Tax Audit 28 56%
Total 50 100%
Source: Primary Data
Figure No. 5.16
Liability to Tax Audit
134
The above table and figure shows that 22 (44%) partnership
firms are liable for tax audit u/s 44AB as their yearly business
turnover is more than Rs. 40,00,000/- and 28 partnership firm
assessees, whose minimurnover is below Rs. 40,00,000/- are not liable
for tax audit u/s. 44AB of Income Tax Act, 1961.
3. Sources of Income:
As a business entity, the partnership firms earn profit by carrying
on their business activities as well as profit on sale / purchase of their
assets or renting their assets. Under Income-Tax Act, 1961 the taxable
total income of the partnership firm is computed and assessed under
four heads, viz.
• Profits and gains from business or profession
• Capital gains
• Income from house property
• Income from other sources
Following table shows the different sources of income and under
which the partnership firms surveyed are charged to income-tax.
Table No. 5.47
Sources of Income
Particulars No. of Firms Percentage (%)
Income from house
property
--- ---
Profits and gains from
business or profession
50 100%
Capital gain 6 12%
Income from other
sources
8 16%
Source: Primary Data
135
Table No.5.47 shows that, all the 50 (100%) Partnership Firm
assessees are having the business income as main source of income. 6
(12%) partnership firms have source of income by way of capital gains
besides the business income and 8 (16%) partnership firms have source of
income by way of income from other sources apart from business income.
None of the firm showed income from house property as its source of
income.
4. Net Profit Range
A study is carried to see as to what is the range of the net profit
earned by the partnership firm in the year of study. The position in this
regard is as follows:
Table No. 5.48
Net Profit Range
Net Profit Range No. of Firms Percentage (%)
Less than Rs. 10,00,000/- 28 56%
Rs. 10,00,000/- to 50,00,000/- 21 42%
More than Rs. 50,00,000/- 1 2%
Source: Primary Data
136
Figure No. 5.17
Net Profit Range
Table no. 5.48 shows that 28 (i.e. 56%) Partnership firm assessees
examined fall under the first income group i.e. who earns net profit
less than Rs.10,00,000/-. 21 (i.e. 42%) Partnership firm assessees are
earning net profit more than Rs. 10,00,000/- but below Rs. 50,00,000/-
and remaining one Partnership firm earns net profit more than Rs.
50,00,000/- .This means that maximum partnership firms (98%) are
earning on an average yearly below Rs. 50,00,000/- as their net profit.
5. Book Profit Range
In case of charging of income-tax not the net profit range but book
profit range is considered. The income-tax is only charged on book
profit of the partnership firm. Book profit includes only income under
the head ‘Profits or gains from business or profession’. It is calculated
by adjusting net profit as increasing by the salary / remuneration paid
to the partners and interest on capital paid to them etc. and deducting
income chargeable to tax under the heads ‘income from house
property’, ‘capital gains’ and ‘income from other sources’ etc., if
137
credited to ‘profit and loss account’. The data in this respect is as
follows:
Table No.5.49
Book Profit Range
Book Profit Range No. of Firms Percentage (%)
Less than Rs. 10,00,000/- 26 52%
Rs. 10,00,000/- to 50,00,000/- 23 46%
More than Rs. 50,00,000/- 1 2%
Source: Primary Data
From the survey, it is noticed that 26 (52%) partnership firms are in
book profit range of below Rs.10,00,000/-, 23(46%) are in range of
Rs.10,00,000/- to Rs. 50,00,000/- and only one firm is in the range of
more than Rs. 50,00,000/-.
It means firms in the studied area are of small size and earn taxable
profit less than Rs. 50,00,000/-.
5.B.II.iii. Qualification and Services Availed From Tax
Consultants
1. Qualification of Tax Consultants
Choice of tax consultant is of much important in case of
partnership firms as they not only require income-tax services but also
many other services such as financial planning and management,
project planning and management, audit, consultancy services etc.
from their tax consultant. As such they prefer those tax consultants,
who provide all the services under one shelter.
The income-tax consultancy services are provided by the firms of
chartered accountants, advocates, commerce and taxation graduates
138
and by certified auditors such as G.D.C. & A. qualified persons. A
survey is carried out as to choice of their tax consultants and their
qualification. The position in this regard is as follows:
Table No. 5.50
Qualification of Tax Consultants
Qualification of Tax Consultants No. of Firms Percentage (%)
Chartered Accountant 32 64%
G.D.C.&A. 2 4%
D.I.T.&S.T. 6 12%
LLB 7 14%
B.Com., M.Com 3 6%
Total 50 100%
Source: Primary Data
Figure 5.18
Qualification of Tax Consultants
139
Table No. 5.50 shows that 32 (64%) partnership firm assessees
have chosen their tax consultant having qualification of Chartered
Accountant, 2 (4%) partnership firms have selected persons having
G.D.C&A. qualification as their tax consultants, 6 (12%) partnership
firm assessees have preferred tax consultants having the degree of
D.I.T. & S.T., 7(14%) partnership firm assessees have selected law
graduates as their tax consultants and remaining 3 (i.e. 6%)
partnership firm assessees have selected B. Com., M. Com., degree-
holders as their tax consultants. Majority of the partnership firms opt
for Chartered Accountants’ firm because such firms provide with
usual tax services, accounting and auditing and allied services under
one roof on specified basis.
The audit u/s 44AB of Income-Tax Act, 1961 is required to be
done by chartered accountants and therefore the partnership firms
liable to get accounts audited u/s 44AB have selected chartered
accountants as their tax consultants.
2. Services Availed
In the study area, generally the business activities like
manufacturing on small scale, wholesale trade, any other medium size
business etc. is carried out by organizing partnership firms. Such
partnership firms cannot afford to appoint specialized staff for various
services such as legal matters, accounting, auditing, taxation,
management consultancy etc. as such they avail such services from
specialized professional firms by paying certain fees as professional
charges to them. Again these partnership firms have to fulfill their
taxation obligations under various State-Central Acts. For the purpose
they take tax consultancy and other services from such professionals.
The services availed by the partnership firms are of two types:
140
a. Taxation Services
Those services which are concerned with various types of taxes
imposed by central or state government under various taxation Acts
are known as taxation services. These taxes mainly include Income-
Tax, Value Added Tax, Service tax, Central excise, Custom duty, etc.
The following table shows the taxation services availed by the
partnership firm assessees from their tax consultants.
Table No. 5.51
Taxation Services
Particulars No. of Firms Percentage (%)
Income-Tax 50 100%
Value added Tax 22 44%
Service Tax 6 12%
Central Excise 4 8%
Custom Duty --- ---
Tax Planning 50 100%
Tax Compliances &
procedural work
50 100%
Source: Primary Data
The above table no. 5.51 shows that all partnership firm assessees
avail the services of income-tax issues, tax planning and tax
compliances and procedural work from income-tax consultants. Tax
planning is the service which tries to ensure that the tax liability is
minimum. The compliances and procedural work aims at making sure
that all necessary forms and payments are appropriately submitted.
Apart from the core areas of income-tax consultancy services, 22 (44
%) and 6 (12 %) of the partnership firm assessees avail the Value
141
Added Tax consultancy and Service Tax consultancy services
respectively. VAT is paid on inter-state sale or purchase of goods and
‘Service Tax’ is paid on services provided covered under the Finance
Act. Central Excise Duty is paid on manufacturing of goods and
Custom Duty is paid on import and export of goods. Central Excise
service is availed by 4 partnership firm assessees.
b. Allied Services:
Many partnership firms that engaged in trading, manufacturing on
small scale or medium scale do not afford to employ expert staff for
the non-tax services such as book-keeping, costing, audit and many
managerial services. As such for these services they depend upon their
tax consultants. The tax consultants with their taxation services,
provides such non-tax services too. The main non-tax services
provided by tax consultants are as under:
• Book-keeping and Cost Accounting Services
Book-keeping is an art of recording the business transactions.
Some partnership firm assessees who are ignorant of book-keeping or
who don't want to take any risk of any tax matter, leave their
responsibility of book-keeping to tax consultants. Most of the income-
tax consultants provide such book keeping services to their clients.
Cost accounting relates to the collection, classification,
ascertainment of cost and its accounting and control relating to the
various elements of cost. The following table shows the details of the
book keeping services and cost accounting services availed by the
partnership firm assessees:
142
Table No. 5.52
Book-keeping and Cost Accounting Services
Book-keeping Cost Accounting Particulars
No. of Firms (%) No. of Firms (%)
Availing Services 5 10% --- ---
Non-availing
services
45 90% 50 100%
Total 50 100% 50 100%
Source: Primary Data
Generally all the medium and large size partnership firms appoint
staff for maintaining financial account. Only few small size firms do
not maintain their own staff for the purpose.
The above table no. 5.52 shows that the only 5 (i.e. 10%) of the
partnership firm assessees avail the services of book keeping and 45
(i.e. 90%) partnership firm assessees are maintaining required books
of accounts themselves. In case of cost accounting records they are
mandatory only in the case of certain type of manufacturing business.
But none of the firm under survey is maintained cost accounting
record and availed these services from their tax consultants.
• Audit Services
Audit is a systematic examination of books of accounts and
records, in order to ascertain whether the financial statements give
true and fair view of the financial position as at the year end and of
the financial results for that year. VAT audits and service tax audit
are mandatory in cases of sales in excess of Rs. 40,00,000/-. Tax
audit is mandatory for the assessees having business turnover in
143
excess of Rs.60,00,000/- or gross receipts from profession in excess
of Rs. 12,00,000/-. The following table shows various types of audit
services availed by the firms.
Table No. 5.53
Audit Services
Services availing Services not availing Particulars
No. of
Firms
(%) No. of
Firms
(%)
Cost Audit --- --- 50 100%
Tax Audit 22 44% 28 56%
VAT Audit 22 44% 28 56%
Internal Audit --- --- 50 100%
Financial Audit --- --- 50 100%
Environmental Audit --- --- 50 100%
Information System Audit --- --- 50 100%
Source: Primary Data
The above table no. 5.53 shows that approximately 44%
partnership firm assessees avail the services of Tax audit and VAT
Audit. As other types of audits are not mandatory none of the firm
have availed other audit services or carried on the audit on their
accord.
• Management and Consultancy Services
Partnership firm assessees also avail the consultancy services from
their tax consultants. Such consultancy includes management
accountancy, project planning and financing, project improvement or
turn around studies, arrangement for the sources of finance, etc. The
144
following table illustrates the different types of consultancy services
availed by the partnership firm assessees.
Table No. 5.54
Management and Consultancy Services
Particulars No. of firms Percentage
Management Accountancy 2 4%
Project Planning & Finance 9 18%
Project improvement or turnaround
studies
1 2%
Arrangement for the sources of finance 13 26%
Source: Primary Data
The above table no. 5.54 shows that 2(4%) partnership firm
assessees avail the services of Management Accountancy, 9(18%)
partnership firms avail the services of project planning, 13(26%)
partnership firms avail the services of arrangement for the sources of
finance. Only one partnership firm in the selected area avails the
project improvement service.
3.Timely Notification of Amendments, Decisions of Supreme Court
etc. by Income-Tax Consultants
The respective provisions of Income-Tax Act, 1961are changed as
per provisions of the Finance Act of the year. Even the income
provisions of the Income-Tax Act are amended by Amendments Act
and Ordinance. Some tax cases are decided by High Courts and
Supreme Court. The decision given by Supreme Court in such cases,
becomes the law.
145
All the amendments / changes made in tax laws as above are
important matters for assessees for tax planning. Therefore timely
supply of such information to assessees by the tax consultants become
necessary. The following table no. 5.55 gives the details of supply of
such information.
Table No. 5.55
Intimation of the Amendments, Decisions of Supreme Court etc. by
Income-Tax Consultants
Particulars No. of firms Percentage (%)
Timely informed 45 90%
Not informed 5 10%
Total 50 100%
Source: Primary Data
The above table no. 5.55 shows that the approximately 90% of the
partnership firm assessees are informed by their income-tax
consultants regarding amendments, judgments, etc. Only 10% of the
partnership firms are not intimated such changes by their tax
consultants.
The informal discussion with the partnership firm assessees
revealed that many times such information is not received from the tax
consultant as it is not possible to them to intimate all the assessees
regarding the amendments, judgments etc. due to time and technical
support system and non-availability of trained staff with them.
4. Receipt of Compliance Reminders from Income-Tax
Consultants
146
Generally partnership firm assessees receive reminders regarding
compliance of tax matters from time to time from their tax consultants.
Such reminders make aware about it. Timely reminding saves delay in
compliance as well as financial penalty fined by it. The following
table shows the performance in this regard:
Table No. 5.56
Compliance reminders by Income-Tax consultants
Particulars No. of firms Percentage (%)
Reminded 45 90%
Not Reminded 5 10%
Total 50 100%
Source: Primary Data
The above table no. 5.56 shows that the approximately 90% of the
partnership firm assessees receive reminders regarding tax compliance
from their tax consultants which make to comply all the necessities in
time and save from penalization. Only 10% of the partnership firm
assessees do not receive such reminder.
5. Behavior of Staff
General behavior of staff of the income-tax consultants is polite
with the clients. They are courteous and helpful to clients. They avoid
behave rudely with them. The details in this regard are as follows:
147
Table No. 5.57
Behavior of Staff
Particulars No. of firms Percentage (%)
Polite 24 48
Co-operative, Helpful 19 38
Non-cooperative 2 4
Irresponsible 3 6
Rude 2 4
Total 50 100
Source: Primary Data
From the table no. 5.57 it can be observed that 24 (48%)
partnership firm assessees stated that behavior of the staff of the tax
consultants is polite, 19 (38%) partnership firm assessees stated that its
co-operative while 2 (4%) partnership firms stated that staff of tax
consultants are non-cooperative. 3 (6%) partnership firm assessees
complained that they are irresponsible and 2 (4%) individual assessees
complained as they are rude.
5.B.II.iv. Tax Awareness
4. Modes of Tax Information
Tax rates and obligations of the partnership firms regarding
taxation change from time to time according to financial budget as
well as changes in Income-Tax Act in each year. Partnership firms
always require information about it. Each and every tax-payer tries
to collect information in this regard. A survey is conducted from
which they got information of such kind. The main sources which
are available to the partnership firms for the purpose are: getting
148
such information from tax consultants, publications in journals,
advertisements and business friends etc. The data in this regard is
as under:
Table No. 5.58
Modes of Tax Information
Sources of information No. of firms Percentage
Tax Consultants 45 90%
Friends and relatives 5 10%
Media 47 94%
Source: Primary Data
Figure 5.19
Modes of Tax Information
This table no. 5.58 and the graphical representation show the
number of assessees getting tax information through these three
modes. 45 (i.e.90 %) of partnership firm assessees get the
information of taxation through tax consultants, 5 (10%)
partnership firm assessees get information through friends and
149
relatives and 47 (94%) of partnership firm assessees get the
information through media. The data in the above table makes it
clear that tax consultants and media plays a vital role in providing
information on tax matters to the partnership firm assessees.
5. Awareness of Tax Provisions
The assessee should have up to date knowledge of applicable
tax provisions. They should be aware of such provisions which
affect their tax liability. It helps them in tax planning and early
compliance. The following table shows the awareness of
partnership firm assessees in this regard:
Table No. 5.59
Awareness of Tax Provisions
No. of Partnership Firms Particulars
Knowing % Not
Knowing
%
Awareness of changes
in Finance Act
46 92% 4 8%
Items exempt from tax
u/s 10
9 18% 41 82%
Computation of taxable
income
23 46% 27 54%
Deduction under
chapter VI-A
45 90% 5 10%
Rates of taxation 31 62% 19 38%
Source: Primary Data
According to data collected, above table no. 5.59 shows that 46
(92%) partnership firm assessees know that Income-Tax Act
150
undergoes changes every year with the changes in Finance Act.
Remaining 4 (8%) assessees are unaware of changes in Finance
Act and impact of it on their tax liability.
9 (18%) partnership firm assessees know various items exempt
from tax under section 10 while 41 (82%) partnership firm
assessees are unaware of such items.
23 (46%) partnership firm assessees are aware of computation
of taxable income and 27(54%) assessees are unaware about it.
The aggregate of income computed under each head after giving
effect to the provisions of clubbing of income and set off of losses
is known as ‘gross total income’. In computing the total income of
an assessee certain deductions from gross total income are
permissible under sections 80 C to 80 U of Income-Tax Act, 1961.
Table No. 5.59 shows that 45 (90%) partnership firm assessees
know these deductions and 5 (10%) are unaware of these
provisions.
On total income, tax is calculated according to the rates
prescribed under the relevant Finance Act. According to above
table, it is clear that 31 (62%) partnership firm assessees know
these rates of income-tax and 19 (38%) assessees have no
knowledge of these rates of income-tax.
In informal discussion it is observed that assessees provide all
required documents to tax consultants and get relaxed. They don’t
try to get knowledge about income-tax and its provisions in the
Act.
151
6. Discussion of Annual Budget
Annual Budget presented in the Parliament contains various tax
proposals. Some of the proposals may be relating to the partnership
firm assessees. It is expected that the partners of the firm should
study these proposals and plan to minimize the tax burden.
Table No. 5.60
Discussion of Annual Budget
Particulars No. of firms Percentage
Discussion with Tax consultants 5 10%
No discussion with tax consultants 45 90%
Total 50 100%
Source: Primary Data
Above table no. 5.60 shows that 5(10%) partnership firm
assessees discuss the annual budget provisions with the tax
consultants before hand. And 45 (90%) partnership firms don't hold
such discussions.
But in personal interviews with the assessees majority of (45
i.e. 90%) representative partners of the partnership firms revealed
that they don't hold discussions regarding provisions of annual
budget with tax consultant, but they explained that whenever they
do so, their tax consultants help them in understanding such
provisions. It is further added that tax consultants do not explain
tax provisions until they ask.
152
5.B.II.v. Filing Returns of Income
1. First Filing Returns of Income
When and why the firm came under taxation bracket firstly
is of much importance in case of assessee himself. The first return
of income of the firm can be filed to claim the loss and to claim the
refund of tax deducted at source. It is also filed when the firm has
taxable income. Once the person becomes assessee and files the
return of income, he has to file return of income every year
regularly. The table below shows the position in this regard.
Table No. 5.61
Filing Returns of Income
Reasons No. of firms Percentage (%)
Due to taxable income 40 80%
Refund claim 7 17%
Voluntary 3 6%
Notice from Income-
Tax Department
--- ---
Total 50 100%
Source: Primary Data
According to this table, 40 (80%) partnership firm assessees
fall under first category. They have filed their first return of income
to comply with the provisions of section 139 of Income Tax Act. In
case, where the tax has been deducted at source from the income of
a person not liable to pay tax, such assessee is required to file a
claim of refund. Such claim must be submitted in Form No.30
153
along with his return of income. 7 (17%) partnership firm assessees
have filed their 1st return of income for this purpose.
Irrespective of the first two cases the returns are also filed by
the assessee for the proposal of bank loan or any other such
requirement. 3 (6%) partnership firm assessees have filed returns of
income voluntarily for the purpose. None of the firm has received
the notice for filing of tax returns from Income-Tax Department.
2. Preparation for Filing of Returns of Income
In case of partnership firm assessees, the return of income
must be filed in a prescribed form (Form No. 5) or specified
computer readable media and verified in the prescribed manner, on
or before 31st July of the assessment year. After consulting
taxation matters with tax consultants, the assessees supplies the
required documents to tax consultants. Timely submission of such
documents to the tax consultants is the necessity in avoidance of
the delay in filing the return of income. The position in this regard
is as follows.
Table No. 5.62
Preparation for Filing of Returns of Income
Particulars No. of firms Percentage (%)
1 month before due date 42 84%
1 week before due date 5 10%
2-3 days before due date 3 6%
After due date --- ---
Total 50 100%
Source: Primary Data
154
Table no. 5.62 indicates that 42 (84%) partnership firm
assessees out of total 50 partnership firm assessees are punctual in
filing of returns of income. They start preparation 1 month before
due date. They fulfill all tax obligations, collect required
documents and approach to their tax consultants for further
process. It means 84% partnership firms take due care in filing the
returns of income before due date. They start preparatory work one
month before due date. As they get sufficient time for compliance
the percentage of mistakes in returns of income filed by them is
lower.
5 (10%) partnership firms out of 50(10%) partnership firms
examined, do prepare for filing the return within 1 week just before
due date i.e. 31st July of the assessment year. This time period is
still sufficient for partnership firms requiring fewer documents.
3 (i.e. 6%) partnership firm assessees start preparatory work
just 2-3 days before 31st July of the assessment year. As the period
for preparation is very short and therefore the chances of mistakes
in their returns of income are more.
Though the period for preparatory work varies from assessee
to assessee, it is found that all the partnership firms examined have
filed their returns of income before due date.
3. Time Lag for Filing Returns after Documentation
After receipt of documents from the assessees the tax
consultants prepare the income-tax returns in due form and files it
with the Income-Tax Office. The performance of tax consultants in
this regard is as under.
155
Table No. 5.63
Time Lag for Filing Returns after Documentation
Particulars No. of firms Percentage (%)
Within 1 day 3 6%
Within a week 31 62%
Within a month 16 32%
More than a month --- ---
Total 50 100%
Source: Primary Data
After submission of all the required information and
documents to tax consultants, in case of 3 (i.e. 6%) partnership
firms, tax consultants have filed the returns of income within one
day, In case of 31 (62%) partnership firms, within a week, in case
of 16 (32%) partnership firms, within a month. No tax consultant is
found requiring period of more than one month for submission.
4. Penalty Levied (for late filing of returns)
The assessee may be penalized under Income-Tax Act for
many reasons. One of the major reasons for such penalty is late
filing of returns. Other main reasons for the penalty are:
i) Non-Payment or Short-Payment of Self-assessment tax {u/s
221(1)}
ii) Non-maintenance of required record {u/s 271(A)}
iii) Failure to deduct tax at source and pay tax collected at source
{u/s 272 A (2)}
156
iv) Failure to furnish a return of income u/s 139 (1) before the end of
the relevant Assessment Year {u/s 271 (F)}
v) Failure in making the payment of tax, interest or demand {u/s
221(i)}
vi) Failure to quote P.A.N. and T.A.N.in any document {u/s 272 B
(2)}
To save from the levy of penalty, assessees have to file their
return of income before due date and comply all the provisions of
Income-Tax Act. Table below shows the position in this regard.
Table No. 5.64
Penalty Levied (for late filing of returns)
Late filing of returns Other reasons Particulars
No. of firms % No. of firms %
Penalized --- --- 1 2%
Not penalized 50 100% 49 98%
Total 50 100% 50 100%
Source: Primary Data
Table no. 5.64 shows that out of 50 partnership firms in the
selected area randomly selected for the study, no single firm is
found which faced the penalty for late filing of return of income
while only one (2%) assessee has penalized short payment of self
assessment tax.
157
5.B.II.vi. Change of Income-Tax consultant
1. Regularity in Filing Returns of Income
A survey is conducted as to from how many years they are
filing the income-tax returns regularly. The position in this regard
is as under:
Table No. 5.65
Regularity in Filing Returns of Income
Particulars No. of firms Percentage (%)
0-5 years 15 30%
5-10 years 9 18%
10-15 years 5 10%
15-20 years 8 16%
more than 20 years 13 26%
Total 50 100%
Source: Primary Data
The above table no. 5.65 shows that 15(30%) partnership
firm assessees are filing the returns of income since 5 years, while
9 (18%) partnership firm assessees are filing it since 10 years, 5
(10%) partnership firm assessees are filing return of income since
15 years and 8 (16%) partnership firm assessees since 20 years. 13
(26%) partnership firm assessees are filing the returns of income
since more than 20 years.
158
2. Change of Income-Tax Consultant
The tax consultant can be changed by the assessee because
of variety of reasons including inconvenience, fees charged by tax
consultant, death of tax consultant etc. In case of the surveyed
cases only 4 partnership firm assessees are found, who have
changed their tax consultant for the following reasons.
Table No. 5.66
Reasons for Change of Income-Tax Consultant
Particulars No. of firms Percentage
Change in office place of tax
consultant
1 10%
Change in office place of
assessees
1 10%
High charges 1 10%
Dissatisfaction --- ---
Death of tax consultant 1 10%
Conflicts with consultant --- ---
Any other reason --- ---
Source: Primary Data
Total 50 partnership firm assessees are examined, out of
them 4 (8%) partnership firms have changed their tax consultants
(only once). Out of 4, 1 partnership firm assessee has changed the
tax consultant due to inconvenience due to change in office place
of tax consultant, 1 partnership firm assessee has changed the tax
consultant due to change in place of its own office, 1 partnership
firm assessee has changed tax consultant due to the death of the tax
159
consultant and 1 partnership firm has changed the tax consultant
because of higher fees/charges.
5.B.II.vii. Misplacement of Documents by Tax Consultants
The documents submitted to the tax consultant may be
misplaced in his office. The misplacement of the documents can
create problems for the assessee and equally to the tax consultant.
In case of the survey taken in this regard no single case of tax
consultant found in which there is misplacement of documents
submitted to him / her.
5.B.II.viii. Non-disclosure of Secret Information
It is expected that the professional must observe ethical
standards of not disclose the secret information of the assessee to
others, may be his friend, relative or foe. Observation of such
standard enhances the client confidence in him. The survey is taken
as to what is the confidence level in this regard of the assessees.
The data in this respect is as follows:
Table No.5.67
Non-disclosure of Secret Information
Particulars No. of firms Percentage (%)
Disclosure of information by
tax consultants
--- ---
Non-disclosure of information
by tax consultants
50 100%
Total 50 100%
Source: Primary Data
160
In personal interviews with partners of partnership firms in
selected area, it is confirmed that no single tax consultant has
discussed the financial matters of assessees with others. Tax
consultancy profession survives on the trust of assessees. Therefore
tax consultants strictly follow their professional ethics.
5.B.II.ix. Sincerity & Integrity of the Tax Consultant
Sincerity & integrity of the tax consultant creates the confidence
in the mind of assessee. This is one of the reasons of having long
term association of assessee with the tax consultant. The survey is
conducted in this regard and it is noticed that all the assessees have
full faith in the sincerity and integrity of their tax consultants. They
are cock-sure that all their tax matters are timely handled by their
tax consultants.
5.B.II.x. Scrutiny of the Returns by Income-Tax Department
Income-Tax Department selects regularly some returns as per
the norms fixed by them for scrutiny. The norms for the selection
of cases for scrutiny are as under -
i) Non-disclosure of bank interest income.
ii) showing income below 5% of trade receipts.
iii) If the assessee is a contractor and has shown his income below 8%
of his contract receipts.
In such cases, partnership firms are selected for scrutiny.
They are selected randomly under (CASS) Computer Assisted
Scrutiny System. Details in this regard are shown in table no. 5.68:
161
Table No. 5.68
Selection for Scrutiny
Particulars No. of firms Percentage (%)
Scrutinized 1 2%
Non-scrutinized 49 98%
Total 50 100%
Source: Primary Data
In the surveyed cases only one partnership firm assessee
faced scrutiny process. In personal interview with the partners of
the partnership firm of which is selected for scrutiny, it is revealed
that the tax consultant appeared and attended the hearings of the
case and successfully handled the matter.
5.B.II.xi. Fees charged
Tax consultant renders services to the clients. He computes
the taxable income and quantifies the amount of tax payable by the
firm. The expectations of the clients from the tax consultants are
also reasonable. They expect that the tax consultant should render
services in time to avoid last minute service and the paper work
done by him should be accurate. The client expects without any
reasonable basis that the tax liability should be minimum and fees
charged by him for the services rendered should also be minimum
as per his terms.
The factual data collected in this regard is as under.
162
Table No. 5.69
Fees Charged
Fees charged No. of Firms Percentage (%)
Reasonable 40 80%
Higher 3 6%
Lower 2 4%
Total 50 100%
Source: Primary Data
In a discussion with the assessees, it is noticed that 40 (80%)
of the partnership firm assessees are satisfied with the fees charged
by the tax consultants while only 3 (6%) partnership firms presume
the fees are higher as compare to others. 2 (4%) disclosed that the
fees charged are lower than the others.
5.B.II.xii. Satisfaction of the Firm Assessees
Satisfaction of the clients should be the guiding principle of
the tax consultant and he should give satisfactory services to
clients.
Table No. 5.70
Satisfaction of the Firm Assessees
Satisfaction level No. of firms Percentage (%)
Fully satisfied 40 80%
Partly satisfied 8 16%
Not satisfied 2 4%
Total 50 100%
Source: Primary Data
163
Table no. 5.70 shows that out of partnership firm assessees
examined, 40 (80%) are fully satisfied with the services rendered
by their tax consultants while 8 (16%) partnership firms are partly
satisfied. Only 2 (4%) partnership firms disclosed dissatisfaction in
this regard.
164
5.B.III. COMPANY ASSESSEES
5.B.III.i. Introduction
The Companies Act, 1956 states that a ‘company’ means a
company formed and registered under this Act or an existing company
which is formed and registered under any of the previous company
laws.
As per section 2 (17) of the Income-Tax Act, 1961, company
means:
i) Any Indian Company, or
ii) Any body corporate incorporated by or under the laws of a country
outside India, or
iii) Any institution, association a body which was assessed as a
company for any assessment year under the Income-Tax Act,1952
or was assessed under this Act as a company for any assessment
year commencing on or before 1.4.1970, or
iv) Any institution, association or body whether incorporated or not
and whether Indian or Non-Indian, which is declared by a general
or special order of Central Board of Direct Taxes to be a company.
In common practice, it is a voluntary association of persons
formed for the purpose of doing business, having a distinct name
and limited liability. Registration of a company is compulsory
under the Companies Act, 1956 if it is engaged in banking business
with more than ten persons and more than twenty persons in case
of companies engaged in any other activities
165
The Company form of organization is preferred to collect
maximum required capital and to reap the fruits of managerial
skill in running the business on large scale.
I. Sources of Income
1. Income Head under which Income Is Taxable
The sources of income of a company are of various types but
for the purpose of charging the income under the Income-Tax Act,
1961, the taxable total income of a company is computed and
assessed under four heads, viz.
• Income from house property
• Profits and gains from business or profession
• Capital gains
• Income from other sources
The income sources under which the income of the companies
surveyed can be seen from the following table:
Table No. 5.71
Income Heads under which Income of Company Is Taxable
Particulars No. of Companies Percentage
Income from house property 1 3.33%
Profits and gains from
business or profession
30 100%
Capital gain 2 6.67%
Income from other sources 25 83.33%
Source: Primary Data
166
Figure 5.20
Income Heads under which Income of Company Is Taxable
While discussing with the Directors and / or Managers of
companies, it is observed that the Companies have "Profits and
gains from business or profession" is the main source of income
and they have other sources of income such as income from house
property, income from other sources and capital gains etc.
As per table No. 5.71, all the 30 (100%) Company assessees
are having the business income as the main source of income. 1
(3.33%) company has source of income by way of income from
house property, 2 (6.67%) companies have capital gain and 25
(83.33%) companies have income from other sources apart from
the business income as main source of income.
2. Net Profit Range
Net profit earned by the company with certain adjustments is
charged for the purpose of income-tax. The tax liability of a
167
company changes directly with the change in net profit. Following
table shows the net profit range of the companies surveyed.
Table No. 5.72
Net Profit Range
Range No. of Companies Percentage
Less than Rs. 10,00,000/- 19 63.33%
Rs. 10,00,000/- to 50,00,000/- 8 26.67%
More than Rs. 50,00,000/- 3 10%
Total 30 100%
Source: Primary Data
Table no. 5.72 shows that 19 (i.e.63.33 %) Company assessees
out of total 30 assessees examined fall under the first income group
i.e. who earn net profit less than Rs.10,00,000/-. 8 (i.e.26.67%)
Company assessees are earning net profit more than Rs.
10,00,000/- but below Rs. 50,00,000/- and remaining 3(i.e.10%)
Companies earn net profit more than Rs. 50,00,000/- .
3. Book Profit Range (for Minimum Alternative Tax)
Under section 115 JB(1) of the Income-Tax Act there is a
specific provision that the tax payable by a company can not be
less than 10% (10% for A.Y. 2009-10 and 15% for A.Y. 2010-11)
of Book profit of the company. It is also known as MAT
(Minimum Alternative Tax)
Book profit is arrived at after making specified adjustments
to the net profit as shown in the Profit and Loss Account so
prepared. To arrive at Book Profit, the net profit is required to
increase by the amounts charged to Profit and Loss Account such
168
as taxes paid, provisions, transfers to any revenue, amounts by way
of provisions, dividend paid or proposed, depreciation and
decreased by the amounts withdrawn from reserves, deferred taxes,
sick units’ losses, etc.
The book profit range of the company assessees surveyed is as
follows:
Table No. 5.73
Book Profit Range
Particulars No. of Companies Percentage
Less than Rs. 10,00,000/- 21 70%
Rs.10,00,000/- to Rs.50,00,000/- 7 23.33%
More than Rs. 50,00,000/- 2 6.67%
Source: Primary Data
It can be observed from the above table that though there are 19
companies whose net profit is below Rs. 10,00,000/-, 21 (i.e.70%)
company assessees fall under the first income group i.e. who earn
net profit less than Rs.10,00,000/-. 7(i.e.23.33%) company
assessees are earning net profit more than Rs. 10,00,000/- but
below Rs. 50,00,000/- and remaining 2(i.e.6.67%) companies earn
net profit more than Rs. 50,00,000/- .
II. Qualification and Services Availed from Tax Consultants
1. Qualification of Income-Tax consultants
Company is taxed as a separate entity under the Income-Tax
Act, 1961. For handling of taxation matters companies generally
prefer specified service providers such as chartered accountants or
169
practicing lawyers etc. who are well served in all company taxation
and legal matters. In the case of the samples surveyed the
qualification of the tax consultants, appointed by the companies are
as follows:
Table No. 5.74
Qualification wise Classification of Tax Consultants
Particulars No. of Companies Percentage (%)
Chartered Accountant 30 100%
G.D.C.&A. --- ---
D.I.T.&S.T. --- ---
LLB --- ---
B.Com., M.Com --- ---
Total 30 100%
Source: Primary Data
The above table no. 5.74 shows that though the professionals of
various qualifications such as G.D.C. & A., D.I.T. & S.T., LL.B.,
etc. provide such services, all the companies surveyed, preferred
chartered accountants as their tax consultants. There is a provision
u/s 224 of Companies Act, 1956 to appoint the auditor who is
Chartered Accountant within the meaning of the Chartered
Accountants Act, 1949. Appointment of auditor is compulsory in
the case of Company. The chartered accountant can be of immense
help to company in the matter of taxation, accounting, audit etc.
Therefore the services by Chartered Accountants are preferred by
the companies.
170
2. Appointment of Separate Tax Consultant for Service Tax,
Central Excise etc.
Though the Tax audit and VAT audit is required to be
carried out by Chartered Accountant only, the companies prefer
other services such as preparation and submission of quarterly
returns under VAT and submission of returns of service tax, excise
duty etc. from other tax consultants who are non-chartered
accountants. In a discussion with the directors and office bearers of
the companies, it is revealed that they don't want to rely upon one
single person for all services as it sometimes proves to be risky. It
is also noticed that they want to have quality services from the
specialists in the field of Service tax, VAT, Excise etc. The
position of the company assessees studied in this regard is as
follows:
Table No. 5.75
Appointment of Separate Tax Consultant for Service Tax,
Central Excise etc.
Qualifications No. of Companies Percentage
Not appointed separate consultant 8 26.67%
Appointed separate consultant 22 73.33%
Total 30 100%
Source: Primary Data
It is noticed that out of total 30 companies examined, 22 (73.33%)
companies have appointed separate tax consultants other than their
auditors who are chartered accountants for other tax services such as
Service tax, Central Excise, VAT etc. and 8 (26.67%) companies have
171
relied upon one single person (i.e. chartered accountant) for all tax
services.
3. Services Availed
Services availed by the company assessees for the study purpose has
been divided into taxation services and allied services.
a. Taxation Services
While running the business, the businessman is required to observe the
provisions of various tax laws applicable such as Income-Tax Act, 1961,
VAT Act, Central Excise Duty Act, Finance Act for service tax, custom
duty etc. Such services are known as taxation services.
The following table shows the different taxation services provided
by the income-tax consultants and the number of company assessees
availing these services.
Table No. 5.76
Various Taxation Services
Particulars No. of Companies Percentage (%)
Income-Tax 30 100%
Value-added Tax 25 83.33%
Service Tax 20 66.67%
Central Excise 9 30%
Customs Duty --- ---
Tax Planning 30 100%
Tax Compliances &
procedural work
30 100%
Source: Primary Data
172
The table no. 5.76 shows that almost all the company assessees
avail the services of income-tax issues, tax planning and tax compliances
and procedural work from income-tax consultants. Apart from the core
area of income-tax consultancy services, approximately 25 (84 %) and 20
(67 %) of the company assessees examined, avail the Value Added Tax
consultancy and Service Tax consultancy services respectively. VAT is
paid on inter-state sale or purchase of goods and service tax is paid on
services provided and covered under the Finance Act. Central Excise
service is availed by 9 (i.e. 30%) company assessees. Central Excise Duty
is paid on manufacturing of goods and Custom Duty is paid on import
and export of goods. No company assessees availed these services in
selected area.
b. Allied Services
i. Accountancy Services
Accountancy services mainly include financial accounting which
concerned with financial book-keeping, cost accountancy and audit.
� Book-keeping Services
There are huge numbers of transactions in the case of company and
company is bounded to file returns under various taxation Acts on
frequent intervals. So company has to keep their books of accounts up to
date. Generally, companies themselves appoint staff for book-keeping. In
the case where the size of the company or number of transactions is very
low, company may take the book-keeping services from tax consultants.
From the following table no. 5.77, it can be seen that only 6 (20%)
companies availed book-keeping services from their tax consultants.
� Cost Accountancy Services
Cost accounting relates to the collection, classification,
ascertainment of cost and its accounting and control relating to the
various elements of cost. From the following table no. 5.77 it is clear that
173
in the studied area none of the company assessees availed these services
from their tax consultant.
� Audit
Audit is a systematic examination of books of accounts and
records. It is conducted to ascertain whether the financial statements give
true and fair view of the financial position as at the year end and of the
financial results for that year. VAT audits are mandatory in cases of sales
in excess of Rs. 40,00,000/-. Tax audit is mandatory also for the assessees
having business turnover in excess of Rs.60,00,000/- or gross receipts
from profession in excess of Rs. 12,00,000/-. The table no.85 also
explains various audit services availed by the companies.
Table No. 5.77
Various Allied Services
Particulars No. of Companies (%)
Book-keeping 6 20%
Cost Accountancy NIL NIL
Audit
Cost Audit NIL NIL
Tax Audit 30 100%
VAT Audit 25 83.33%
Internal Audit 3 10%
Financial Audit / Statutory Audit 30 100%
Environmental Audit --- ---
Information System Audit --- ---
Source: Primary Data
174
Table no. 5.77 shows that all the companies availed the services of
tax audit. Out of 30 company assessees examined, 25 (i.e. 83.33%)
company assessees avail the services of VAT audit. All the companies
have availed the services of statutory audit as it is compulsory under
Companies Act, 1956. 3 (10%) companies have availed the service of
internal audit to keep the record accurate. No single company has availed
the services of environmental audit and information system audit.
ii. Consultancy Services
Tax consultancy services availed by company assessees includes
management accountancy, project planning and financing, project
improvement or turnaround studies, arrangement for the sources of
finance, etc. The following table illustrates the different types of
consultancy services availed by the company assessees.
Table No. 5.78
Consultancy Services
Consultancy Services No. of Companies Percentage
(%)
Management Accountancy --- ---
Project Planning & Finance 5 16.67%
Project improvement or
turnaround studies
7 23.33%
Arrangement for the sources
of finance
10 33.33%
Source: Primary Data
The above table no. 5.78 shows that no company assessee availed
the services of Management Accountancy, 5(16.67%) companies availed
the services of project planning and financing, 7(23.33%) companies
175
availed the services of project improvement or turn around studies and 10
(33.33%) companies availed the service of arrangement for the sources of
finance.
Management accounting is concerned with accounting information
which is useful to management in establishing plans for reasonable
economic objectives in making of rational decisions with a view towards
these objectives. Project planning and finance is related to financial
aspects of project. Project improvement or turnaround studies are related
to appraisal of project. Generally these services are availed by big
companies who are having various projects. As discussed earlier
companies in the studied area are of small size. Very few companies
which are comparatively big have availed these services.
iii. Timely Notification of Amendments, Decisions of Supreme
Court etc. by Income-Tax Consultants
Every year budget proposals in the form of finance bill are presented
to parliament for consideration and approval. When the bill is passed by
the parliament and the President of India gives his / her consent, it
becomes Finance Act of the financial year. The respective provisions of
Income-Tax Act are also changed with changes in the finance Act of the
year.
Some tax cases are also decided by the Supreme Court during the
financial year. The decisions given by the Supreme Court in tax matters,
becomes law.
All the amendments / changes made in tax laws as above are
important matters for the assessees for tax planning. Therefore timely
supply of such information to assessees by the tax consultants is
176
necessary. The following table gives the details of supply of such
information:
Table No. 5.79
Intimation Relating to Amendments to Clients
Particulars No. of Companies Percentage (%)
Receipt of intimation 25 83.33%
Non-receipt of intimation 5 16.67%
Total 30 100%
Source: Primary Data
The above table no. 5.79 shows that 25 (83.33%) companies
received such intimation in time from their consultants while 5 (16.67%)
companies not received such intimation.
Sometimes it is not possible for tax consultants to intimate all the
clients regarding the amendments, judgments etc. due to non availability
of proper technical support system and trained staff.
iv. Reminders by Income-Tax Consultants
In case of company assessees they are required to comply various
tax matters frequently. These matters have compulsion nature. Timely tax
compliance plays very important role in avoiding penalty and defaults. As
such tax consultants intimate assessees from time to time regarding
compliance matter. The position in this regard is:
177
Table No. 5.80
Reminders by Income-Tax Consultants
Particulars No. of Companies Percentage (%)
Reminded 30 100%
Not reminded --- ---
Total 30 100%
Source: Primary Data
Table no. 5.80 shows that all the company assessees surveyed
received various intimations and reminders for compliance from their
income-tax consultants.
v. Behavior of Staff
Companies have to fulfill so many compliances regarding tax
matters within the time limit. So these companies need much more
support from tax consultants and their staff. Staff members of the tax
consultants generally courteous and helpful to company assessees too.
They avoid behave rudely with them. The details in this regard are as
follows: Table No. 5.81
Behavior of Staff
Particulars No. of Companies Percentage (%)
Polite 12 40%
Co-operative / Helpful 14 46.66%
Non-cooperative 2 6.67%
Irresponsible 2 6.67%
Rude --- ---
Total 30 100%
Source: Primary Data
178
From the table no. 5.81 it can be observed that 12 (40%) company
assessees stated that behavior of the staff of the tax consultants is polite,
14 (46.66%) company assessees stated that its co-operative while 2
(6.67%) companies stated that staff of tax consultants are non-
cooperative. 2 (6.67%) company assessees complained that they are
irresponsible and no company assessee complained that they are rude.
III. Tax Awareness
Tax awareness among the assessees saves their time and money as
such each and every assessees tries to become properly aware in this
regard.
1. Modes of Tax Information
Provisions of the Income-Tax Act, 1961 are changed every year with
the changes made in finance Act. Frequent changes are also made
intermittently in the provisions of Income-Tax Act by passing
Amendments Act or Ordinance. These changes have bearing upon the
assessees' tax liability and other obligations under the Act. The assessee
can get such information from the sources such as tax consultants, media
or other companies.
Table No. 5.82
Modes of Tax Information
Particulars No. of Companies Percentage (%)
Tax Consultants 30 100%
Other companies 4 13.33%
Media 28 93.33%
Source: Primary Data
179
The above table shows that all the companies are getting
information from their tax consultants as well as the details about it from
the advertisement through media. All the 30 (i.e.100%) of company
assessees get the information of taxation through tax consultants,
4(13.33%) company assessees get information through other companies
and 28 (93.33%) company assessees get the information through media.
The data in the above table makes it clear that media also plays a vital
role in providing information on tax matters to the company assessees.
2. Awareness of Tax Provisions
It is surveyed that whether the assessees knew the specific provisions
made in the Act as to which affect their tax liability such as the various
items of their income exempt from tax, other deductions allowed etc. The
position in this regard is as follows:
Table No. 5.83
Awareness of Tax Provisions
No. of Companies Particulars
Knowing Percentage Not-knowing Percentage
Awareness of
changes in
Finance Act
25 83.33% 5 16.67
Items exempt
from tax
14 46.67% 16 53.33%
Deduction
under chapter
VI-A
30 100% --- ---
Source: Primary Data
Above table shows that 25 (83.33%) Company assessees know that
Income-Tax Act undergoes changes every year with the changes in
180
Finance Act. Remaining 5 (16.67%) assessees are unaware of changes in
Finance Act and impact of it on their tax liability.
Only 14 (46.67%) Company assessees know various items exempt
from tax under section 10 while 16 (53.33%) company assessees are
unaware of such items.
The aggregate of income computed under each head after giving
effect to the provisions of clubbing of income and set off of losses is
known as "gross total income". In computing the total income of an
assessee certain deductions from Gross Total Income are permissible
under chapter VI-A of Income-Tax Act, 1961. As per table No. 5.83
shows all Company assessees know these deductions.
It is observed that majority of all types ssesses try to know only
those provisions which are relating to them e.g. they want to know the
rate of income-tax applicable to them only. But they are not interested in
how the rates of income tax are decided and how it is related with
Finance Act.
3. Discussion of Annual Budget
Assessees who are curious about their burden of tax liability discuss
among themselves as to which change in annual budget are beneficial to
them. From time to time they demand before presenting annual budget to
insert the provisions / changes which are beneficial to them. A survey is
conducted to know how many assessees discuss such tax provisions with
their tax consultants. The picture in this regard is as follows:
181
Table No. 5.84
Discussion of Annual Budget
Particulars No. of Companies Percentage (%)
Discussed 27 90%
Not discussed 3 10%
Total 30 100%
Source: Primary Data
Above table no. 5.84 shows that 27 (90%) companies discuss the
annual budget provisions with the tax consultants before hand. And only
3 (10%) companies don't hold such discussions.
In a personal interview with the directors and managers of the
companies, it is revealed that they hold discussions regarding provisions
of annual budget with tax consultants. And whenever they do so their tax
consultants help them in understanding such provisions.
IV. Filing Returns of Income
The return is a legal format which is provided by the Income-Tax
Department to show the income calculations and final tax to be paid by
the assessees. Each and every assessee has to submit his returns with
specified amount of tax in it, up to a specified date every year to the
Income-Tax Department. It is obligatory on the assessee by the law to file
the return regularly. A survey is carried on as to when the company
started to file their returns regularly and for what reason.
1. First Return of Income
In case of company engaged in engineering activity / business the
investment in building, plant & machinery etc. is high. In the books of
accounts depreciation is to be charged on these assets which may result in
182
loss. Such business loose can be carried forward for next 8 (eight) years
and set off can be claimed against the profit earned during this period. For
this purpose submission of return in time is necessary. This may be the
reason for filing first return of income. There is also a case of claim of
refund. If the tax is deducted at source and company is not liable to pay
tax then in such case the tax deducted at source should be refunded to the
company. To get this refund company has to file return. In case, the
company is at profit then it is necessary to file the first return of income
and pay the tax. Company is taxed at flat rate of 30% on its profit even if
it is Re. 1/-. Therefore, the companies, in general, file the first return of
income as per regular provisions of Income Tax Act, 1961. The following
table no. 5.85 show the position in this regard:
Table No. 5.85
Filing of First Return of Income
Particulars No. of Companies Percentage (%)
For the payment of Tax 8 26.67%
To claim loss 6 20%
Refund claim 7 23.33%
Voluntarily 9 30%
Notice from Income-
Tax Department
--- ---
Total 30 100%
Source: Primary Data
Table No. 5.85 shows that 8 (26.67%) company assessees out of 30
company assessees examined has filed their first return of income for the
payment of tax, due to taxable profit, 6 (20%) company assessees to
claim loss, 7 (23.33%) company assessees have filed first return of
183
income to claim refund and 9 (30%) companies have filed their first
return of income voluntarily for their own sake.
2. Preparation for Filing Returns of Income
By law a company is required to appoint an auditor u/s 224 of the
Companies Act, 1956 to audit the annual accounts of the company and to
keep before the Annual General Meeting, the copies of audited Balance
Sheet and Profit and Loss Account for the information of their
shareholders. Annual general meeting is required to be held within the
stipulated period. As well as the tax audit u/s 44AB of Income-Tax Act is
also compulsory to the company if their turnover is in excess of a
stipulated amount. It was Rs. 40,00,000/- for assessment year (A.Y.)
2010-11 (Rs. 60,00,000/- for A. Y. 2011-12) .
Under the provisions of Income Tax Act, the company must file
the return of income with digital signature in the prescribed form no.
ITR-6 latest by 30th September of the assessment year to avoid the
penalty for late filing.
Generally due to legal compulsions as above the office bearers of
the company start preparatory work well in advance and submit the
documents to the tax consultants before the due date. In survey it is
observed that all the companies selected for the study, are punctual in
submitting the documents to the tax consultants and have submitted the
necessary documents to their tax consultants well in advance.
3. Time Lag for Filing Returns after Documentation
Generally time lag of one to two month is taken by the tax
consultants after receiving necessary documents from the company
assessees. Computing the taxable income of a company considering all
the documents placed before him, preparing the tax audit report by
184
examining the accounts of the company and preparing the policy
statement is a time consuming job. A survey is carried on as to how much
period is taken by tax consultants to prepare returns of income and submit
the same to Income-Tax Department. The position in this regard is as
follows:
Table No. 5.86
Period for Submission of Returns of Income by Tax Consultants
Particulars No. of Companies Percentage (%)
Within 1 day --- ---
Within a week 2 7%
Within a month 25 83%
More than a month 3 10%
Total 30 100%
Source: Primary Data
Figure 5.21
Period for Submission of Returns of Income by Tax Consultants
185
It can be observed from the above table no. 5.86 that in case of 2
(7%) companies, their tax consultants filed return of income within a
week after receiving required documents. In case of 25 (83%) companies,
their tax consultants filed return of income within a month while in case
of remaining 3 (10%) companies; their tax consultants filed it after a
month.
4. Levy of Penalty
If the assessees fails to comply the statutory provisions of the Act
attracts some kind of penalty.
i. Penalty Levied (for Late Filing of Returns)
Under section 271B of Income-Tax Act, if the return have not been
filed within specified date the assessee becomes liable to pay a penalty
which is presently 0.5% of the company’s turnover. As such all the
companies try to submit returns in stipulated time limit as well as the tax
consultants also gives topmost priority to preparing and filing the returns
of income of companies. In case of the present study the position in this
regard is as follows:
Table No. 5.87
Penalty Levied (for late filing of returns)
Particulars No. of companies Percentage (%)
Penalty levied --- ---
Penalty not levied 30 100%
Total 30 100%
Source: Primary Data
It is observed that due to timely action by tax consultants in
submitting the returns of income, no single company in the selected area
186
for the study is found facing the penalty proceeding for late filing of
return of income.
5. Penalty Levied (other than Late Filing of Returns)
There are various types of offences other than late filing of returns
which assessees commit e.g. failure to pay tax or interest on self
assessment, failure to comply with the notice by Income-Tax Department,
furnishing wrong particulars of income failure to get accounts audited etc.
There are various sections which provide penalties for these various
offences. A survey is conducted as to how many companies penalized for
offences other than late filing of returns. Details in this regard are as
under:
Table No. 5.88
Penalty Levied (other than for Late Filing of Returns)
Particulars No. of companies Percentage (%)
Faced penalty 1 2%
Not faced penalty 49 98%
Total 30 100%
Source: Primary Data
From table no. 5.88 it can be seen that only one company faced the
penal proceeding and penalty is levied for contravention of provisions of
section 269(T) of Income Tax Act (for the cash repayment of deposit) and
of section 269SS (Cash receipt of deposit) of Income Tax Act. Penalty of
equal amount of deposit received and repaid is levied.
187
V. Scrutiny of the Returns by Income Tax Department:
If the low income than reasonable income is shown in the return of
income by assessee or to confirm the genuiness of source of huge
investment made in the business by assessee, Income-Tax Department
may call that assessee for scrutiny. With this Department randomly
selects some cases for scrutiny. At present the cases are selected for
scrutiny under CASS (Computer Assisted Support System) for example
randomly, case No. 1, 10, 20, 30, 40 etc.
If the case of assessee is selected for the scrutiny, the books of
accounts of the assessee are required to be produced before Assessing
Officer for examination. In the examination of accounts, if some
irregularities are detected by Income-Tax Officer he enquires about it
from the assessee and if he is not satisfied on the basis of such
information, he starts the penal proceedings against the assessee as per
law. While carrying on study in this respect the following information is
received:
Table No. 5.89
Scrutiny
Particulars No of Companies Percentage (%)
Scrutinized 3 10%
Non-scrutinized 27 90%
Total 30 100%
Source: Primary Data
Table no. 5.89 shows that as per norms laid down by the Income-
Tax Department for selection of scrutiny cases, 3 Company assessees are
selected for scrutiny.
188
In personal interviews with directors and managers of the
companies selected for scrutiny, it is revealed that the tax consultants
played the cooperative role by attending the hearing of the cases before
the officers of Income-Tax Department. Tax consultants have
successfully handled the matters.
VI. Relation with Income-Tax Consultant
Generally any relation stands on trust. Tax consultation is related to
financial matters of the assessee. So both the parties try to maintain
cordial and friendly relationship and try to avoid any unnecessary clashes
among them. Tax consultants are expected as trustees for assessees. With
this trust if, the services rendered by tax consultant to assessee are
satisfactory, then assessee do not change his tax consultant and take his
services continuously year after year. This builds strong and healthy
relation between the assessee and the tax consultant.
A survey is carried on as to how long the parties are in associate with
each other. The following table no. 5.90 shows information in this regard:
Table No. 5.90
Service period of filing the returns of income
Particulars No. of companies Percentage (%)
0-5 years 12 40%
5-10 years 9 30%
10-15 years 3 10%
15-20 years 4 13.33%
more than 20 years 2 6.67%
Total 30 100%
Source: Primary Data
189
Figure No. 5.22
Service period of filing the returns of income
It is observed that 12(40%) company assessees are filing the
returns of income since 5 years, 9 (30%) assessees since 10 years, 3
(10%) assessees since 15 years and 4 (13.33%) assessees since 20 years.
And 2 (6.67%) Company assessees are filing the returns of income since
more than 20 years with the help of same tax consultant.
Change of Income-Tax Consultant
There may arise some cases of change of tax consultants from the
part of the assessee. Such tax consultants can be changed by the assessee
due to number of reasons which mainly includes inconvenience, fees
charged by tax consultant, death of tax consultant etc. During survey it is
noticed that out of 30 companies examined, 3 (10%) companies have
changed their tax consultant. The details in this regard are as under:
190
Table No. 5.91
Reasons for Change of Income-Tax Consultant
Particulars No. of Assessees Percentage (%)
Change in office place
of tax consultant
1 33.33%
Change in office place
of assessees
1 33.33%
High charges --- ---
Dissatisfaction 1 33.34%
Death of tax consultant --- ---
Conflicts with
consultant
--- ---
Any other reason --- ---
Total 3 100%
Source: Primary Data
From the above table no. 5.91 it can be observed that 3 (10%)
Companies have changed their tax consultants (only once). Out of 3, 1
Company has changed their tax consultant due to change in their office
place while, 1 (33.33%) had changed its tax consultant because of change
in tax consultants office and 1 company has changed its tax consultant
due to dissatisfactory service by tax consultant.
VII. Misplacement of Documents by Tax Consultants
There is possibility of misplacement of documents in the office of
the tax consultant. The reason may be negligence or wrong filing of
documents. The details in this regard are as under:
191
Table No. 5.92
Misplacement of Documents by Tax Consultants
Particulars No. of companies Percentage (%)
Documents misplaced --- ---
No documents misplaced 30 100%
Total 30 100%
Source: Primary Data
From the table no. 5.92 it is observed that out of 30 (100%)
companies selected randomly for study, there is no single case of
misplacement of documents by tax consultants.\
VIII. Non-disclosure of Secret Information
It is expected that the tax consultants should not disclose the
confidential tax information of assessee to others without his permission.
A survey is carried on as to whether the assessees are satisfied in this
respect or not. The data in this regard is as follows:
Table No. 5.93
Confidentiality of the Information
Particulars No. of companies Percentage (%)
Confidentiality followed 30 100%
Confidentiality not
followed
--- ---
Total 30 100%
Source: Primary Data
192
All directors and managers of all companies are found satisfied that
tax consultant keeps all the information regarding their tax matters
confidential.
In personal interviews with Directors and Managers of companies,
it is confirmed that just no single tax consultant is found discussing the
financial matters of assessees with others. Tax consultancy service mainly
depends upon the trust. Therefore tax consultants strictly follow their
professional ethics.
IX. Fees Charged
Tax consultant renders services to the clients. He computes his
taxable income and quantifies the amount of tax payable by him. The
expectations of the clients from the tax consultants are also reasonable.
They expect that the tax consultant should render services on time to
avoid last minute services, the paper work done by him should be
accurate. But sometimes his expectations are disturbing to the tax
consultant. The client expects without any reasonable basis that his tax
liability should be minimum and fees charged by him for the services
rendered should also be minimum as per his terms.
The factual data collected through questionnaire is as follows:
Table No. 5.94
Fees Charged
Particulars No. of companies Percentage%
Reasonable 25 83.33%
Higher 2 6.67%
Lower 3 10%
Total 30 100%
Source: Primary Data
193
From the table no. 5.94 it is observed that in case of 25 (83.33%)
companies, the directors and managers of those companies agreed that the
fees charged by their tax consultants for the services rendered by them are
reasonable. Directors and managers of 2 (6.67%) companies stated that
the fees charged by their tax consultant are higher while directors and
managers of 3 (6.67%) companies stated that the fees charged by their tax
consultant are lower.
X. Satisfaction
Assessees assign the taxation work to tax consultants considering
his sincerity and integrity in the professional work. A survey is carried on
as to know the satisfaction level of the assessees in this regard:
Table No. 5.95
Satisfaction of company assessees
Particulars No. of companies Percentage (%)
Fully satisfied 27 90%
Partly satisfied 3 10%
Not satisfied --- ---
Total 30 100%
Source: Primary Data
From the table no. 5.95 and the graphical representation it can be
seen that 27 (90%) companies are fully satisfied with the services
provided by their tax consultants and 3 (10%) companies are partly
satisfied with the services provided by their tax consultants.
194
Testing of Hypothesis:
Hypothesis 1-
H01: The tax consultants face problems while providing consultancy
services to their clients due to unawareness of tax-payers regarding
tax laws and procedures.
H11: The tax-payers are aware about tax laws and procedures.
Table No.5.96
Unawareness of Individual Assessees Regarding Tax Laws and
Procedures.
(At level of significance α =0.05)
Knowledge
Range
Calculated
Value of ‘Z’ (Z)
Table Value of
‘Z’ (Zα/2)
Test Criteria
75-100 1.863961012 1.96 Z < Zα/2
50-75 0.577350269 1.96 Z < Zα/2
25-50 0.577350269 1.96 Z < Zα/2
0-25 3.872983346 1.96 Z > Zα/2
Table no. 5.96 shows that the value of Z is less for the 50%
individual assessees who are in the knowledge range 25-100. It means
that 50% individual assessees are unaware regarding tax laws and
procedures. Hence, first null hypothesis (H01) is accepted. Therefore first
alternative hypothesis (H11) is rejected.
Table no. 5.96 shows that the value of Z is greater for the remaining
50% individual assessees who are in the knowledge range 0-25. It means
that remaining 50% individual assessees are aware of tax laws and
195
procedures. Hence, first null hypothesis (H01) is rejected. Therefore first
alternative hypothesis (H11) is accepted.
Table No.5.97
Unawareness of Partnership Firm Assessees Regarding Tax Laws
and Procedures.
(At level of significance α =0.05)
Knowledge
Range
Calculated
Value of ‘Z’ (Z)
Table Value of
‘Z’ (Zα/2)
Test Criteria
50-100 4.247653 1.96 Z > Zα/2
0-50 2.070197 1.96 Z > Zα/2
Table no. 5.97 shows that the value of Z is greater for partnership
firm assessees. It means that partnership firm assessees are aware of tax
laws and procedures. Hence, first null hypothesis (H01) is rejected.
Therefore first alternative hypothesis (H11) is accepted.
Table No.5.98
Unawareness of Company Assessees Regarding Tax Laws and
Procedures.
(At level of significance α =0.05)
Knowledge
Range
Calculated
Value of ‘Z’ (Z)
Table Value of
‘Z’ (Zα/2)
Test Criteria
25-100 4.247653 1.96 Z > Zα/2
Table no. 5.98 shows that the value of Z is greater for company
assessees. It means that company assessees are aware of tax laws and
196
procedures. Hence, first null hypothesis (H01) is rejected. Therefore first
alternative hypothesis (H11) is accepted.
Hypothesis 2-
H02: The tax consultants face problems while providing consultancy
services to their clients due to improper book-keeping and
documentation by the tax-payers.
H12: There is proper book-keeping and documentation by the tax-payers.
Table 5.99
Improper Book-Keeping and Documentation by the Individual
Assessees
(At level of significance α =0.05)
Range Calculated
Value of ‘Z’
(Z)
Table Value of
‘Z’ (Zα/2)
Test Criteria
50-100 2.828427 1.96 Z > Zα/2
50-75 1.720147 1.96 Z < Zα/2
25-50 0.57735 1.96 Z < Zα/2
0-25 1.445998 1.96 Z < Zα/2
According to table no. 5.99, it is seen that calculated value of Z is
greater. Hence the second null hypothesis (H02) is rejected for individual
assessees. Therefore second alternative hypothesis (H12) is accepted that
means 40 % individual assessees maintain proper book-keeping and
documentation.
On the other hand for remaining 60 % individual assessees, the
calculated value of Z is less. Hence second null hypothesis (H02) is
197
accepted for these individual assessees. Therefore second alternative
hypothesis (H12) is rejected for these individual assessees. That means
these 60% individual assessees not maintain proper book-keeping and
documentation.
Table 5.100
Improper Book-Keeping and Documentation by the Partnership
Firms Assessees
(At level of significance α =0.05)
Range Calculated
Value of ‘Z’
(Z)
Table Value of
‘Z’ (Zα/2)
Test Criteria
50-100 4.551295 1.96 Z > Zα/2
50-75 0.204124 1.96 Z < Zα/2
25-50 0.840168 1.96 Z < Zα/2
0-25 1.338734 1.96 Z < Zα/2
Source : Table No. 5.15
According to table no. 5.100, it is seen that calculated value of Z is
greater. Hence the second null hypothesis (H02) is rejected for partnership
firm assessees. Therefore second alternative hypothesis (H12) is accepted
that means 58 % partnership firm assessees maintain proper book-
keeping and documentation.
On the other hand for remaining 42 % partnership firm assessees, the
calculated value of Z is less. Hence second null hypothesis (H02) is
accepted for these partnership firm assessees. Therefore second
alternative hypothesis (H12) is rejected for these partnership firm
198
assessees. That means these 42% partnership firm assessees not maintain
proper book-keeping and documentation.
Table 5.101
Improper book-keeping and documentation by the Company
Assessees
(At level of significance α =0.05)
Range Calculated
Value of ‘Z’
(Z)
Table Value of
‘Z’ (Zα/2)
Test Criteria
50-100 9.899495 1.96 Z > Zα/2
50-75 0.252646 1.96 Z < Zα/2
25-50 --- --- ---
0-25 0.252646 1.96 Z < Zα/2
Source : Table No. 5.17
According to table no. 5.101, it is seen that calculated value of Z is
greater. Hence the second null hypothesis (H02) is rejected for company
assessees. Therefore second alternative hypothesis (H12) is accepted that
means 88 % company assessees maintain proper book-keeping and
documentation.
On the other hand for remaining 12 % company assessees, the
calculated value of Z is less. Hence second null hypothesis (H02) is
accepted for these company assessees. Therefore second alternative
hypothesis (H12) is rejected for these company assessees. That means
these 12% company assessees not maintain proper book-keeping and
documentation.
199
Hypothesis 3-
H03: The tax consultants face problems while providing consultancy
services to their clients regarding electronically filing of returns.
H13: There is no problem regarding electronically filing of returns.
Table 5.102
Problems in Electronically Filing of Returns of Income
(At level of significance α =0.05) (For tax consultants)
Range Calculated
Value of ‘Z’
(Z)
Table Value of
‘Z’ (Zα/2)
Test Criteria
Not-facing
Difficulties
5.380143673 1.96 Z > Zα/2
Source: Table No. 5.14
Table no. 5.102 shows that calculated value of Z is greater. Hence
third null hypothesis (H03) is rejected. Therefore third alternative
hypothesis (H13) is accepted. It means that 63% tax consultants are
not facing problems in electronically filing the returns. On the other
hand it means that 37% tax consultants facing problems in
electronically filing of returns.
Hypothesis 4-
H04: The assessees face problems while receiving consultancy services
from the tax consultants due to no proper guidance or detailed
explanation by the tax consultants.
H14: Tax consultants provide proper guidance or detailed explanation to
their assessees.
200
Table 5.103
Proper Guidance or Explanation by Tax Consultants
(At level of significance α =0.05) (For assessees)
Range Calculated Value
of ‘Z’ (Z)
Table Value of
‘Z’ (Zα/2)
Test Criteria
To Individual
Assessees
6.21059 1.96 Z > Zα/2
To Partnership
Firm Assessees
0.745356 1.96 Z < Zα/2
To Company
Assessees
15.58846 1.96 Z > Zα/2
Source : Table No. 5.31, 5.60 and 5.84
Table no. 5.103 shows that calculated value of Z is greater in case
of individual assessees and company assessees. It means that the
individual and company assessees hold discussion regarding provisions of
annual budget with tax consultants. Hence fourth null hypothesis (H04) is
rejected. Therefore fourth alternative hypothesis (H14) is accepted.
But table no. 5.103 shows that calculated value of Z is less. It
means that the partnership firm assessees don’t hold such discussions and
whenever they do so their tax consultants help them in understanding
such provisions. Hence fourth null hypothesis (H04) is accepted.
Therefore fourth alternative hypothesis (H14) is rejected.
Hypothesis 5-
H05: The assessees face problems while receiving consultancy services
from the tax consultants due to no intimation relating to
amendments, decisions of Supreme Courts by them.
201
H15: Tax consultants intimate relating to amendments, decisions of
Supreme Courts to their assessees.
Table 5.104
Intimation relating to amendments, decisions of Supreme Courts
(At level of significance α =0.05) (For assessees)
Range Calculated Value
of ‘Z’ (Z)
Table Value of
‘Z’ (Zα/2)
Test Criteria
To Individual
Assessees
52.44256117 1.96 Z > Zα/2
To Partnership
Firm Assessees
20.1246118 1.96 Z > Zα/2
To Company
Assessees
11.04802351 1.96 Z > Zα/2
Source : Table No.5.28, 5.55 and 5.79
Table no. 5.104 shows that calculated Z is greater for all types of
assessees. It means that 88% tax consultants intimate relating to
amendments, decisions of Supreme Courts to their assessees. Hence,
fifth null hypothesis (H05) is rejected. Therefore fifth alternative
hypothesis (H15) is accepted.