Final Report of Tax Reform Committee headed by Dr. Raja J. Chelliah has been published in 197 I.T.R. p.177. The Committee has specifically recommended for computerization in taxation system with relevant extracts is reported in 197 I.T.R. p.281, which is reproduced as under :

"The Imperative Need for Computerisation."

5.70 In the last few years, the impact of the electronic computer and automatic data processing (ADP) has been revolutionary particularly in tax administration. The most immediate benefit to the tax administration to be obtained from ADP relates to its functions as an incredibly efficient processing system. Further, it provides not only an increased capacity for handling paper, but also furnishes the administrator with the means for integrating all of his data processing functions as well. It is capable of performing a combination of operation on facts stored in its internal memory and of producing results that satisfy many different needs. This integrated processing of information enables the tax administrator to perform at time various tasks which otherwise would have been handled on a piecemeal basis under a manual or mechanical system. Thus, integrated data processing in itself is a valuable time saver and this coupled with the speeds at which the computer process occur, results in efficient data handling.

5.71 Among the more difficult the tedious of the many tasks of tax administration is record keeping, which today employs many people, large space and requires much equipment. Hundreds of thousands of records can be stored in a single reel of magnetic tape. Also it can be modified or extracted as quickly as needed. Finally, once the significant portions of a document have been placed on magnetic tape and the accuracy of the record has been established, references to the original source document will become less essential and infrequent. These documents, therefore, need no longer occupy valuable working space for long periods.

(a) Direct taxes :

5.72 As indicated in Chapter 6, the comprehensive use of computer will enable the Department to accomplish its tasks in a far more efficient manner:

• The efficiency of the collection function is enhanced through the determination of the true balance of each tax payer's account and the possibility of recording each transaction relating to tax payment regardless of where it occurs.
• The ADP greatly facilitates the posting operation of payments and liability so that the status of accounts can be updated.
• The ADP greatly facilitates follow-up and recovery actions because of case of calculation and availability of current data without much manual work. Similarly, the task of refunds is facilitated.
• The use of computer facilitates the processing and storing of information received/collected from taxpayers, persons required to supply particular classes of information, the Central Information Bureau (CIB) and the Investigation Directorate. The Taxpayers' Master File (TMF) and the computerise storage of all information received enables the Department to have at its finger tips, so to speak, comprehensive and valuable information on tax payers and their economic transactions, which can be retrieved without difficulty. The Department's knowledge of, and ability to deal with, taxable entities is thus increased manifold.
• The ADP enables the development and use of a proper method of choosing samples for scrutiny assessments as explained in Chapter 6 in the Section on scrutiny assessment.

5.73 There is little doubt that no worldly improvement in the enforcement of taxes and reduction in the hardship and trouble caused to the assessees can be achieved without full-fledged computerization. However, before the design of computerization and the choice of hardware and software is decided upon, it is necessary to determine the contours of the revamped and recognized tax administration system, along the lines we have recommended. The design of computerization including the choice of hardware and software requirements must be worked out with care with the help of experts who have set up and have worked upon such systems. A group of Officers of the department must be associated with the whole exercise. Therefore, we strongly urge that :

• Technical assistance from multilateral finance institutions be first availed of;
• A reputed Indian Consultancy Agency could be hired to work with the experts supplied by this multilateral agency;
• A group of officers from the department who participate in this exercise; and
• If help from multilateral institutions is not be availed of, a reputed foreign private consultancy agency could be hired.

5.74 In this connection, we learn that a neighbouring country, namely, Sri Lanka, has successfully completed a programme of compueterisation of its tax administration with the assistance of multilateral agencies. It would be worthwhile for some of the officers of the Income Tax Department qualified in this area to acquaint themselves with the compueterisation programme and the improvements brought about in tax administration in countries which have completed such programmes.

5.75 In order to augment the pool of technical manpower in the Department, all new recruits to the Department whether at the officer level or at the staff level, should be required to undergo a compulsory and successful training in computers before being confirmed in their jobs. As regards the existing officers and staff, since a large number of computer training centers exist in the country, the Government should require the officers and the staff to undergo training before their next promotion but not later than two years from now. The expenditure on these training courses should be reimbursed to the staff and the officers by the Government.

During past 10 years after the report is published, the recommendations which are stated above are not fully implemented.