A Parliamentary Panel on Monday asked the government to refrain from using coercive methods for recovering tax dues and look at better ways to resolve the issue.
Department Related Parliamentary Standing Committee on Commerce expressed concern over the tax related controversy of some multinational companies.
The Committee is "concerned to note that the controversy over many multinational companies - the Shell and Vodafone tax cases, which finally went against CBDT - have brought about a bad name for India as far as the issue of taxation is concerned".
The recent controversy over minimum alternate tax on capital gains made by FIIs has further led to negative image of the country on tax matters.
"There are far better ways to resolve tax issues instead of resorting to coercive methods to recover taxes which in any case are turned down later by courts.
"Taxation framework is very complex, besides taking a lot of time and being expensive, it creates a lot of noise that is not in the best interest of the country", the Committee observed in its report on "Ease of Doing Business".
The Committee feels that "if Make in India initiative is to succeed, taxation has to be stable and predictable".
Policy uncertainty and tax disputes have made many foreign companies increasingly nervous about taking the plunge in India, it added.
It "strongly recommends that there should be a fair, predictable and stable tax regime in the country".
It also said that there is a need to improve the department's interface with the tax payers and immediate steps should be taken to reduce physical interface of taxpayers with the authorities.
There is also a need to widen the tax net and action against evaders should be taken as the tax evasion spoils the compliance culture, it said.
"As of now around one per cent of the cases are taken for scrutiny but there is still substantial human interface bringing in instances of corruption and emergence of grievances", it added.
Expressing distress, the Committee said that searches and seizures are at times used as tools for "harassment" of tax payers for political reasons or for settling personal scores.
It suggested that searches and seizures should be done in the rarest of the rare cases where it is firmly established that tax evasion has taken place.
"It has been brought to the notice of the Committee that tax payers at times are subjected to undue harassment in the name of scrutiny and they are required to produce papers ranging up to six years from the end of the relevant assessment", it added.
