Income Tax Weapon of Search & Seizure Becoming Stingless
By
Shailendra Kumar
In
general public perception, the Income Tax Department is better known for its 'Raids'
on corporate houses or politicians, falling out of the 'good books' of the
Government. Even if we leave aside the controversial 'use' of such powers by
the Government of the day, the purposive object of Search, Seizure and Surveys
is to 'google' undisclosed income or assets and gather evidence which is
otherwise not collectible by using other means. So, in other words, whether it
is a Survey or a Search & Seizure, it is merely a tool to detect undeclared
income or black money and is certainly not an end in itself. Such invasive
powers contrary to the doctrine of privacy have been vested in the Department
(and also upheld by various courts), is to achieve the larger goal of being an
effective deterrent against tax evasion. In simple words, the power to search
& seize is theoretically expected to act like a hanging sword which would
in turn ensure voluntary compliance with the tax laws. So, it is very clear
that it is not a direct tool for revenue augmentation.
With
this background, a soul-searching attempt was recently made at the Annual Conference
of the CCITs & DGITs to study the effectiveness of the tool of Survey,
Search & Seizure and also to find out how judiciously such a tool has so
far been used by the Investigation Wing of the Department. As per the records,
the last fiscal of 2013-14 witnessed 5300 Surveys, highest in the past four fiscals,
that detected unreported income of as colossal a figure as Rs. 90,390.00 Crore
from a mere Rs. 5,894.00 Crore detected in 2010-11. Such a figure may be
attributed to one particular Survey in Delhi
A
large number of searches are conducted in those cases where a search had
earlier taken place. Let's hope the CBDT pans its attention to the eroding value of Search &
Seizure tool which is globally seen as the most effective tool to sustain the
fight against tax cheats.
TIOL
Adds: This is an absolutely correct finding which goes to prove the growing
ineffectiveness of the tool of Search & Seizure. When the objective is to
be efficient deterrence to tax evasion, the glaring fact is that the earlier
search operations had not deterred even the searched persons and they continued
to entertain themselves by indulging in tax evasion. Therefore its impact on
other taxpayers can be easily guesstimated. In too many cases, it is reliably
learnt, the Department was forced to conduct raids at higher frequency. If that
is the case, it certainly amounts to bad news for the fiscal policy makers who
are pitted against hardened tax evaders entertaining no fear at all against tax
evasion charges. But the larger question is - Do such statistics indicate that
the Department has been conducting only routine raids to generate dumb
statistics? Or, there are too many flaws in the investigation and filing of
appraisal reports post-search?
Let's move to other findings
to find solutions to such questions.
The
final realisation of taxes in search cases did not constitute substantial
portion of the overall tax mop-up, and therefore, the emphasis on voluntary
admission of undisclosed income was misplaced.
TIOL
Adds: This is indeed yet another legitimate observation coming out of the
process of 'manthan' from inside! Although the CBDT does not maintain a
separate head to keep track of revenue realised under this HEAD but
knowledgeable sources indicate that it may not be even one percent of the
total revenue collected. If that is so, all the tall claims made at the time of
carrying out search and seizure operations and the consequential surrender of
income are at best hollow. There may be thousands of raids and surrender of
undisclosed income in thousands of crores but only a paltry sum finally gets
translated into tangible addition to the Consolidated Fund of India. This also
reveals the malady of excessive stress on admission of undisclosed income
during searches. A series of flaws can be pointed out in the Investigation of
evidence and filing of unrealistic appraisal reports. Such a malady also tells
us the tale of retraction of undisclosed income surrendered at the time of
search in a huge number of cases.
A
large number of high-pitched assessments are done towards the end of time
barring period without undertaking proper probe and without marshalling the
evidence adequately.
Large number of assessments made under Sections 158BD &
TIOL Adds: Such a finding evidently indicates the sorry state of affairs in the Department where all the efforts made by a part of the Department are set off for the failure like not paying attention to record reasons. When it comes to the levy of penalty, the quality of work is often found to be woefully stinking and poor. In many cases when cases are transferred to Central Charge, such a decision has been quashed for either not giving an opportunity of being heard or not complying with the dictum of passing speaking orders.
There are many more reasons pointing towards the prevailing malady which calls for an immediate remedy in terms of a new approach. The focus must shift from targeting disclosure to producing deterrence value. Extra efforts and monitoring are required in penalty cases, followed by launching of prosecution. To suggest a roadmap, the CBDT has set up two Committees headed by DGITs but what is badly required is what the Bombay High Court has rightly suggested - Top Revenue officers need to muster the required courage for bold decisions and timely action in case of dereliction of duty. This can be seen as half of the solution and the other half can be the recommendations from such committees.
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