In an effort aimed at allaying concerns raised by industry regarding the increased powers to tax officials for conducting searches and seizures incorporated in the Union Budget for 2017-18, the Central Board of Direct Taxes (CBDT) chairman Sushil Chandra has asserted that the law was amended “to plug the abuse” of law by tax evaders. The power for provisional attachment of property has been accorded in the Budget as tax evaders could sell off their property in the intervening time taken for preparation of investigative report, which is usually around 4-5 months, he said at an industry event here on Saturday.
“The power of referring the property to a valuation cell has been given to the investigative officers. The rationale behind it is that it takes 4-5 months for preparation of report when the search takes place. So some of the assessees, what they did was till the time report is being made ready, they could sell off their properties. So to plug that particular thing, the power has been given to provisionally attach the property. He cannot sell the property. Tax official can provisionally attach the property so that whenever the liability is created after that time you can pay the liability and the property will be released. It is only to safeguard the revenue,” Chandra said at a post-Budget interactive session with industry representatives organised by FICCI.
He said the intent was not to harass any taxpayer. “I want to tell you very clearly that no power of the officer vis-a vis the misuse against the assessee has been increased. Not at all. That is not the endeavour of the government, the philosophy is very clear that a genuine taxpayer should not be harassed at any cost,” he said.
When asked about the possible misuse by tax officials in relation to the recent 18 lakh communications sent by the tax department as part of the Operation Clean Money launched after demonetisation, Revenue Secretary Hasmukh Adhia said that no one should feel pressurised to complain against tax officials if they misuse their powers. “Why do you feel pressurised by any officer? Why should any democracy like ours, with enlightened people like all of us be pressurised by any income tax officer? Why can’t we raise our voice? So let’s also be upfront. No genuine, tax compliant person needs to be afraid of taxman.”
“The problem is that we get this complaint very often from people who have something to hide. But people who have nothing to hide, there should be no problem with them. Anybody can write direct e-mail to me, I have given my personal id. So far, in spite of giving my personal e-mail id, not a single complaint has come to me. Why is it so? Outside everybody is talking that it keeps on going like this. But no one told me. There is CBI, there are ministers, there are MPs, you can always raise a problem with them, if somebody is openly asking for something or you can get him trapped also,” he said.
Adhia said that those who have made genuine deposits, need not worry but those who have made ingenuine deposits, they will have to come forward and declare it.
Chandra also responded to the other concern raised by industry regarding the amendment to Section 10(38) of Income-tax Act by saying that it had been brought to stop the misuse of this route by bogus companies or by people dealing in penny stocks. The amendment relates to levy of long-term capital gains (LTCG) tax arising out of sale of unlisted shares acquired after October 1, 2004, if no securities transaction tax (STT) has been paid at the time of purchase.
“In last 2 or 3 years we have found that this route of Long Term Capital Gain was misused by a large number of persons. There were a lot of khoka (shell) companies. It became a mandi that you can buy a long term capital gain, you can buy a loss, whatever you want to buy in the market it was available. So it was our challenge as to how to plug it. We have done a lot of researches and lot of work and I can tell you that in last (few) years, we detected bogus long term capital gain of Rs 80,000 crore,” Chandra said.
He said that there are around 15 lakh companies incorporated, out of which only 6.8 lakh companies are filing returns.
Experts had raised concerns that the amendment may deprive benefit of an LTCG exemption to a promoter of an unlisted firm selling shares once the company is listed. At present, LTCG arising on sale of shares held for more than a year does not attract any capital gains tax and only 0.1 per cent STT is applicable.
The CBDT chairman assured industry that genuine investors, IPO, FPO, placement, ESOPs, will not be affected by this amendment. “It is an anti-abuse method, nothing else,” he added.
On the other power given to taxmen for referring the property to valuation cells, Chandra said that it will also help reduce the time for valuation of a property for investigative officers, given that currently the power is available only with assessing officers, who are able to refer to valuation cells only after the completion of the entire process of a search. It does not imply increasing the power of searches, he said.
He further said that power given to deputy director, joint director and assistant director to seek information from some other person regarding a tax assessee without the approval of a higher officer, that is Income-tax Commissioner, will help reduce time involved in the whole process. At present, these officials have the power to issue summons to a tax assessee but they have to take permission from a higher authority for seeking information from some other individual relating to the assessee. “It is not that the assessing officers have been given power to call information to harass you,” he said.