In a strongly worded advisory, the Income Tax department has asked its officials to go beyond just raids and searches to target tax evaders. The Central Board of Direct Taxes (CBDT), in a recent missive to its field officials, has stressed the need to instill the fear of “incarceration and consequent loss of liberty and social opprobrium” among tax evaders by way of speedy prosecution and penalties.
Further, the department has asked the field staff to add at least 25 lakh new assessees every month — a stiff target by all counts considering that it is nearly equivalent to the number of new assessees added annually.
The CBDT has told its officials to change their mindset from using searches as a revenue augmenting tool to creating credible deterrence by sustainable penalties and prosecution so that “potential evaders desist from crossing the red line”.
According to an analysis on the effectiveness of search and seizures conducted in 2005-06, 2006-07 and 2007-08, it was found that the outlook of these coercive actions was “extremely poor” with regard to prosecution and penalty sought. Also, it was found that most of these cases were not prosecuted under Section 276C(1) for wilful attempt to evade tax.
“The searches have become limited to mere detection of tax evasion, and that too mostly based on admission,” an official told The Indian Express, adding that repeat searches in same groups within a short span of time showed that they were not an effective tool to deter tax evaders.
“Deviant assessees take minor financial hiccups in their stride and promptly return to their wayward ways. What scares them is the fear of incarceration and consequent loss of liberty and social opprobrium that it brings. It is to this fear that a search or survey action must address itself,” the advisory said, adding that effective deterrence was needed to meet the target of adding 25 lakh new assessees every month.
The monthly target is sharply higher than the normal annual rate of growth in the number of assessees — the number of assesses grew from 4.07 crore to 4.26 crore in 2011-12. The figure increased to 4.58 crore in 2012-13 and 4.70 crore in 2013-14.
The advisory comes amid the government’s attempts to curb black money by bringing in a legislation with harsh punishments for those who stash black money abroad. Another legislation for benami transactions is also being considered by parliament to tackle the menace of domestic illegal funds.
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Up to December 2014-15, the Income Tax department had conducted searches in 414 groups and seized undisclosed assets of Rs 582 crore while undisclosed income to the tune of Rs 6,769 crore was admitted by the taxpayers during these searches. In 2013-14, 569 groups were searched and total assets seized during the period stood at Rs 807.84 crore while Rs 10,791.63 crore of undisclosed income was admitted.
With regard to prosecution, convictions were obtained in only 51 of the 244 cases filed in 2010-11; 14 of the 209 cases in 2011-12; and 15 of the 283 prosecutions in 2012-13.
Pointing to “apathy and lethargy” among officials in undertaking investigations to establish a case beyond reasonable doubt and then processing it for prosecution and penalty, the CBDT asked senior officials to effectively monitor such investigations and launch prosecution without waiting for the outcome of the appellate process.