ONE of the fall-outs of the rapid-paced globalisation phenomenon is the steady integration of the Indian financial markets. But it has so far not made a serious dent into the tendency to generate black money. Let’s recall the last week seizure of Rs 4.9 Crore cash by the Pune Income Tax (Investigation) in Thane. But what seems to be doing wonders for the Income Tax is the new levy of Banking Cash Transaction Tax (BCTT). Since the banks are statutorily required to furnish data related to heavy transactions, more than the benefit of BCTT collections it is the investigation and other wings which seem to have got benefited.

As against 6000 surveys conducted u/s 133A in 2004-05 the Department has closely followed the data coming from all the scheduled banks and zeroed in on potential cases and organised 7400 surveys in 2005-06 and detected undisclosed income to the tune of Rs 2300 Crore. Last fiscal it was only 6200 Surveys but detected Rs 2600 Cr undisclosed income. With the Board putting additional officers at the disposal of CCITs for monitoring BCTT, the monthly mop-up which used to average about Rs 36 Cr in 2005-06 has gone up to Rs 46 Cr last fiscal. In fact, the current fiscal opened the account with a collection of Rs 60 Cr in April. Last year BCTT collections were Rs 535 Crore.

Thanks to the streamling of the internal procedure for analysing huge data it has been receiving on monthly basis from all scheduled banks, the Income Tax last fiscal detected one company making cash purchases of about Rs 86 Cr. Since it was hit by Sec 40A(3), the assessee paid a tax of Rs 6.5 Cr. In another survey in Pune, two concerns were caught making cash purchases of Rs 47 Cr and 73 Cr and they immediately paid the tax. In the case of Ahmedabad, the Revenue found that the assessee was making heavy cash withdrawals for labour payments and medical expenses. Since this information clearly indicated the chances of inflation of expenses, the Department conducted a search which led to recoverey of concealed income of Rs three crore. In Chennai, based on prior information, the Department conducted a Survey on a leather exporter who was allegedly inflating the purchases by introducing bogus accounts and the cheques paid were being withdrawn in cash from bank accounts opened in the names of associates. Here the assessee paid Rs three crore.

Given that the department predominantly depends on the external network of informers for detecting cash transactions, it has also streamlined the compilation and time-bound action on tax evasion petitions (TEPs). The CBDT has prescribed news procedures to be closely monitored by the CCITs and DGITs. The Central Information Branch has also been assigned a more active role in dissemination of filtered information to AOs.

Given that the Department has been collecting huge data through AIR and electronic TDS returns, efforts are on to rapidly wrap up the development of data mining software which would convert the raw data into valuable intelligence tips. The Delhi Directorate of Investigation has already been working on integrated tax profiling system whereby customised profiles of individuals are being tailored.

Given that the tax rates are moderate now, the CBDT strongly feels that since the focus of the Govt has been on voluntary compliance, the tax evasion must go with high costs. And the fear of prosecution is being seen as an effective deterrent. Given that the Department launched only 73 prosecutions last year, the Board intends to go beyond technical and small cases and file prosecution in tax evasion cases. Till date, 27000 prosecutions have been pending in various courts, and only about one per cent is decided annually. Then it also takes 13-15 years to decide.

Since the intention is to instill fear for tax evasion, the Board has directed all the CCITs to take due care, and each CIT jurisdiction should file at least one prosecution in a year. For better coordination with the counsels, the Board is going to ask each CCIT to designate one nodal officer for the same.

In fact, at the recently held All India Conference of CCITs and DGITs it was suggested that one nodal Addl/JCIT under each CCIT(CCA) should coordinate between the AO and the departmental witnesses; to ensure attendance of witnesses, production of documents taken as evidence, proper record-keeping of prosecution files, timely clearance of bills of prosecution counsels and provide logistics to the witnesses and retired officials. It was also suggested that since the trial court’s decision is likely to depend on the appellate authority’s decision, the prosecution should be launched only after the appellate authority decides the quantum and penalty.

Let’s hope all these steps finally help the Revenue in curbing the growing tendency to evade tax and add to the parallel economy. However, the CBDT also needs to take special care in rewarding the informers quickly as once they lose interest it would be difficult for the Department to get much valuable leads from the heaps of information filed in the AIR and e-TDS returns. Let’s recall a recent incident of an informer threatening to sit on dharna before Income Tax office in Mumbai as he was not paid for more than a decade. Such incidents go against the interest of revenue which in both the Boards needs to take care of such a tribe.

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