QUESTION: In an article published in Business Line on June 18, 2011,
it has been suggested that “tax administration in India is notoriously
known to be slack; there is lot of political interference”. The
article also implies that tax evasion is not a criminal offence
compared to the situation in the U.S. or China. It has also been
mentioned that “surprisingly DTC has omitted the term “concealment”
from the Code. I am not in a position to agree with the author on
these observations and would like to have the reaction of Tax Forum .
ANSWER: Tax evasion has always been a criminal offence in India. There
are a number of provisions relating to prosecution under Chapter XXII
of the Income-tax Act, 1961. Failure to file timely return of income,
false statement and verification, wilful attempt to evade tax,
fabrication of accounts and documents and failure to deposit tax
deducted or collected at source attract minimum rigorous imprisonment
of three/ six months. Removal, concealment, transfer or delivery of
property to thwart tax recovery or failure to afford necessary
facilities for the officers during search operations are some more
offences liable for rigid sentences. Abetment of false return, where
it is proved, would land not only the accused in trouble but those who
help him, including those rendering professional assistance, providing
for a rigorous imprisonment for a minimum period of three/ six months
and a fine. Where the offence is rendered by a firm or company
partners and the officers, including directors of the company, may be
responsible, unless they are able to prove that the offence was
committed without their knowledge in spite of due diligence on their
part. For the offence of the Hindu Undivided Family (HUF), the karta
himself, besides all members, is deemed to be guilty, unless such
members are able to prove that the offence was committed without their
consent or connivance.
Enforcement of law is also made easier for prosecution by statutory
presumptions of culpable mental state placing the responsibility of
proving innocence on the accused. Probation of Offenders Act, 1958, is
not applicable for economic offences under the income-tax law, except
for persons below 18 years of age.
The law in India treats tax offences not only as a criminal offence
but also has strengthened the same by statutory presumptions and
minimum rigorous imprisonment subject to a maximum period of seven
years. There are number of prosecutions launched year after year.
It is difficult to accept that tax administration in India is
“notoriously” slack and that there is a lot of political interference.
More often the Department is known for its overzealousness, while the
tax officers are comparatively independent protected by law. If they
yield to political pressure, it cannot be solely the fault of the
politicians. There are numerous instances, where the officers have not
yielded to pressure from any quarters. If there is still significant
tax evasion, it is as much a part of the system of limited scrutiny in
vogue for the past several years and more probably because of all
pervading corruption against which stiffer action is certainly
necessary.
As for comment relating to the proposed Direct Taxes Code Bill, 2010,
provisions relating to prosecutions under Chapter XV in the proposed
Code do not lighten the severity of the provisions under the present
Act. The word “concealment” is not used in the context of prosecution
either under the present Act or the proposed legislation. But there
are provisions to tackle defaults of every kind. As regards penalty,
the Code provides for levy of penalty automatically, wherever there is
a difference between reported and assessed income. The removal of the
word “concealment” takes away the need for inference of intent to keep
back any information relating to assessment. The law in the Code makes
no difference between the deliberate delinquency and the innocent
omission so that the Code, as in most other aspects, is more stringent
on the taxpayer.
--
CA Ramachandran Mahadevan,M.Com.,F.C.A.,
it has been suggested that “tax administration in India is notoriously
known to be slack; there is lot of political interference”. The
article also implies that tax evasion is not a criminal offence
compared to the situation in the U.S. or China. It has also been
mentioned that “surprisingly DTC has omitted the term “concealment”
from the Code. I am not in a position to agree with the author on
these observations and would like to have the reaction of Tax Forum .
ANSWER: Tax evasion has always been a criminal offence in India. There
are a number of provisions relating to prosecution under Chapter XXII
of the Income-tax Act, 1961. Failure to file timely return of income,
false statement and verification, wilful attempt to evade tax,
fabrication of accounts and documents and failure to deposit tax
deducted or collected at source attract minimum rigorous imprisonment
of three/ six months. Removal, concealment, transfer or delivery of
property to thwart tax recovery or failure to afford necessary
facilities for the officers during search operations are some more
offences liable for rigid sentences. Abetment of false return, where
it is proved, would land not only the accused in trouble but those who
help him, including those rendering professional assistance, providing
for a rigorous imprisonment for a minimum period of three/ six months
and a fine. Where the offence is rendered by a firm or company
partners and the officers, including directors of the company, may be
responsible, unless they are able to prove that the offence was
committed without their knowledge in spite of due diligence on their
part. For the offence of the Hindu Undivided Family (HUF), the karta
himself, besides all members, is deemed to be guilty, unless such
members are able to prove that the offence was committed without their
consent or connivance.
Enforcement of law is also made easier for prosecution by statutory
presumptions of culpable mental state placing the responsibility of
proving innocence on the accused. Probation of Offenders Act, 1958, is
not applicable for economic offences under the income-tax law, except
for persons below 18 years of age.
The law in India treats tax offences not only as a criminal offence
but also has strengthened the same by statutory presumptions and
minimum rigorous imprisonment subject to a maximum period of seven
years. There are number of prosecutions launched year after year.
It is difficult to accept that tax administration in India is
“notoriously” slack and that there is a lot of political interference.
More often the Department is known for its overzealousness, while the
tax officers are comparatively independent protected by law. If they
yield to political pressure, it cannot be solely the fault of the
politicians. There are numerous instances, where the officers have not
yielded to pressure from any quarters. If there is still significant
tax evasion, it is as much a part of the system of limited scrutiny in
vogue for the past several years and more probably because of all
pervading corruption against which stiffer action is certainly
necessary.
As for comment relating to the proposed Direct Taxes Code Bill, 2010,
provisions relating to prosecutions under Chapter XV in the proposed
Code do not lighten the severity of the provisions under the present
Act. The word “concealment” is not used in the context of prosecution
either under the present Act or the proposed legislation. But there
are provisions to tackle defaults of every kind. As regards penalty,
the Code provides for levy of penalty automatically, wherever there is
a difference between reported and assessed income. The removal of the
word “concealment” takes away the need for inference of intent to keep
back any information relating to assessment. The law in the Code makes
no difference between the deliberate delinquency and the innocent
omission so that the Code, as in most other aspects, is more stringent
on the taxpayer.
--
CA Ramachandran Mahadevan,M.Com.,F.C.A.,
