New Delhi, Feb. 9: Businessmen, who have been hounded and harassed by tax inspectors, can now breathe easy: income tax search and seizure operations may no longer be a way of life.
This is not to say that searches and seizures will stop altogether; they will continue on a very limited scale. But there are two developments that indicate an end to the harassment after that deathly knock on the door.
First, the government plans to do away with the special procedures for assessment of search cases at 60 per cent rate of duty. Instead, those found guilty of tax evasion will have to face the full battery of interest payouts on back taxes, penal rates as well as prosecution.
Second, revenue officers will no longer be rewarded for search and seizures which, the finance ministry feels, would act as a major disincentive for unnecessary raids made merely on the basis of unconfirmed tipoffs.
Raids are expected to be taken up only after extensive investigation, especially of transaction records through the data interchange, and will be authorised by senior officers. These measures are expected to be brought in along with other budgetary moves.
The finance ministry will also issue orders that stocks with traders during such raids should be seized only for inventories and kept under the tax department’s seal for a maximum time-frame of seven days so that normal business can continue despite income tax probes.
Currently, businesses find the going very tough as stocks seized are sealed for prolonged periods.
Similar books of accounts will be released within seven days after the tax officers have photocopied them. This has been a long pending complaint of business chambers, but till now had not been acceded to as there were genuine fears that books will be tampered with as also the photocopies kept with the department.
To back all this up, the tax department plans a slew of measures for a comprehensive computerisation of the income tax system and mandatory usage of tax identification numbers in all high value monetary transactions.
Top finance ministry officials feel this will help them in widening the tax base and pinpointing tax dodging without having to go through “the painful police-style route.”
Individuals trading in securities beyond, say, Rs 25,000 a day, or inheriting or being gifted any property worth more than Rs 5 lakh or even transferring a motor car will have to compulsorily mention their tax identification number.
Currently, permanent account number (PAN), issued under the Indian tax identification system, has to be quoted only when selling or purchasing property but not for inheritances or gifts. Securities trading also does not require PAN to be quoted.
To help the income tax department keep instant track of all such and other monetary transactions, it will become mandatory to file annual returns of information on various transactions by all third parties. The return will have to be filed in an electronic format so that it is easy for computer savvy IT officers to mine data.
The tax department will also set up an electronic data interchange with banks, stock exchanges, and telecom companies. This will provide a data of sales and purchases above a certain threshold.
At the same time, tax returns will be digitalised and stored in an electronic format by an outside agency which will again help in data mining.