Home / India / When the taxman knocks, peace goes out

When the taxman knocks, peace goes out

Read more below

RASHEED KIDWAI   |   Published 20.04.10, 12:00 AM

April 19: When the taxman’s knock sounds on your door, it matters little if he finds anything incriminating.

Chances are you would be opening your doors to an ordeal lasting months, which makes the dreaded knock a potent weapon in the hands of the government when it takes on people like Lalit Modi.

In India, tax raids rarely lead to convictions and seldom is any action taken against the guilty. But they usually take on a life of their own, triggering speculation that often causes more damage to the person at the receiving end than the outcome of the raids themselves.

The raids often serve as handy tools to harass opponents or settle scores with adversaries, especially when the targets are powerful personalities in their own right.

Instead of unearthing black money or evidence of fraud or financial wrongdoing, most of these raids turn into a witch-hunt, serving to “discipline” the targeted individuals or companies.

Tax raids became a political instrument to “fix” opponents during the tenure of Prime Minister Indira Gandhi in the 1970s, when her son Sanjay Gandhi called the shots.

There was one particularly bizarre incident during the Emergency:

In New Delhi’s Connaught Place stood a textile shop, Pundit Brothers, whose 80-year-old owner was the uncle of P.N. Haksar, former principal secretary to Indira.

Haksar is said to have suggested to Indira that she disassociate herself from Sanjay’s activities. It may have been just a coincidence but during the Emergency, Haksar’s uncle had to spend a day in police custody.

His fault: the towels and napkins in his shop did not bear price tags individually although the bundles did.

Freedom fighter and industrialist Ramkrishna Bajaj too found himself at the receiving end of a tax raid.

The Gandhian, who loved to describe himself as “Gandhi’s coolie”, was harassed throughout the 21-month Emergency when Sanjay and his team — Vidya Charan Shukla, Om Mehta and Ambika Soni — tried to take control of Vishwa Yuvak Kendra, an apolitical youth training and development centre in the heart of Delhi of which Bajaj was director.

He faced massive income-tax raids and was forced to prevail on Gandhian Vinoba Bhave to call off his fast-to-death against cow slaughter.

Ramkrishna, never a man to take offence easily, sought help from Indira, who was his childhood friend, and from Nehru-Gandhi family retainer Mohammad Yunus. But the torment did not end.

Ramkrishna realised that the harassment was a deliberate ploy to browbeat the Bajaj family into submission.

He later learnt that his close association with Viren Shah (who later became governor of Bengal when the NDA was in power at the Centre) and the decision of his politician brother Kamalnayan — the father of Rahul Bajaj — to desert Indira in 1966 had been held against him.

Sanjay’s brother Rajiv Gandhi was himself pro-industry and a “reformist”. Soon after becoming Prime Minister, he appointed a committee to advise him on what he dubbed the “menace of black money” which, he said, permeated “every part of our lives”.

Soon his finance minister V.P. Singh, aided by enforcement directorate boss Bhure Lal, set about cracking down on firms with formidable reputations. They placed India’s leading industrialists in the exalted category of Al Capone — the American gangster who was put behind bars for tax evasion.

Five weeks into Rajiv’s premiership, excise officials raided the offices of the Pune-based Kirloskar industrial group and arrested its 84-year-old chairman, S.L. Kirloskar.

The company was accused of not paying customs duty on air compressors and violating foreign exchange regulations by investing in Germany. The authorities lost the case in court.

In late 1986, VP targeted another respectable house — the Thapar group, which was then the fifth-largest private industrial company in India.

Group chairman Lalit Thapar was a Doon School old boy and, despite their age difference, a close friend of Rajiv. Lalit was arrested, humiliated and charged with violating foreign exchange norms.

In an unprecedented move, the Indian ambassador to the US sent a confidential note to Rajiv saying Thapar’s arrest had affected business confidence among potential investors.

The Thapar raid had an adverse impact on the relationship between industry and government, prompting Rajiv to start a process to remove VP from the finance portfolio.

Often, though, tax raids are seen as a social badge of honour. The logic, laced in black humour, goes that if you’ve been raided, you’ve arrived.

Copyright © 2020 The Telegraph. All rights reserved.