Financial Daily from THE HINDU group of publications
Tuesday, Dec 31, 2002
Financial Daily from THE HINDU group of publications Tuesday, Dec 31, 2002 |
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Industry & Economy
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Economic Offences Kelkar for scrapping seizure norm in black money drive — Recommends penalty, prosecution Mohan Padmanabhan
KOLKATA, Dec. 30 POINTING out that search and seizure (S&S) had a limited role in income tax proceedings, and that S&S was "not a substitute for investigation", the Kelkar panel, in its final report submitted to the Government, has suggested that the special procedure for assessment of search cases in Chapter XIV B (block Assessment, which provides for tax at the rate of 60 per cent on undisclosed income) should be scrapped. It is stated that "as and when concealment is detected and established, it should suffer full penal consequences of interest, penalty and prosecution". The panel has also suggested that the scheme of rewarding officers engaged in search and seizure activities be abolished. The Task Force has recommended that "the Central Board of Direct Taxes (CBDT) must issue immediate instructions to the effect that no raiding party should obtain any surrender whatsoever. Wherever a taxpayer voluntarily desires to make a disclosure, he should be advised to do so after the search. As a result, the taxpayer will not be able to allege coercion and successfully distract investigations". The panel has further recommended that in all cases where surrender is obtained during the course of the search in violation of the instructions of the CBDT, the leader of the raiding party should be subjected to vigilance enquiry. It is suggested that all statements recorded during the search should be video-recorded, as "this will add to the confidence of the taxpayer in the impartiality of the system". The panel is of the view that the powers of the Settlement Commission to grant immunity from interest, penalty and prosecution may be restricted to cases other than those where the assessee admits to tax evasion consequent upon S&S action taken by the department. Hailing this suggestion as a path-breaking one, Mr Narayan Jain, tax advocate and author, told Business Line that under the scheme of block assessment and settlement by the Settlement Commission, a person searched was not required to pay any interest or penalty, and is never subjected to any prosecution in respect of the income concealed. The assessee, he felt, now gets away by paying tax at the rate of 60 per cent against the normal rate off 30 or 35 per cent. Consequently, the deference effect of a search becomes doubtful, he clarified. The task force, according to Mr Jain, has pointed out that the officer in- charge of the raid prepares a report on the seized material in about 60 days, giving an (own) appraisal of the S&S, without any accountability over what he discloses (or omits) in the report. According to Kelkar report, the AO does not independently investigate the case, as he has neither the time nor inclination to do so, and "the assessment is one-sided, high pitched, completed in a hurry when it is close to getting barred by limitation, ignoring the contentions of the assessee". Clarifying that the contribution of searched cases to the total revenue collection was less than one per cent, the panel has noted that "search and seizure is not a substitute for investigation. It is only a tool for investigation, not an end in itself, and cannot be a way of life for any civilised society". It is pointed out that a cross section of people in trade and industry has complained of "high handed behaviour of raiding parties, particularly while recording a statement". Enthusiastic raiding parties would often coerce a "surrender", resulting in all follow-up investigations getting distracted.
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