It may no longer be easy to legally challenge the taxman’s search and seizure actions. This is because the Finance Bill 2017 has introduced as many as seven provisions that confer “unbridled powers” on the taxman conducting search and seizure operations.
Sample this: Once the Finance Bill gets enacted into law, the taxman need not — up to the level of Appellate Tribunal — disclose the “reason to believe” or the “reason to suspect” that led to the search and seizure operations.
This means that only when the matter is raised before a High Court or the Supreme Court would the taxman be obliged to disclose the rationale for his action.
Tax authorities are not only going to get a “liberal hand” — the muscle to come down heavily on tax evaders — but also the necessary legislative backing to withstand the judicial scrutiny of their actions, say tax experts.
Also, the taxman can now provisionally attach assets during search and seizure operations, and re-open cases for up to 10 years if the search operations reveal undisclosed income and assets of over ₹50 lakh.
Moreover, the taxman can withhold refunds if it is felt that grant of any refund may affect revenue recovery post the search and seizure operations.
Amit Singhania, Partner, Shardul Amarchand Mangaldas & Co, a law firm, said the main intent behind the Budget proposals pertaining to search and seizures is to overturn the technical arguments against the taxpayers. “This will help the revenue in arguing its cases in Court of law,” Singhania told BusinessLine .
‘Unbridled powers’Aseem Chawla, Partner, Phoenix Legal, a law firm, said the amendments relating to search, seizure and survey and the extended time period for reopening past assessments do suggest the vesting of unbridled powers with the tax authorities.
“In a situation where the tax department wants to bridge the trust deficit and inculcate voluntary tax compliance, adequate checks and balances should actually be resorted to before such measures are undertaken,” Chawla said.
Amit Singhal, Partner-Direct Tax, BDO India, said the changes relating to search and seizure operations seem to be opposite to the government’s intent to improve ease-of-doing business in India.
“It remains to be seen as to how the tax authorities apply these sweeping powers at the ground level. Further, it should be ensured that it does not lead to harassment of taxpayers,” Singhal said.
The Centre is betting big on direct taxes in 2017-18 to achieve its overall tax collections target of ₹19.05 lakh crore. Of this, the direct taxes mop-up is estimated at ₹9.8 lakh crore, higher than the indirect taxes target of ₹9.25 lakh crore.