Hoping to “protect its sources” for conducting search and seizure operations, the Income-Tax Department has proposed that it should be able to carry out such operations if they have “reason to believe” or “reason to suspect” any evasion.
The Finance Bill, 2017 proposes to include an explanation to sub-sections (1) and (1A) of section 132 and sub-section (1) of section 132A of the Income tax Act “to declare that the ‘reason to believe’ or ‘reason to suspect’, as the case may be, shall not be disclosed to any person or any authority or the Appellate Tribunal”.
The Explanatory Memorandum to the Bill that was tabled in Parliament along with the Union Budget noted, “Confidentiality and sensitivity are the hallmarks of proceedings under section 132 and section 132A. However, certain judicial pronouncements have created ambiguity in respect of the disclosure of ‘reason to believe’ or ‘reason to suspect’ recorded by the Income-Tax authority to conduct a search under section 132 or to make requisition under section 132A.”
Explaining the rationale behind the move, a senior tax official said, “We always provide reason to the person against whom we are conducting the raid. But often warrants for searches are conducted based on tip-offs from informers, disgruntled employees or family members or through surveillance of the assessee. When it is a challenged by the taxpayer, the court or tribunal wants to know the reason or evidence for the raid.”
The official stressed this was only a clarification and would not lead to harassment of taxpayers and conduct of raids based on whims of officials.
“There is a process for conducting a search and seizure, which has to be approved by the Principal Chief Commissioner or the Director General of Income Tax,” he stressed.
However, the proposed amendment, which will take effect retrospectively, seems to have created a lot of panic. While online fora such as Twitter saw reactions against the plan, tax experts also said it was questionable.
“Without getting into whether it is right or wrong, it seems incorrect that the basis for conducting the raid will not be shared by the income tax officials,” said a tax expert, who did not wish to be named. He added that the department may have to provide more clarifications on the issue.