Parliament has passed the Finance Bill 2017 which gives the Taxmen – income tax authorities extraordinary powers with regard to raids, search and seizure of property.

Taxmen | Details

  • Through this money bill, the Government has made the amendment to Section 132 of the Income Tax Act which now empowers the taxman to not disclose to any person or even to any Appellate Tribunal as to why a raid is conducted.
  • Oddly enough, this section can be applied retrospectively e. from 1962 onwards and the assessment can be done for the raided persons from April 1st 1962 and the concerned property can be confiscated from persons from April 1st 1975 onwards.
  • Income tax officials can also attach the properties of anyone that they choose to raid.

Taxmen | Analysis

  •  Necessity of these powers

Currently, the powers conferred on taxmen may seem to be draconian but in the larger perspective, when demonetization was being done, many people with unaccounted wealth tried to cheat the system by depositing them into ‘Benaami’ property or in other people’s accounts and through shell companies etc. Hence, it is up to the taxmen to try and identify such people who have tried to escape the system through such dubious means. This necessitates additional powers for the taxmen in this regard to take quick action and bring such people to justice. However, to ensure that the era of tax terrorism does not continue indefinitely, there should be a sunset clause to these powers through which original position should be restored back after this process of investigation is complete. During this process, it should be ensured that the honest taxpayers of the country are not harassed in the name of target completion.

  • Tax evasion

This has been a major issue but it should not be the sole reason for allotment of such ambiguous powers to the income tax authorities. The amendment talks about ‘reasons to believe’ by income tax authorities shall not be disclosed to anybody. This provision defeats the very purpose of recording a reason itself. It can be argued that disclosing the reason will not jeopardize the actions or sources of information of income tax authorities as we know that the reasons can be disclosed to courts even if taxmen don’t reveal it to appellate tribunals. Government should provide more clarity regarding the recent amendments to Section 132 of the Income Tax Act against the ambiguous clauses that confer indefinite powers to taxmen. It should be noted that as per the amendment, the tax official can reopen cases many years old and harass even the honest taxpayer, which may lead to ‘tax-terrorism’. Some definite rules should be provided so that these powers are not misused by the taxmen in terms of retrospective taxation.

 Taxmen | Repercussions on people

  • According to this amendment as of now, the taxmen will not be accountable to anyone as the officer’s action will not be reviewed and his rationale will not be questioned. This could lead to lack of accountability of taxmen and an inimical relationship between the taxpayer and the assessor.
  • It is well-known that the tax to GDP ratio is already low in India and our country does not have a tax compliant society. These rigorous steps were necessitated because of this reason so that the Government has enough money at its disposal to pursue the development objectives that the country is yearning for today. Such changes will ensure the development of fear amongst the people who try to evade taxes by unscrupulous means.
  • Few people argue that there is a dire need to expand the tax base rapidly but it does not need such rigorous provisions. The issue has become a question of intent, willingness and right plan to execute it through right procedures. The sceptics already argue that it is also necessary to effectively enforce the tax measures which are already in place because the recent amendment seems to show that the existing laws are insufficient and therefore, they need to be armed with more powers to enforce the rules.

Taxmen | Conclusion

Government needs to cautiously walk the rope and try to avoid such harsh amendments which goes against the principle of rule of law. Accountability is necessary for taxmen without which they will have the license to act at will and misuse the power vested in them, which will negate the principle of democracy itself. The taxpayers should be brought in willingly to contribute to nation’s path of progress and not through the ‘financial-terrorism’ imposed upon the citizenry through the tax warriors.

RSTV Debate : 

Sweeping powers to taxmen in finance bill… are they necessary?

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