Sweeping powers to taxmen in finance bill- Are they necessary? -The Big Picture
The Finance Bill 2017 passed in the Lok Sabha gives the income tax authorities unprecedented powers with regard to raids, search and seizure of property. Of the many amendments made to multiple acts through this money bill, which was recently passed in the Lok Sabha, the amendment to Section 132 of the Income Tax Act empowers the taxman to not disclose to any person or even an Appellate Tribunal as to why a raid is conducted. Moreover, this section can be applied retrospectively from 1962 onwards i.e. assessment can be done for persons raided from April 1st 1962 and property can be confiscated from persons from April 1st 1975 onwards. Income tax officials can also attach properties of any person that they choose to raid.
- Necessity of these powers:
At present, the powers conferred on taxmen do seem to be draconian but in the larger context, when demonetization was being done, lot of people with unaccounted money tried to beat the system by depositing them into benaami or some other accounts, opening new companies etc. Now it is up to the taxmen to try and identify such people who have tried to escape the tax net through these dubious means. Therefore, some additional powers are needed for the taxmen in this regard to take quick action. There may be cases of whistleblowers who are informing them and their harassment. However, there should be a sunset clause to these powers which should be restored back to the original powers after this process is complete. In the process, it should also be ensured that the honest taxpayers of the country are not harassed.
- Issue of tax evasion:
Tax evasion has been a major problem but still this should not be the reason for such wide powers to be given to income tax authorities. The amendment reads ‘reasons to believe’ by income tax authorities shall not be disclosed to anyone. This defeats the very purpose of recording a reason. Disclosing the reason will not jeopardize the actions or sources of information of income tax authorities. The reasons can be disclosed to courts even if taxmen don’t reveal it to appellate tribunals. But there needs to be more clarity here because as long as the amendments of Section 132 stays in the Finance Bill, this ambiguity on taxmen’s role stays. As per this, the tax official can reopen cases many years old and harass even the honest taxpayer. Some rules need to provided so that these powers are not misused by the taxmen.
- Possible impact on people:
According to this amendment as of now, the taxmen will be accountable to no one. The officer’s action will not come up for review and his rationale will not be questioned. This will lead to lack of accountability of taxman and an unfriendly relation between the taxpayer and the assessor. It is known that the tax GDP ratio is low in India and the country does not have a tax compliant society. These steps have to be taken up so that the Government has enough money at its disposal to pursue the development objectives that it has. These changes will ensure a fear among the people who try to evade taxes by various means. There is a dire need to expand the tax base rapidly but it does not need these kind of provisions. It is a question of willingness, intent and right plan to execute it. It is also necessary to enforce the tax measures already in place. The present amendment seems to prove that the existing laws are not good enough and therefore, they need to be empowered more to enforce the rules.
India is a democracy and is ruled by rule of law. But these amendments tend to negate the rule of law. The Government needs to be much more cautious and try to avoid such amendments which goes to the roots of the principle of rule of law. Accountability is important for taxmen without which they will have the license to act at will and misuse the power vested in the department, which will not be fruitful. The taxpayers should be brought in willingly to contribute to nation’s progress and not by force or fear.