Thousands of tax payers who were hoping for Achhe Din with certain tax rebates from the recently announced Union Budget were left high and dry when Finance Minister Arun Jaitley announced a proposal to amend Section 132 of the Income Tax Act.
As per the proposed amendment, income-tax authorities are not bound to disclose the reasons they believe or suspect for carrying out raids to any person, any authority or the appellate tribunal.
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 proposal, stated, “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.”
However, much before the amendment taking a final shape, there is an uproar among the general public as well as business establishments who are terming it a 'Draconian law', if accepted.
Anupam Gupta, a doctor, said, "Whatever the reasons may be for the department to bring in such an undemocratic law, the point is, it will take away the basic right of an Indian citizen to know why he is being subjected to the inconvenience especially when this law also empowers the Income Tax department so much so that even the income tax appellate tribunal would be kept in the dark about the reasons and suspicions for conducting such raids. How can this be justified in any manner?" he questioned.
"There are several possibilities for this amendment to be misused. In my opinion, this should not be approved by the Parliament. There have been many instances in the past wherein Income Tax officials have an axe to grind against businessmen and thus raids were conducted which resulted in nothing but harrassment to the family of the victim. This amendment will add to problems for any honest tax-payer of the country," M P S Chawla, an exporter and hotelier, said.
Meanwhile, I-T officials are making all out efforts to convince the public about the move which is very likely to be misused. Speaking with The Statesman, a senior I-T official on condition of anonymity said, "There is no need to fear or panic that the amendment will be misused. Even when the amendment will be made accepted, there will be protocols to be followed. Before conducting any raids, the team will still have to get approval from a senior designated officer explaining the reasons well. That is a part of our internal procedure which is not being done away with".
"One of the major reasons for the amendment to be brought in was that there were several people who would approach courts seeking reasons for the raids just to buy more time. So in order to avoid unnecessary litigation, it was decided to bring in the amendment," he added.
Varun Bansal, Taxation Lawyer, said, "This proposed amendment can be interpreted both ways. It has its positive side as the department will be saved from litigation which it has to go through for years together unnecessarily in many cases. This will definitely strengthen the hands of the Income Tax department in flushing out unaccounted wealth accumulated by certain people. On the other hand, some people may have to face inconvenience. But overall, it is a good initiative".
Govind Gupta, a Chartered Accountant, said, "Conducting an Income Tax raid is not an easy task. There is a huge amount of paperwrk and scrutiny which is done before any such raid is conducted. However, it was seen that in several cases, despite all the preparations by the team, sometime due to want of search warrants or permissions on account of absence of officials, raids could not be conducted. So with this amendment in place, all that can be taken care of."
"As far as misuse of law is concerned, it is very unlikely as months of homework backed by valid evidence goes into conducting raids by the IT officials and that legwork will still have to be done even with this amendment," he added.
Meanwhile, the Central Board of Direct Taxes (CBDT) on Thursday clarified that the common man has nothing to worry as the powers to carry out raids has been vested with responsibility, and tax authorities have to submit a "satisfaction note" to a high court, explaining why a raid has been carried out and providing evidence for the conclusions.
A satisfaction note provides the reason for a search and includes evidence to support the conclusion. The common practice followed by the policy-making body has been to show this note in the court in a sealed cover before initiating a search.