Taxmen get power to provisionally attach property; a concern: experts

We have not increased anybody’s power, this is a misnomer, says Revenue Secretary Hasmukh Adhia

BUDGET PROPOSAL

THE BUDGET proposal to provide taxmen with the power to provisionally attach the property of an assessee for six months either at the time of search and seizure or till sixty days from that date is just one of the several steps announced by the government that give extreme powers to tax officials.

According to tax experts, the move has led to anxiety among business owners.

Further, the finance minister’s decision to amend Section 132 and Section 132A retrospectively from 1962 and 1975, respectively, have shook their confidence. A leading tax expert said that the government has gone back on its earlier promise as finance minister Arun Jaitley, had in July 2014, stated that the current government will not rely on retrospective tax legislation.

When asked about the increased powers relating to search and seizure given to tax officials, revenue secretary Hasmukh Adhia said, “We have not increased anybody’s power, this is a misnomer. All I-T assessing officers, which are more than 8,000 in the country, they all have the powers to seize the bank account but the investigating division officers who are of higher rank than this, did not have this power. So we have just extended this power to the investigating division because when they go for investigation, once they notice that this person has got so many bank accounts, unless they have powers to seize the bank account, they have to wait for the investigation report, send it to assessing officer, who then can only seize his bank account, put a freeze on his bank account. By then money would have been withdrawn.”

In the Budget 2017-18, the finance minister proposed to provide the taxmen with power of provisional attachment for a period of six months with the prior approval of a senior official. “In order to protect the interest of revenue and safeguard recovery in search cases, it is proposed ... the authorised officer on being satisfied that for protecting the interest of revenue it is necessary so to do, may attach provisionally any property belonging to the assessee,” said the Budget proposal.

Currently, property of the assessee could only be attached after his request for stay on attachment is rejected by an income tax commissioner. Normally, the department gives 30 days to the assessee for payment of the demand in which time the assessee can apply for stay on attachment of property.

In another move that tax experts are terming as a move away from transparency, the government has now provided the taxmen with an additional right to not disclose the reason for carrying out search and seizure to any person or authority or the Appellate Tribunal. The government has cited the requirement of “confidentiality and sensitivity” for proceedings of search and seizure. The revenue secretary, however, said, “He (tax official) has to get the satisfaction note approved by a senior before going for search the premises ... So, this power is extended only to that set of investigating officers but they are few in number, higher-ranked officers. But it was by omission that they didn’t have this power.”

A leading tax expert who did not wish to be named said, “The Budget proposals and the way the government is pursuing tax payers post demonetisation under Section 133C of the Income Tax Act, give a sense that we are getting into a situation of inspector raj. Also, the decision to not disclose the reason for search and seizure is a step backward on the issue of transparency.”

Amarjeet Singh, partner, KPMG said, “While the governmentislookingtoincreasethetax base and is welcoming new tax assessees by reducing the tax rate for the lowest tax bracket they need to provide them comfort and also should be seen as supporting them on tax compliance.” The Budget also proposed to empower an income-tax authority to conduct search and seizure beyond the business establishment and said that it can also be conducted at a charitable institution.

Further, the government also proposed to empower officer’s of the rank of joint director, the deputy director or assistant director to call for information for the purpose of inquiry or proceeding without seeking prior approval of higher authorities. Earlier, such powers were only with officials of the rank of the principal director or director or the principal commissioner or commissioner.

In the Finance Bill 2012-13, the then finance minister Pranab Mukherjee had proposed to amend Section 104 of Customs Act, 1962, and Section 13 of the Central Excise Act, 1944, to make all offences that attract more than 3 years of imprisonment cognizable and non-bailable.

During the debate in Rajya Sabha on Budget 2012-13 on March 26, 2012, the then Leader of Opposition of Rajya Sabha Arun Jaitley had said the proposed amendments in Customs Act used to exist in POTA and TADA. Stressing on the fact that there might be a case of genuine evasion, Jaitley had said, “Let us please move in a proper direction. There might be a dispute of value addition. There might be a genuine case of evasion. But then the proportionality of the offences and the manner in which the law deals with him, there must be some nexus between the two.”

He had further said, “You have brought in a disproportionate provision. You don’t need a hammer to kill a fly, and, therefore a provision, of this kind which you said should not even apply to terrorists, you are saying now in custom offences these provisions will apply. Slowly once you do it in customs offences, in every economic offence, it will start applying. I can tell you there is no better advice you can give to the Indian business than this, don’t invest in India because if you do, these are going to be the consequences.”

Following the criticism against the amendments, they were later withdrawn by the government.

According to tax experts, the move to provide taxmen with the power has led to anxiety among business owners