Decriminalise the Offences under Income tax.

Apart from levy of interest & penalty for various defaults by the taxpayer, the Income-tax Law also contains provisions for launching prosecution for offences committed by the taxpayer.  The idea of undergoing imprisonment if convicted of offences can be a strong deterrent from brazen tax evasion and non- compliance, but sometimes the tax department use this to harass citizen and government should make sure that bureaucrats should not misuse this special power of law on citizen.

Section 275A to 280D of Income tax act contains laws relating to prosecution and a summary of the same is given below:

Section 275A & 275B	Search related
Section 276 & 276A	Transfer of property
Section 276B, 276BB, 276C(1), and 276C(2)	Failure to pay  & evasion of tax.
Section 276CC & 276D	Failure to file return  & documents.
Section  277, 277A	False verification and falsification of documents.
Section 278 & 278A	Abatement & subsequent offence.

The PM of India promised to citizen of India for ease of doing business but making  entrepreneurs convicted for small mistakes or for debatable issues cannot fulfil his promise.  Given below few instances where entrepreneurs faces hardship from Income tax department.

Ø  Prosecution should not be launched hurriedly by the tax department  during the pendency of case before the appellate authorities. The law of limitation u/s 468 Cr.P.C. for criminal prosecution has been excluded by the Economic Offences (Inapplicability of Limitation) Act, 1974 & so there is no need for hasty action.  { Sayarmull Surana vs. ITO (Madras High Court)}. Thus there should not be any prosecution proceedings on the debatable issues and where various courts have given different order.

 

Ø  Prosecution has been launched for delay in depositing TDS with interest due to genuine reason for financial hardship.    The government should re-think where tax has been self -deposited with delay having genuine reason. Right now entrepreneur are getting’s convicted due to shortfall in cash.  Refer ITO vs. Ichibaan Automobiles Pvt Ltd and Golden Gate Properties Ltd vs. DCIT

Ø  A person should not be convicted multiple times for a single mistake.  Instances were found that some mistakes conviction is common under other act like, ED, black money, FEMA etc. Thus, where other act already provide scope of punishment, there was no need for Income tax to provide the same.

Ø  The conviction should not be done for the cases where the tax impact is very small and taxpayer did the same due to his limited knowledge of tax laws.  Given below few examples where small tax payer disclose incorrect facts in their return of Income and invite trouble.

§  Non declaration of foreign investment like ESOP etc.

§  Not disclosing   share transactions as they had incurred losses.

§  Not filed return of Income

Ø  Mere imposition of penalty under the provisions of the Income tax Act does not mean that the petitioner has committed offence which  require conviction and that Department should establish ‘wilful’ conduct to evade taxes.

 

Ø  There are instances where proceedings were initiated as the taxpayer raised grievances against the tax department.  Also there are instances, where proceedings were initiated on small taxpayer to test how the law workout in the court.  The government should make necessary step to block this kind of proceedings otherwise remove the grievance system.

Ø  It has been found that tax department initiating the prosecution proceedings to meet their targets.  The government should stop this kind of practice followed by bureaucrats. Also it has been found that prosecution proceedings were initiated without penalty order and speaking order. 

From the above few examples, the law makers should get message that the income tax laws should reduce the criminalisation. The process of conviction should not be on small  tax payer, mistakes with genuine reason  &  datable issues and the process of bureaucrats should be watched by other agencies as to make sure that same was not done with the purpose of harassment.  Only then doing business can become easy   in our country.