Finance Bill's amendments to Income Tax Act: Black money crackdown or return of inspector raj?

Among the 40 amendments present in the Finance Bill 2017 are those that make key changes to the Income Tax Act.

The countdown has begun. Come April 1, the central government's crackdown on black money is set to get more intense.

The Centre has pushed at least 40 amendments to the Finance Bill, 2017, which was recently passed by the Lok Sabha as a money bill. The amendments include key Income Tax Act changes which give sweeping powers to tax officials.

The biggest change is in how the Income Tax Department will not be required to disclose the reason for carrying out an I-T raid. The I-T Department won't need to justify on what basis an individual scrutinised and why his financial assets were evaluated.

"The government has justified it claiming the whistleblower will be protected if the secrecy of the reason of conducting a survey (raid) is maintained, but it can be misused", claims Ved Jain, a former president of The Institute of Chartered Accountants of India.

The amendments have also becoming a political issue, with the opposition slamming the government for bringing back 'inspector raj'. 

funfacts

THE AMENDMENTS AND POLITICAL REACTIONS

  1. Up until now, the principal commissioner could order a 'survey', while the director general of Income Tax could order a 'search'. The latter empowers tax officials to enter residential premises of a suspected tax evader.
  2. Now, once the I-T Act gets modified according to the amendments present in the Finance bill, a junior assessing officer will be able to take the call on conducting a 'survey' or a 'search'.
  3. Essentially, an income tax officer or assistant commissioner, who are three to four rungs lower than the principal commissioner in the chain of command, can authorise a 'survey'. An assistant director of income tax, meanwhile, will have the power to order for a 'search'.
  4. The second far reaching impact is on the Section 132 of the I-T Act 1961. The section has been tweaked so that anything can be 'provisionally attached'. Now a search officer who conducts a survey (raid) has the authority to 'seize or attach' the property. The I-T Department can now also raid the property of a charitable institution for seeking information.
  5. "Earlier property of a tax evader could be 'attached' only after court order after thorough examination of the evidence collected by the search officer. But we have seen tax evaders taking advantage of the time lag, hence this will ensure at least there is prompt action now. Income tax officer can even order a probe in the past 10 years if he finds disputed assets of over 50 lakh rupees ", said Ved Jain to India Today.
  6. While Lok Sabha has passed the Finance Bill, the opposition is raising objections over these amendments in the upper house. "(It is clearly) visible that inspector raj is returning", claimed Ambika Soni, Congress MP.
  7. "Even Supreme Court has observed that extra powers cannot be given to other agencies. This will promote corruption. It will be more of a misuse than of use if Inspectors given more power", said Majeed Memon, NCP MP
  8. "I have raised this issue that all the changes that are being brought in will have a negative impact on the Tax payers", said Naresh Agarwal, SP MP.
  9. Interestingly, even if Rajya Sabha overturns this amendment, it will be a token gesture to register their 'objections'. Lok Sabha has the power to reject the mandate of the upper house for a money bill.
  10. The government on the other hand is seeking to allay the fears. "Opposition can say anything and it is a finance bill (and) all things (ammendments) are brought in to ease the business. It's not the case of return of inspector raj", Santosh Gangwar, MoS Finance told India Today.

funfacts

ALSO READ | 5 new Income Tax rules that could harass taxpayers after demonetisation