This Article is From Feb 07, 2017

Taxmen Won't Need Reason To Raid After Changes To Law: 10 Points

Under tax rule changes, a person who has been raided cannot challenge taxmen to disclose any info.

New Delhi: Tax raids based on unsubstantiated rumours or simply suspicion will be legit after the government's tweaks to the Income Tax law. But the changes will be effective retrospectively in an apparent turnaround by the government despite its promise not to do so. The amendment to Section 132 of the Income Tax Act dealing with searches by taxmen says that a raid can be authorized if there is "reason to believe" or "reason to suspect" that a person is hiding his wealth and skipping taxes.

Here are top 10 points about the amended rules:

  1. The "reason to believe" or "reason to suspect" does not have to be disclosed to anyone, either the target of the raids or the appellate tribunal.

  2. A tax official, based on "reason to believe", can ask for a person's books of account, documents or assets.

  3. The amendments will take effect "retrospectively" from when the laws concerned were enacted - April 1962 and October 1975 - which contradicts Finance Minister Arun Jaitley's Budget speech in 2014 after the BJP-led government came to power.

  4. "The sovereign right of the government to undertake retrospective legislation is unquestionable. However, this power has to be exercised with extreme caution and judiciousness keeping in mind the impact of each such measure on the economy and the overall investment climate. This government will not ordinarily bring about any change retrospectively which creates a fresh liability," Mr Jaitley had said.

  5. His words were seen as a direct reference to the previous Congress-led government's move on the Vodafone tax case.

  6. In 2012, the UPA government controversially made retrospective changes to the 1962 tax law to circumvent a Supreme Court order favouring Vodafone.

  7. In his 2014 budget, the Finance Minister had said, "At this juncture I would like to convey to this August House and also the investors community at large that we are committed to provide a stable and predictable taxation regime that would be investor friendly and spur growth."

  8. Over the years, the rules for tax raids have generated much debate, especially after courts said "reason to believe" should not be based on suspicion but on concrete information that the tax authorities have received.

  9. The government has pledged to raise income tax collections by 24.9 per cent to Rs 441,255.27 crore in the next financial year.

  10. Under the changed rules, a person who has been raided cannot challenge taxmen or force them to disclose the information on the basis of which they were searched.