The government’s proposal to arm tax officers with sweeping powers to conduct searches and surveys has sparked a sense of jitteriness in the industry with many expressing fear that it could lead to arbitrariness and harassment.
The Finance Bill 2017 proposes changes in the procedural rules involving search and seizure operations by income-tax authorities, giving the assessing officer more power.
As per the proposed amendments to the Income Tax Act, the tax officer is not required to give any reason to the taxpayer or the appellate authorities the grounds under which the search was undertaken.
Armed with more powers, junior officers in the tax department can conduct an inquiry in a case where no proceeding is pending, without even getting sanction from a higher authority.
The proposal is meant to reduce the work load of the department as well as maintain confidentiality and sensitivity of the search proceedings. The changes will come with retrospective effect from April 1, 1962.
Earlier, the power to call for search and seizures rested at the level of the Principal Commissioner but with the new bill this power has been delegated to the Assessing Officer who is three to four levels down in the hierarchy order.
With the new bill, tax authorities could now open up for assessments going back 10 years if disputed assets worth Rs 50 lakh are found in a search. This period earlier restricted to six years.
There is also a proposal to extend the scope of search and seizures operations beyond business establishment to charitable institutions, a move many believe is aimed at NGOs.
Tax experts note that these are fairly extensive powers and have the potential of being abused. “While this has been done with the intent to give more flexibility to the tax authorities in investigation cases, some checks and balances are required,” Shefali Goradia, a partner with BMR & Associates’ corporate tax practice, was quoted as saying by the Business Standard.
Another proposed amendment allows the assessing officer to provisionally attach any property belonging to the assessee for six months, albeit with prior approval of senior officers.
“Both tax experts and taxpayers are wary of the additional powers to the assessing officer. Sweeping powers have been given to the assessing officer. This needs to be balanced,” said Dinesh Kanabar, CEO of Dhruva Advisors, according to the daily.
“The amendments effectively provide the tax authorities with sweeping powers to provisionally attach, and thereby debar a taxpayer from disposing of any investment or immovable property that he owns,” Rakesh Nangia, managing partner, Nangia & Co said.
“Tax lawyers point out that the powers of tax officers in search and seizure cases are generally highly discretionary. Now with proposed attachment of assets we can expect wider authority,” said Riaz Thingna, Director, Grant Thornton Advisory.