Strong action against big tax evaders acts as deterrent: CBDT

The CBDT dismissed reports that it has asked its officers to go beyond raids and searches to target tax evaders and maintained that stringent action in big cases of evasion would go a long way to demonstrate to compliant taxpayers that laws are just and fair.

“In such cases where after intensive fact assessment, the department undertakes search and seizure action as permissible under the law, mere tax collection does not have deterrence value.

“These need to be taken to their logical conclusion in terms of levy of penalty and launching of prosecution as per the provisions of the Income Tax Act,” the CBDT said in a release reacting to media reports that it has told its officers to go beyond raids and searches to target tax evaders.

The release referred to a discussion paper circulated during the recently concluded national conference of Chief Commissioners and Directors General of Income Tax and said the media reports were out of context.

The apex policy making body of the I-T department, in the strategy paper for the conference, had told tax sleuths that the “need of the hour” is to effectively launch prosecution cases in wilful evasion cases at the earliest even “without” waiting for the outcome of any other appellate processes.

“Deviant assesses take minor financial hiccups in their stride and promptly return to their wayward ways. What scares them is the fear of incarceration and consequent loss of liberty and social opprobrium that it brings. It is to this fear that a search/survey action must address itself,” the Central Board of Direct Taxes (CBDT) said in its paper for financial year 2015-16.

“CBDT clarifies that this is factually not correct. It may be appreciated that the need of the hour is to provide effective deterrence since the soft action in extreme and big cases of tax evasion affects the behaviour of the compliant tax payers.

“This has been brought out in the latest study conducted by NIPFP. This is the very aspect that was covered by CBDT in the discussion during the All India annual conference of senior officers. Effective and stringent action only in known and big cases of tax evasion would go a long way in demonstrating to the large number of compliant tax payers that the tax laws are just and fair and also encourage voluntary tax compliance,” it said.