Confronted by the rising number of willful Income Tax (I-T) defaulters, the department has asked its officers not to shy away from invoking the rare provisions of arrest, detention and auctioning of attached assets of the accused.
Now defaulters face rigorous imprisonment for a period between three months and three years and a fine as the Central Board of Direct Taxes, in a strategy paper for the current fiscal, has directed the I-T department to use this provision, used rarely till now, stated under Section 276C (2) of the I-T Act. The I-T department has also decided to block Permanent Account Number (PAN) of default entities for any activities, get their lPG subsidy cancelled and take measures to ensure that they are not sanctioned loans.
The I-T department has a designated official to execute these rare powers, called the Tax Recovery Officer (TRO) within its establishment. “The machinery of the TRO should be strengthened by providing more infrastructure and manpower. The TROs should be further trained specifically for their work in order to increase their effectiveness. In respect of non-compliant defaulters, the provisions of arrest and detention as per the provisions of Rules 73 to 81 of Schedule II should be invoked by the TRO. Stringent action can be taken in suitable cases, including use of the provision for prosecution under Section 276C(2) of the Act,” it said.
The strategy papers act as a guiding light for the taxman for the financial year, 2016-17. It has asked the supervising authority to monitor TROs’ work, “especially in the area of attachment and sale of property to ensure that the attached properties are sold within one year.”
“The role of a TRO comes at the fag end in a tax evasion case when the demand raised by the department gets converted into wilful default. A TRO executes his power of arrest and detention when there is a chronic default.
That is why we see these provisions have been rarely invoked in the past. But now, more action on this front will be undertaken as defaults are becoming a menace now,” an IT official explained.
The instructions also make it clear to the TRO that in case of liquidation of assets there should be “prompt lodging of the claim” with the official liquidator and constant monitoring of the case in order to guard the interest of the revenue or the department.
It has also been directed, as per the strategy paper, that supervisory officers “may instruct” the TRO or the Assessing Officer of a case to monitor cases which are being heard in the Debt Recovery Tribunals (DRTs).
They (TRO) should, it said, consider lodging of claims of outstanding demand in such cases before the DRT. “At any level of a default case, the department’s interest of getting taxes is supreme and hence the TRO is being directed to pursue the cases up to the level of DRTs too. Getting revenue and due taxes from an entity is the ultimate aim of the IT department. By using these new strategies, the department also ensures that a strong message goes to all such people that the taxman will not let it go easily,” the official said.
The I-T department has also decided to block Permanent Account Number (PAN) of default entities, get their lPG subsidy cancelled and take measures to ensure that they are not sanctioned loans. As per a strategy paper, the taxman will block PAN in such a way that these defaulters are not sanctioned any loans or overdraft facility by public sector banks, as the same is bound to become non-performing assets.
“Ministry of Finance can be suggested to withdraw facility like lPG subsidy which is directly credited to the bank accounts of the said defaulters,” it said, adding that this step will act to disincentivise the defaulters.
The taxman also proposes that the identities of such blocked PANs be circulated to the Registrar of Properties with a request for not allowing any registration of immovable properties where such PANs are involved. Such defaulters’ information has also been recommended to be circulated across tax offices so that their activities loans or the Government subsidy can be plugged country-wide. The department has also decided to subscribe to the Credit Information Bureau limited (CIBIl) data, on a possible payment basis, to check out the financial activities of defaulters and undertake action against them for recovery and freezing of assets.