The Hindu Business Line : Punishment for abetting tax evasion

Tax experts say that the explanation will make life easier for the Revenue Department, which can now "just allege a general intent without proving the allegation specifically."

New Delhi , Aug 3

CHARTERED accountants and tax consultants are a worried lot. The Finance Bill 2004 provision that stipulates punishment with rigorous imprisonment for falsification of books or documents to induce or abet any other person to evade tax has come as a bolt from the blue for the professionals.

The term of punishment under the proposed law (Section 277A) will be not less than three months but may extend to three years with a fine.

The proposed Section 277A is being introduced as the Revenue Department believes that "deterrence against making false books or documents with an intent to enable other person evade tax, penalty or interest can be effectively provided by declaring the making of such books or documents an offence under the Income-Tax Act."

Under the existing provision of Section 278, punishment to a person who abets or induces any other person to evade tax is linked with tax evasion by another person, and charge of the abetment in case of the first person can be sustained only if tax evasion by the other person is established.

The ominous part of Section 277A, say certain tax experts, is the explanation to the proposed Section 277A in the Income-Tax Act. The explanation provides that it is sufficient (under this Section for levying a charge) to allege a "general intent" to enable the other person to evade any tax, penalty or interest. It does not require specification of any instance for attracting the Section.

Tax experts say that the explanation will make life easier for the Revenue Department, which can now "just allege a general intent without proving the allegation specifically."

Faced with prospects of hardship for its members on account of Section 277A, the Institute of Chartered Accountants of India (ICAI) has written to the Finance Minister, Mr P. Chidambaram, seeking withdrawal of the explanation to Section 277A.

In the letter, the ICAI President, Mr Sunil Goyal, highlighted that there is a likelihood of this provision (Section 277A) being misused against innocent persons. The letter held that it is also possible that an unscrupulous tax evader when caught may put the blame on the professionals handling the accounts.

ICAI said this section read with the explanation goes well beyond the criminal law, where the onus to prove the guilt always rests upon the prosecution, which has to prove commission of an offence beyond any doubt.

"We strongly believe the proposed provision will have serious ramifications on assessees, their employees, their associates, tax consultants, advocates, chartered accountants. This might also cause unintended hardship and harassment without meeting the underlying objective," the ICAI letter said.

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