The Hindu Business Line : Experts flay proposed clause on abetting tax evasion

DIRECT tax experts at a recent national workshop sought a relook at the proposed insertion of a new Section 277A in the Act, as per the Finance Bill 2004, which provides for criminal prosecution against any person who wilfully does something with general intent to enable any taxpayer to evade tax or interest or penalty chargeable under the Act through falsification of accounts.

What has sent alarm bells ringing for CAs, auditors and income-tax practitioners is the wide latitude provided to department officials, who would be free to pick on any of them merely on charge of wilful intent to abet tax evasion.

On conviction, one shall be liable to rigorous imprisonment for a minimum of three months and a maximum of three years.

Tax experts have also expressed concern over the insertion of new Sections 271FA and 285BA pertaining to an Annual Information Return (AIR) for data collection to maintain a vigil for enforcing strict tax compliance. Under this, any person who enters into any financial transaction of a prescribed nature will now be required to furnish within the prescribed time an AIR in prescribed form with respect to such financial transactions during any financial year.

A penalty provision has also been inserted (271FA) at Rs 100 for every day in continuation of failure to submit the AIR, effective from April 1, 2005.

Speaking to Business Line on the sidelines of the meet, Mr Pawan K. Agarwal, Chartered Accountant and former President of the Direct Taxes Professionals Association (DTPA), said that the terms of Section 277A were extraordinary (in criminal justice), as mere intent on the part of the professional to help anyone evade tax was enough to hand out punishment.

Stating that no real situation existed now for enactment of such a provision, he said that the existing Section 278 in the Act already took care of the situation referred to, and provides for prosecution and punishment for abetment and inducement in any manner.

What is more ominous, according to him, was the explanation to the proposed section, which is "unprecedented in the field of criminal justice".

The charge shall survive even in the absence of a specific instance of evasion of tax that has actually occurred or is likely to occur.

The implication, according to experts, is that Revenue, as the prosecution, need not show that any tax evasion has actually resulted or was likely to result from the alleged abetment, yet the abettor shall face trial for abetting tax evasion.

Commenting on the contradictory aspect, Mr Agarwal said that as per the explanation to the provision, no instance of tax evasion needs to be proved, which is pure logical fallacy.

"The core of criminal justice is the criminal act on the part of the perpetrator culpable under criminal law, and if there is no criminal act, there is no question of any supposed perpetrator being brought to trial for punishment."

A criminal offence has in its core two basic criminal elements - actus reus (guilty act) and mens rea (guilty mind). "If there is no act in the nature of a definite crime, there is no occasion for criminal blame."

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