The Hindu Business Line : Undue concentration on confession

"IN the public perception, the Income Tax department is identified with raids. That is its identity. That is its most visible enforcement activity," observed Dr Vijay Kelkar.

According to the Kelkar Task Force, the objective of a search is to ascertain facts and collect evidence of concealed income and drive home the message that tax evasion will not go undetected or unpunished. But the way the departmental officers have been going about search operations gives one the impression that their main objective is to obtain a declaration of undisclosed income from the person searched.

The moment such a confessional declaration is obtained, further investigations are slowed or abandoned. There is no real investigation. Assessments in search cases are completed in a hurry, and do not stand scrutiny in appeal.

These observations of the Task Force have proved to be right in a number of cases, resulting in heavy loss in revenues.

It is known that in real estate cases, much of the consideration passes as cash and elaborate investigations will be required to see if any trail is left behind after registration.

In a case in Gujarat, the departmental officers searched the premises of a partnership firm to find out if any `on money' was received for sale of shops.

During the course of search, one of the partners made a confessional statement about such receipt of cash outside the books of accounts. Subsequently, during the course of assessment, the said partner filed an affidavit retracting the confession.

The assessing officer (AO), however, made a large addition towards receipt of `on money'. This was knocked off in the appeal. The department went in further appeal before the High Court.

The court pointed out that it was the AO's duty to make further inquiry in respect of shop owners. Entries in loose papers found and seized during the search were not properly investigated to pinpoint the responsibility on the partnership firm to explain the transaction.

The court dismissed the Department's appeal and held that no assessment can be made based on a mere a confessional statement during the search which is later on retracted by the deponent (DYCIT vs Ratin Corporation (2005) 145 Taxman 503 (Guj)).

The Kelkar Task Force has been critical of the I-T department for obtaining forced confessions of undisclosed income. Search and seizure, it is said, has become a substitute for all investigations and an end in itself. It had become a routine exercise. There is no meaningful investigation prior to, during, or after the search. The social and economic cost of search and seizure activity is very high. It can never be a tool for investigation. A retraction of a confession brings investigations to a standstill. Surrender is not backed by adequate evidence.

If there is enough evidence, there is no need for surrender. The Task Force had suggested that no raiding party should obtain any surrender whatsoever. It had also recommended that statement recorded during the search should be video graphed.

In 2002, the income-tax law was radically amended and Chapter IV B containing special provisions for making assessments in search cases was dropped from the statute book. The power to search under Section 132 and record a statement continued unaffected. The department, however, had instructed the officers to abide by the advice given by the Task Force.

The same also holds true of survey operations undertaken by income-tax officials. Here again, statements are obtained about surrender of incomes.

Section 27 of the Indian Evidence Act requires that a confession is valid only if it is corroborated by further evidence and leads to discovery of incriminating material.

This section is scrupulously followed in criminal cases. It is necessary that income-tax officials should be given a thorough understanding of the law of confessions as enshrined in Section 27 of the Indian Evidence Act.

It is also necessary that I-T officials should be barred from publicising a search before clinching evidence about concealment is obtained.

The law contains sufficient safeguards for the Revenue — using statements made during a search as evidence in assessment proceedings being one such.

There is also a legal presumption built into the law to the effect that valuable articles or things found in the possession or control of any person in the course of search belonged to such person and that the contents of such books of accounts and other documents are true. This is, of course, a contentious presumption.

In spite of such safeguards, if the department is not able to make a success of search and seizure procedure for unearthing black money, it only reflects on the efficiency of the officers concerned.

(The author is a former Chief Commissioner of Income-Tax.)

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