The consequences of adopting the BIT-(Best Ignored and Trashed) policy to notices received from the Income-Tax Department cannot be taken for granted.

While the news of income-tax raids on two leading actresses in Mumbai grabbed the headlines, the fact that these raids were the result of keeping mum for a while on notices received from the Department was underplayed. The charges were all revenue related – endorsement and other fees received and cash and not offered to tax and income from India shown as income from abroad to avail tax breaks. The case would be resolved on payment of TIP- (Tax, Interest and Penalty), but it shows that none is spared if the patience of the Department is tested. The Department has deemed it necessary to visit places or individuals involved in scams and controversies.

Less menacing

The present Income-Tax Act and the proposed Direct Taxes Code (DTC) use the less-menacing term ‘search and seizure' for raids.

The provisions in the DTC are not materially different from the present. While the DTC has good, bad and ugly sides, the intent to simplify the provisions to ensure better compliance and higher tax revenues with some checks and balances appears clear.

The thought to do away with the necessity for filing of tax returns by the salaried class reflects its trust in them and the confidence in its information mechanism to snare the recalcitrant. Search and seizure operations could occur only if the patience of the Department is tested beyond tolerant levels or an entity/individual is the cynosure of all eyes for economic offences.

The DTC has fairly simple provisions regarding unexpected visits by tax officers. The stand-out proviso in Clause 135 that commences the dialogue regarding search and seizure is the opening one which permits any Authorised Officer to conduct searches and seize material if any person to whom a summons or notice has been issued under the DTC has omitted or failed to furnish the material or information asked for.

Legalising the search and seizure provisions, the DTC winds off by ruling that any proceeding under this Code before an income-tax authority shall be deemed to be a judicial proceeding within the meaning of Section 193 and Section 228 and for the purposes of Section 196 of the Indian Penal Code.

(The author is a Bangalore-based chartered accountant.)