Denial raj?

Mohan R Lavi | Updated on January 17, 2018 Published on July 06, 2016

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Tax defaulters may not get loans, subsidies

Recently, we have been privy to an eclectic mix of news from the income tax department. It commenced with the news that the Prime Minister has given the tax department a target of reaching 10 crore tax payers — a stiff target given the fact that the base as of today is 5.3 crore and tax payer growth in India has been modest.

The department quickly denied the statement by providing an ambivalent explanation. It was soon consigned to memory as one of the ‘doubling’ ambitions of the Government — such as the one to double farm income by 2022. The fact that this target was set by the Prime Minister and not the finance minister led many to conclude that the ministry of finance and the tax department appear to be busy firing internal salvos.

Next came the news that the tax department has used its powers and arrested a few wilful tax defaulters. This too was denied by clarifying that though the provisions for arrest and detention by recovery officers in respect of the non-compliant tax defaulters are contained in the Income Tax Act, these are used extremely sparingly.

Strategy paper

A strategy paper prepared by the department had more news in store for tax defaulters. In order to cripple and check (strong words these!) the activities of tax defaulters, the income tax department has decided to block the PAN of such entities, get their LPG subsidy cancelled and take measures to ensure that they are not sanctioned loans. With the objective of disincentivising the defaulters, it would recommend that the LPG subsidy which is directly credited to the bank accounts of the said defaulters be annulled. 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.

The department has also decided to subscribe to the Credit Information Bureau Limited (CIBIL) data to check out the financial activities of defaulters and undertake action against them for recovery and freezing of assets. The department, beginning last year, has also started to “name and shame” large tax defaulters by publishing their names and other credentials in leading national dailies and on its official web portal.

Beginning this financial year, the department has decided to publicly name all category of taxpayers who have a default of ₹1 crore and above. While all these strategies are bound to draw attention, whether the tax department can curb the fundamental rights of a taxpayer to seek loans/LPG subsidy is a question that is bound to land up in the courts.

Curbing rights

It would appear that the tax department is donning the gloves of a judge about to pronounce a penal judgement on the guilty. Are we moving towards an era of ‘Denial Raj?’ Over the years, the Indian taxpayer in general and the defaulting one in particular, has become a war veteran in fighting his battles with the department.

Working in sync with his consultants, he is able to thwart every move of the department. Unless there is something in the deal for the taxpayer by way of a carrot, he is not going give in.

The writer is a chartered accountant

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Published on July 06, 2016
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