Taxpayers ought not to be forced to make confessions under duress during a search and survey operations when they are most vulnerable and anxious as tax sleuths rummage through their offices and homes.
Tax experts are suggesting that in the interest of fairness, a taxpayer who has been subjected to a raid should get at least 15 working days to make their disclosures.
During a search operation, a taxpayer rarely has access to all the relevant details and the benefit of advice from his tax consultant to be able to make a full disclosure.
Tax advocate Narayan Jain said during a recent webinar that the practice of forcing a disclosure out of a harried taxpayer should be legally banned. Jain said that the Central Board for Direct Taxes had issued an instruction in 2003 (F. No 286/2/2003) in which it said: “Instances have come to the notice of the board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income.
The note went on to add: “It is advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed to the income tax department… No attempt should be made to obtain confessions as to the undisclosed income.”
Jain reckons that the tax sleuths should also hand over a copy of the statement recorded during a survey and search operation to the taxpayer so that he can then proceed with his best legal options. He added that the stipulation that two respectable witnesses should be present during a raid is rarely followed in its true spirit. In many cases, he said, servants of the taxpayers were shown as witnesses — which is inconsistent with the legal stipulation.
He said the tax administration should allow the filing of wealth tax returns to enable assessees to prove the acquisition or disclosure of jewellery. The last wealth tax return was allowed to be filed for the assessment year 2015-16. Wealth tax was abolished in the budget of 2015.
Former income tax chief commissioner R.S. Upadhyay agreed that the CBDT had instructed that taxpayers should not be pressured to declared undisclosed income during a survey and search operation. However, the instruction was not always scrupulously followed which perpetuated a negative image of the department.