If it wasn’t bad enough that the taxman has been accused of ‘tax terrorism’ of the type akin to what was seen during VP Singh’s infamous raid-raj, going by an amendment in the latest Finance Bill, even more powers are being given with regard to searches and seizures. While tax-terror of the last few years has seen disputed tax arrears rise to a mammoth R6.8 lakh crore in FY16, the taxman can now provisionally attach a property for a period of six months in order to ensure the exchequer doesn’t lose out on any dues. Moreover, he can, via a reference to the valuation officer, try and estimate the ‘fair market value’ of any property. Given how taxpayers undervalue assets and income—the low tax-base is testimony to the large-scale evasion—the seizing of property and assessing ‘fair market value’ seems the right thing to do, but this is an unduly harsh measure and gives the taxman large powers of harassment and blackmail over honest taxpayers. To be sure the property is not being confiscated, but given how long it takes to resolve any case, it could be years before the owner can do anything with it.
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Revenue secretary Hasmukh Adhia, though, points out these additional powers are being given to around 300 officers belonging to the investigative wing across the country—the 8,000 assessing officers, he says, are already equipped with these powers. The objective, he says, is to ensure that assessees do not move money out of their bank accounts or transfer property as soon as a search begins which is often the case. While Adhia makes a powerful point, it is equally important to keep a close eye on the taxman since there is a fine line between catching tax thieves and tax terrorism. Since one way to do this is to keep personal interaction to a minimum, the revenue department has done well to ask for online clarifications in the 18 lakh bank accounts shortlisted for scrutiny post-demonetisation instead of sending tax inspectors. Another way to demonstrate it will deal with taxpayers in a transparent manner and with a soft hand would be to have a 24×7 monitoring mechanism of various tax notices/circulars—in the case of the MAT notices to FIIs last year or this year’s indirect-transfer notices, for instance, this would have raised an alert on the impact of these ill-advised notices and they could have been withdrawn before they hit the media and got chalked up as another example of tax terror. Bringing tax officials who misuse their powers to book, as is being done, is another way to ensure the taxman does not run wild. Over the past two years, 72 officials from the CBEC and CBDT have been dismissed while 193 have been ‘heavily penalised’ and some are even facing prison terms. Taxmen are doing an important job in catching tax thieves, but if officials are to earn a better reputation for themselves, they need to work harder at it.