Not surprisingly, collection of relevant data and its harnessing to curb evasion became the focus of the two-day meet of director generals (investigation) and commissioners of the income tax department here on Tuesday.
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The FM therefore expected the department to show greater resolve to curb financial crimes if confidence in the tax system was to be fostered and a climate of total voluntary compliance were to be generated. Revenue secretary S Narayan said this could be achieved by focussed collection of data on business transactions throughout the country and putting this into effective use to catch up with tax evaders.
Mr Narayan therefore asked I-T department to identify a relevant set of business transactions depending on the geographic locations. In Mumbai, the parameter could be the volume of share transactions, while in some other place it could be real estate dealings. This information should then be prioritised according to relevant parameters and intelligently used for detection of evasion, Mr Narayan said, asking the department to build an effective memory system so that culprits were traced easily.
Mr Narayan mentioned that government will shortly set up a financial intelligence unit (FIU) to tackle economic offences. We are in the process of finalising the terms and conditions of the FIU, he said.
In this connection, Central Board of Direct Taxes (CBDT) officials have already launched an all India project to create a national database of high value transactions involving mandatory quoting of Permanent Account Number (PAN). Sources said the project should get operational by September end, digitising significant transactions involving TDS. The databank will serve as a wealth of information for plugging the information gaps in checking revenue leakages, a senior official said.
In Budget 2002-03, the finance minister has extended the list of transactions requiring compulsory quoting of PAN to expenditure exceeding Rs 25,000 incurred in cash on foreign travel, purchase of bank draft exceeding Rs 50,000 in cash and making cash deposits exceeding Rs 50,000 in any bank account.
The transactions will have to be reported to the income tax department within a specified period. In 1998, Mr Sinha had prescribed certain high-value transactions such as purchase or sale of motorcars and expenditure incurred in hotels where PAN was to be compulsorily quoted.
Creation of a national databank is part of a comprehensive strategy of the income tax department to effectively deal with non-filers, stop-filers, and tax evaders of all sorts, the official said, making management of information on economic transactions as the key to realise these objectives.
Sources said that it has been felt that to handle the situation successfully, the central information branch (CIB) of CBDT needs a well-defined business process which will plan, build, and manage an effective information system infrastructure.
Such a system should not mean only the computer network as the ideal infrastructure, it must combine a suitable information system with the technical and human resources for building, operating, and maintaining systems. Further, it has been felt that there are a number of activities specific to geographical areas/regions and types of trade which should be brought under CIBs purview. The conference will discuss various suggestions for improving CIBs functioning, including re-designation of CIB as directorate of intelligence and legislative changes to enforce collection of information. Addition of power of survey and issue of summons to ensure enhanced compliance and development of a reporting system for CIB to monitor and quantify its products in key result areas are among other steps to be discussed.