Lok Sabha Question No. 435 (STARRED), answered on 2017-03-31
Subject: Tax Evasion
Ministry: FINANCE
Asked by: SUNIL KUMAR MONDAL, RAYAPATI SAMBASIVA RAO

## Government of India Ministry of Finance Department of Revenue

## LOK SABHA STARRED QUESTION NO.  *435

TO BE ANSWERED ON FRIDAY, MARCH 31, 2017 CHAITRA 10, 1939 (SAKA)

## TAX EVASION

*435: SHRI SUNIL KUMAR MONDAL: SHRI RAYAPATI SAMBASIVA RAO:

Will the Minister of Finance be pleased to state:

- (a) Whether  his  Ministry  has  taken  any  serious  measures  to  address  the  issues  of  tax evaders;
- (b) If  so,  the  details  thereof  along  with  the  measures  taken  by  the  Government  in  this regard; and
- (c) if not, the reason therefor?

## ANSWER MINISTER OF FINANCE (SHRI ARUN JAITLEY)

- (a) to (c):  A Statement is laid on the table of the House.

***********

## Statement as referred to in reply to Starred Question No. *435 to be answered on 31 st March, 2017 in Lok Sabha on the subject of Tax Evasion.

Reply to part (a) to (c) of the subject Parliamentary Question is as under:

## (a)

Yes, Madam.

(b) The Government has taken various measures, both by way of policy initiatives as well as  through  more  effective  enforcement  actions  on  the  ground  to  check  tax  evasion. These  include  putting  in  place  robust  legislative  and  administrative  frameworks, systems  and  processes  with  due  focus  on  capacity  building  intelligence  gathering, profiling studies etc which is followed up by investigation and integration of information and its mining through increasing use of information technology. The details of some of these measures are at Annexure.

## (c)

Does not arise in view of the reply to point (a) and (b) above.

*****

## ANNEXURE

Annexure  as  referred  to  in  reply  to  part  (b)  of  Starred  Question  No.  *435  to  be answered on 31 st  March, 2017 in Lok Sabha on the subject of Tax Evasion.

*****

## Some of the measures taken by the Government to address the issue of Tax Evasion

## Direct Tax

- (i) Constitution  of  the  Special  Investigation  Team  (SIT)  on  Black  Money  under Chairmanship and Vice-Chairmanship of two former Judges of Hon'ble Supreme Court.
- (ii) Enactment  of  a  comprehensive  law  -  'The  Black  Money  (Undisclosed  Foreign Income and Assets) and Imposition of Tax Act, 2015' to specifically deal with black money stashed away abroad.
- (iii) Constitution of Multi-Agency Group (MAG) consisting of officers of Central Board of Direct  Taxes  (CBDT),  Reserve  Bank  of  India  (RBI),  Enforcement  Directorate  (ED) and  Financial  Intelligence  Unit  (FIU)  for  investigation  of  recent  revelations  in Panama paper leaks.
- (iv) Proactively engaging with foreign governments with a view to facilitate and enhance the exchange  of information  under Double  Taxation Avoidance Agreements (DTAAs)/Tax Information Exchange Agreements (TIEAs)/Multilateral Conventions.
- (v) Proactively furthering global efforts to combat tax evasion/black money, inter alia, by joining the Multilateral Competent Authority Agreement in respect of Automatic Exchange of Information (AEOI) and having information sharing arrangement with USA under its Foreign Account Tax Compliance Act (FATCA).
- (vi) Renegotiation of DTAAs with other countries to bring the Article on Exchange of Information  to  International  Standards  and  expanding  India's  treaty  network  by signing new DTAAs and TIEAs with many jurisdictions to facilitate the exchange of information and to bring transparency.
- (vii) Enabling attachment and confiscation of property equivalent in value held within the  country  where  the  property/proceeds  of  crime  is  taken  or  held  outside  the country by amending the Prevention of Money-laundering Act, 2002 through the Finance Act, 2015.
- (viii) Enactment  of  the  Benami  Transactions  (Prohibition)  Amendment  Act,  2016  to amend the Benami Transactions (Prohibition) Act, 1988 with a view to, inter alia, enable  confiscation  of  Benami  property  and  prosecution  of  benamidar  and  the beneficial owner.
- (ix) Initiation of the information technology based 'Project Insight' for strengthening the non-intrusive, information driven approach for improving tax compliance.
- (x) Launching  of  'Operation  Clean  Money'  on  31st  January  2017  for  collection, collation and analysis of information on cash transactions during demonetisation period,  extensive  use  of  information  technology  and  data  analytics  tools  for identification  of  high  risk  cases,  expeditious  e-verification  of  suspect  cases  and enforcement actions in appropriate cases  which include searches, surveys, enquiries,  assessment  of  income,  levy  of  taxes,  penalties,  etc.  and  filing  of prosecution complaints in criminal courts, wherever applicable.

## Indirect Tax

In order to deal with indirect taxes evasion (central excise, service tax and customs), the  Government  has  taken  several  legal,  procedural  changes,  as  also  increased  use  of information  technology.  Intelligence  gathering  is  a  primary  source  for  detection  of  tax evasion through non-intrusive methods, such as, independent market inquiries, profiling, studies  etc  which  is  followed  up  by  investigations.  The  details  of  these  measures  are indicated below.

## 1.1         Legal measures

1.1.1       Prosecution and Arrest provisions exist in the Finance Act, 1994, Central Excise Act,  1944  and  the  Customs  Act,  1962. 4446  arrests  have  been  made  by  the  Customs Commissionerates / Directorate General of Revenue Intelligence and 116 arrests have been made by DGCEI / Central Excise and Service Tax Commissionerates during the last three years (2014-15, 2015-16 and 2016-17 (upto December, 2016).

Central Excise Act, 1944: A person can be arrested in the following cases(a)clandestine removal of manufactured  goods;(b) removal of goods without declaring the correct assessable value and receiving a portion of sale price in cash which is in excess of invoice price and not accounted for in the books of account;(c) taking Cenvat Credit without the receiving  the  goods  specified  in  the  invoice;(d)  taking  Cenvat  Credit  on  fake  invoices;(e) issuing  Cenvatable  invoices  without  delivering  the  goods  specified  in  the  said  invoice.(f) wrong availment of refund claim, provided that the amount of duty sought to be evaded is more than Two Crore rupees. The time period permissible in law for issuance of show cause notice on tax evasion has been increased from 1 year to 2years for a normal circumstance by amending section 11A of Central Excise Act, 1944 vide Finance Act, 2016.

Customs Act, 1962: Any person guilty of serious offence under Customs Act, 1962 which is punishable under Sections 132, 133, 135, 135A or 136 of the said Act, can be arrested by a Customs officer authorized in this behalf, as provided under Section 104(1) of the said Act. Further, in the Finance Bill, 2017, the provision to incorporate the concept of beneficial owner  in  the  Customs  Act  has  been  introduced  to  target  unscrupulous  elements  using fake/front Import Export Code. In order to ensure that arrests and prosecutions are not set aside on   legal or technical grounds, detailed guidelines relating to arrest and prosecution have been issued. Keeping in view the changes in law, the guidelines for prosecution were issued vide Circular No. 27/2015-Customs dated 23.10.2015.

Finance  Act,  1994:  In  view  of  detection  of  several  cases  of  Service  taxevasion,  changes were made to its legal provisions. Any person who collects any amount as service tax but fails to pay the amount so collected to the credit of the Central Government beyond a period of six months from the date on which such payment becomes due and the amount exceeds two hundred lakh rupees is liable for arrest and such an offence is treated as a cognizable offence. It is punishable with imprisonment for a term which may extend to seven years. Further, any taxable person who commits  offences like knowingly evading the payment of service tax, or availing or utilizing credit of taxes or duty without actual receipt of taxable service or excisable goods either fully or partially in violation  of the  rules  or maintaining false  books  of  accounts  or  failing  to  supply  any  information  required  to  be  supplied  or supplies false information, and the amount exceeds two hundred lakh rupees, is punishable with imprisonment for a term which may extend to three years. If any person is convicted of such an offence, then for the second and for every subsequent offence, he shall be punished with imprisonment for a term which may extend to seven years.

1.1.2      Third  Party  Information:  Provisions  have  been  made  in  the  Central  Excise  Act 1944,  which  are  also  applicable  to  Service  Tax,  whereby  specified  authorities  who  are responsible for maintaining record of registration or statement of accounts or any periodic return or document containing  details of payment of tax and other details or transaction of goods or services or transactions related to a bank account or consumption of electricity or transaction  of  purchase,  sale  or  exchange  of  goods  or  property  or  right  or  interest  in  a property,  under  any  law  for  the  time  being  in  force,  shall  furnish  an  annual  information return  of  the  same  as  prescribed.  Under  this  provision  the  Annual  Information  Return Rules 2016, have been prescribed. Initially this return has been prescribed for  RBI to give details of foreign remittances for receipt of specified services, for such entities whose value of  remittances  exceeds  rupees  ten  lakh  in  a  financial  year  ,  as  well  as State  Electricity Boards  or  an  electricity  distribution  or  transmission  licensee  under  the  Electricity  Act 2003, or any other entity entrusted with such functions by the Central Government or State Government,  to  give  details  of  electricity  consumed  by  such  manufacturers  using  an induction furnace or rolling mill to manufacture goods falling under Section XV of the First Schedule  to  the  Central  Excise  Tariff  Act,  1985  (5  of  1986),  whose  aggregate  value  of clearance  exceeds  rupees  one  hundred  and  fifty  lakhs  in  the  financial  year  to  which  the return pertains . 1.2.         Procedural measures: In  tune  with  the  changing  scenario  and  suggestions from various Customs field offices, the Central Board of Excise and Customs vide Circular No. 20/2015 dated 31.7.2015 (amended by Circular No. 29/2016 dated 23.6.2016) issuing fresh  reward  guidelines  for  government  servants  and  informers  so  as  to  get  information about tax evasion. 1.3.       Increased use of information technology: Through a formal process of sharing of information with other statutory authorities like  the  Income  Tax  department,  VAT authorities, the department has access to data which is followed up in order to detect cases of tax evasion. The processes of selection of returns for detailed manual scrutiny as well as selection  of  assessees  for  audit  have  been  made  wholly  risk  based  from  2015.  This  will ensure that returns as well as assessees with a higher risk score are targeted for detailed manual scrutiny or audit, as the case may be. Return Scrutiny analysis is carried out by utilising the data retrieved from Enterprise Data Warehouse of the Department.

- ********