Taxation is an essential wing of the government’s revenue which provides a bulky collection to the government to meet the social and economical expenditure of the nation. Being a citizen of a civilised nation one should pay tax for the growth and upliftment of the nation according to their ability to pay. The ability of a person is determined on the basis of his income. As per Income Tax is concerned the quantification of ability and the determination of tax liability has been prescribed by the Income Tax Act. There are certain basic exemption and reliefs which the act provides to certain categories of person. With the implication of the Direct Tax Code, such exemption has been further enhanced, thereby providing a huge relief to the assessee. So, the assessee should arrange his source of fund and application of fund in such a way so as to enjoy a higher tax benefits. A person becoming eligible to file his Income Tax return should from the initial stage , take steps so as to keep proper books of accounts and the documents providing evidence to such books of accounts. In short, filing proper and accurate tax return saves you from lots of hassles which the Act has created for those who intend to escape tax. If a person intends to escape tax by not disclosing his proper income, he is going to face great trouble. At a later date, an assessment by the income tax authority may bound you to pay tax along with penalty and interest which will be extremely high as compared to the normal rate of tax. And as the operational approach of the Income Tax Department is increasing incorporating surveillance system, evading tax may prove hectic. So better take a proper take planning and enjoy as much benefits as possible as applicable to you as per the provisions of the act.
Let’s see the power and the authority the Income Tax Act provides to their officers for tracing undisclosed and understated incomes as well as the penalty to be imposed on person found guilty of escaping tax:
POWERS TO INSPECT/REQUIRE EVIDENCE/RETAIN BOOKS
Where the tax authority has reason to suspect that any income has been concealed, or is likely to be concealed, by any person or class of persons, within his jurisdiction, then, for the purposes of making any enquiry or investigation relating thereto, it shall be competent for him to exercise the powers provided by the Income Tax Act under section 131 similar to the power as are vested in a court under the Code of Civil Procedure concerning following matters namely:
· discovery and inspection
· enforcing the attendance of any person
· compelling the production of books of account and other documents
· Issuing commissions.
Again, any authority may confiscate and retain in its custody for such period as it thinks fit any books of account or other documents produced before it in any proceeding under this Act subject to certain conditions.
POWER TO SEARCH & SEIZURE
The Income Tax Authority empowered in this regard by the board or their authorised officer has reasons to believe that any person to whom a summons was issued to produce, cause to be produced, any books of accounts or other documents has omitted or failed to produce or cause to be produced such documents or has in his possession any money, bullion, jewellery or any valuable article which has not been disclosed or would not be disclosed for the purpose of this act may
· Enter and search any building, place, vehicle, vessel or aircraft where he suspects that books of accounts, other documents, money, bullion, jewellery or valuable article or thing are kept.
· Search any person within, getting out of or getting in such building, place, vehicle, vessels or aircraft.
· Break open the lock of any door, box, locker, safe, almirah etc where keys are not available.
· Seize any such documents, books of accounts, money, bullion, jewellery etc found in course of such search.
(Provided any bullion, jewellery etc being stock in trade shall not be seized)
· Place mark of identification or make extracts and copies therefrom.
· May request the service of any police to comply with the provision of this section.
· May examine any person in possession or control of any documents, money, bullion etc., on oath
Where any books of accounts, other documents, money, jewellery, bullion etc are found in course of search procedure shall be presumed to be belonging to the person in control or possession of it.
The assets seized may be used to recovery any liabilities under this act. Any balance remaining after recovering defaults out of such assts may be discharged to the person from whom it was seized.
Section 133A of the Income tax Act empowers an income-tax authority to enter any place within the limits of the area assigned to him or any place occupied by any person in respect of whom he exercises jurisdiction, at which a business or profession is carried on and require any person who may at that time attending such business or profession:
(i) To facilitate inspection such books of account or other documents as he may require and which may be available at such place,
(ii) To facilitate verification of cash, stock or other valuable article
(iii) To furnish such information as he may require as to any matter
An income-tax authority may enter any of the aforesaid places only during the hours at which such place is open for the conduct of business or profession and, in the case of any other place, only after sunrise and before sunset.
POWER TO CALL FOR INFORMATION
Section 133 of the Income tax Act provides the power to its officer to call for information from any firm or HUF as regarding the name and address of its partners/member. He may also call for information from any person as regarding particulars of rent, interest, commission, royalty, brokerage etc paid by such person .
POWER TO IMPOSE PENALTY
Where any person fails to comply with the notice or the direction contained therein the notice, the penalty of Rs.10000 for each failure may be imposed subject to the provisions of the Income Tax Act.
Where any person conceals the particulars of his income/fringe benefit or furnished inaccurate particulars, the penalty to be imposed shall be imposed not less than the amount of tax sought to be evaded and not more than three times the amount of tax sought to be evaded.
Any person fails to keep and maintain any books of account and other documents as required by section 44AA or the rules made thereunder, in respect of any previous year or to retain such books of account and other documents for the period specified in the said rules, a penalty of Rs.25000 may be imposed. (Sec 271A)
Any failure to deducted tax at source the person shall be liable to pay, by way of penalty, a sum equal to the amount of tax which the person shall to deduct or pay tax. (Sec271C)
Non Submission of return before the end of the relevant assessment year attracts a penalty of Rs. 5000, which the Assessing officer on its own discretion may impose. (Sec 271F)
TAKING OR ACCEPTING CERTAIN LOAN AND DEPOSITS:
A person taking or accepting any loan or deposits amounting to Rs.20000 or more, it should be via A/C Payee Cheque or A/C Payee Bank Draft, subject to certain loan or deposits as per the provision of Sec 269SS of the I.T.Act. Contravention of this section attracts the penalty of an amount equal to the amount of loan taken or accepted as per Sec 271D.
So, it’s better to legitimately pay tax and relax oneself from the nightmare of the being caught by the tax authorities. Again Income Tax Return reflects your financial position and credit worthiness. At times you may require loan for personal or business use, then this financial statement and Tax Return will act a base documents for sanctioning and quantifying loan eligibility. Maintaining proper and accurate particulars and assets and liabilities helps to allocate assets at a optimum level as against liabilities.
TAX PLANNING à ENJOY TAX BENEFITS à PAY PROPER TAX à GET RELAXED
--- RAHUL PODDAR
Chartered Accountants
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