RAW training for India's taxmen

Income Tax sleuths are looking forward to be trained in the ways of intelligence gathering similar to RAW and IB personnel as they feel the present techniques employed by them are 'ad hoc'.

In a report to the Union finance ministry, the Income Tax department's Pune division (Investigation) has said: "The manifest actions of the search, seizure and surveys are based on intelligence gathered about tax evaders and their modus operandi."

In an era of high spending net worth individuals and families, there is a need for the Income Tax department to streamline its intelligence gathering machinery by adopting latest methodogies used by agencies like RAW and IB, said the Perspective Plan For Investigation Wing 2005-2010 prepared by a panel headed by director general (Investigation) S K Sharma.

"We aim to replace this system with a more systematised and organised intelligence gathering. Officers of the wing may be trained in modern techniques of intelligence gathering by the personnel of RAW, IB and a time-bound programme for coordination with these agencies be drawn up and implemented in the next six months", the report said.

The report said the department proposes to gather information on various trades/industries by cultivating insider informants on a long-term basis.

"This would be in addition to the present case specific reward scheme...which would be modified to make it more responsive and attractive," the report said.

Search and seizures are important for detecting tax evasion. As the economy becomes less and less cash-driven, the tax evasion techniques are bound to be increasingly reliant on modern and sophisticated technology, the recommendations said.

"Towards the objective of achieving a non-intrusive technique for investigation, we should adopt a focussed approach to collect information on hig spenders. Source of such expenditure shall be verified through a team of officers and staff well-trained in using modern method for such verification", it said.

With regard to investigation on transactions involving national and financial security of the country, information gathered from security agencies can be used effectively for investigations of suspicious transactions (of individuals/groups) involving crime/drug money, it said.

The recommendations lay stress on the need to build trade-wise expertise by the Income-Tax sleuths.

"It is well known that tax evasion practices change from industry to industry. Certain evasion practices are more prevalent in particular areas/industry.

"Accordingly, the patterns of tax evasion encountered by various directorates are different. We, therefore, should focus on developing expertise on specific trades and industries for which individual directorates may volunteer", the report said.

Stressing the need for streamlining the presently prevalent system of valuation of an asset by a valuer, it highlighted the lacunae in the Income Tax Act providing exemptions to certain entities.

"The IT Act provides exemption to certain incomes for which certain entities are kept out of tax net. This is done to achieve various objectives like encouraging exports, supporting senior citizens and to encourage organisations undertaking charitable work etc.

"However, such exemptions are being misused on a large-scale. This endangers the fairness of the tax system.

Incomes liable to tax are wrongfully shown to have been earned through tax exemption sources/entities", the report said.

There was a need for fast and effective prosecution of tax offenders, it said.

The department wanted less dependence on police for security during search and seizure operations and suggested creating a uniformed force for the investigation wing on the lines of the one the one in the Customs and Central Excise Department.

Do you want to discuss stock tips? Do you know a hot one? Join the Stock Market Investments Discussion Group