The Central Board of Direct Taxes (CBDT) said on Monday dismissed media reports that it had asked its officers to go beyond raids and threaten jail term while targeting tax evaders.
Stringent action in big cases of evasion would go a long way in demonstrating to compliant taxpayers that laws are just and fair, it said.
The media reports of jail term had stemmed from an internal discussion paper circulated late last month, based on a study conducted by the National Institute of Public Finance and Policy. Some reports claimed the CBDT had stressed the need to instill fear of "incarceration and consequentloss of liberty and social opprobrium" among tax evaders.
"In such cases where after intensive fact assessment, the department undertakes search and seizure action as permissible under the law, mere tax collection does not have deterrence value," the CBDT said on Monday.
"These need to be taken to their logical conclusion in terms of levy of penalty and launching of prosecution according to the provisions of the Income Tax
(I-T) Act... soft action in extreme and bigcases of tax evasion affects the behaviour of the compliant taxpayers." It said the media reports were out of context.
Further, CBDT said, "it may be worthwhile to mention that one of the issues for discussion during the All India conference of Chief Commissioners and Director Generals of I-T (held on 25-26 May) was Lack of Credible Deterrence Through Penalty and Prosecution - Causes and Ways to Improve".
"The discussion was within the limited context of cases where action under Section 132 of the I-T Act 1961 for search and seizure had been undertaken by the investigation division of the department. These are exceptional cases which are selected for intrusive action after detailed intelligence gathering and due diligence on the basis of credible evidence and are not the norm for routine cases. It may be noted that only 537 searches were conducted in financial year 2014-15 in which admitted undisclosed income was of Rs 10,288.05 crore," the board said.
