This New Year could well be forgettable if you are the Income Tax (I-T) departments chosen one. Those with unaccounted cash stashed
away inside mattresses, behind false ceilings or dummy firms, are likely to be greeted by a rather unfriendly visit by officials.
All this is not without reason. Faced with a worrying situation of shrinking collections and a dent in its image, the Mumbai I-T department has declared war on tax evaders and is gearing up for some high-profile raids to send out a clear message.
Through a 50-slide power point presentation peppered with inspirational quotes (a copy of which is available with ET), top I-T officials have been exhorted to put in full efforts to mop up revenue collection from every possible source.
The presentation was made during a high-level meeting of the department in Mumbai on Thursday. A source present at the meeting told ET the department has decided to activate its enforcement wing, which is responsible for carrying out raids on tax evaders.
The numbers tell the story. So far in 2008-09, the Mumbai I-T department has only collected Rs 83,531 crore against its full years target of Rs 1.50 lakh crore. Terming the situation as grim, the presentation speaks of the Mumbai region passing through its most challenging time, and that the departments reputation was at stake.
Among other things, the I-T staff has also been asked to defer any plans of taking time off. The message is amply clear, when it says that there is a need to work in the coming three months as in a state of emergency.
Advance tax collection has fallen by 8% while the the income-tax advance tax has dipped by over a third. The current growth is at a woeful 5.5% against the target of 31.6%. The growth in tax collection during the same period last fiscal was a phenomenal 60%. The only silver lining is that the TDS collection has jumped by 37%.
Interestingly, the presentation makes no mention of the slowdown in the economy, which is probably the biggest dampener as far as the shortfall
story goes. If the presentation is an indicator of what might follow, tax evaders might have to get their act together. This, in the departments language, is euphemistically referred to as a search survey.
Evidently, there is a sense of conviction that the best way to go about it is by using the search mechanism. Search is the ultimate action for creating deterrence. Conduct searches that would have maximum impact, says one slide, and this is how it is proposed to be done.
Each range (area division there are 87 in all) should conduct one survey per week. If there are four surveys each month, the IT-department thinks they will complete 350 surveys. In three months time, we should be able to conduct 1,000 surveys, says the presentation.
In an attempt to be more proactive, top I-T officials have been summoning CEOs and CFOs of leading companies to explain the reasons for low tax payments this fiscal compared to last year. The department would be launching combing operations and ensure that demand notices have been served in respect of each demand raised, including processing of returns.
It would also be setting up a collection target for tax recovery officers, who have been asked to complete processing of returns for 2007-08 as quickly as possible.
The focus will be on transfer pricing cases as they have high revenue potential. The department has also asked the officers to pass as many orders as possible so that a follow-up assessment can be completed by mid-February this year.
It has urged its foreign tax department responsible to collect tax from overseas entities operating in India to make efforts to maximise revenue collection. Last fiscal, this department collected more than Rs 10,000 crore. The advance tax part has not missed the departments attention, which has been on the lower side.
It has asked its officers to be alert to big financial transactions. Receipts by banks from the government on account of loan waivers and big spending by the government and other agencies in areas like TDS are among these.