The Union government may be pushing for more disclosures and widening of the tax base but assessees in Gujarat have found innovative ways to evade taxes. In the financial year 2012-13, disclosures of unaccounted income more than doubled.

According to tax officials, buyback of shares through a web of holding companies, and transfer of property at lower than jantri rates are among the new ways adopted by taxpayers in the state to hide their real incomes.

A top income-tax official of Gujarat region said that all taxpayers are not dishonest.

“But there are scores of examples where properties were transferred to other names at less than jantri rates. This is just to avoid the capital gains tax. In some cases, fake or bogus identity was used in the property transfer. Buyback of shares through a web of holding and fictitious companies is another trick that is commonly used,” said a top income tax official.

For the Gujarat region, the Central Board of Direct Taxes (CBDT) has fixed the income tax collection target for 2012-13 at Rs26,552 crore. The actual collection, however, is falling short of the target because of the sluggish economy. Total collection till March 2 was Rs19,459 crore.
“We are hopeful of meeting the overall target as the last tranche of advance tax payments will be good. We will be able to meet the target,” the official said optimistically.

Meanwhile, the investigation wing of the income tax department has also worked hard to bridge the shortfall in collections. “Till December 2012, the total unaccounted income disclosure in the state was Rs1,352 crore, which is more than double of Rs648 crore in 2011-12,” the official said.

Taxmen say that instances of properties being transferred at less than jantri rates are quite large.

“In these cases, the aim is to avoid capital gains tax. What happens is that a series of transactions are shown and property is transferred from one name to another within a short period of time. Each time the value of the transaction shown is different but mostly below jantri rates,” another income tax official said.

He further said that in some cases, bogus parties, confronting parties and artificial disputes are also created so that the actual value of the transaction is less. “This ensures that there is no tax to be paid or the assessee has to pay lower tax,” the official added.

A maze of holding companies created for transfer and buyback of shares is another method by which assessees avoid tax.

“In these cases, shares are transferred or bought back by promoters who pay inflated premium on share prices. In certain cases, the company which has purchased the share or sold the share does not have the financial strength to do such transaction. Mostly unlisted companies are used as it is not mandatory for them to publish the buyback and other transactions,” the official said.