Tax evasion could land you behind bars if the countrys direct taxes authority has its way. The central board of direct taxes wants to prosecute tax evaders under the tough anti-terror financing law, even as it looks to adopt a more friendly approach towards honest tax payers.
It has proposed to the department of revenue to bring offences such as concealment of income, not filing income tax returns, failure to deposit tax deducted at source and giving false evidence under the ambit of Prevention of Money Laundering Act or PMLA.
If these offences become scheduled offences under the anti-money laundering law, they will invite rigorous imprisonment of three to seven years and a fine of up to Rs 5 lakh. The trial will be faster in the case of offences under PMLA as these are tried in special courts and the accused has to prove that he is not guilty.
The board has written to the Department of Revenue to include these as predicate offence under the PMLA, a finance ministry official said. The department of revenue is an arm of the finance ministry that administers the money laundering law.
Under the current rules the income tax department has to take law ministrys permission to initiate prosecution against tax evaders. The cumbersome procedure has meant that so far no evader has been put behind the bars although there is a provision for six months imprisonment and penalty on tax evasion. The tax authorities prefer not to invoke these provisions as prosecution could take many years.
The income tax authorities have generally not launched prosecution and even in cases where prosecution have been launched, they have been compounded into fines, said Amitabh Singh, partner at consulting firm Ernst & Young. Considering the fact that assessing officers are hesitant to launch penalty proceedings for concealment of income or furnishing of wrong particulars, PMLA may acquire a draconian nature, he said.
The authorities can also attach property derived or obtained as a result of a scheduled offence that may be confiscated and disposed of.
The amended money laundering law covers offences such as insider trading and market manipulation, human trafficking, smuggling of migrants, piracy and environmental crimes, over invoicing and under invoicing under customs inviting stricter punishment.
As on September 30, 2009 the total direct taxes dues were Rs 1,98,506 crore, including Rs 1,33,232 crore on account of corporate tax and Rs 65,274 crore from individuals. Of these arrears as much as Rs 1,85,437 crore is difficult to recover for various reasons. These include companies under liquidation, no assets or inadequate assets, stays given by courts and demand notified under special courts.
India has tightened its anti-money laundering law in line with the recommendation of the global anti-terror financing watchdog Financial Action Task Force (FATF) to gain its membership. Globally, many FATF nations also have these offences under their money laundering laws.
The FATF is evaluating whether Indias local laws meet its stipulations. Membership of this body will get India easy access to real-time exchange of information on money laundering and terror financing and a key global platform to raise pitch against export of terror.