How To Make Dubiously-Seized Cash Legal

The word ‘draconian’ has the following synonyms: harsh, severe, strict, extreme, drastic, stringent, tough, cruel, brutal, oppressive, ruthless, relentless, summary, punitive, authoritarian, despotic, tyrannical, Amendment to Income Tax Act in the Finance Bill 2017, arbitrary, repressive and iron-fisted

‘Draconian’ was invented to describe what kind of arbitrary power a government can wield to get its way. Ours seems to have taken this up as a challenge and introduced a queasy little amendment in the proposed Finance Bill, 2017, which turns Income Tax officers into… well… pirates.

Search and Seizure

Section 132 of the Income Tax gives officers of the tax-world powers to raid businesses and individuals if they have “reason to believe” that they are being shady.

By using this section, they can enter and search buildings…

Get Daya-like powers and break down doors…

Search any person on the premises they are raiding…

You must have heard stories about tax raids. Like this recent one where 40 coaching centres in Kota were raided and Rs 100 crore was recovered. Giving powers to the Income Tax department to conduct these search and seizures are necessary and play the important function of keeping tax thieves in check. But there are times when the Income Tax department might raid the wrong people. They’re only human!

For that, there is a “reason to believe” protection available for the person getting raided. The IT officers can be challenged and asked to explain why they conducted the raid. These cases are referred to the Income Tax Appellate Tribunal, which is a special quasi-judicial body established to decide on such things.

But that is all about to change dramatically.

Reason to believe

Belief is an interesting concept. It’s an acceptance that something exists or is true, and does not require this acceptance to be predicated on proof. I can choose to believe that aliens exist, but to convince someone who doesn’t, I’ll have to use my powers of persuasion. That’s what passes for evidence when it comes to belief. I will have to explain my “reason to believe” that there is extraterrestrial life on other planets. In much the same way, tax officials can believe all they want that a certain person is stashing a lot of illicit wealth, but when asked, they are obligated to explain what that reason is.

Not any more.

The Government has proposed a curious little amendment in the Finance Act 2017 to allow IT officials not to disclose their reasons for conducting search and seizure.

In a future Income Tax raid, this can actually happen:

Owner: “Oi! Why you do dees?”IT raid-god: “We have reason to believe that you have been doing shady things.”Owner: “What reason? What shady things?”IT raid-god: “I’m not gonna tell ya! Because I don’t have to tell ya!Owner:

But wait, there’s more. This change will be retrospective in nature.

Assessment for people who have been raided now can be done from 1962 onwards. They can be ordered to hand over their books of accounts, property, assets from 1975 onwards. Simply put, the income tax department can now create trouble for anything the assessee or his father or his grandfather has done in the past. It gets even worse because now IT officials can attach and seize any property of the person they are raiding.

Owner: “This is draconian…”IT raid-god: “Reason to believe.”Owner: “You can’t…”IT raid-god: “Reason to believe.”Owner: “My house…”IT raid-god: “SHUT UP! I SAID REASON TO BELIEVE.”

A possible political weapon?

During demonetisation, we saw the IT department go bonkers with cash seizures across the country. These seizures were conducted despite there being no law or regulation that specifically forbids people from holding cash. The seized amount will have to be justified as originating from an illegal source if IT officials want to punish the hoarders. Otherwise, hoarders would go scot free. According to one story in Quint, the instructions for raids were being given directly from the Prime Minister’s Office. “Sources said that no official instructions or orders have been issued by the Revenue Department of the Finance Ministry for the I-T sleuths to swoop on people suspected to be holding, or actually holding, bulk cash.”

This new amendment in the Income Tax act will give arbitrary powers to tax officials. They will be able to raid anyone they want, for anything they ‘believe’ their target has done in the past or present. All the cash and property seized during the 50 days of demonetisation will be held by the government forever, without giving a reason as to why they are doing so.

The IT Department comes directly under the central government’s control. The kind of havoc they would be able to cause by unleashing these raid-gods on opponents and dissidents would be unprecedented. This is not just about the present Bharatiya Janata Party government misusing this provision to get their way, but also about governments in the future using this provision as a political weapon.

The Finance Bill 2017 will be discussed and voted upon in the second half of the budget session of Parliament commencing on March 9. One really, really hopes that they don’t repeat what they did in 2016 and ram this bill through with this scary amendment intact.

Until then: CONSTANT VIGILANCE!

The author can be contacted on Twitter @Memeghnad