Finance minister Nirmala Sitharaman could effectively have a point when, in the context of the furore more than tax raids on filmmaker Anurag Kashyap and actor Tapsee Pannu, she asked why there wasn’t a equivalent reaction when the two had been raided in 2013. Apart from the challenge of why any action by a BJP government has to be justified by regardless of whether or not the Congress did the very same factor when it was in energy, the genuine query – that the FM did not shed any light on – is what the outcome of the 2013 raids had been how considerably undeclared earnings was discovered and how considerably tax was paid on this? While there is no such information publicly accessible for person instances, the CAG has carried out some evaluation at the aggregate level and even even though the CAG says – in its 2020 functionality audit of search and seizure – “search and seizure is a very powerful tool available to Income Tax Department to unearth any concealed income or valuables and to check the tendencies of tax evasion”, the information presented recommend the precise opposite is accurate. The information suggests search and seizure and survey – raids in preferred parlance – serve tiny objective and are finest kept to the absolute minimum, if not abolished altogether more so considering that, in any case, the taxman has a lot more information on folks and businesses from so numerous sources which includes, now, even GST transactions.
Apart from the CAG’s functionality audit of raids, the other report to look at is the one – also in 2020 – on direct tax collections. The second report points out that, in 2018-19, for instance, Rs 12.9 lakh crore of taxes had been collected from folks and corporations. Take the information in the report from FY15 to FY19 and, if you assume an typical successful tax price of 20%, it turns out the earnings shown by folks and corporations in this period was Rs 253 lakh crore. Juxtapose this with the quantity of earnings that the 50,877 raids claim to have unearthed through this period – this incorporates the quantity the assessees are supposed to have admitted to through these operations – and it turns out that, amongst FY15 and FY19, just .5% was added to the earnings of assessees. Given the message that tax raids send out of the taxman getting unfriendly, certainly such a modest raise in earnings levels is not worth the difficulty? Indeed, the very same CAG report points out that 82% of the total earnings and corporation tax is collected – 90% if you include things like, as you should really, cesses and surcharges – by way of TDS or voluntary measures like advance tax and self-assessment tax.
Even so, if the taxman’s intervention, by way of typical assessments or by way of search and seizures, adds 10% to the earnings of folks and corporations, this is a large quantity. There are two concerns right here. One, as the CAG notes, of the Rs 12.3 lakh crore of tax dues in FY19 – mostly the outcome of assessees difficult tax orders – only a tiny more than one % is truly collectible all of which tends to make you wonder what the point of most of the extra tax assessments is. In the case of raids, the CAG took a sample from the assessments that had been completed just after the raids amongst FY15 and FY18. It discovered that, for 84 groups exactly where the raids had resulted in an addition of Rs 24,966 crore to their earnings, much less than a fourth of this remained just after the instances had been by way of just the CIT(A) and ITAT appeals processes. Some aspect of the incredibly poor functionality, as the CAG points out, is due to poor paper work by the taxman, but it is very clear that tax raids serve a restricted objective – more so provided the vast details sources currently accessible to the taxman – when it comes to unearthing undisclosed earnings.