Available remedies for reporting Tax Evasion in India : A comparative analysis
Introduction
The growing instances of tax evasion has created a huge nuisance for the revenue and treasury of India, causing a deficit for the government in spending into much needed portfolios such as infrastructure and education. Keeping these problems in mind, the government has time and again brought in force multiple schemes in order to curb such menace, creating an opportunity for individuals to come forward and disclose such wrongful evasions. In 2018, one such scheme was brought by the finance ministry, by enticing informants with a reward upto 5 Crores when the disclosures are related to foreign assets and upto 1 crore, when the disclosures are related to income tax and benami assets. Additionally the department of Income tax also maintains a e-portal for reporting such evasions in form of a tax Evasion Petition. Detailed analysis of the procedure is dealt into this article. 
Informant Reward Scheme 2018.
‘Guidelines for grant of rewards to Informants, 2007’, as was issued in 2007 vide Board’s letter referred above, has been revised and “Income Tax Informants Rewards Scheme, 2018” has been issued in supersession of it with effect from date of issue.
Informant under this scheme
A person will be considered an informant for the purposes of this Scheme only if he has furnished specific information of substantial tax evasion in a written statement in the prescribed form (Annexure – A to this Scheme) and, based upon which, an Informant Code has been allotted to him by the prescribed authority. No claim for reward shall be entertained from a person who is not an informant under this Scheme, even if such person has furnished some information in any manner.
“Explanation: A person cannot claim any reward under the scheme if he is not an informant under the scheme, even if such person has furnished specific information of income or assets in any other manner, e.g., through letter, e-mail, CD, WhatsApp, SMS, phone, posting in social networking site or publishing letter in newspaper or any other media.“
Procedure of furnishing information by Informant
How application to be filed
- A person who wants to give information of substantial tax evasion in expectation of reward under this scheme may contact the DGIT (Inv.) (Directorate General of Income Tax Investigation )/PDIT (Inv.) ( Principal Director of Income Tax) /JDIT (Inv.) concerned.
- If he appears before DGIT (Inv.)/PDIT (Inv.), they will direct him to appear before JDIT (Inv.) concerned to furnish the information in the prescribed form (Annexure-A). If the jurisdictional JDIT (Inv) considers the information prima facie actionable, the person shall have to submit the information in prescribed format in Annexure – A by appearing in person before the JDIT (Inv), when called. In case of any difficulty, the person desirous of giving specific information may contact the PDIT (Inv) of the area.
- Where a person gives information to an Income Tax Authority other than DGIT (Inv.)/PDIT (Inv.)/JDIT (Inv.), such person should be asked to contact the DGIT (Inv.)/PDIT (Inv.)/JDIT (Inv.) concerned, and thereafter, the aforesaid procedure, as the case may be, for receiving the information is to be followed by these authorities.
Finality of Decision
The decision of PDIT (Inv) will be final in the matter of allotment of Informant Code under this Scheme.
For foreign persons
Where a foreign person wants to give information of undisclosed foreign income/assets of a person liable to tax in India, he may contact the Member (Investigation), CBDT, North Block, New Delhi-110001 either in person or by post or by a communication at email id [email protected] with a copy to [email protected] for further action.
Group Informants
If the information is furnished by a group of informants (more than one informant working together), the prescribed form, statements, etc. must be filled and signed by all such informants, jointly and Informant code will be allotted to each of them separately. The reward payable in such cases shall be disbursed in equal proportion, unless specified otherwise by such informants at the time of furnishing information in the prescribed form (Annexure-A).
If an informant furnishes information in respect of more than one group of cases, the prescribed form at Annexure-A shall be filled and signed separately for each such group. However, in such a situation the Informant Code for such informant shall remain one and the same.
The informant shall be liable to render assistance as may be required by the JDIT (Inv.) or any other investigating officer to whom the JDIT (Inv.) concerned may assign the investigation in the matter of information given by the informant.
DsIT (Inv) are presently posted at Ahmedabad Name and address of offices from where contact details of JDsIT (Inv) can be obtained are given in Annexure – B
The informant shall be given a unique Informant Code and the person will always be identified on the basis of that Informant Code.
Liability for false evidence
It should be noted that furnishing false information/evidence is an offence and a person giving false information/evidence/statement will be liable to be prosecuted for such offence.
Reward
Reward under this scheme can be granted in two stages :
- Interim Reward
- Under the Black Money (Undisclosed Foreign Income and Assets) Act, 2015
- Interim reward up to 3% of the additional taxes levied (which is directly attributable to the information furnished by him), under the Black Money (Undisclosed Foreign Income and Assets), Act, 2015, may be granted on statutory determination of undisclosed foreign asset/income following completion of assessment proceedings under sub-section (3) or (4) of section 10 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, subject to a ceiling of the Indian Rupees 50,00,000 (Rupees Fifty Lakh or five million) to an informant for the information given at a time in a single Annexure – A form when the authority competent is satisfied that assessment made is likely to be sustained in appeal and taxes levied are likely to be recovered.
- Under the Income Tax Act, 1961 ( fixed rate 1%, variable ceiling limit depending upon amt of cash seized)
- Interim reward up to 1% of the additional taxes realizable, which is directly attributable to the information furnished by the informant, on the undisclosed income detected by the Investigation Directorate under the Income-tax Act, 1961, may be granted subject to a ceiling of Indian Rupees 10,00,000 (Rupees Ten Lakh or one million) to an informant for the information given at a time in a single Annexure – A form when the competent authority is satisfied that the additional taxes on the income detected are likely to be recovered.
- Where specific information of unaccounted/undisclosed cash is given by informant which leads to seizure of the cash exceeding Rupees 1,00,00,000 (Rupees one crore or Ten million) as undisclosed income/asset during search & seizure action u/s 132 of the Income-tax Act, 1961, the ceiling of interim reward shall be Indian Rupees 15,00,000 (Rupees Fifteen Lakh or One and half million) even though the rate will be same at 1% as above.
Timeline for payment of interim reward
- Under the Black Money (Undisclosed Foreign Income and Assets) Act, 2015
Within four months of completion of the relevant assessments under sub section (3) or (4) of Section 10 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
- Under the Income Tax Act, 1961
Within four months of forwarding of final investigation report by the Investigation Directorate concerned to the Assessing Officer in cases where information of undisclosed income/assets liable under the Income-tax Act.
- Final reward
For information of undisclosed income/assets liable under the Income Tax Act, 1961
(i) The maximum amount of reward payable to an informant shall not exceed 5% of the additional taxes levied and realized, which are directly attributable to the information furnished by him, under the Income-tax Act, 1961 subject to a ceiling of Indian Rupees 50,00,000 (Rupees Fifty Lakh or Five nullum) after the assessment has become final on the issues relevant for determination of reward by appeals, revision etc. .
(ii) If the informant has claimed reward for giving information of evasion of tax payable under Income Tax Act, 1961, as well as benami properties based upon substantially the same facts and has been found eligible for grant of reward under the Benami Transactions Informants Reward Scheme, 2018 as also the Income Tax Informants Reward Scheme, 2018, the total amount of reward under both the schemes taken together shall not exceed Rupees 1,00,00,000 (Rupees one crore or Ten million)
Timeline for final reward
All reward granting authorities shall endeavor to pay final reward to an informant eligible for such reward, within six months of fulfillment of the conditions mentioned in this scheme.
Factors relevant for determination of interim or final reward
The following factors may be considered for grant and payment of interim or final reward:
(i) Fulfillment of conditions for grant of interim or final reward, as the case may be, mentioned in this scheme.
(ii) Accuracy and precision of the information furnished by the informant.
(iii) Extent of usefulness of information including supporting documents etc. provided by the informant.
(iv) Extent and nature of assistance rendered by the informant in detection of undisclosed income/asset.,
(v) In case of final reward, the amount of additional taxes levied and realised on the undisclosed income/asset detected, which is directly attributable to the information received from the informant.
(vi) Risk and trouble undertaken and expenses incurred by the informant in securing and furnishing the information
Circumstances under which an informant will not be eligible to get any reward
No reward shall be granted to an informant under certain circumstances which may include the following:
(i) Where the information is not provided in accordance with the Scheme
(ii) If terms and conditions of the scheme are not fulfilled; or
(iii) Where the information given is not of substantial tax evasion; or
(iv) Where the information given is vague/non-specific and/or of general nature; or
(v) Where the information given is already available with the Income Tax Department; or
(vi) Where the information is not received directly from the informant but through any organization other than Income Tax Department; or
(vii) Where additional taxes on the undisclosed income detected are not directly attributable to the information given by the informant; or
(viii) Where Income Tax Department has evidence that the information given by the Informant has been shared by him or any other person authorized by him, with any other entity/agency including media; or
(ix) In respect of incidental or collateral benefit which may arise to revenue in any other case as a result of the information furnished by the informant.
Nature of reward and prohibition on litigation/representation
Reward in accordance with this scheme shall be ex-gratia payment, which subject to this scheme, may be granted in the absolute discretion of the authority competent to grant reward. The decision of the authority shall be final and it shall not be subject to any litigation, appeal, adjudication and arbitration except review as provided below in this Schem
- Tax Evasion Petition- to be filed under the E-Portal
Brief Introduction
The Central Board of Direct Taxes has launched an automated dedicated e-portal on the e-filing website of the Department to receive and process complaints of tax evasion, foreign undisclosed assets as well as complaints regarding benami properties.
Procedure for filing a tax evasion petition.
File complaint under the ‘Submit Tax Evasion Petition or Benami Property holding’ through a link on the e-filing website of the Department https://www.incometaxindiaefiling.gov.in/ under the head “Submit Tax Evasion Petition or Benami Property holding “.
The complainants are required to choose whether:
(i) If they want to file a simple complaint regarding tax evasion, foreign undisclosed income/asset, benami property without claim for reward or
(ii) If they want to become informer and claim reward
The facility allows for filing of complaints by persons who are existing PAN/Aadhaar holders as well as for persons having no PAN /Aadhaar.
After an OTP based validation process (mobile and/or email), the complainant can file complaints in respect of violations of :
(i) the Income- tax Act, 1961,
(ii) Black Money (Undisclosed Foreign Assets and Income) Imposition of Tax Act, 1961 and
(iii) Prevention of Benami Transactions Act (as amended)
There are three separate forms designed for the above purpose”
(i) Form-1 Complaint regarding Tax Evasion
(ii) Form-2 Complaint regarding Undisclosed Foreign Assets, and
(iii) Form-3 Complaint regarding Benami Properties/Transactions
Upon successful filing of the complaint, the Department will allot a unique number to each complaint and the complainant would be able to view the status of the complaint on the Department’s website.
Note – The existing portal of the Department at www.incometaxindiaefiling.gov.in would not be available to taxpayers as well as other external stakeholders for a brief period of 6 days i.e. from 1st June, 2021 to 6th June, 2021.
Analysis
Upon a stark analysis of the various formats of disclosing tax evasion. The above mentioned two broad procedure formulates the exhaustive list.
- Tax evasion petition filed through the e-portal of the Income tax department
- Submission of complaint under the INCOME TAX INFORMANTS REWARDS SCHEME, 2018.
Procedural explanation
For ease and convenience the tax evasion petition is filed in the income tax e-portal. Where the option is availed to the informer, whether he/she wants to get rewarded for the information they are providing. Following few other procedural steps such as providing PAN/Aadhar details. The informer is then asked to fill Form 1 ‘Complaint Regarding Tax Evasion’. Upon successful filing of the complaint, the Department will allot a unique number to each complaint and the complainant would be able to view the status of the complaint on the Department’s website.
However in the case of the Informant Reward Scheme 2018. The procedure is described as above, the relevant difference between the scheme and petition is that the disclosure is made to the JDIT/DGIT/PDIT(Investigating) of the Income tax and the matter is then referred to the JDIT(inv) who inturn would admit the matter or reject the matter. The decision of PDIT (Inv) will be final in the matter of allotment of Informant Code under this Scheme.
Applicability of RTI on scheme and petition
Information in respect of investigation carried out by office of Directorate General of Income Tax (Investigation) in respect of TEP is not required to be intimated to complainant as said office is outside purview of RTI Act, 2005; only broad outcomes after completion of investigation could be communicated only when directed by High Court[1]
Even in the case of Shri Brij Ballabh Singh vs. DGIT (Investigation), Lucknow that complete disclosure of the outcome of a certain TEP can be misused and thus only a broad outcome can be provided as information to the initiator of the TEP. Thus, in case of information requested on the status of a TEP, the broad outcome can be provided without disclosing the details of the investigation and any other data that could hamper the process of investigation.
Therefore whether RTI can be filed for seeking status of Tax Evasion petition – Yes. Whether the RTI can be filed for seeking the status of the reward amount.[2]
However the same is not the case with the Informant Rewards Scheme 2018. The Central Board of Direct Taxes or the Income Tax Department does not provide feedback and/or update on the information received or subsequent actions taken thereon. Disclosure of information regarding specific taxpayers is prohibited except as provided under Section 138 of the Income-tax Act, 1961 and under Section 84 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, read with Section 138 of the Income-tax Act 1961 Directorates General of Income Tax (Investigation) are exempt from providing information under Section 24 of the Right to Information Act, 2005 read with Second Schedule thereof.
Efficiency of the systems? Possibility of willfully sitting on Information by authorities
In case of any grievance in the Informant Rewards Scheme 2018, the informant may contact the PDI1 (Inv) concerned who shall take necessary steps to redress the grievance expeditiously.
“In case it is found that the antecedents of the informant, nature of the information furnished by him in past and his conduct justify not taking cognizance of the information furnished by him, the matter shall be referred by the JDIT (Inv) to the PDIT (Inv) concerned and, if approved by the PDIT (Inv), it would be open to the JDIT (Inv) to ignore the information furnished by the informant.”[3]
Therefore it can be said that there lies a certain amount of discretion with the PDIT to sit on the information and not take any actions upon the said information to reopen the assessment or conduct any raid or search & seizure against the assessee in question, which may cause imparity to justice. Furthermore on non-application of the RTI act, the same cannot be brought in check by the informant and the tax evader can be left untaxed.
Thus on a comparative note, the Tax Evasion petition stands as a more proactive and vigilant form of mechanism in order to curb the tax evasion practises.
[1] Principal Director, Income Tax, v. Rajiv Yaduvansh [2021] 125 taxmann.com 100 (Delhi)/[2020] 429 ITR 369
[3] INCOME TAX INFORMANTS REWARDS SCHEME, 2018, LETTER [F.NO.292/62/2012-IT (INV.III)/26]., DATED 23-4-2018
Author: Dhruv Chhajed
Editor: Adv. Aditya Bhatt & Adv. Chandni Joshi
