More for less: Tax searches down, but seizures shoot up

The Income Tax (I-T) department seems to have mastered the art of getting more for less. No strong-arm tactics here; it is just that the department has improved what it calls the effectiveness of its search operations through better targeting.

Consider this: While the amount of assets seized more than doubled in the past four years, the number of raids came down substantially. The I-T department had searched 529 groups in 2006-07. This dropped to 454 in 2007-08, 429 in 2008-09 and 409 in 2009-10.

The value of assets seized in a year, however, more than doubled from Rs 366 crore in 2006-07 to Rs 786 crore in 2009-10. In 2007-08 and 2008-09, the assets seized were worth Rs 427 crore and Rs 550 crore, respectively.

“The effectiveness of the search has increased because we are now acting on more specific information. The I-T infrastructure has become more sophisticated and the latest tools used by our officers, such as Integrated Tax Payer Data Management System (ITDMS), are throwing up excellent cases (read: big fishes),” said a finance ministry official on condition of anonymity.

A tax expert associated with an industry chamber said the yield per search had gone up in the last few years because the finance ministry was more keen on high value searches. He said in many cases the department first conducts a survey to get an assessment of the amount involved in the case and if there is huge money involved, the investigation often leads to a search and seizure.

The number of searches has also come down because the method of filing income tax returns has been simplified, resulting in better tax compliance, the official said.

The government is using ITDMS for making 360-degree profiles of high net worth assesses. It is comparing data from various sources like the online tax accounting system, annual information return, assessment information system and tax deducted at source.

The government has also set up cyber forensic labs in Mumbai and Delhi for cloning digital data during search and survey operations. The labs have been found to be useful in breaking password, locating hidden, secret and deleted files. Tax officials are also using portable forensic labs to seal the data on the spot of investigations. Such labs were used during the investigation on the Indian Premier League.

In a search operation (called raid in common parlance) conducted under section 132 of the Income Tax Act, investigators can enter the offices and residence of a company any time without notice and seize the documents. A director of investigation or commissioner of income tax can issue a warrant for such an operation.

In a survey conducted Section 133, investigators enter premises in normal business hours. They cannot seize documents or take away any valuables with them, unlike in a search. A survey is conducted on the instructions of a joint commissioner or a joint director of the I-T department.