India’s Superpower Euphoria CLXXII

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India’s Superpower Euphoria CLXXII
http://cogitoergosum.co.cc/2010/12/29/indias-superpower-euphoria-clxxii/

29 12 10 Written by navanavonmilita

Pranab Mukherjee to make big Budget change in direct tax laws
Pradeep Thakur, TNN, Dec 30, 2010, 12.37am IST

Comments (5)

Tags:Pranab Mukherjee|Income Tax Settlement Commission|Central Board
of Direct Taxes

NEW DELHI: Saddled with huge tax arrears of Rs 2,50,000 crore — more
than half of the total tax collection projected for 2010-11 — finance
minister Pranab Mukherjee is likely to introduce in the forthcoming
Budget some major changes in direct tax laws that could help in swift
recovery of a significant portion of the arrears.

The changes proposed include reducing the limits to approach Income
Tax Settlement Commission (ITSC), allowing those who have faced I-T
raids to approach the commission even if the demand raised against
them is not hefty.

Till last year, search cases were debarred from approaching the ITSC
for settling their tax demand cases. The FM had in his 2010-11 Budget
allowed these cases but the bar was kept at Rs 50 lakh and above, the
tax demand raised. However, from this year, the government may reduce
this and restore it to pre-2007 level of Rs 3 lakh in cases of search
and survey cases and Rs 1 lakh for others.

Other changes proposed include measures to improve the functioning of
the settlement mechanism under direct tax laws — bringing all types of
cases within the ambit of the ITSC and giving a security of tenure to
the members of the commission. These changes may reflect in the
forthcoming budget, sources said.

The matter was discussed by the FM in a pre-Budget review meeting with
senior officials of the Central Board of Direct Taxes (CBDT) last
week. The CBDT is working on the details to be incorporated in the
Budget.

The FMs directive is to streamline the ITSC and make it a preferred
mode of resolution for tax disputes, a senior CBDT official said.
Mukherjee acknowledged the role of the settlement commission in
reducing litigation with taxpayers and its potential for reducing tax
arrears.

Out of the nearly Rs 2.50 lakh crore arrears, nearly Rs 99,000 crore
is locked in tax disputes between the I-T department and taxpayers.
The options were further squeezed when former FM P Chidambaram
disempowered the ITSC in 2007 to take up search and survey cases.

Till March 31, 2010 the total arrears were Rs 2.30 lakh crore, and in
the new fiscal year another Rs 20,000 crore has been added to this
figure. Last year, the department had managed to recover nearly Rs
12,000 crore while the target set for this year has been fixed at Rs
14,000 crore.

To speed up the recovery process, the I-T department has circulated
details of at least 550 high net worth individuals and entities — who
have willfully defaulted or have unpaid tax of Rs 25 crore and above —
to field officers for recovery, sources said. The tax arrears have
doubled in the last two years to Rs 2.50 lakh crore, almost 66% of the
total direct taxes collection of 2009-10.

Box

1. FM may modify tax laws to accommodate more I-T raid cases for
settlement
2. Details of 550 high net worth willful defaulters put on priority
3. Dossiers have details of properties, bank transactions &
investments
4. IT Officers have been asked to initiate attachment of assets if
necessary
5. Individual Transaction Statement (ITS), special tool to help track
related assets of defaulters

Readers’ opinions (5)

Recommended (1)

richard dias dias (Chembur, Bombay)
3 mins ago (08:55 AM)

So that much money is not accounted for. Is it held up in foreign
accounts, real estate, gold and jewellery or in unaccounted loans lent
at high interest rates? The co-operative housing societies collect
unaccounted transfer fees. They even allow undervalued transfer of
flats. Some bigwigs finance construction work at an exorbitant
interest rates. Some even trade in hutment properties. In big cities,
even the footpath trade is financed. How can a governing authority
hold all these people accountable?

S L Gera (Delhi)
1 hr ago (07:45 AM)

Will the Finance Minister also come out with some proposal to mop up
black money?
Agree (4)Disagree (0)Recommend (1)

sam (melbourne) replies to S L Gera
9 mins ago (08:49 AM)

If Then How he will manage the next election expenses?

ssmoorthy (usa)
2 hrs ago (06:52 AM)

The income tax in India is out moded for the enormous country with
innumerable small businesses.It is time to consider VAT(value added
tax) and abolish income tax altogether. More than 50% of the income is
not reported by many except for the monthly wage earners.We have to
change the system so that fleecing of India does not occur.
Agree (2)

Abhi (Vadodara)
3 hrs ago (05:55 AM)

One more Aaam aadmi myth to be busted… congress is one more step ahead
after making so many scams under it now wants officially money by
raising tax on common people… truly only one party deserves to be call
Aaam Admit party and thats Congress (Good luck people who chose such
government.)
Agree (14)Disagree (4)Recommend (3)

The Personal Income Tax in India: Compliance Costs and Compliance
Behavior of Taxpayers

Tax Evasion

Tax Evasion entails the efforts that are made by trusts, individuals,
firms, and various other entities to avoid paying taxes by illegal and
unfair means. The Evasion of Tax usually takes place when taxpayers
deliberately hide their incomes from the tax authorities in order to
reduce their liability of tax.

Evasion Tax takes place when the people report dishonest tax that
includes declaring less gains, profits, or income than what has been
actually earned and they even go for overstating deductions. The
Evasion of Tax level depends on certain factors such as fiscal
equation which means that people’s tendency to pay less tax declines
when the payment due from taxes becomes obvious. The level of Tax
Evasion is also dependent on the tax administration’s efficiency and
corruption levels.

The level of Evasion Tax also depends on the chartered accountants and
tax lawyers who help companies, firms, and individuals evade paying
taxes. Tax Evasion is a crime in all major countries and the guilty
parties are subjected to imprisonment and fines. The various methods
of Tax Evasion are:

* Smuggling
* Customs duty evasion
* Value added tax evasion
* Illegal income tax evasion

Smuggling is a method of Tax Evasion, following which people export or
import foreign goods through routes that are unauthorized. People
resort to smuggling for they want to avoid paying total customs duties
that are chargeable and also when they want to import items that are
contraband. Customs duty evasion is another method of Tax Evasion
under which the importers evade paying customs duty by false
declarations of the description of the product and quantity. The
importers in order to evade paying customs duty also resort to under-
invoicing.

Another method of Tax Evasion is value added tax evasion under which
the producers who collect from the consumers the value added tax evade
paying taxes by showing less sales amount. Many people earn money by
means that are illegal such as theft, gambling, and drug trafficking
and so they do not pay tax on this amount and thus this is another
method of Tax Evasion that is called illegal income tax evasion.

Tax Evasion results in the loss of revenue for the government and so
ideally, no one should be indulging in it and the Indian government
must also take steps in order to stop Evasion of Tax by the people.

Purpose of Taxation

The main purpose of taxation is to accumulate funds for the
functioning of the government machineries. No government in the world
can run its administrative office without funds and it has no such
system incorporated in itself to generate profit from its functioning.

In other words, a government can run its administrative set up only
through public funding which is collected in the form of tax.
Therefore, it can be well understood that the purpose of taxation is
very simple and obvious for proper functioning of a state. Taxes are
charges levied against a citizen’s personal income or on property or
for some specified activity.

Further, the other important purposes of taxation are as follows -

* Increase in effectiveness and productivity of the nation
* Increase in the quantum of revenue collection
* Improvement in services of the government
* Improve employment at all industry verticals
* Induction of modern technology in to the system
* Rationalization of terms and condition of the economic system
* Rationalization of employment terms and conditions

There are basically two types of taxes, like -

* Direct tax
* Indirect tax

Further, it is sub-divide into major groups like -

* Income tax
* Wealth tax
* Gift tax
* Expenditure tax
* Interest tax

The present day tax structure of India finds its root in the first
draft of Indian taxation system, which was incorporated in 1922. The
first draft was amended a number of time according to the economic
policy requirements. The main acts and rules that governs the main
purpose of taxation in India is the income tax acts and rules, which
are as follows -

Acts

* Finance Act, 2007- An Act to give effect to the financial proposals
of the Central Government for the financial year 2007-2008
* National Tax Tribunal (Amendment) Act, 2007 – An Act to amend the
National Tax Tribunal Act, 2005
* Taxation Laws (Amendment) Act, 2006 – An Act further to amend the
Income-tax Act, 1961, the Customs Act, 1962, the Customs Tariff Act,
1975 and the Central Excise Act, 1944
* Finance Act, 2006 – An Act to give effect to the financial proposals
of the Central Government for the financial year 2006-2007
* Taxation Laws (Amendment) Act, 2005 – An Act further to amend the
Income-tax Act, 1961 and the Finance Act, 2005
* National Tax Tribunal Act, 2005 – An Act to provide for the
adjudication by the National Tax Tribunal of disputes with respect to
levy, assessment, collection and enforcement of direct taxes and also
to provide for the adjudication by that Tribunal of disputes with
respect to the determination of the rates of duties of customs and
central excise on goods and the valuation of goods for the purposes of
assessment of such duties as well as in matters relating to levy of
tax on service, in pursuance of article 323B of the Constitution and
for matters connected therewith or incidental thereto
* Finance Act, 2005 – An Act to give effect to the financial proposals
of the Central Government for the financial year 2005-2006
* Maharashtra Fiscal Responsibility and Budgetary Management Act,
2005- An Act to provide for the responsibility of the State Government
to ensure inter-generational equity in fiscal management, fiscal
stability
* Finance (No. 2) Act, 2004- The following Act of Parliament received
the assent of the President on the 10th September, 2004, and is hereby
published for general information:- An Act to give effect to the
financial proposals of the Central Government for the financial year
2004-2005
* Finance Act, 2004- An Act to continue for the financial year 2004-05
the existing rates of income-tax and the levy of the National Calamity
Contingent Duty and the National Calamity Contingent Duty of Customs
on certain items

Taxation rules in India:

* Income-tax (Fourteenth Amendment) Rules, 2007- In exercise of the
powers conferred by section 295 read with sub-section (2) of section
17 of the Income-tax Act, 1961 (43 of 1961)
* Income-tax (Thirteenth Amendment) Rules, 2007
* Income-tax (Twelfth Amendment) Rules, 2007
* Income-tax (Eleventh Amendment) Rules, 2007
* Income-tax (Ninth Amendment) Rules, 2007
* Income-tax Welfare Fund Rules, 2007
* Wealth-tax (First Amendment) Rules, 2007
* Post Office (Monthly Income Accounts) (Amendment) Rules, 2007
* Directorate of Income-tax (Systems), Joint Director (Systems),
Deputy Director (Systems) and Assistant Director (Systems) Recruitment
(Amendment) Rules, 2007
* Income-tax (Eighth Amendment) Rules, 2007

History of Taxation

The history of taxation dates back to time immemorial and it is not a
recent development by any account. A thorough research on the history
of taxation system shows that taxes were levied on either on the sale
and purchase of merchandise or livestock.

Further, the history of taxation suggests that the process of levying
and the manner of tax collection were unorganized. But it suggests
that all historical leaders and head countrymen collected taxes to run
its authority. In other words taxes on income, sale, purchase and
properties were collected to run the ruling Government machineries.
Further, these taxes were collected to meet their military and civil
expenditure and also to meet the common needs of the subjects like
maintenance of roads, drainage system, government buildings,
administration of justice and other functions of the region. day India
tax machinery is very much based on that laid down foundation.

Although, there were no homogeneous tax rate structures but it
depended on the production capacity and commodity of that particular
country and/or region. Moreover, the tax rates and quantum varied
according to the annual production. These taxes were collected in cash
or in kind and it entirely depended on the type of commodity or
service on which it was levied upon. For example, there was a very
common practice of selling food crops and cash crops to government
machineries against no money. The history of taxation suggests these
were done to store government buffer stocks to meet emergencies. Taxes
were levied on all classes of citizens, like actors, dancers, singers
and even dancing girls. Taxes were paid in the form of gold-coins,
cattle, grains, raw-materials and even by rendering personal service.

In India, the tradition of taxation has been in force from ancient
times. It finds its references in many ancient books like ‘Manu
Smriti’ and ‘Arthasastra’. There was a perfect admixture of direct
taxes with indirect taxes and they were varied in nature. India’s
history of taxation suggests existence of a large and composite
taxable population. With the advent of the moguls in India the country
witnessed a sea of change in the taxation system of India. Although,
they also practiced the same norm of taxation but it was more
homogeneous in structure and collection. The period of British rule in
India witnessed some remarkable change in the whole taxation system of
India. Although, it was highly in favor of the British government and
its exchequer but it incorporated modern and scientific method of
taxation tools and systems. In 1922, the country witnessed a paradigm
shift in the overall Indian taxation system. Setting up of
administrative system and taxation system was first done in the
history of taxation system in India. The period thereafter witnessed
rapid growth and modernization of the Indian taxation system and the
present

Economics of Taxation

Economics of Taxation deals with the economic effects of taxation
pertaining to a country. The effects pertaining to the economics of
taxation is not singular in nature but it is a series of small and
large effects which has significant impacts on the economy of the
country. The stability of the system of taxation reflects the
performance of the country’s economy. The economics of taxation
depends on the type of economic structure the government follows such
as capitalist economy, socialist economy and mixed economy.

The system of taxation follows several parameters mentioned in the
jurisprudences administrating the economics of taxation. The tax in
India considers five different types of income for the purpose of
taxation, such as salary head of income, house property head of
income, profit in business or profession head of income, capital gains
head of income, and other sources head of income. There is a list of
rebates and exemptions which can be claimed under the laws governing
the system of taxation. The income tax is levied on all kinds of
income and collected by the Central government of India apart from the
income on agriculture which is not taxable under the Central
government. The State government of India collects the tax pertaining
to income from agriculture, value Added Tax (VAT), sales tax, state
excise duty, stamp duty, professional tax, land revenue, etc. Taxes
imposed by the local bodies are pertaining to octroi tax, water supply
utilities, drainage and sewage utilities, and property tax. Pertaining
to the economics of taxation, India went through a lot of alterations
related to the reforms on taxation.

Important aspects of tax under Economics of Taxation:

* Knowledge of tax burden
* Knowledge of the taxpayers both individual taxpayers and corporate
taxpayers
* Knowledge of the system of taxation and its development
* Knowledge of the reforms required for the system of taxation
* Knowledge about avoiding double taxation
* Knowledge of establishing a direct connection between the taxes paid
and the services received

Some important concepts of Economics of Taxation:

* Taxation is an unavoidable defrayments to the government authorities
of a country
* Taxation is referred as transfers made by individuals or corporate
sector units to the government authorities of a country and these
transfers are compulsory in nature
* Of all the economic issues taxation is most delicate and
controversial
* The resources reallocated to the government authorities is not
directly connected to the services and goods supplied by the
government

Objectives of the system of tax under Economics of Taxation:

* Maintenance of a very low burden of taxation
* Maintenance of a wider platform pertaining to taxation as the
different rates of taxation help maintaining a low tax rate
* Ensuring that the system of taxation is fair and equal to everyone
* Shifting the weightage pertaining to taxation from tax imposed on
income to tax imposed on expenditure
* Reduction of the rates pertaining to taxation on income of any kind
to encourage the provision of more and more incentives and the
creation of wealth within the economy
* Usage of the system of taxation to make the markets function in a
better way, such as imposition of environmental taxes on both the
producers of goods or services and the consumers to make them aware
about the external costs.

Tax Avoidance

Tax Avoidance means the tax regime’s legal use for one’s own personal
advantage so as to lessen the tax amount that is payable to the
government by ways that are legal. The Avoidance of Tax is usually
done by the people who desire to keep their money with themselves and
not give it to the government.

Avoidance Tax includes situations when people eliminate or reduce tax
by following a transaction or many transactions that are legal. The
income tax department provides many provisions through which the
people can go for Tax Avoidance such as refunds, credits, benefits,
and many other kinds of entitlements. The various methods of Tax
Avoidance are:

* Legal entities
* Country of residence
* Double taxation

Legal entities are a method that people follow when they want to go
for Tax Avoidance. Under this method of Avoidance Tax, people legally
defer paying personal taxes by creating a legal separate entity to
which they donate their property. The legal separate entity that is
set up is often a foundation, company, or trust. The properties are
transferred to the trust or company, as a result of which the income
that is earned belongs to this entity and not by the owner. Usually,
people are taxed personally on earnings and property that they own and
thus by transferring property to a legal separate entity, individuals
can avoid personal taxation although certain taxes such as corporate
taxes are still applicable. In order to go for Tax Avoidance, the
foundation, company, or trust can also avoid corporate taxes if the
entity is set up in a jurisdiction that considered offshore.

Country of residence is another method that people adopt when they go
for Avoidance of Tax. Under this method of Tax Avoidance, the company
or person changes the tax residence to a place that is a tax haven in
order to lower the amount of taxes that they pay. Under this method,
the person may also become a regular traveler so that taxation can be
avoided. Double taxation means that many countries charge taxes on the
income that has been earned inside that country without taking into
consideration, the resident country of the firm or person. So that
people do not have to pay double taxes, once in the country where the
income has been earned and then again in the resident country, many
countries have gone for bilateral treaties of double taxation with
other countries. This helps tax-payers as they are able to avoid
paying double taxes.

Tax Avoidance reduces the revenue of the government and also brings
into disrepute, the tax system. Ideally, Avoidance of Tax should not
be encouraged and the government should also take measures in order to
prevent it.

Tax Evasion

Tax Evasion entails the efforts that are made by trusts, individuals,
firms, and various other entities to avoid paying taxes by illegal and
unfair means. The Evasion of Tax usually takes place when taxpayers
deliberately hide their incomes from the tax authorities in order to
reduce their liability of tax.

Evasion Tax takes place when the people report dishonest tax that
includes declaring less gains, profits, or income than what has been
actually earned and they even go for overstating deductions. The
Evasion of Tax level depends on certain factors such as fiscal
equation which means that people’s tendency to pay less tax declines
when the payment due from taxes becomes obvious. The level of Tax
Evasion is also dependent on the tax administration’s efficiency and
corruption levels.

The level of Evasion Tax also depends on the chartered accountants and
tax lawyers who help companies, firms, and individuals evade paying
taxes. Tax Evasion is a crime in all major countries and the guilty
parties are subjected to imprisonment and fines. The various methods
of Tax Evasion are:

* Smuggling
* Customs duty evasion
* Value added tax evasion
* Illegal income tax evasion

Smuggling is a method of Tax Evasion, following which people export or
import foreign goods through routes that are unauthorized. People
resort to smuggling for they want to avoid paying total customs duties
that are chargeable and also when they want to import items that are
contraband. Customs duty evasion is another method of Tax Evasion
under which the importers evade paying customs duty by false
declarations of the description of the product and quantity. The
importers in order to evade paying customs duty also resort to under-
invoicing.

Another method of Tax Evasion is value added tax evasion under which
the producers who collect from the consumers the value added tax evade
paying taxes by showing less sales amount. Many people earn money by
means that are illegal such as theft, gambling, and drug trafficking
and so they do not pay tax on this amount and thus this is another
method of Tax Evasion that is called illegal income tax evasion.

Tax Evasion results in the loss of revenue for the government and so
ideally, no one should be indulging in it and the Indian government
must also take steps in order to stop Evasion of Tax by the people.

Tax Fraud

Tax Fraud implies a person paying less tax or wrongfully asking for
repayment of tax by acting in a dishonest way. Tax Fraud Tax is a
deliberate act by a person and is not an act of negligence by the
concerned person.

Fraud of Tax is a crime and as a result of it the government has to
suffer great loss in revenue for the people submit less money as tax
to the government. A person goes for Tax Fraud for he wants to pay
less money to the government as tax and save more money for himself.
As a result of Fraud Tax, the government has less revenue and so can
spend less money on the development of schools, infrastructure,
pensions, health services, and various other services.

The various ways of Tax Fraud are when a person does not tell the
Income Tax department about their correct income, when businesses do
not declare all or part of their profits, when employers pay their
employees without operating the system of PAYE, and when businesses
charge VAT from their customers illegally. The other methods of Tax
Fraud are when businesses do not register for VAT when the businesses
should be registering themselves, when the retailers import products
like tobacco and alcohol without making the necessary payment for
Excise Duty, when individuals do smuggling of goods under which the
person exports or imports foreign goods through illegal routes.

Smuggling is a method of Tax Fraud for it helps in the total evasion
of the customs duties that are applicable on the goods and is also
done for importing items that are contraband. Tax Fraud is also done
by the traders who create huge unpaid liabilities of VAT tax and also
make false claims for VAT repayment. Fraud Tax is done by businesses
when they function without registering with the Income Tax department
and as a result they make no payment of taxes. Some businesses
register themselves with the Income Tax department but do Tax Fraud by
declaring only a part of their income. Tax Fraud is a crime and so the
government prosecutes the person who commits it by imposing fine or by
the way of imprisonment.

Tax Fraud must be avoided at all costs since it is an illegal activity
and if found guilty, a tax offender can be subject to imprisonment or
fine.

Tax Shelters

Tax Shelters are programs under which individuals participate in order
to lessen their amount of taxes irrespective of their financial
status. Tax Shelters include investments in equipment leasing,
breeding and cattle feeding programs, real estate, and gas and oil
companies. There are some Tax Shelters which are legal and there are
some which are illegal. The various types of legal Tax Shelters are:

* Retirement plan
* Flow through partnerships that are limited

Retirement plan is a type of legal Tax Shelter that is used to lessen
the burden of the pension funded systems of the government. In this
type of Shelter Tax, the governments may also allow the individuals to
make investments in their own retirement pension plan. In these kinds
of retirement plans the income that is contributed will not be taxed
at that point of time but will be taxed at the time of the retirement
of the individual. The advantage of this kind of Tax Shelter is that
the money is not taken out as tax and instead in the account is
compounded until the withdrawal of the funds.

Another type of legal Tax Shelter is the flow through partnerships
that are of limited nature. These investments are made in oil drilling
and mining companies in which the investors normally do not want to
invest for these companies take many years before they can generate
profit. So in order to encourage investors to make investments in
these kinds of companies, the governments reward the investors with
Tax Shelters by giving them instant savings on tax and also huge gains
in case the company discovers oil or gold.

The various types of illegal Tax Shelters are:

* Financing arrangements
* Offshore companies

Financing arrangements is a kind of illegal Tax Shelter following
which a person pays very high rates of interest to a party as a result
of which the person can reduce from an investment the amount of
income. But at the same time in the financing arrangements Tax Shelter
the person makes huge gain of capital when he withdraws the financing
investment. Another type of illegal Tax Shelter is offshore companies
under which the funds are transferred to a company which is located in
a different country. One may transfer the funds claiming that it is an
expense and thus lower his income that is taxable.

Tax evasion glare on Reddys
G.S. RADHAKRISHNA

Hyderabad, Dec. 29: The Reddy brothers in the Karnataka cabinet have
evaded income tax of Rs 86 crore in their controversy-ridden mining
business in 2007-08, according to the department’s internal reports.

Under the evasion glare is the Obalapuram Mining Company (OMC), which
is owned by G. Janardhana Reddy and his elder brother G. Karunakara
Reddy and has mining leases in Karnataka and Andhra Pradesh. But the
sum that the exchequer has allegedly been cheated of is limited to the
Andhra side of the operations.

The income-tax department’s documents reveal that the evasion was done
using Mangopub Pvt Ltd, a Singapore-based company with which memoranda
of understanding (MoUs) were signed, as a cover to conceal the OMC’s
actual income.

The OMC had three MoUs with Mangopub, which was later bought over and
renamed Gali Lakshmi Aruna International, or GLA International.

Aruna is wife of Jardhan Reddy, the tourism minister who is a director
in the firm.

The I-T report indicates that OMC officials fudged the books to show
the firm made less money from exporting ore mined in Andhra than it
actually did.

Documents traced to the Dubai and Singapore offices of the OMC show
that high-quality ore was sold at $76 to $98 per tonne, almost half of
the global market rates of $144-165.

The Andhra government had sought a CBI inquiry on OMC, a stand that
was later upheld by the high court.

The I-T report has been prepared on the basis of documents related to
OMC unearthed during raids that the department had carried out a few
weeks ago on Janardhana Reddy’s offices in Bangalore, Hyderabad and
Bhubaneswar.

Karnataka’s BJP government had termed the swoop “politically
motivated”.

The mining operations of Reddy brothers and the controversy
surrounding their business is also the subject of Blood and Iron, a
documentary by Paranjoy Guha Thakurta due for release on January 8.

The documentary looks at Bellary’s mining mafia and the alleged cartel
of politicians, officials and businessmen behind it. The documentary
has been produced with financial assistance from the Delhi-based
Centre for Science and Environment.

Scandal Threatens India’s Economic Growth

by Corey Flintoff

December 28, 2010
Listen to the Story

Morning Edition
[4 min 45 sec]

Lobbyist Niira Radia was questioned by the government in New Delhi in
November. India’s income tax department had tapped her phone, looking
for evidence of alleged tax evasion and money laundering. She denies
wrongdoing.
AP

December 28, 2010

A couple of months ago, India was riding high. Its economy came
through the worldwide recession with growth at 8 1/2 percent.

World leaders, including President Obama, visited New Delhi to
proclaim that India had “arrived.”

Yet today, India’s government is mired in a series of costly scandals,
its parliament is gridlocked, and business leaders fret that foreign
investment will fall.

What happened?

Leaked Wiretapped Phone Calls

Some analysts say India’s surge in growth exposed conflicts and
contradictions that have haunted the country since it won
independence.

The scandals have been brewing for years, but they erupted in the past
two months with the leak of a series of wiretapped phone calls.

India’s income tax department had tapped the phone of a prominent
lobbyist named Niira Radia, looking for evidence of alleged tax
evasion and money laundering.

One call that raised a lot of eyebrows showed Radia trying to convince
a fellow power broker to help get a former telecommunications minister
restored to his post despite allegations of corruption against him.

“Can he be put somewhere other than telecom?” the man asks.

“Trust me,” Radia says, “he’ll behave himself.”

That minister, Andimuthu Raja, later resigned amid charges that he had
allocated lucrative cell phone licenses to well-connected companies at
yard-sale prices.

The alleged under-pricing may have cost the Indian government as much
as $40 billion in potential revenue. Both Raja and Radia deny any
wrongdoing.

Is India An Oligarchy?

What the tapes seemed to reveal was a web of influence with Radia at
the center, making deals among business tycoons, top politicians and
journalists.

Saikat Datta is an assistant editor at Outlook, a weekly newsmagazine
that has put some of the leaked tapes on its website. He says the
tapes reveal that the country that prides itself on being the world’s
largest democracy is really ruled by a small coterie of powerful
people.

First of all, it completely clears one myth that has been around for
the past 63 years — that India is a democracy. It completely
establishes for the first time that India is an oligarchy.

- Saikat Datta, an assistant editor at Outlook, a weekly news magazine

“First of all, it completely clears one myth that has been around for
the past 63 years — that India is a democracy,” he says. “It
completely establishes for the first time that India is an oligarchy.”

Datta says that ultimately, the problem stems from the fact that,
after independence in 1947, the Indian state never attempted land
reform, leaving the country’s wealth in the hands of the same people
who’d always held it — and still do.

Eswar Prasad, an economist at Cornell University who has followed the
scandals, says the growth in the scale and scope of corruption has a
lot to do with India’s move toward a free-market economy after many
decades of government control.

“In the process of shifting from a government-led economy to a private
sector-led economy,” Prasad says, “the opportunities for graft were
enormous, because those who were politically well-connected could most
benefit from the private-sector expansion.”

The Need For Transparency

Prasad likens India to Russia after the fall of the Soviet Union, when
state-owned enterprises were sold cheaply to plugged-in businessmen
who became billionaires.

He notes that India will privatize more industries in the years to
come, and warns that the losses could be huge if the country fails to
adopt clear rules and transparent processes.

Journalist and historian Prem Shankar Jha says the convergence of
money and political power in India stems from a problem that’s also
fiercely debated in the United States: “The lack of any system for
financing elections.”

Jha says that wealthy donors seeking influence don’t have to support
political parties. They found they could spend their money on people
who already held public office

“That is the cronyism which has now been exposed,” Jha says.

Jha says he’s not necessarily optimistic that this exposure will lead
to immediate reforms. He says he thinks the public will have to
undergo more scandals and more shocks before enough outrage builds up
to change the system.

“What you see here is a middle-class revolt,” Jha says. “It’s coming
from the fact that the Indian middle class feels that it can be first
rate. And everything which stands in the way, which makes them look
bad, or which stands in the way of efficiency — and corruption does
both — is something that’ll now be attacked.”

The next development, he suggests, is that India is now growing a
strong enough middle class to eventually give power to outrage.

Comments on:

Scandal Threatens India’s Economic Growth
Michael McKee (idiomac)

dela cruz (dugoattubig) wrote:

“Journalist and historian Prem Shankar Jha says the convergence of
money and political power in India stems from a problem that’s also
fiercely debated in the United States: ‘The lack of any system for
financing elections.’”

I would say that beating back corruption would require more than just
having a system in place. There absolutely need to be values that
would support and allow the system to reach its full potential. The
rich and influential in particular need to hold those values. Unless
that happens, in India as well as the US, cronyism will rule and our
slippery slope slide continues with the rich getting richer and the
poor getting squeezed out.

Tuesday, December 28, 2010 1:05:36 PM

Recommend (6)

Jazz Mann (progressive_one)

Jazz Mann (progressive_one) wrote:

*******This reads like a page out of the Americans Play
Book*************

Tuesday, December 28, 2010 1:02:26 PM

Recommend (1)

Sam Vurti (SAM09)

Sam Vurti (SAM09) wrote:

I can’t help but notice the smirk on her face…she knows she will get
away with it. They all do!

Tuesday, December 28, 2010 12:47:19 PM

Recommend (1)

Peter Rabbit (peterabbit)

Peter Rabbit (peterabbit) wrote:

John Ferdinand and Eric Anderson just took the words out of my mind.

Only transparency can educate citizens of democracies to vote against
corruption and hidden oligarchies — in India as in the USA.

Tuesday, December 28, 2010 12:41:51 PM

Recommend (5)

Eric Anderson (lightnessandjoy)

Eric Anderson (lightnessandjoy) wrote:

John Ferdinand says below:

“Using Mr. Datta’s logic, the UK, United States, and many other
countries are oligarchy(sic).”

Well, of course they are, John. When the top 2% of the population
controls 90% of the wealth, you live in an oligarchy. Whatever gave
you the idea that the illusion of free and fair elections means you
live in a democracy?

Tuesday, December 28, 2010 11:36:20 AM

Recommend (14)

Jon Roesler (redder)

Jon Roesler (redder) wrote:

Perhaps the Indian oligarchy could better succeed in maintaining power
by taking a lesson from America. The trick seems to be, to pay
attention to the religious values of the largest possible percentage
of voters and then make a show of embracing those values… while
accusing your opponent(s) of trying to undermine those same values.
None of has to be genuine, and the occasional individual will slip up
and get caught in the lie, but will will wring his or her hands and
shift the focus to how the media is picking nits.
The strategy seems to be quite successful here and, if practiced
properly, could ensure the oligarchy another 50 years of power… at
least!

Tuesday, December 28, 2010 10:45:45 AM

Recommend (11)

Michael McKee (idiomac)

Michael McKee (idiomac) wrote:

When the good people of the United States come to the realization and,
start to act up, we will see just how many “skin “disruptors” the
Oligarchy has manufactured over the past ten years. I’ll bet there
will be one on every street corner. Technology can be a bad thing too
you know. Have you seen one? Do you know what they are? I’ll give you
a hint: Microwaves. This new trinket the government spent a few
billion dollars to create is not something you would use in
conventional warfare but something with a more ominous intention;
Crowd control. I mean, really, the device could be taken out too
easily in a battle setting so, that tells you right there what it’s
for. A tool to use on unarmed people. I just love Capitalism
Unfettered. The money invested in this trinket could have gone back
into Social Security but, what do I know.

Tuesday, December 28, 2010 10:22:38 AM

Recommend (6)

Michael McKee (idiomac)

Michael McKee (idiomac) wrote:

Wait, I’m not sure they even do that in Russia and China anymore. Do
they?

Tuesday, December 28, 2010 10:03:53 AM

Recommend (1)

Michael McKee (idiomac)

Michael McKee (idiomac) wrote:

An NPR moderator has removed this comment because it does not adhere
to the discussion guidelines

Tuesday, December 28, 2010 10:02:38 AM

Recommend (2)

Michael McKee (idiomac)

Michael McKee (idiomac) wrote:

Elections? Come on, we don’t even have free and fair elections. Oh,
you can go to the polls and punch what you think is a legitimate
ballot without getting shot at but, it has no meaning. And, if you’re
one of the millions who think it does then, I want to thank you for
the years of belly laughs you have given me. American Zealots, plump
from gobbling propaganda, sensationalism and the biggest calorie
staple the Oligarchy serves up, Patriotism. If you question the
government you are not a patriot, remember that. Wow! that’s just what
the Russian and Chinese government says to their people! Dah?

Tuesday, December 28, 2010 9:56:18 AM

Recommend (4)

Michael McKee (idiomac)

Michael McKee (idiomac) wrote:

Yeah, we don’t talk about jouralistic corruption either. We don’t have
to. It’s in our face every day. The corporate state runs every media
source and crushes anyone who questions the integrity of “corporate
law makers”. Congressmen and CEO’s have cross-pollinated into great
orating thieves, Allowing poison to be imported from China that
actually kills pets and humans alike, all for the enrichment of some
greedy capitalist who cares nothing for the country he calls home. One
world order sweetheart, that means treasonist parasites that give all
that’s good for our people away for the sake of capitalism. Capitalism
is the new kingdom. It’s not just a form of economics anymore.

Tuesday, December 28, 2010 9:29:59 AM

Recommend (9)

David Brookbank (DavidBrookbank)

David Brookbank (DavidBrookbank) wrote:

Ah, yes. “The next development, he suggests, is India is now growing a
strong enough middle class to eventually give power to outrage.” Just
like in that wonderful people’s democracy called the United States of
America. Not in your lifetime, buddy, not in your lifetime.

Tuesday, December 28, 2010 9:29:09 AM

Recommend (11)

Report abuse

Debra Williams (debralovesgospe)

Debra Williams (debralovesgospe) wrote:

Nothing surprising here. India…take back your country…maybe we can
learn how from you.

Tuesday, December 28, 2010 9:22:06 AM

Recommend (4)

Michael McKee (idiomac)

Michael McKee (idiomac) wrote:

Well, what do you know? The U.S. was a great teacher. We’re living
under an Oligarchy and so is India! “Is it any wonder”. But, don’t
worry, We will continue to call ourselves a Democratic country. Hail
to the Corporate State! The Masters of the Universe are in full
control now. That’s the result when all restraints are peeled away
over time. Capitalism at it’s finest. We now have a criminogenic
society that can trash the constitution and make or delete laws as is
needed to allow the Oligarchy to suck off the masses. And, believe it,
just look at your gas prices in the coming months. The prices of every
staple you need is too high and will only get higher. Won’t have an
effect on the uber wealthy though, What’s $5.00 a gallon to them? I
wonder how many miles to the gallon an Escalade gets. I’ll bet Al Gore
is nice and warm with his six furnaces and five fireplace’s. Oh, but
he buys carbon credits, I forgot.

Tuesday, December 28, 2010 9:06:26 AM

Recommend (12)

John Ferdinand (johnferd)

John Ferdinand (johnferd) wrote:

“Saikat Datta… says the tapes reveal that the country that prides
itself on being the world’s largest democracy is really ruled by a
small coterie of powerful people.”

That’s quite a leap of logic, or at least, reporting. First, Mr. Datta
is a reporter trying to sell a story. India does have free and fair
elections, there are no military coups. Sure, the politicans might be
corrupt, but that’s a separate issue from the democratic machinery
that underpins a democracy. Using Mr. Datta’s logic, the UK, United
States, and many other countries are oligarchy.

“Datta says that ultimately …. the Indian state never attempted land
reform, leaving the country’s wealth in the hands of the same people
who’d always held it — and still do.”

Incorrect. India did pursue land reform, and broke up many of the
virtual fifedoms, as argued in the Oxford Companion to Economics in
India [http://econ.lse.ac.uk/staff/mghatak/landref.pdf]. The problem
is that every family has a small plot of land which makes it difficult
to organize into cooperatives. As well, big companies have attempted
land grabs. Mr. Datta has the problem backwards.

Ironically, Mr. Datta doesn’t talk about the journalistic corruption
at the heart of this latest scandal.

Tuesday, December 28, 2010 9:00:43 AM

Recommend (3)

Laure Stevens-Lubin (LaureSL)

Laure Stevens-Lubin (LaureSL) wrote:

I have spent 5 years in India over the last 20 years. When I first
went there in 1991 I was struck by how different our two countries
were. Over the years they have drawn closer together, not simply
because India has a growing middle class. We should look at our own
movement toward becoming an oligarchy run by a few powerful interest
groups. Our poverty levels are rising, yet we have given tax cuts to
the wealthiest one percent.

Tuesday, December 28, 2010 8:52:22 AM

Recommend (14)

Bernie Bongo (BongoBern)

Bernie Bongo (BongoBern) wrote:

India has indeed “arrived!” Welcome to unrestrained capitalism.
Transparency is a good thing; it helps locate the rats.

Tuesday, December 28, 2010 8:28:18 AM

Recommend (7)

Larry Woller (DutchIl)

Larry Woller (DutchIl) wrote:

I see greed powered capitalism has found its way into India..

Tuesday, December 28, 2010 5:03:23 AM

Recommend (24)

shadeed ahmad (shadeed)

shadeed ahmad (shadeed) wrote:

This sounds like an example of “the good old boys club’ with a
feminine cover.

Tuesday, December 28, 2010 5:01:34 AM

Recommend (10)

Danny DeGuira (Outofbox)

Danny DeGuira (Outofbox) wrote:

“The fact which the politician faces is merely that
there is less honor among thieves than was supposed,
and not the fact that they are thieves.”

Thoreau-from Slavery in Massachusetts

It’s time the slaves take their life back from the moneychangers and
enjoy why we were put on the planet for not RAPE it!

Tuesday, December 28, 2010 4:54:05 AM

Recommend (17)

Karnataka: VTU officials under cloud for tax evasion

As reported in deccanchronicle.com on 14 September 2010:
VTU officials under cloud for tax evasion | Deccan Chronicle |
2010-09-14

VTU officials under cloud for tax evasion

Sept. 13: Visvesvaraya Technological University (VTU) has come under a
cloud for alleged tax evasion by two of its former vice chancellors
and registrars. Income Tax department sources say the former VCs and
registrars have been accused of not paying tax on the payment they
received for helping to conduct the Post Graduate Common Entrance Test
(PGCET) for MBA, MCA and MTech courses in affiliated colleges.

“Although TDS is a must for all payments above Rs 20,000, no tax was
deducted on the lakh and more given to the former VCs and registrars
for helping to conduct the PGCET.

They did not show this amount when filing their annual returns either.
Verification of form 16 issued by the VTU financial officer reveals
that they paid tax only on their salaries,” claims a senior I-T
officer. In all, 34 officers were paid for working on the entrance
test. Except for a few, all of them were eligible for TDS as they were
paid between `40,000 and `1.32 lakh, he said.

The I-T department was reportedly alerted by a city Right to
Information (RTI) activist. Says activist Gowtham U, “ The government
must order a high level inquiry into VTU’s financial affairs.”

Income Tax Department
Department of Revenue,Ministry of Finance, Government of India

The CBDT is a part of Department of Revenue in the Ministry of
Finance. On one hand, CBDT provides essential inputs for policy and
planning of direct taxes in India,at the same time it is also
responsible for administration of direct tax laws through the Income
Tax Department. The Central Board of Direct Taxes is a statutory
authority functioning under the Central Board of Revenue Act, 1963.
The officials of the Board in their ex-officio capacity also function
as a Division of the Ministry dealing with matters relating to levy
and collection of direct taxes.
The Central Board of Revenue as the Department apex body charged with
the administration of taxes came into existence as a result of the
Central Board of Revenue Act, 1924. Initially the Board was in charge
of both direct and indirect taxes. However, when the administration of
taxes became too unwieldy for one Board to handle, the Board was split
up into two, namely the Central Board of Direct Taxes and Central
Board of Excise and Customs with effect from 1.1.1964. This
bifurcation was brought about by constitution of the two Boards u/s 3
of the Central Boards of Revenue Act, 1963.

Organisational Structure of the Central Board of Direct Taxes :
The Chairman, who is also an ex-officio Special Secretary to
Government of India, heads the CBDT. In addition, CBDT has six
Members, who are ex-officio Additional Secretaries to Government of
India.

* Member (Income Tax)
* Member (Legislation and Computerisation)
* Member (Revenue)
* Member (Personnel & Vigilance)
* Member (Investigation)
* Member (Audit & Judicial)

The Chairman and Members of CBDT are selected from Indian Revenue
Service (IRS), a premier civil service of India, whose members
constitute the top management of Income Tax Department.

Responsibilities of Chairman and Members, Central Board of Direct
Various functions and responsibilities of CBDT are distributed amongst
Chairman and six Members, with only fundamental issues reserved for
collective decision by CBDT. In addition, the Chairman and every
Member of CBDT are responsible for exercising supervisory control over
definite areas of field offices of Income Tax Department, known as
Zones.

Present constitution of CBDT

S.no

Name

Designation

Zone

Ph no

1

Shri S.S.N.Moorthy

Chairman

Mumbai

23092648

2

Shri Sudhir Chandra

Member(Inv)

-

23093356

3

Shri Durgesh Shankar

Member(R)

Eastern Zone (West Bengal, Bihar, NER & Orissa)

23092831

4

Shri C.S. Kahlon

Member(L&C)

Central Zone (Ahmedabad, Pune, MP & Chattisgarh)

23092375

5

Shri S.S.N.Moorthy

Member(IT)

South Zone

23094683

6

Shri Durgesh Shankar

Member(A&J)

North Zone (NWR and Delhi)

23093621

7

Shri Prakash Chandra

Member(P&V)

UP(East), UP(West) and Rajasthan

23092791

Areas for Collective Decision By CBDT

* Policy regarding discharge of statutory functions of the CBDT and of
the Union Government under the various direct tax laws.

* General Policy relating to:

* Set up and structure of Income Tax Department;
* Methods and procedures of work of the CBDT;
* Measures for disposal of assessments, collection of taxes,
prevention and detection of tax evasion and tax avoidance;
* Recruitment, training and all other matters relating to service
conditions and career prospects of all personnel of the Income-tax
Department;
* Laying down of targets and fixing of priorities for disposal of
assessments and collection of taxes and other related matters;
* Write off of tax demand exceeding Rs.25 lakhs in each case;
* Policy regarding grant of rewards and appreciation certificates.

Any other matter, which the Chairman or any Member of the Board, with
the approval of the Chairman, may refer for joint consideration of the
Board.
Chairman

* Administrative planning;

* Transfers and postings of officers in the cadre of Chief
Commissioner of Income-tax and Commissioner of Income-tax;

* All matters relating to foreign training;

* Public Grievances;

* Matters dealt with in the Foreign Tax and Tax Research Division,
except matters under Section 80-O of the Income-tax Act, 1961;

* All matters relating to tax planning and legislation relating to
direct taxes referred to Chairman by Member (Legislation);

* All matters relating to Central and Regional Direct Taxes Advisory
Committees and Consultative Committee of the Parliament;

* Coordination and overall supervision of Boards work;

* Any other matter which the Chairman or any other Member of the Board
may consider necessary to be referred to the Chairman;

* Supervision and Control over Director General of Income Tax
(International Taxation) and CCIT Mumbai charge.

Shri S.S.N.Moorthy is Chairman CBDT. He can be contacted at
011-23092648 (Office) or 011-23092544 (Fax) or through email at
***@incometaxindia.gov.in
Member (Investigation)

* Technical and administrative matters relating to prevention and
detection of tax evasion, particularly those falling under Chapter
XIIB in so far as they are relevant to the functioning of Directors
General of Income-tax (Investigation) and Chief Commissioners of
Income Tax (Central), all matters falling under Chapter XIIC, Chapter
XIXA, Chapter XXB,Chapter XXI, Chapter XXII, Section 285B, 287, 291,
292 and 292 A of Chapter XXIII of the Income Tax Act, 1961 and
corresponding provisions of other Direct Tax Acts;

* Processing of complaints regarding evasion of tax;

* All matters relating to administrative approval for filing, dropping
or withdrawing of prosecution cases in respect of offences mentioned
in Chapter XXII of the Income Tax Act and corresponding provisions in
other direct taxes;

* All technical and administrative matters relating to provisions of
sections 147 to 153 (both inclusive) of the Income-tax Act, 1961;

* Searches, seizures and reward to informants;

* Survey;

* Voluntary disclosure schemes;

* Matters relating to the Smugglers and Foreign Exchange Manipulators
(Forfeiture of Property) Act, 1976;

* Work connected with High Denomination Bank Notes (Demonetisations)
Act, 1978;

* Supervision and control over the work of Directors General of Income
Tax (Investigation), Chief Commissioners of Income Tax (Central)

Shri Sudhir Chandra is Member(Inv), CBDT. He can be contacted at
011-23093356 (Office) or through email at
***@incometaxindia.gov.in
Member (Revenue )

* All matters relating to Revenue budget, including assigning of
budgetary targets amongst Chief Commissioners of Income Tax throughout
the country;

* Recovery of taxes (Chapter XVII of Income Tax), except part F
thereof, sections 179, 281, 281B, 289, Second Schedule and Third
Schedule of the Income-tax Act, 1961;

* Write off of Income-tax demands between Rs.1.5 lakhs and Rs.25 lakhs
in each case;

* Matters relating to departmentalized accounting system.

* All matters falling under Chapter XIVA, XXA, XXC of the Income-tax
Act, 1961;

* General coordination of the work in the CBDT;

* Work relating to Directorate of Income Tax (Recovery), Directorate
of Income Tax (Pr,PP&OL) and Directorate of Income Tax (O&MS);

* Supervision and control over Chief Engineers (Valuation Cell);

* All matters relating to widening of tax base,

* Supervision and control over the work of Chief Commissioners of
Income Tax situated in western charge Gujarat, Rajasthan, Madhya
Pradesh, Chattisgarh & Maharashtra (excluding Mumbai),

Shri Durgesh Shankar is Member(Revenue) . He can be contacted at
011-23092831 (Office-Telefax) or through email at
***@incometaxindia.gov.in
Click Here to view the Message from the Member(Revenue).
Member (Legislation & Computerisation)

* All work connected with the reports of various commissions and
committees relating to Direct Taxes Administration;

* All matters of tax planning and legislation relating to various
direct taxes and the Benami Transaction (Prohibition) Act, 1988;

* Monitoring of tax avoidance devices and suggesting legislative
remedial action,

* Computerization of the I.T. Department;

* Supervision and control over the work of Directors General of Income
Tax(Systems)

* Supervision and control over work of Chief Commissioners of Income
Tax situated at Eastern Region West Bengal, Bihar, Orissa, North East
& Jharkhand.

Shri C.S. Kahlon is Member(L&C), CBDT. He can be contacted at Telefax
011-23092375 (Office) or through email at
***@incometaxindia.gov.in
Member (Income Tax)

* All matters relating to Income-tax Act, Super Profit-tax, Companies
Profit (Sur-tax) Act, and Hotel Receipts Tax Act, except matters that
have been specifically allotted to the Chairman or to any other
Member;

* All matters relating to Interest Tax Act, 1974, Compulsory Deposit
Act, 1974;

* Approvals under Section 36(1)(viii) and (viiia) of the Income-tax
Act, 1961;

* Supervision and control of the work of DGIT(Exemption) and work of
DIT (IT), except the work relating to examinations, which is overseen
by Member(P).

* Supervision and control over the Chief Commissioners of Income Tax
situated in Southern Region – A.P., Kerala, Tamil Nadu, Karnataka and
Goa.

Shri S.S.N.Moorthy is Member(Income tax), CBDT. He can be contacted at
011-23094683 (Office) or through email at
***@incometaxindia.gov.in
Member (Audit & Judicial)

* All judicial matters under Chapter XX and section 288 of the Income-
tax Act, 1961;

* All matters relating to writ and appeals to the High Courts and
Supreme Court and all matters relating to Civil suits under the code
of Civil Procedure, 1908;

* Matters relating to appointment of Standing Counsels, Prosecution
Counsels and Special Counsels for the Income-tax Department before the
High Court and Supreme Court;

* All matters relating to Audit and Public Accounts Committee;

* All matters falling under section 72A and 80-O of the Income-tax
Act, 1961;

* All matters concerning Wealth-tax Act, Expenditure-tax Act, Estate
Duty Act and Benami Transaction (Prohibition) Act, excluding those
relating to prevention and detection of tax avoidance;

* Supervision and control over the work of Chief Commissioners of
Income Tax situated in Northern charge – Delhi, Punjab, Haryana & H.P.

Shri Durgesh Shankar is Member (Audit & Judicial), CBDT. He can be
contacted at Telefax 011-23093621 (Office) or through email at
***@incometaxindia.gov.in
Member (Personnel & Vigilance)

* All Administrative matters relating to Income-tax establishment
(except transfers and postings of officers of the level of Chief
Commissioner of Income Tax and Commissioner of Income-tax), transfers
and posting at the level of Deputy Commissioners and Assistant
Commissioner will be made with the approval of the Chairman;

* All matters relating to deputation of Income Tax officers, Assistant
and Deputy Commissioners of Income Tax to ex-cadre posts;

* All matters relating to training, except foreign training;

* All matters relating to expenditure budget;

* All matters relating to implementation of official language policy;

* Office equipments;

* Office accommodation and residential accommodation for the Income-
tax Department;

* Work relating to Directorate of Income Tax (Income Tax) in matters
relating to examination;Vigilance, disciplinary proceedings and
complaints against all officers and members of staff (both Gazetted
and Non Gazetted);

* Supervision and control of the work of Chief Commissioners of Income-
tax situated in Kanpur, Lucknow & Jaipur.

Shri Prakash Chandra is Member(P & V), CBDT. He can be contacted at
Telefax 011-23092791 (Office) or through email at
***@incometaxindia.gov.in
There are as many as 8 Directorates as attached offices of CBDT to
play a vital role by developing a positive liaison between the field
formations and the CBDT. The following Directors General of Income Tax
are directly under the administrative control of the Central Board of
Direct Taxes:-

* Director General of Income Tax (Administration)
* Director General of Income Tax (Systems)
* Director General of Income Tax (Vigilance)
* Director General of Income Tax (Training)
* Director General of Income Tax (Legal & Research)
* Director General of Income Tax (Business Process Re-engineering)
* Director General of Income Tax (Intelligence)
* Director General of Income Tax (HRD)

In addition to above there are three more Directorates and also Chief
Commissionerates at field level which are as follows:-

* DGIT(Investigation)
* DGIT(Exemption)
* DGIT(International Taxation)
* 18 cadre controlling Chief Commissioners of Income Tax

Various Directorates, which are headed by Directors of Income Tax,
have been placed under the Director Generals of Income Tax and report
through them to the Central Board of Direct Taxes :

1. The Director General of Income Tax (Administration) supervises the
functioning of the following Directorates:-

* Directorate of Income Tax (PR,PP &OL)
* Directorate of Income Tax (Inspection & Examination)
* Directorate of Income Tax (Audit)
* Directorate of Income Tax (Recovery)
* Directorate of Income Tax (TDS)

2. The Director General of Income Tax (Systems) exercises supervision
and control over the following Directorates:-

* Directorate of Income Tax (Systems)
* Directorate of Income Tax (Organisation & Management Services)
* Directorate of Income Tax (Infrastructure)

3. The Director General of Income Tax (Vigilance) is the head of the
following four regional Directorates of Income Tax (Vigilance):-

* Directorate of Income Tax (Vigilance) (North), Delhi
* Directorate of Income Tax (Vigilance) (South), Chennai
* Directorate of Income Tax (Vigilance) (East), Kolkata
* Directorate of Income Tax (Vigilance) (West), Mumbai

4. The Director General of Income Tax (Training), NADT heads the
National Academy of Direct Taxes at Nagpur. The Regional Training
Institutes (RTIs) and the Ministerial Staff Training Units (MSTUs)
also function under the DGIT (Training).

5. The Director General of Income Tax (HRD), is the head of
Directorate of Income Tax (HRD).

1. Functions of Director General of Income Tax (Administration)

Supervision and control over the work in the following Directorates:-

* Directorate of Income Tax (Inspection & Examination)
* Directorate of Income Tax (Audit).
* Directorate of Income Tax (PR,PP&OL)
* Directorate of Income Tax (Recovery)

Administrative Functions :

The DGIT (Admn.) performs the following administrative functions :-

* Transfers and posting of “Group A” officers upto the level of Addl./
Joint DIT within the above mentioned Directorates.
* Cadre controlling authority in respect of Group ‘B’ officers as also
the staff allocated to the above Directorates and DGIT (Admn.).
* Handling vigilance and disciplinary matters of the gazetted officers
working under his Administrative control. The relevant files are to be
put up to the DGIT(Admn.) for appropriate orders through the DIT
concerned.
* Writing the confidential reports of the DITs working in his charge
in addition to officers working directly under him.
* Review of the confidential reports of the officers written by the
Director of Income Tax. He obtains reports from the Directors of
Income Tax concerned and takes further necessary action including
communication of adverse remarks. The Headquarters office of the
DGIT(Admn.) would deal with the representations against adverse
remarks and submit the relevant file to the DGIT(Admn.) through the
DIT concerned. The DIT concerned is required to forward two copies of
the duly completed annual confidential reports of all the officers
working under him to the DGIT(Admn.), who, after keeping one copy for
his record, passes on the other copy to the Board.
* Scrutiny of the immovable property returns submitted by the
officers.

Budgeting and expenditure control to be exercised through DGIT (Admn.)

All financial sanctions shall be issued by the DGIT(Admn.) or the
officers authorised by him, under the relevant rules. Residuary
financial powers and budgetary control in respect of the Directorates
specified above will vest with the DGIT(Admn.).

Other functions

* DGIT(Admn.) will keep track of important points arising from
inspection reports commented upon by the DIT(I&E). DGIT(Admn.) will
guide the DIT(I&E) on issuing instructions regarding points to be
looked into by the Inspecting Officers. He will ensure that remedial
action based on the inspection reports of the CIT/Addl.CIT/JCIT are
taken by the field officers in time and further that where general
instructions need to be issued by the Directorate or the Board such
instructions get issued in time.
* DGIT(Admn.) will coordinate and monitor the follow up action in
cases of audit objections which give rise to issues likely to arise in
other charges or which require active involvement of more than one
CIT. He will ensure that suitable instructions are issued to the
field. Wherever an amendment of law or procedure is considered
necessary, he will get the matter examined in the Board for further
appropriate action.
* DGIT(Admn.) will look into all specific audit paras selected for
oral reply and be in a position to assist the Board effectively.
* DGIT(Admn.) will scrutinise the printing and publication programmes
of the DIT(RSP&PR) and monitor their successful implementation.
* DGIT(Admn.) will look into the bottlenecks in actual distribution of
circulars, instructions, books, brochures etc., and ensure that these
publications reach the persons for whom they are intended, namely the
assessing and collection authorities in the field.
* At the end of the year, the DGIT(Admn.) will obtain an annual report
of the performance of each DIT under him and send one copy each
thereof with his comments to the Chairman, CBDT or the functional
members concerned.
* DGIT(Admn.) shall coordinate the activities and streamline the
working of the different Directorates functioning under his control.

1(a)Composition and functions of Directorate of Income Tax (Public
Relations, Printing, Publications & Official Language)

The functions of this Directorate, which is headed by a DIT, are as
under:-

Printing and publishing wing

* It is responsible for evolving a systematic programme for bringing
out up-to-date bulletins of technical and administrative nature and
monographs for use by departmental functionaries and is responsible
for supplying these to the officials in the field offices.
* It is also responsible for printing and supplying of forms and
registers, statutory and non-statutory, including refund order books-
both MICR & Non-MICR.

Publicity and public relations wing

* This wing brings out updated version of the taxpayer’s information
booklets.
* It prepares and issues advertisements in national dailies in
English, Hindi and regional languages.
* It prepares and broadcasts radio spots, TV quickies and films on
subjects relating to income-tax.
* It is involved in conducting programmes on TV and AIR with constant
liaison with senior officers of these mass media agencies.
* It compiles, prints and distributes the annual administrative
handbook.
* It compiles, prints and distributes the pocket size telephone
directory.
* It prepares and releases advertisements in the web sites through the
Internet.
* It coordinates outdoor publicity by way of display on hoardings,
bill-boards on buses and release of slides in cinemas.
* It prepares and releases publicity materials in the form of posters,
pamphlets, laminated wall-hangers, caps, tee-shirts, stickers etc.
* It maintains and disseminates information through the web-site of
the Department

Official language policy wing

* Implementation of the Official Language Policy of the Government in
the Department.
* Inspection of the field offices of the Department to monitor the
progressive use of Hindi in official work.
* Cadre Controlling Authority for recruitment, promotion etc. of the
personnel working in the Official Language Wing of the Income-tax
department.

1(b)Composition and functions of Directorate of Income Tax (Income
Tax)

The Directorate of Income Tax (Income Tax) was created as an attached
office of the Board in 1940, under a Director of Inspection.
Previously, coordination of audit work also formed part of this
Directorate. This was separated in 1982.

The functions of Directorate of Income Tax (Income Tax) are as under:-

A. Inspection wing

* To lay down general guidelines for inspections by CCITs, CITs, Addl./
Jt. CITs.
* To obtain inspection programmes from CITs, CCITs, DITs, DGITs and to
monitor progress of inspection.
* To examine and review the reports received and to provide feedback
to field formations on quality of assessments and inspections
determined on the basis of a study of inspection records.
* To report periodically to the Board on the findings emerging from
the inspection review.
* To bring out an annual review of inspection.

B. Examination wing

To conduct departmental examinations for :

* Asstt. CIT(Probationers) recruited by the UPSC.
* Income Tax Officers (Group B).
* Income Tax Inspectors.
* Ministerial Staff.
* Group D Employees.

Besides these, this wing is entrusted with other functions and
responsibilities such as review, amendment and interpretation of the
rules and syllabi of the various examinations, creation and abolition
of centres for various departmental examinations. The directorate also
performs all other related work.

1(c)Composition and functions of Directorate of Income Tax (Audit)

The functions of the Directorate of Income-tax (Audit), which is
headed by a DIT, are as under:-

* To control and review Internal Audit functions.
* To issue general instructions to field officers regarding Internal
Audit and Revenue Audit.
* To inspect the work of the audit wing of the various CIT charges.
* To organise collection and feedback of information regarding
critical areas where mistakes have been detected by Revenue Audit and
Internal Audit.
* To bring out manual, bulletins, circulars etc., for the purpose of
Internal Audit.
* To prepare annual Internal Audit Report.
* To ensure expeditious disposal and settlement of Revenue Audit
Objections.
* To collect material and prepare briefs for the Board in respect of
draft paras to be discussed at the PAC meeting and also to assist the
Board on other PAC matters.
* To collect and compile statistical data for inclusion in the C&AG’s
Reports, Annual Reports of the M/o Finance and any other data
specifically called for by the Board.

1(d)(Composition and functions of Directorate of Income Tax (Recovery)

The functions of this Directorate, which is headed by a DIT, are
enumerated below:-

* Collection, compilation and collation of data relating to recovery
of tax arrears of Income Tax and Wealth Tax involving demand of Rs. 1
crore and above (one lakh and above in case of Film Dossiers) from all
CCIT/DGIT(Inv.) charges throughout the country.
* Study of the dossiers received from the CCIT/DGIT(Inv.) charges,
monitoring the work of collection/reduction of arrear demand,
preparation of detailed reviews after analyzing the factual and legal
complexities in cases and offering comments and suggestions for
further action.
* Preparation of Quarterly Report of Analysis of Dossier of Rs. 25
crore and above for monitoring of high demand cases by the CBDT.
* Inspection of field offices for speeding up of collection/reduction
of tax arrear.
* Compilation and analysis of statistical data and furnishing material
to the Board for replies to various Parliament Questions.
* Processing of write off, partial write off and scaling down of
arrear demand proposals received from CCIT charges.
* Processing of BIFR/AAIFR cases in the terms of granting Reliefs/
concessions under the IT

Act, to the sick companies in the process of rehabilitation. This
includes:-

* Verifying the genuineness of the claims of the “sick” industrial
company through the A.O.;
* Examining the case for approval from CBDT to reliefs u/s 19(2) of
Sick Industrial Companies (Special Provision) Act, 1985 (SICA) and
communicating to the field formations the final order of the BIFR in
cases where relief has been granted under the Income Tax Act;
* Attending hearings before BIFR & filing appeals at AAIFR/High Court
etc. as need arises;
* Coordinating and processing for getting consent of BIFR for recovery
u/s 22 of SICA, 1985.
* Assisting the CBDT in policy formulation in recovery/BIFR related
matters.

2.Functions of Director General of Income Tax (Systems)

DGIT (Systems) performs the following functions:

* He supervises and controls the work in the following Directorates:-
o Directorate of Income-tax (Systems)
o Directorate of Income-tax (Organisation & Management Services)
o Directorate of Income-tax (Infrastructure)
* He acts as cadre controlling authority in respect of Group ‘B’
officers as also the staff allocated to the above Directorates and his
own office.
* He handles the vigilance and disciplinary matters of the gazetted
officers working under his administrative control. The relevant files
will be put up to the DGIT (Systems) for appropriate orders through
the DIT concerned.
* He writes the confidential reports of the DITs working in his
charge, in addition to officers working directly under him.
* He reviews the confidential reports of the officers written by the
Director of Income Tax. The DGIT (Systems) obtains reports from the
Directors of Income- tax concerned and takes further necessary action
including communication of adverse remarks. The headquarters office of
the DGIT (Systems) would deal with the representations against adverse
remarks and submit the relevant file to the DGIT (Systems) through the
DIT concerned. The DIT concerned will forward two copies of the duly
completed annual confidential reports of all the officers working
under him to the DGIT (Systems), who, after keeping one copy for his
record, will pass on the other copy to the Board.
* He scrutinises immovable property returns submitted by the officers.
* At the end of the year, he will obtain an annual report of the
performance of each DIT under him and send one copy each thereof with
his comments to the Chairman, CBDT or the functional Member concerned.
* He shall coordinate the activities and streamline the working of the
different Directorates functioning under his control.
* All financial sanctions under the relevant rules shall be issued by
him, or the officer(s) authorised by him. The residuary financial
powers and budgetary control in respect of the Directorates specified
above will vest with the DGIT (Systems).

2(a)Composition and functions of Directorate of Income Tax (Systems)

This Directorate, which is headed by a DIT, was created in 1981 to
coordinate, at the apex level, all activities relating to introduction
of computerisation in the Income-tax department and to perform the
following functions :-

Software development

* Conduct of feasibility and systems study to identify areas suitable
for computerisation.
* Development, testing and documentation of application software
packages.
* Implementation of software packages at various computer centres of
the department including on-the-job training and monitoring the
progress of implementation.

Hardware installations

* Conduct of bench-mark tests for selection of appropriate computer
hardware for various users of the Department and finalisation of terms
and conditions for purchase with the approval of appropriate
authorities.
* Selection of sites for installation of computer hardware,
preparation of sites with the help of the appropriate Govt. agency,
installation of computer systems, conducting acceptance tests and
making the system operational.
* Maintenance of computer hardware through appropriate agencies and
finalisation of terms and conditions of the annual maintenance
contract which may be taken up centrally and/or in decenteralised
manner through CCIT of the region, concerned.
* Monitoring of the performance of installed computer hardware and
periodic evaluation of the needs of additional hardware.

Training and coordination

* Identification of training requirements of the Department in the
field of computers.
* Conduct of various courses at different computer centres of the
Department to build up in-house expertise in the field of computers at
various operational levels.
* Coordination of all activities relating to the smooth functioning of
all computer centres of the Department.
* Evaluation of the requirements of technical manpower to man the
computer centres of the Department and preparation of suitable
recruitment rules for the appointment of this manpower from within and
outside the Department.

Hardware installations

* Conduct of bench-mark tests for selection of appropriate computer
hardware for various users of the Department and finalisation of terms
and conditions for purchase with the approval of appropriate
authorities.
* Selection of sites for installation of computer hardware,
preparation of sites with the help of the appropriate Govt. agency,
installation of computer systems, conducting acceptance tests and
making the system operational.
* Maintenance of computer hardware through appropriate agencies and
finalisation of terms and conditions of the annual maintenance
contract which may be taken up centrally and/or in decenteralised
manner through CCIT of the region, concerned.
* Monitoring of the performance of installed computer hardware and
periodic evaluation of the needs of additional hardware.

National Computer Centre

* Planning and co-ordination of all activities relating to setting up
and functioning of the National Computer Centre.
* Maintenance of the national databases pertaining to departmental
application softwares.
* Ensuring security of the national databases.

Research and development

Undertaking of special projects to enhance the speed of work flows in
the Department for ensuring better taxpayer services and tax
compliance.

2(b) Composition and functions of Directorate of Income Tax
(Organisation & Management Services)

The Directorate of Income Tax (O&M Services), which is headed by a
DIT, came into existence in the year 1972 on the recommendations of
the Direct Taxes Enquiry Committee (Wanchoo Committee). It started
functioning in April 1973. This Directorate is an attached office of
the Board and functions as a kind of an internal management
consultant.

The original charter of functions of this Directorate are :-

* Carrying out review of the procedures and systems of work.
* Laying down work /staffing norms.
* Monitoring the utility of existing forms and registers, office
layouts, etc. In the Income-tax department.

Over the years, the Directorate has not only carried out these
functions but has also considerably enlarged the scope of its original
charter of functions because of complex management and organisation
problems not contemplated earlier. The directorate has advised the
Board on their solutions, from time to time. It is at present
functioning as an internal management consultant to the Board
performing mainly the following functions:-

* Conduct of organisation and management studies.
* Carrying out continuous review of work procedures for improving
methods and management practices. The Directorate seeks to identify
deficient areas and devises more efficient methods of work.
* Laying down work/staffing norms.
* Assisting the CBDT in formulation of the Action Plan for the Income-
tax department and its appraisal by regularly monitoring the
performance of the field offices vis-a-vis the targets set for them.
On a monthly basis the Directorate collates Central Action Plan
statements showing the figures of collection/reduction of arrears and
current demand of corporation tax/income-tax and progressive workload
and disposal of income tax assessments. The directorate also monitors
the performance of the field offices vis-a-vis the quarterly targets
set for them.
* Monitoring the utility of existing forms, register etc.

2(c)Composition and functions of Directorate of Income Tax
(Infrastructure)

This Directorate, has been created after the restructuring of the
Department. It draws up a strategic plan for upgradation of facilities
at all levels and serves as a nodal agency for prioritizing decisions
relating to creation of infrastructure and procurement in the
Department. The Directorate is based in Delhi and is headed by a
Director of Income Tax (an officer of the rank of Commissioner of
Income Tax), who works under the administrative control of Director
General of Income Tax (Systems). The DIT (Infrastructure) undertakes
the following functions, which were earlier performed by the Board :-

* Drawing up of the construction programme for the Income-tax
department on an all India basis.
* Implementation of the construction programme.
* Examination of individual proposals received from CCIT/Commissioners
of Income-tax regarding construction of buildings involving :-
o drawing up of a schedule of accommodation.
o scrutiny of plans and estimates.
o securing approval of Expenditure Finance Committee where necessary;
o issue of administrative approval and expenditure sanction.
* Scrutiny of proposals regarding acquisition of land for construction
of departmental buildings involving :-
o detailed examination of requirements for office and residential
accommodation based on staff strength etc.;
o issue of administrative approval and expenditure sanction.
* Examination of proposals regarding purchase of buildings.
* Examination of proposals regarding repairs of departmental buildings
and minor works.
* Finalisation of budget proposals in respect of construction of
departmental buildings, acquisition of land and purchase of buildings.
* Examination of proposals regarding hiring of office/office-cum-
residence accommodation and godown accommodation in respect of
attached and subordinate offices.
* Provision of subsidized accommodation to the staff.
* Processing court cases relating to the matters concerning
Infrastructure.
* Cases regarding requisitioning of buildings and requisitioned
properties.
* Framing and interpretation of rules regarding allotment of
residential accommodation in the departmental pool of the
I.T.Department.
* Disposal of surplus lands and buildings.
* All miscellaneous matters in respect of departmental buildings ,
office and residential
* Processing representations from various staff associations of the
Income-tax department.
* Processing representations and complaints regarding location of
offices in particular buildings.

3. Functions of Director General of Income Tax (Vigilance)

The Director General of Income-tax (Vigilance) is the Chief Vigilance
Officer of the Income-tax department. He is appointed with the
concurrence of the Central Vigilance Commission, and functions
directly under the Central Board of Direct Taxes. He reports to Member
(Personnel) and Chairman, CBDT.

Some of his important functions are:-

A. Administrative functions

* Supervision and control over the work of the different Directorates
of Income Tax (Vigilance).
* Vigilance clearance for Group ‘A’ Officers.
* In respect of Group ‘A’ level officers, finalisation of the Agreed
List, the list of officers of doubtful integrity and the list of
officers whose work would be subjected to vigilance inspection.
* Maintenance of CVO’s registers for Group ‘A’ officers.
* Preparation and furnishing of reports to CBDT/CVC/Ministries.
* Framing of norms and issuing guidelines for vigilance functions of
the Department.
* Drawing up the annual action plan for vigilance work for various
functionaries of the department including DGIT (Vig.) himself, DITs
(Vig.), CCITs and DGITs.

B. Technical functions

* Dealing with complaints.
* Vigilance Inspection.
* Action on self-contained report.
* Disciplinary proceedings.
* Actions in respect of cases processed/investigated by the CBI.
* References to CVC.
* References to UPSC.
* References to DOP&T/Ministry of Law/Other Departments.
* Scrutiny of immovable property returns.
* Coordination with CBI and CVC in respect of complaints against
officers of the department.

C. Miscellaneous

* DGIT (Vig.) acts as cadre controlling authority in respect of Group
‘B’ officers as also the staff allocated to the regional directorates
and DGIT (Vigilance).
* He will handle the vigilance and disciplinary matters of the
gazetted officers working under his administrative control.
* He will initiate the confidential reports of the DITs working in his
charge in addition to officers working directly under him.
* He will review the confidential reports of the officers in the
Directorate written by the Director of Income Tax. He will obtain
reports from the Directors of Income-tax concerned and take further
necessary action including communication of adverse remarks. The
headquarters office of the DGIT (Vigilance) would deal with the
representations against adverse remarks and submit the relevant file
to the DGIT (Vigilance) through the DIT concerned. The latter will
forward two copies of the duly completed annual confidential reports
of all the officers working under him to the DGIT (Vigilance) who,
after keeping one copy for his record, will pass on the other copy to
the Board.
* DGIT (Vigilance) shall coordinate the activities and streamline the
working of the different directorates functioning under his control.

3(a)Composition and functions of Directorate of Income Tax (Vigilance)

The Director of Income-tax (Vigilance) is an officer of the level of
Commissioner of Income-tax. He is assisted by a number of Addl./Joint
CITs, at the headquarters, having broadly territorial distribution of
work. At present, there are four regional directorates of income-tax
(Vigilance) viz. North, West, East and South with their headquarters
at Delhi, Mumbai, Kolkata and Chennai respectively.

The detailed functions of the Directorate of Income-tax (Vigilance)
are given in the Chapter on “Vigilance” of this Manual and a separate
“Manual on Vigilance”. However, the main functions of the Directorate
are as under:-

A. Administration functions

* Vigilance clearance for Group ‘B’ officers.
* In respect of Group ‘B’ level officers, finalisation of the Agreed
List, the list of officers of doubtful integrity and list of officers
whose work would be subjected to vigilance inspection.
* Maintenance of CVO’s registers for Group ‘B’ officers.
* Preparing and furnishing following reports to DGIT(Vig.) in respect
of Group ‘B’ officers :-
o Quarterly progress report.
o Quarterly report on the status of disciplinary proceedings cases
pending for more than six months.
o Quarterly report regarding grant of sanction for prosecution in CBI
cases.
o Quarterly report on officers/staff under suspension.
* Furnishing the above mentioned report in respect of non-gazetted
officials of their regions to the DGIT (Vig.) after compiling the same
from the reports received from the cadre controlling CCITs.

B. Technical functions

* Dealing with complaints.
* Preliminary verification.
* Investigation of complaints
* Vigilance Inspection.
* Action on self-contained report.
* Disciplinary proceedings.
* Action in respect of cases processed/investigated by the CBI.

4. Functions of Director General of Income Tax (Training), National
Academy of Direct Taxes (NADT)

The Income Tax Department has an elaborate organisation for the
training of its officials -both those who are newly recruited as well
as those already in service. The apex body is the National Academy of
Direct Taxes (N.A.D.T) at Nagpur. This is headed by the Director
General of Income Tax (Training). He is assisted by an Additional
Director General, Addl./Joint Directors and Deputy/Assistant
Directors.

The DGIT(Training) is the training coordinator for the Income-tax
department. He has the overall responsibility of planning, organising
and conducting the induction training courses for the probationers as
well as organizing in-service training programmes for senior officers
of the Department.

The DGIT(Training) supervises the functioning of seven Regional
Training Institutes at Bangalore, Kolkata, Lucknow, Mumbai, Chennai,
Chandigarh and Ahmeabad and 26 Ministerial Staff Training Units spread
over the country. These institutes impart training to various cadres
within their jurisdiction .

Technical functions of DGIT (Training)

* Planning, designing and conducting the induction/foundational
training course for the officers of IRS and of other services who are
selected through UPSC.
* Planning, designing and conducting in-service training courses both
at NADT and the RTIs.
* Nominating various officers for different training courses conducted
in either NADT or in the RTIs.
* Conducting research for identification of the new training needs of
personnel in the Department and also on the efficacy of the training
being given to probationers.
* Preparation of course materials, background papers etc for the
courses to be conducted from time to time on the basis of research
studies.
* Control, organisation and development of the NADT library.
* Coordination of international courses on direct taxes conducted in
India.
* Coordination between the IT Department and the Department of
Personnel in framing the training policy for departmental personnel.
* Organising paid courses for other Indian and foreign organisations.
* Design and conduct of specialized courses abroad on direct taxes for
developing countries.

Miscellaneous functions

* The DGIT(Training) acts as the cadre controlling authority in
respect of Group ‘C’ employees under his administrative control
(except the staff on deputation from CCIT, Nagpur).
* He handles the vigilance and disciplinary matters of both gazetted
and non gazetted officers working under his administrative control.
* The CCIT of the region, in which the NADT or RTI or MSTU, as the
case may be, is located, would allocate a specified number of Group B
officers as also all categories of staff to each one of these
institutes according to their sanctioned strength.
* All references from the Directorate General of Income Tax (Training)
to the Board, whether technical or otherwise, would be made through
DGIT(Training) except in respect of items specially specified by the
Board.
* Responsibility of keeping the CBDT informed of all the developments
in the NADT, RTIs and MSTUs.

Composition and functions of the Regional Training Institutes

* RTIs will be headed by a Director/Commissioner of Income Tax. He
will be assisted by Addl./Joint Director(s) and four Deputy/Assistant
Directors in addition to the specified staff.
* The main functions of the RTIs are to identify the training needs of
Group B, C & D officials. They are responsible for planning, designing
and mounting of all in-service training courses at RTIs and at the
MSTUs functioning under them. The RTIs also conduct some training
courses for IRS officers and some specialised courses for various
departments of the Govt. of India and Public Sector Undertakings. They
supervise and control the work of MSTUs coming under their respective
jurisdictions. These units cater to the training needs of Group C and
D officials.

4a.Functions of Director General of Income Tax (HRD)

* To develop and design strategic human resource plans, policies and
processes aligned with the goal and vision of the Income Tax
Department for ensuring optimal resource mobilisation and delivery of
taxpayer services.
* To assess and determine the job requirements, job profiles and
skills needed for various jobs in the Income Tax Department, and make
projections of human resource requirements.
* To assist CBDT in designing and implementing policies for systematic
career progression, equal opportunity, gender equity, counseling and
employee welfare.
* To operate a human resource information system by accessing database
maintained by CBDT.
* To assist CBDT in developing and implementing proper human resource
development policies including those relating to recruitment,
promotions, performance appraisals, transfers and succession plans.
* To design a scientific and objective performance management system
to foster accountability and develop a scientific scheme for linking
of rewards to performance.
* To identify training needs, formulate training policies and
facilitate skill enhancement, and to coordinate with other educational/
training institutaions/agencies in India and abroad for training of
officers of the Department.
* To foster international co-operation for incorporating
administrative best practices in the field of tax administration.
* Any other matter which may be specially assigned by the CBDT.

5.Functions of Director General of Income Tax (Legal & Research)

The functions of Directorate (Legal & Research) shall be as under:-

* Receipt of SLP Proposals/Appeal Proposals
* To refer the Proposals to Board and Ministry of Law with specific
recommendations
* Eliciting information from Field Formations needed by Ministry of
Law, Central Agency Section.
* Vetting of draft Special Leave Petitions, Appeals, Counter
Affidavits, Condoning of Delay Applications, etc., on receipt from the
Central Agency/field formations
* Preparing necessary letters of telex regarding payment of fees by
Chief Commissioners of Income tax/forwarding of Special Leave Petition
etc.
* Correspondence before or after filing of Special Leave Petition/
Appeal (filed by Tax Payers/Revenue Department) shall be attended to
by the Directorate (Legal).
* Correspondence now being handled by the SCC [at present under
Commissioner of Income Tax (Judicial), Delhi] relating to queries
generated by the CAS on daily hearing basis, shall, once the
directorate becomes fully functional, shall stand merged in the
Directorate (Legal & Research).
* Liaison with the Counsels and Registry of the Supreme Court.
* Computerizing the database of Special Leave Petitions (including
back files of the Board pertaining to Special Leave Petitions) and
creation of database in formats prescribed by Board.
* Maintenance of database in formats prescribed by the Board to
monitor Special Leave Petitions/revenue effect/issues/ aspect
parameters/generation of prescribed reports and coordination with
other Zonal Commissioner of Income Tax (Judicial) in this regard
including forwarding of supporting inputs.
* Any other function that may be allotted to achieve the objectives
stated above and any other function that may be assigned by Member
(Audit and Judicial), Central Board of Direct Taxes, New Delhi in this
regard.

Research and statistics wing

* It compiles and analyses the annual performance statistics based on
monthly progress reports and allied data sent by field offices.
* It compiles and presents economic statistics.

5(a). Functions of Director of Income Tax (Research)

This Directorate is located in Delhi and is headed by an officer of
the rank of Commissioner of Income tax. It undertakes in-house
research for the department and performs the administrative functions
for the Directorate

6.Functions of Director General of Income Tax (Business Process Re-
engineering)

The functions of the Directorate of BPR is to supervise the project
for the Business Process Re-engineering of the Department
concentrating on the four principal areas of work namely Pre-
assessment, Assessment, Post-assessment and Appellate together with
support functions cutting across all the four areas.

7.Functions of Director General of Income Tax (Intelligence)

The Directorate of Intelligence is an allied and compact investigative
set up. The DGIT (Intelligence) reports directly to the Member (Inv.),
CBDT. The office will be attached to the office of the Board. The
Directorate will be required to take up intensive investigation of
selected cases / class of cases and develop them for further action /
specialized operation; study and analyze emerging trends in tax
evasion, new modus operandi etc; create an economic offence data base;
develop a profiling system etc. both in traditional and non
traditional fields. The Directorate liaise/interact with other
intelligence/investigating agencies such as FIU, NCB, ED, DRI, DGCEI,
SFO, CEIB etc. The Directorate have access to all the information
received by the Department viz. AIR, TDS, BCTT, STT, CIB, AST etc.
Departmental national net work, Departmental records etc.

The DGIT and his directorate is located at Delhi. They have an all
India jurisdiction and are assigned concurrent powers with the other
DG’sIT (Inv.). To perform the assigned functions, the DGIT
(Intelligence) have a compact team of selected officers comprising of
a Director of Income Tax (of the rank of Commissioner of Income Tax),
two Additional Directors of Income Tax, five Deputy Directors of
Income Tax (Intelligence), two ITOs and supporting staff.

Other Directorates

1.Functions of Director General of Income Tax (Investigation)

The Director General of Income Tax (Investigation) performs the
following functions:-

* Supervision and control over the Directors of Income Tax
(Investigation), Commissioners of Income Tax (Central) and
Commissioners of income Tax (CIB). In Mumbai and Delhi, CCIT (Central)
exercises control over CIT (Central).
* Chief Commissioner to continue as cadre controlling authority in
respect of Group ‘B’ officers as also the staff allocated to the DG or
Directors or CITs, Additional/Joint/Deputy Directors, ADsIT and
Central Circles under the control of DG(Inv.). In respect of Group ‘B’
officers and staff borne on the strength of the Directorate of Income
Tax (Inv.) Delhi, the Director General is the cadre controlling
authority.
* Fixing of overall sanctioned strength of each Directorate, CIT(CIB)
and Central Circle.
* Selection of officers upto the level of Addl. /Joint DIT in
consultation with cadre controlling Chief Commissioner of Income Tax
and Chief Commissioner of Income Tax (Central).
* Computerisation.

1(a)Functions of Director of Income Tax (Investigation)

The Director of Income Tax (Investigation) performs the following
functions :-

* Planning and execution of search and seizure and survey operations.
* Statutory functions.
* Grant of awards/rewards.
* Administration of secret funds.
* Processing of TEPs.
* computerisation.

2.Functions of Director General of Income Tax (Exemptions)

The Director General of Income Tax (Exemptions) performs the following
functions:-

* Statutory functions.
* Assistance to CBDT in processing of certain approvals and
notifications for exemption.
* Supervision and control over DITs(E).
* Vigilance and disciplinary matters.
* Computerisation.

2(a)Functions of Director of Income Tax (Exemptions)

The Director of Income tax (Exemption) performs the following
functions :-

* Statutory functions relating to claims for exemption.
* Supervision and control over the Directorate.
* Vigilance and disciplinary matters.
* Computerisation.

3.Functions of Director General of Income Tax (International Taxation)

The Director General of Income Tax (International Taxation) performs
the following functions:-

* Supervision and control over the work of Directorate of Income Tax
(International Taxation).
* Vigilance and disciplinary matters.
* Computerisation.
* Statutory functions.

3(a)Functions of Director of Income Tax (International Taxation)

There are five DITs (International Taxation) located at Delhi, Mumbai,
Kolkata, Chennai and Bangalore. Their functions are :-

* Supervision and control over the Directorate.
* Statutory functions in respect of taxation of foreign companies and
non-residents and withholding tax on remittances abroad.
* Vigilance and disciplinary matters.
* Computerisation.

3(b)Functions of Director of Income Tax (Transfer Pricing)

In accordance with section 92CA of the Income Tax Act, 1961, a
reference is made by the AO to DIT (TP) for determination of arm’s
length price in relation to the international transaction (S). The
transfer price is determine by the TPO in terms of section 92C. The
price is determine by the any one of the method stipulated in sub
section (1) of section 92 and by applying the most appropriate method
referred to in section (2) thereof. The TPO after taking into account
all relevant facts and data available to him determines arm’s length
price and passes a speaking order after obtaining the approval of DIT
transfer pricing.

Chief Commissioner of Income Tax

The cadre of Chief Commissioner of Income Tax came into being from
September, 1981 with the creation of 5 posts at Ahmedabad, Kolkata,
Chennai, Delhi and Mumbai. At present, there are 116 posts of Chief
Commissioner. Out of 116 posts, 19 Chief Commissioners have been
identified as cadre controlling authorities.

Functions to be performed exclusively by cadre controlling CCITs

The Chief Commissioner of Income tax performs the following cadre
control functions:-

* Transfer and posting of Group ‘A’ officers upto the level of Addl./
Joint CIT and all other cadre control functions in relation to Groups
‘B’, ‘C’ and ‘D’ employees.
* Fixation of the sanctioned strength of various cadres in the charge
of each CIT and allocation of officers and staff to each CIT/CIT(A).
* Vigilance and disciplinary matters.
* Confidential reports of officials working in the region in addition
to those working directly under him.
* Immovable property returns.
* Budgeting and expenditure control.
* Estate functions.
* Grievance redressal.
* Employees’ association matters.
* Protocol functions.
* Computerisation.

Functions to be performed by the Chief Commissioners including cadre
controlling CCITs.

* Supervision and control over CITs, both administrative and appeals.
* Administrative approval of proposals for write-off of arrears.
* Review of arrear dossiers.
* Administrative sanction for launching prosecutions against tax
delinquents.
* Implementation of Official Language Policy.
* Implementation of computerisation in the department as per the
policies and procedures laid down by CBDT/DIT (Systems).
* Changing of headquarters of any officer upto the level of DCIT under
intimation to the cadre controlling CCIT.
* Staff grievances
* Statutory functions under direct tax laws.

Functions of Commissioner of Income Tax

Detailed administrative and statutory functions of the CIT have been
enumerated in the relevant chapters of this manual, for example ‘Head
Quarter Organisation and Functions’ etc.

Functions of Commissioner of Income Tax (Appeals)

The posts of CIT (Appeals) were created in July’ 1978 to perform the
functions of first appellate authority under the statute.

Functions of Commissioner of Income Tax (Computer Operations)

Each Regional Computer Centers (RCC) is headed by a Commissioner of
Income-tax (Computer Operations). Other Computer Centres have also
been placed under the functional control of the CITs (CO). Their major
functions are:-

* Working as liaison officer between the CCIT /CIT and DGIT
(Systems) / DIT (Systems).
* Management of the RCC, Computer Centres and terminal banks in their
charge.
* Working as liaison officer between Department and outside agencies
such as banks, telephone department etc.
* Implementation and maintenance of centralised application software
(IPAN, AIS, TAS, and MMS).
* Providing help, training and support to end users in implementation
of other application software, and monitoring their performance.
* Implementation of technical instructions concerning implementation
of information technology issued from the CBDT/ DGIT (S) / Directorate
of Income Tax (Systems).
* Maintenance of hardware, and network including annual maintenance
contracts.
* Resolving day-to-day problems of officers/officials in
implementation of the computerisation programme.
* Management of all types of backups such as system backup, database
backup, and software library.
* Security of system and data

Functions of Commissioner of Income Tax (Judicial)

With the restructuring of the Department, four posts of CIT(Judicial)
were created at Delhi, Mumbai, Chennai and Kolkata to co-ordinate the
intra-zonal judicial work as detailed in the instruction no. 4/2002
dated the 7th May 2002 (F.No. 277/109/2001 -ITJ)

Functions of Commissioner of Income Tax (CIB)

Following are the functions of CIT (CIB) :-

* Supervision and control over the work of officers and staff of CIB
branch.
* Vigilance and disciplinary matters.
* Collection, collation and dissemination of information ( Refer to
Chapters on ‘Collection, Collation and Dissemination of Information’
and ‘Central Information Branches’).
* Computerisation.

Functions of Commissioner of Income Tax (Audit)

Internal audit in Income tax department was introduced in the year
1954 with a view to provide for a second check in ensuring
arithmetical accuracy in the assessment of income and levy of tax. In
1960, the Government introduced audit of Income tax receipts by C&AG.
The object of Internal Audit function was subsequently enlarged so
that “it has a deterrent and reforming effect in the direction of
prevention of mistakes and secondly, it plays a corrective role by
checking up on the mistakes and having these remedied without loss of
time. This dual role, go a long way in improving the Department’s
performance and image, saving it avoidable comments from C&AG as well
as PAC, thus, safeguarding the interest of both the revenue and
assessee.” (Instruction No. 485 dated 13-12-1972). In pursuance of
these objectives the Department set up Internal Audit parties and
Special Audit parties to audit assessments and refunds. The
Directorate of Income-tax (Audit), set up in 1963 mainly co-ordinates
and supervises the audit work on behalf of the Board. On restructuring
of department in 2001, now the officers in the Assessment Unit will
perform internal audit functions on a chain basis i.e. one officer
will do the internal audit of work done by another officer. This new
audit pattern has since been formulated and put in place vide
Instruction No. 8/2001 dated 06.12.2001.

There are separate chapters on ‘Internal Audit’ and ‘Revenue Audit’ in
volume-III of this Manual which detail the role and functions of
officers at various levels in relation to audit work of the
department. In addition to his audit related functions, CIT(Audit) has
following administrative functions also :-

* Supervision and control over the officers and staff working under
him.
* Vigilance and disciplinary matters.

Functions of Commissioner of Income Tax (Departmental Representative),
Income Tax Appellate Tribunal.

The functions of CIT(DR) and organisation of his office etc. have been
described in detail in the Chapter on ‘ Appeal and Revision’ in Volume-
II of this Manual.

Functions of Additional/Joint Commissioner of Income Tax
(Headquarters)

The Additional/Joint Commissioner (Headquarters) attends to the work
entrusted to him by the Chief Commissioner/Commissioner of Income Tax.
The detailed functions of the headquarters are enumerated in the
Chapter on ‘Headquarters Organisation and Functions’.

Functions of Additional/Joint Commissioner of Income Tax (Range)

After restructuring of the department, the business process has been
redesigned to make it Range-centric, thus emphasising the pivotal role
of the Range-head. Additional/Joint Commissioner, who is the head of
the Range, exercises concurrent jurisdiction and may, as such, also be
required to formulate assessments in revenue yielding and complex
cases. The assessment unit of the Range consists of five assessing
officers (one DCIT/ACIT and four ITOs). The collection unit in a Range
is headed by a TRO who is responsible for collection and recovery of
tax. The Record Keeping Unit of the Range is headed by an
Administrative Officer/Office Superintendent.

As head of the range, the main functions of the Addl./Joint
Commissioner of the Income Tax are :

* Supervision and control
* Statutory functions
* Effective tax-payer services
* Expansion of tax-base
* Judicial functions
* Processing of TEPs
* Computerisation

Note: Detailed functions of the Range are enumerated in the relevant
chapters of this Manual such as ‘Office Management’, ‘Assessment
Procedure’, etc.

Functions of Departmental Representatives (Senior/Junior), Income Tax
Appellate Tribunal

In an appeal filed before the Tribunal, the Assessing Officer is one
of the parties and since every officer cannot appear himself, the
officers of the rank of Additional/Joint Commissioner of Income Tax
and Deputy/Assistant Commissioner of Income Tax are appointed as
Senior Departmental Representatives and Junior Departmental
Representatives respectively to represent the case before the Income
Tax Appellate Tribunal. The Senior or Junior Departmental
Representative is expected to present and argue the case of the
department independently and to render necessary assistance to the
CIT(DR).

Functions of Additional/Joint/Deputy/Asstt. Commissioner of Income Tax
(Audit)

The Additional/Joint Commissioners of Income tax (Audit) are expected
to test check the registers maintained in Income Tax Offices for
recording audit objections and their disposal, as also to check the
working of Audit Cells set up in Income Tax Offices for dealing with
audit objections. The primary responsibility in these matters rests
with Addl./Joint Commissioner of Income Tax (Range). Addl./Joint
Commissioner of Income Tax (Audit) will, however, report any
deficiency in the matter to the CIT. The idea underlying is to ensure
that the statistics compiled from these registers reflect a true
picture.

There are separate chapters on ‘Internal Audit’ and ‘Revenue Audit’ in
volume-III of this Manual which detail the role and functions of
officers at various levels in relation to audit works of the
department.

Functions of Addl./Joint/Deputy/Assistant Director of Income Tax
(Investigation)

* Pre-search enquiries and reconnaissance work.
* Search and Seizures.
* Preparation of appraisal report.
* Enquiry work in the TEPs.
* Surveys u/s 133 A(1) and 133A(5).
* Keeping liaison with other departments like Customs and Central
Excise, Enforcement Directorate, Revenue Intelligence, Economic
Offenses Wing of State Govt. , Police, etc.
* Deals with the informants.

Functions of Deputy/Assistant Commissioner of Income Tax
(Headquarters).

Deputy/Assistant Commissioner of Income Tax (Headquarters) assists the
Chief Commissioner/Commissioner of Income Tax in the headquarter
functions. CCITs/CITs have been permitted to utilise more than one
Deputy/Assistant Commissioner of Income Tax as Deputy/Assistant
Commissioner of Income Tax (Headquarters) in multi CC regions.

Functions of Assessing Officers

The main functions of the Assessing officers are :-

* Ensuring processing of returns on AST module.
* Allotting PANs wherever required.
* Making IRLA operational and ensuring that all demands are entered
into this system.
* Ensuring that all the software packages prescribed by the DIT
(Systems) are made operational.
* Seeing that all tax payers grievances are attended in time and
redressed in a fixed time bound manner.
* Ensuring timely collection of demands and issue of refunds.
* Selection of cases for scrutiny in time and ensuring their timely
disposal.
* Controlling all computer hardware and software of the range and
ensuring its maintenance, replacement and updating. Providing
technical support and guidance for operation of the computer system.
* Taking all necessary steps for widening of the tax base.
* Internal Audit functions.
* Ensuring that appeal effects are given and central scrutiny reports
are submitted in time.
* Statutory functions.

Functions of Tax Recovery Officer (TRO).

The jurisdiction of the Tax Recovery Officer (TRO) commences when an
assessee is in default or is deemed to be in default in making payment
of tax. The Tax Recovery Officer may draw up under his signature a
statement in the prescribed form specifying the amount of arrears due
from the assessee under section 222(1) of the Income Tax Act, 1961.
The procedure for recovery of tax is stipulated in the Second Schedule
to the Income Tax Act, 1961. Rule 4 of the Second Schedule lays down
the following modes of recovery of arrears of tax :

* Attachment and sale of the assessee’s movable property.
* Attachment and sale of his immovable property.
* Arrest of the assessee and his detention in prison.
* Appointing a receiver for the management of his movable and
immovable properties.

The Tax Recovery Officer has to exercise his powers in accordance with
Income Tax (Certificate Proceedings) Rules (I.T.C.P. Rules), 1962 and
the Second Schedule to the Income Tax Act. The Tax Recovery Officer is
primarily responsible for effecting recovery of the arrears of tax. If
at any time, after drawing the tax certificate, the higher authority
treats the assessee as not being in default for a particular period
for a certain demand, the T.R.O. is bound to stay his recovery
proceedings for that demand for the particular period. He should
liaise with the Assessing Officer so that details of movable and
immovable property and also the correct position of demand can be
ascertained.

(ii) The powers and duties of its officers and employees.

Please Refer (i) above.

(iii) The procedure followed in the decision-making process including
channels of supervision and accountability.

The Procedure followed in the decision-making process including
channels of supervision and accountability is given in IT Act, 1961,
IT Rules, 1962, Wealth Tax Act, 1957, Wealth Tax Rules, 1957, Manual
of Office Procedure, Volume I to III.

(iv) The norms set by it for the discharge of its functions.

The Department’s mission is to promote compliance with Direct Tax Laws
through quality taxpayer service encouraging voluntary compliance and
firm administration.

The Department believes:-

* in transparency and fairness
* in voluntary compliance
* in encouraging and assisting taxpayers

The said objectives are sought to be achieved by:-

* enhancing the use of information technology;
* streamlining Income Tax procedures;
* encouraging voluntary compliance;
* evolving cooperative initiatives.

(v) The rules, regulations, instructions, manuals and records, held by
it or under its control or used by its employees for discharging its
functions.

Following Acts and Rules, administered by the Central Board of Direct
Taxes through it’s subordinate formations, are available on the CBDT
website www.incometaxindia.gov.in :

Acts

* Income Tax Act, 1961
* Wealth Tax Act, 1957

Rules

* Income Tax Rules, 1962
* Wealth Tax Rules, 1957

Manuals

* Manual of Office Procedure, Volume-I
* Manual of Office Procedure, Volume-II
* Manual of Office Procedure, Volume-III

(vi) A statement of the categories of documents that are held by it or
under its control.

Files and documents related to work assigned to various Sections of
CBDT/Directorates/Field formations are kept in the custody of
respective Sections.

(vii) The particulars of any arrangement that exists for consultation
with, or representation by, the members of the public in relation to
the formation of its policy or implementation thereof.

With a view to encouraging mutual understanding between taxpayers and
Income Tax Officers and to advise the Government on measures for
removing difficulties of general nature pertaining to Direct Taxes
there is a Central Direct Taxes Advisory Committee (CDTAC) at Delhi
and 61 Regional Direct Taxes Advisory Committees (RDTACs) at important
stations. Representative of trade and professional associations are
also nominated to these committees. The term of these Committees is
two years from the date of their constitution.

The Union Finance Minister is the Chairman of the Central Direct Taxes
Advisory Committee. The official Members are Secretary (Revenue),
Chairman, CBDT and Member (Revenue), CBDT. The non-official Members
include four Members of Parliament: two from each House and
representatives of Commerce and Industry like, FICCI, ASSOCHAM etc.,
lawyers and other professionals.

(viii) A statement of the boards, council, committees and other bodies
consisting of two or more persons constituted as its part or for the
purpose of its advice, and as to whether meeting of those boards,
councils, committees and other bodies are open to the public, or the
minutes of such meeting are accessible for public.

Same information as in (vii) .In the meetings of CDTAC and RDTACs
representatives of commerce and industry and lawyers and professionals
take part and offer their suggestions. The minutes of these meetings
are for internal use but the public can view it on demand.

(ix) A directory of its officers and employees.

Please refer website www.incometaxindia.gov.in

(x) The monthly remuneration received by each of its officers and
employees, including the system of compensation as provided in its
regulations.

Sanctioned manpower of the Income-tax Department is as given below:
S.no (1) Name of Post (2) Pay Scale (a) Status of Post Group of Post
Gr.A/ Gr.B/ Gr.C/ Gr.D (d) Total No. of Sanctioned Posts (e) Total No.
of Posts Filled as on 30.9.07 (f)
Gazetted/ Non Gazatted (b) Regular/ Temporary/ Adhoc (c)
1 CCIT/DGIT 22400-24500 Gazatted Regular GR.A 116 80
2 CIT/DIT 18400-22400 -do- -do- -do- 731 683
3 Addl CIT 14300-18300 -do- -do- -do- 606 871
4 Joint CIT 12000-18500 -do- -do- -do- 647
5 DCIT 10000-15200 -do- -do- -do- 1358 1467
6 ACIT 8000-135200 -do- -do- -do- 734
Sub-total Group-A (IRS) 4192 3101
7 Chief Engineer 18400-22400 -do- -do- -do- 09 5
8 Suptd Engineer 12000-18500 -do- -do- -do- 16
9 Executive Engineer 10000-15200 -do- -do- -do- 76
10 Computer Manager 12000-18500 -do- -do- -do- 05 0
11 System Analyst 10000-15200 -do- -do- -do- 25 2
12 Programmers 8000-13500 -do- -do- -do- 72
13 DD (OL) 10000-15200 -do- -do- -do- 05 2
14 Sen. Admn Officer 10000-15200 -do- -do- -do- 05 0
15 Chief Statist. Advisor 8000-13500 -do- -do- -do- 01 2
16 Deputy CSA 12000-16500 -do- -do- GrA 01 0
17 Asstt CSA 10000-15200 -do- -do- -do- 01 1
18 CSA (Jr. Scale) -do- -do- -do- 01 1
19 Sampling Officer 8000-13500 -do- -do- -do- 01 1
20 AD (DOMS) 10000-15200 -do- -do- -do- 06 4
21 Other Gr-A (different scales) -do- -do- -do- 13
Sub-total 238 18
Grand Total
22 Admn Officer Gr-III 6500-10500 -do- -do- GrB 774 706
23 Admn Officer Gr-II 7500-12000 -do- -do- -do- 35 60
24 Income Tax Officer 7500-12000 -do- -do- -do- 4448 4345
25 Sen. PS 6500-10500 -do- -do- -do- 117 180
26 Private Secretary 6500-10500 -do- -do- -do- 706 487
27 DPA Gr.B 6500-10500 -do- -do- -do- 55 17
28 Addl Asstt Director 6500-10500 -do- -do- -do- 10 5
29 Section Officer 6500-10500 -do- -do- -do- 01
30 Asstt Director (OL) 6500-10500 -do- -do- -do- 70 41
31 Asstt Addl Director 6500-10500 Gazetted -do- GrB 01
Total (Gr-B) 6217 5841
32 Income Tax Inspector 6500-10500 Non-Gazetted -do- GrC 9793 7978
33 Office Suptd 5500-9000 -do- -do- -do- 2530 2260
34 Sr. Tax Assistant 5000-8000 -do- -do- -do- 8581 6837
35 Tax Assistant 4000-6000 -do- -do- -do- 11282 5422
36 DPA Gr-A 5000-8000 -do- -do- -do- 160 37
37 Sr Hindi Translator 5000-8000 -do- -do- -do- 52 35
38 Jr. Hindi Translator 4500-7000 -do- -do- -do- 75 40
39 Steno Gr-I 5500-9000 -do- -do- -do- 1022 677
40 Steno Gr-II 4500-7000 -do- -do- -do- 2037 1259
41 Steno Gr-III 4000-6000 -do- -do- -do- 2445 218
42 LDC 4000-6000 -do- -do- -do- 355 314
43 PT Instructor 5000-8000 -do- -do- -do- 01
44 Staff Car Driver (SG) 5000-8000 -do- -do- -do- 38 28
45 Staff C Driver (Gr-I) 4500-7000 -do- -do- -do- 265 205
46 Staff C Driver (Gr-II) 4000-6000 -do- -do- -do- 227 194
47 Staff C Driver (OG) 3050-4590 -do- -do- -do- 210 231
48 Notice Server 2650-4000 -do- -do- -do- 2992 2760
49 Sr. Gestnor Operator 3050-4590 -do- -do- -do- 1
50 Superintendent 6500-10500 -do- -do- -do- 09 9
51 Sr. Technical Asstt 5500-9000 -do- -do- -do- 13 12
52 Technical Asstt 5500-9000 -do- -do- -do- 12 12
53 Research Asstt 5500-9000 -do- -do- -do- 06 3
54 Supted (Jr) 5000-8000 Non-Gazetted GrC 04 4
55 Assistant 5000-8000 -do- -do- -do- 57 55
56 UDC 4000-6000 -do- -do- -do- 85 72
57 Sr Librarian -do- -do- -do- 01 0
58 Other Gr-C (different scales) -do- -do- -do- 150
Total Gr-C 42413 28663
59 Peon 2550-3200 -do- -do- GrD 3091 1858
60 Jamadar 2550-3200 -do- -do- -do- 5276
61 Daftry 2750-4400 -do- -do- -do- 2718
62 Watchman 2550-3200 -do- -do- -do- 996
63 Sweeper 2550-3200 -do- -do- -do- 332
64 Farash 2550-3200 -do- -do- -do- 176
65 Mali 2550-3200 -do- -do- -do- 26
66 Jr Gest Operator 2610-3540 -do- -do- -do- 15
67 Other Gr-D -do- -do- -do- 36
Total Gr-D 8403 6121
Grand Total (Gr.A+B+C+D) 61463 43744*

* Based on information available from CCsIT (CCA)/Cadre Controlling
Authorities

(xi) The budget allocated to each of its agency, indicating the
particulars of all plans, proposed expenditures and reports on
disbursements made.

Please refer to Manual No.11 provided by Revenue Headquarters,
Department of Revenue, Ministry of Finance at
http://finmin.nic.in/the_ministry/dept_revenue/rtiman.htm For CBDT, it
is covered by Demand No.42.

(xii) The manner of execution of subsidy programmes including the
amounts allocated and the details of beneficiaries of such programmes.

Not applicable.

(xiii) Particulars of recipients of concessions, permits or
authorizations granted by it.

Not applicable. However, exemptions, deductions and rebates as
applicable in the Income Tax Act are offered to some sections of the
society.

(xiv) Details in respect of the information, available to or held by
it, reduced in an electronic form.

The administered Acts and Rules are available on the Income Tax
Department’s website www.incometaxindia.gov.in. All Notifications and
Circulars issued from time to time are also made available on this
website.

(xv) The particulars of facilities available to citizens for obtaining
information, including the working hours of a library or reading room,
if maintained for public use.

www.incometaxindia.gov.in

(xvi) The names, designations and other particulars of the Public
Information Officers.

www.incometaxindia.gov.in

(xvii) Such other information as may be prescribed, and thereafter
update these publications every year.

NIL

WHAT IS PAN?

Permanent Account Number (PAN) is a ten-digit alphanumeric number,
issued in the
form of a laminated card, by the Income Tax Department, to any
“person” who
applies for it or to whom the department allots the number without an
application.
PAN enables the department to link all transactions of the “person”
with the
department. These transactions include tax payments, TDS/TCS credits,
returns of
income/wealth/gift/FBT, specified transactions, correspondence, and so
on. PAN,
thus, acts as an identifier for the “person” with the tax department.

PAN was introduced to facilitates linking of various documents,
including payment of
taxes, assessment, tax demand, tax arrears etc. relating to an
assessee, to facilitate
easy retrieval of information and to facilitate matching of
information relating to
investment, raising of loans and other business activities of
taxpayers collected
through various sources, both internal as well as external, for
detecting and combating
tax evasion and widening of tax base.

A typical PAN is AFZPK7190K.

First three characters i.e. “AFZ” in the above PAN are alphabetic
series running from
AAA to ZZZ

Fourth character of PAN i.e. “P” in the above PAN represents the
status of the PAN
holder. “P” stands for Individual, “F” stands for Firm, “C” stands for
Company, “H”
stands for HUF, “A” stands for AOP, “T” stands for TRUST etc.

Fifth character i.e. “K” in the above PAN represents first character
of the PAN
holder’s last name/surname.

Next four characters i.e. “7190” in the above PAN are sequential
number running
from 0001 to 9999.

Last character i.e. “K” in the above PAN is an alphabetic check digit.

WHY IS IT NECESSARY TO HAVE PAN?

It is mandatory to quote PAN on return of income, all correspondence
with any
income tax authority. From 1 January 2005 it will be mandatory to
quote PAN on
challans for any payments due to Income Tax Department.
It is also compulsory to quote PAN in all documents pertaining to the
following
financial transactions :-

(a) sale or purchase of any immovable property valued at five lakh
rupees or more;

(b) sale or purchase of a motor vehicle or vehicle, [the sale or
purchase of a motor
vehicle or vehicle does not include two wheeled vehicles, inclusive of
any detachable
side-car having an extra wheel, attached to the motor vehicle;]

(c) a time deposit, exceeding fifty thousand rupees, with a banking
company ;

(d) a deposit, exceeding fifty thousand rupees, in any account with
Post Office
Savings Bank;

(e) a contract of a value exceeding one lakh rupees for sale or
purchase of securities;

(f) opening a bank account;

(g) making an application for installation of a telephone connection
(including a
cellular telephone connection);

(h) payment to hotels and restaurants against their bills for an
amount exceeding
twenty-five thousand rupees at any one time ;

(i) payment in cash for purchase of bank drafts or pay orders or
banker’s cheques for
an amount aggregating fifty thousand rupees or more during any one
day;

(j) deposit in cash aggregating fifty thousand rupees or more with a
bank during any
one day;

(k) payment in cash in connection with travel to any foreign country
of an amount
exceeding twenty-five thousand rupees at any one time.

PAN – LEGAL FRAMEWORK

Section 139A of the Income-tax Act, 1961. This section lays down the
framework for
The legal authority for allotment and use of the new series of PAN is
derived from
PAN, e.g, who is required to apply for PAN, who else can apply for
PAN, who will
allot PAN, transactions where PAN is required to be quoted, use of PAN
in TDS
certificates and TDS returns, that one person can have only one PAN
and the manner
of applying for PAN.

The manner of applying for PAN is laid down in Rule 114 of the Income-
tax Rules,
1962. This rule, amended in 2003, also specifies the copies of
documents required to
be submitted along with the PAN application as proof of identity and
address of the
PAN applicant.

Rule 114B lists down the documents in which PAN is required to be
quoted while
entering into specified transactions/activities. Persons who do not
have PAN are
exempted from quoting PAN on furnishing a declaration in Form 60. Rule
114C lists
the persons to whom section 139A does not apply. These are persons who
have
agricultural income by furnishing declaration in Form 61, non-
residents, and Central
Govt./State Govt. and Consular offices, where they are payers.
Penalty of Rs.10,000/- is imposable u/s 272B for failure to comply
with the
provisions of section 139A.

Pamphlet – Penalties & Prosecutions

Publications

Introduction

Direct Tax Legislations are one of the significant modes which enable
the State to realize the objectives of both Social and Economic
Justice as also defraying the cost of rendering public services on the
part of the State, Economic order as enunciated in Part-IV (i.e. of
the Directive Principles of State Policy) of the Constitution of
India. The emphasis is shifting progressively to voluntary compliance
of tax laws’; but it will be an exercise in futility, in case it is
not backed by strong deterrence against tax evaders so that they do
not go with impunity. There are three modes built in the fiscal
legislation for encouraging tax compliance: (a) Charge of Interest,
(b) imposition of penalty (c) launching of prosecution against tax
delinquents. While charging of interest is compensatory on character,
the imposition of penalty and institution of prosecution proceedings
act as strong deterrents against potential tax delinquents.

What are the defaults which may invite levy of penalty?

Chapters XVII and XXI of Income-tax Act, 1961, contain various
provisions empowering an Income-tax Authority to levy penalty in case
of certain defaults. The following defaults may invite levy of
penalty:
(i) When the assessee is in default or is deemed to be in default in
making payment of tax, including the tax deducted at source, advance
tax and the self assessment tax. [Section 221 read with Sec.201(1)]
(ii) Failure to pay the advance tax as directed by the Assessing
Officer or as estimated by the assessee. [Section 273(1)]
(iii) Failure to comply with a notice issued under section 142(1) or
143(2) or failure to comply with the direction issued under section
142(2A) to get the accounts audited. [Section 271(1)(b)]
(iv) Concealment of particulars of income or furnishing of inaccurate
particulars of income. [Section 271(1)(c)]
(v) Failure to maintain books of accounts and documents by persons
carrying on profession or business as prescribed under section 44AA.
[Section 271A]
(vi) Failure to get the accounts audited in prescribed circumstances
or failure to obtain the prescribed audit report within prescribed
time period of failure to furnish the audit report along with the
return, as required under section 44AB. [Section 271B]
(vii) Failure to subscribe to the eligible issue of capital [Section
271BB]
(viia) Penalty for failure to deduct tax at source. [Section 271C]
(viii) Accepting of any loan or deposit or repayment of deposit of Rs.
20,000 or more otherwise than by account payee cheque or account payee
draft, in contravention of the provisions of Section 269SS. [Section
271D]
(viiia) Repayment of loan in contravention of the conditions imposed
in section 269T. [Section 271E]
(viiib)
A. Failure of file the return of income as required under Section 239
(1), shall entail imposition of penalty. [Section 271F]
B. Failure to file the return as required under the proviso to Section
139(1), in the event of assessee fulfilling the prescribed conditions,
i.e., certain persons in occupation of immovable property or owner of
motor vehicle or subscriber to telephone, one who incurred expenditure
on foreign travel, the holder of the credit card or a member of a
club, subject to specific conditions, are required to file the return
as per proviso to Section 139(1), failing which penalty may be
imposed. (Proviso to Section 271F)
(ix) Refusal to answer in contravention of legal obligation. [Section
272A(1)(a)]
(x) Refusal to sign any statement made in the course of income-tax
proceedings. [Section 272A(1)(b)]
(xi) Failure to attend or give evidence or produce books of accounts
and documents in compliance with the requirements of summons under
section 131(1). [Section 272A(1)(c)]
(xii) Failure to comply with the provisions of section 139A dealing
with the application for and allotment of Permanent Account Number or
General Index Register Number. [Section 272A(1)(d)]
(xiii) Failure to furnish information regarding securities. [Section
272A(2)(a)]
(xiv) Failure to give notice of discontinuance of business or
profession. [Section 272A(2)(b)]
(xv) Failure to furnish in due time information sought under section
133 of Income-tax Act. [Section 272A(2)(c)]
(xvi) Failure to furnish in due time prescribed returns/statements.
[Section 272A(2)(c)]
(xvii) Failure to allow inspection or take copies of registers of
registers of companies. [Section 272A(2)(d)]
(xviii) Failure to furnish in due time the return of income by
charitable or religious institutions. [Section 272A(2)(e)]
(xix) Failure to deliver in due time a copy of declaration of non-
deduction of tax at source u/s.197A. [Section 272A(2)(f)]
(xx) Failure to furnish a certificate of tax deducted at source to the
person on whose behalf tax has been deducted or collected as required
by Section 203 or Section 206C. [Section 272A(2)(g)]
(xxi) Failure to deduct and pay tax from salary payable to an employee
as directed by the Assessing Officer or the Tax Recovery Officer as
required by Section 226(2). [Section 272A(2)(h)]
(xxii) Failure to allow an Income-tax Authority to collect any
information useful or relevant to the purposes of Income-tax Act u/s.
133B. [Section 272AA)]
(xxiii) Failure to comply with the provisions of section 203a dealing
with tax Deduction Account Number [Section 272BB]

Is the levy of penalty automatic?

No penalty under the Income-tax Act is imposed unless the person
concerned has been given reasonable opportunity of being heard.

What is the minimum and maximum penalty leviable?

The quantum of penalty leviable depends upon the nature of default.
The relevant section of Income-tax Act prescribe the minimum and
maximum penalties which can be levied.

Can the penalty be reduced or waived?

The Commissioner of Income-tax may reduce or waive the amount of any
penalty imposed or imposable, if prescribed conditions are satisfied.
The assessee should voluntarily and in good faith make full and true
disclosure of income prior to the detection of concealment by the
Assessing Officer. In cerain cases of genuine hardship, the penalty
levied can be reduced/waived if the assessee has co-operated in any
enquiry relating to the assessment and recovery of taxes. The waiver/
reduction of penalties is discretionary and dependent upon
satisfaction or prescribed conditions. No assessee can, a matter of
right, claim waiver or reduction of penalty imposed or imposable upon
him. [Section 273A]

Office and prosecution under the income tax act. why is prosectuion
necessary?

In the fight against tax evasion, the imposition of monetary penalty
alone is not sufficient. A calculating tax evader finds it profitable
to evade tax for years, if he knows that he may get away with it by
paying penalty in the year in which he is caught. However, the
prospect of landing in jail is a far more dreaded consequence and
works as a deterrent. Further, for more serious defaults, sometimes
launching of prosecution is prescribed without prescribing monetary
penalties.

The Parliament has, therefore, been enacting deterrent laws for
effective implementation of tax laws. The Income-tax Act contains a
separate chapter XXII wherein offences have been defined and
punishment provided.

What are the offences punishable under the income tax act?

The following offences committed by a person are punishable:
(i) Removal, parting with or otherwise dealing with books of accounts,
documents, money, bullion, jewellery or other valuable article or
thing put under restraint during the search. [Section 275A]
(ii) Fraudulent removal, concealment, transfer or delivery of any
property or any interest in the property with the intention to thwart
recovery of tax. [Section 276]
(iii) Failure on the part of a liquidator or receiver of a company to
give notice of his appointment to the Assessing Officer or failure to
set apart amount notified by the Assessing Officer, or parting away of
company’s properties in contravention of income-tax provision.
[Section 276A]
(iv) Failure to enter into written agreement or failure to furnish the
statement of immovable property intended to be transferred u/s.269UC,
or failure to surrender or deliver the property u/s.269UE, purchased
by the Appropriate Authority or doing or omitting to do anything u/s.
269UL, which will have the effect of transfer of property without the
permission of the Appropriate Authority (under the provisions of
Chapter XX-C) [Section 276AB]
(v) Failure to pay to the credit of the Central Government the tax
deducted at source. [Section 276B]
(va) Failure to pay the tax collected at source. [Section 276BB]
(vi) Wilful attempt to evade any tax, penalty or interest [Section
276C(1)]
(vii) Wilful attempt to evade the payment of any tax, penalty or
interest levied under Income Tax Act. [Section 276C(2)]
(viii) Wilful failure to furnish in due time return of income.
[Section 276CC)]
(viiia) Failure to furnish return of income in Search Cases as
required under section 158BC [Section 276CCC]
(ix) Wilful failure to produce accounts and documents as directed by
issue of notice under section 142(1) [Section 276D]
(x) Wilful failure to get the accounts audited as directed by the
Assessing Officer under section 142(2A). [Section 276D]
(xi) Making of a statement in verification or delivery of an account
or statement which is false and which the concerned person knows or
believes to be false or does not believe to be true. [Section 277]
(xii) Abetting or inducing another person to make and deliver an
account or statement or declaration relating to any taxable income
which is false and which he either knows or believes to be false.
[Section 278]
(xiii) Punishment for 2nd & subsequent offences in cases of certain
defaults. [Section 278A]

No person shall be punished for any failure if he proves that there is
reasonable cause failure. [Section 278AA].

Who is libale to be prosecuted?

Any person, committing the ofference is liable to be prosecuted. In
this connection it is not necessary that the person should be an
assessee under the Income-tax Act. In the case of an offence committed
by a Company, Firm, Association of Persons or Body of Individuals,
every person in charge of or responsible for the conduct of the
business of the concern as well as the concern are deemed to be
guilty. Similarly, in the case of an offence by a Hindu Undivided
Family, the karta thereof, is deemed to be guilty of the offence.

Is mensrea or clupable mental state or guilty intention necessary?

In case of wilful act of omission or commission, the court shall
presume the existence of culpable mental state. However, the accused
can rebut this presumption by producing necessary evidence before the
court. (Section 278E).

Can the offence be compounded?

Section 279(2) of Income-tax Act empowers a Chief Commissioner of
Director General of Income-tax to compound an offence either before or
after the institution of prosecution proceeding.

When public servant liable to be prosecuted?

If a public servant furnishes any information in contravention of the
provisions of Section 138(2), prosecution may be instituted against
him with the previous sanction of the Central Government. (Section
280).

Tax avoidance and tax evasion

From Wikipedia, the free encyclopedia

Taxation

An aspect of fiscal policy
Assorted international currencies.jpg

Policies

Government revenue
Tax revenue · Non-tax revenue

Law · Tax bracket
Exemption · Credit · Deduction
Tax shift · Tax cut · Tax holiday

Tax advantage · Tax incentive
Tax reform · Tax harmonization
Tax competition · Double taxation

Tax, tariff and trade

Economics

Price effect · Excess burden
Tax incidence
Laffer curve · Optimal tax

Collection

Revenue service · Revenue stamp
Tax assessment · Taxable income

Tax lien · Tax refund · Tax shield
Tax residence · Tax preparation
Tax investigation · Tax resistance

Tax avoidance and evasion

Tax shelter · Tax haven
Private tax collection · Tax farming
Smuggling · Black market

Distribution

Tax rate

Progressive · Regressive · Flat

Proportional · Negative (income)

Types

Direct · Indirect · Ad valorem · In rem

Capital gains · Consumption
Dividend · Excise · Georgist
Gift · Gross receipts · Income

Inheritance (estate) · Land value
Payroll · Pigovian · Property
Sales · Sin · Stamp · Turnover

Value-added (VAT)

Corporate profit · Excess profits

Windfall profits

International and trade

Custom · Duty

Tariff (Import · Export) · Tariff war

Free trade · Free trade zone
Trade pact · Tax equalization

Tax treaty

By country

Tax rates around the world

Tax revenues as %GDP

Albania · Australia · Britain · Canada

China · France · Germany
India · New Zealand
United States

v • d • e

Tax avoidance is the legal utilization of the tax regime to one’s own
advantage, to reduce the amount of tax that is payable by means that
are within the law. By contrast, tax evasion is the general term for
efforts not to pay taxes by illegal means. The term tax mitigation is
a synonym for tax avoidance. Its original use was by tax advisors as
an alternative to the pejorative term tax avoidance. Latterly the term
has also been used in the tax regulations of some jurisdictions to
distinguish tax avoidance foreseen by the legislators from tax
avoidance which exploits loopholes in the law.

Some of those attempting not to pay tax believe that they have
discovered interpretations of the law that show that they are not
subject to being taxed: these individuals and groups are sometimes
called tax protesters. An unsuccessful tax protestor has been
attempting openly to evade tax, while a successful one avoids tax. Tax
resistance is the declared refusal to pay a tax for conscientious
reasons (because the resister does not want to support the government
or some of its activities). Tax resisters typically do not take the
position that the tax laws are themselves illegal or do not apply to
them (as tax protesters do) and they are more concerned with not
paying for particular government policies that they oppose.

Tax avoidance

Tax avoidance is the legal utilization of the tax regime to one’s own
advantage, to reduce the amount of tax that is payable by means that
are within the law. The United States Supreme Court has stated that
“The legal right of an individual to decrease the amount of what would
otherwise be his taxes or altogether avoid them, by means which the
law permits, cannot be doubted.” See Gregory v. Helvering. Examples of
tax avoidance include:

Country of residence

One way a person or company may lower taxes is by changing one’s tax
residence to a tax haven, such as Monaco, or by becoming a perpetual
traveler. Some countries, such as the U.S., tax their citizens,
permanent residents, and companies on all their worldwide income. In
these cases, taxation cannot be avoided by simply transferring assets
or moving abroad.

The United States is unlike many other countries in that its citizens
and permanent residents are subject to U.S. federal income tax on
their worldwide income even if they reside temporarily or permanently
outside the United States. U.S. citizens therefore cannot avoid U.S.
taxes simply by emigrating. According to Forbes magazine some
nationals choose to give up their United States citizenship rather
than be subject to the U.S. tax system;[1] however, U.S. citizens who
reside (or spend long periods of time) outside the U.S. may be able to
exclude some salaried income earned overseas (but not other types of
income unless specified in a bilateral tax treaty) from income in
computing the U.S. federal income tax. The 2008 limit on the amount
that can be excluded was US$87,000.

Double taxation

Most countries impose taxes on income earned or gains realized within
that country regardless of the country of residence of the person or
firm. Most countries have entered into bilateral double taxation
treaties with many other countries to avoid taxing nonresidents twice—
once where the income is earned and again in the country of residence
(and perhaps, for US citizens, taxed yet again in the country of
citizenship) — however, there are relatively few double-taxation
treaties with countries regarded as tax havens.[2] To avoid tax, it is
usually not enough to simply move one’s assets to a tax haven. One
must also personally move to a tax haven (and, for U.S. nationals,
renounce one’s citizenship) to avoid tax.

Legal entities

Without changing country of residence (or, if a U.S. citizen, giving
up one’s citizenship), personal taxation may be legally avoided by
creation of a separate legal entity to which one’s property is
donated. The separate legal entity is often a company, trust, or
foundation. Assets are transferred to the new company or trust so that
gains may be realized, or income earned, within this legal entity
rather than earned by the original owner. If assets are later
transferred back to an individual, then capital gains taxes would
apply on all profits.

The company/trust/foundation may also be able to avoid corporate
taxation if incorporated in an offshore jurisdiction (see offshore
company, offshore trust or private foundation). Although income tax
would still be due on any salary or dividend drawn from the legal
entity. For a settlor (creator of a trust) to avoid tax there may be
restrictions on the type, purpose and beneficiaries of the trust. For
example, the settlor of the trust may not be allowed to be a trustee
or even a beneficiary and may thus lose control of the assets
transferred and/or may be unable to benefit from them.

Legal vagueness

Tax results depend on definitions of legal terms which are usually
vague. For example, vagueness of the distinction between “business
expenses” and “personal expenses” is of much concern for taxpayers and
tax authorities. More generally, any term of tax law, has a vague
penumbra, and is a potential source of tax avoidance.[3]

Tax evasion

A “Lion’s Mouth” postbox for anonymous denunciations at the Doge’s
Palace in Venice, Italy. Text translation: “Secret denunciations
against anyone who will conceal favors and services or will collude to
hide the true revenue from them.”

By contrast tax evasion is the general term for efforts by
individuals, firms, trusts and other entities to evade taxes by
illegal means. Tax evasion usually entails taxpayers deliberately
misrepresenting or concealing the true state of their affairs to the
tax authorities to reduce their tax liability, and includes, in
particular, dishonest tax reporting (such as declaring less income,
profits or gains than actually earned; or overstating deductions).

Statistics

The difference between the amount of tax legally owed and the amount
actually collected by a government is sometimes called the tax gap.

In the United States, the IRS estimated in 2007 that Americans owed
$345 billion more than they paid, or about 14% of federal revenues for
the fiscal year of 2007.[4]
Wiki letter w cropped.svg This section requires expansion.

Illegal income and tax evasion

Main article: Taxation of illegal income in the United States

In the United States, persons subject to the Internal Revenue Code who
earn income by illegal means (gambling, theft, drug trafficking etc.)
are required to report unlawful gains as income when filing annual tax
returns (see e.g., James v. United States[5]), but they often do not
do so. Suspected lawbreakers, most famously Al Capone, have therefore
been successfully prosecuted for tax evasion when there was
insufficient evidence to try them for their non-tax related crimes.
The United States Supreme Court has ruled that a simple declaration of
income does not violate an individual’s right to remain silent,[6]
although the privilege may apply to the source of the income if
claimed.[7] Those who attempt to report illegal income as coming from
a legitimate source could be charged with money laundering. By
contrast, in the UK law enforcement agencies do not generally have
access to tax returns and so illegal earnings can supposedly be safely
declared[citation needed] but in practice those carrying on criminal
activities generally prefer not to do so, and so can sometimes be
prosecuted for tax evasion rather than for other crimes[citation
needed]. Soviet spy Aldrich Ames, who had earned more than $2 million
cash for his espionage, was also charged with tax evasion as none of
the Soviet money was reported on his tax returns. Ames attempted to
have the tax evasion charge dismissed on the grounds his espionage
profits were illegal, but the charges stood.

Economics of tax evasion

In 1968, Nobel laureate economist Gary Becker first[citation needed]
theorized the economics of crime, on the basis of which Allingham and
Sandmo produced in 1972 an economic model of tax evasion. It deals
with the evasion of income tax, the main source of tax revenue in the
developed countries. According to them, the level of evasion of income
tax depends on the level of punishment provided by law.[8]
Wiki letter w cropped.svg This section requires expansion.

Evasion of customs duty

Customs duties are an important source of revenue in the developing
countries. The importers purport to evade customs duty by (a) under-
invoicing and (b) misdeclaration of quantity and product-description.
When there is ad valorem import duty, the tax base is reduced through
underinvoicing. Misdeclaration of quantity is more relevant for
products with specific duty. Production description is changed match
an H. S. Code commensurate with a lower rate of duty.[9]
Wiki letter w cropped.svg This section requires expansion.

Smuggling

Smuggling is importation or exportation of foreign products through
unauthorized route. Smuggling is resorted to for total evasion of
leviable customs duties as well as for importation of contraband
items. A smuggler does not have to pay any customs duty since the
products are not routed through an authorized or notified Customs port
and therefore, not subjected to declaration and payment of duties and
taxes.[9]

Evasion of value added tax (VAT) and sales taxes

During the later half of the twentieth century, value added tax (VAT)
has emerged as a modern form of consumption tax through the world,
with the notable exception of the United States. Producers who collect
VAT from the consumers may evade tax by under-reporting the amount of
sales.[10] The US has no broad-based consumption tax at the federal
level, and no state currently collects VAT; the overwhelming majority
of states instead collect sales taxes. Canada uses both a VAT at the
federal level (the Goods and Services Tax) and sales taxes at the
provincial level; some provinces have a single tax combining both
forms.

In addition, most jurisdictions which levy a VAT or sales tax also
legally require their residents to report and pay the tax on items
purchased in another jurisdiction. This means that those consumers who
purchase something in a lower-taxed or untaxed jurisdiction with the
intention of avoiding VAT or sales tax in their home jurisdiction are
in fact breaking the law in most cases. Such evasion is especially
prevalent in federal states like the Nigeria, US and Canada where sub-
national jurisdictions have the constitutional power to charge varying
rates of VAT or sales tax. In Nigeria for example, some local states
enforce VAT on each goods sold by trader. The price must be clearly
stated and the VAT distinct from the price of the good purchased. Any
act by the trader contrary to this (like including VAT in the price of
the goods) is punishable as attempting to syphoning the VAT.
Intranational borders in such countries usually lack customs offices
or similar facilities that could effectively control the movement of
any goods carried in private vehicles from one jurisdiction to another
and most of the respective state and provincial governments simply
lack the manpower and resources to pursue and prosecute every case of
state/provincial sales tax evasion arising from purchases which do not
cross state or provincial borders other than for major purchases such
as cars.[11]

Control of evasion

Level of evasion depends on a number of factors one of them being
fiscal equation. People’s tendency to evade income tax declines when
the return for due payment of taxes is not obvious[citation needed].
Evasion also depends on the efficiency of the tax administration.
Corruption by the tax officials often render control of evasion
difficult. Tax administrations resort to various means for plugging in
scope of evasion and increasing the level of enforcement. These
include, among others, privatization of tax enforcement,[12] tax
farming,[13] and institution of Pre-Shipment Inspection (PSI) agencies.
[14]

Corruption by tax officials

Corrupt tax officials cooperate with the tax payers who intend to
evade taxes. When they detect an instance of evasion, they refrain
from reporting in return for illegal gratification or bribe.
Corruption by tax officials is a serious problem for the tax
administration in a huge number of underdeveloped and southern
european countries.[citation needed]

Level of evasion and punishment

This section contains weasel words, vague phrasing that often
accompanies biased or unverifiable information. Such statements should
be clarified or removed. (October 2009)

Tax evasion is a crime in almost all developed countries and subjects
the guilty party to fines and/or imprisonment – in China the
punishment can be as severe as the death penalty.[citation needed] In
Switzerland, many acts that would amount to criminal tax evasion in
other countries are treated as civil matters. Even dishonestly
misreporting income in a tax return is not necessarily considered a
crime. Such matters are dealt with in the Swiss tax courts, not the
criminal courts. However, even in Switzerland, some fraudulent tax
conduct is criminal, for example, deliberate falsification of records.
Moreover, civil tax transgressions may give rise to penalties. So the
difference between Switzerland and other countries, while significant,
is limited. It is often considered that extent of evasion depends on
the severity of punishment for evasion. Normally, the higher the
evaded amount, the higher the degree of punishment.

Privatization of tax enforcement

Professor Christopher Hood first[citation needed] suggested
privatization of tax enforcement for overcoming limitations of
government tax administration in controlling tax evasion.[15] Some
governments have resorted to privatization of tax enforcement to
enhance efficiency of the tax system. The assumption is that leakage
of revenue will lower under a privatized regime. In Bangladesh, part
of customs administration was privatized in as early as 1991.[16]

Abuse by private tax collectors (see tax farming below) has led to
revolutionary overthrow of governments which have outsourced tax
administration.

Tax farming

Tax farming is an old means of collection of revenue when it is
difficult to determine the leviable amount taxes with certainty.
Governments lease out the collection system to a private entity for a
fixed amount who then collects the revenue and shoulders the risk of
attempts at evasion by the taxpayers. It has been suggested that tax
farming may be a solution to the problem of tax evasion seen in
developing countries.[17]
Wiki letter w cropped.svg This section requires expansion.

Governments have historically turned to tax farming for quick cash. A
“tax farmer” buys a “franchise” by making pre-payment to the
government. The “tax-farmer,” then invested with the authority of the
government, goes into the “farm” and begins extracting “taxes” from
citizens. This is a system destined to be abusive as the “tax-farmers”
seek back their investment, plus profit, and are themselves
unrestrained by “politics.” Abuses by “tax farmers” (together with an
unfair tax system that exempted the aristocracy) were a primary reason
for the French Revolution that toppled Louis XVI.

PSI Agencies

Pre-shipment Agencies like SGS, Cotecna etc. are employed to prevent
evasion of customs duty through under-invoicing and misdeclaration.
However, in the recent times, allegations have been lodged that PSI
agencies have actively cooperated with the importers in evading
customs duties. Authority in Bangladesh has found Cotecna, a PSI
agency of Swiss origin, guilty of complicity with the importers for
evasion of customs duties on a huge scale.[18] The same company
Cotecna was implicated for bribing Pakistan’s prime minister Benazir
Bhutto for securing contract for importation by Pakistani importers.
She and her husband were sentenced both in Pakistan and Switzerland.
[19]
Wiki letter w cropped.svg This section requires expansion.

The distinction in various jurisdictions

The use of the terms tax avoidance and tax evasion can vary depending
on the jurisdiction. In general, the term “evasion” applies to illegal
actions and “avoidance” to actions within the law. The term
“mitigation” is also used in some jurisdictions to further distinguish
actions within the original purpose of the relevant provision from
those actions that are within the letter of the law, but do not
achieve its purpose.

Globe icon.

The examples and perspective in this section deal primarily with
Anglo-American law and do not represent a worldwide view of the
subject. Please improve this article and discuss the issue on the talk
page. (November 2010)

The distinction in the United States

In the United States “tax evasion” is evading the assessment or
payment of a tax that is already legally owed at the time of the
criminal conduct.[20] Tax evasion is criminal, and has no effect on
the amount of tax actually owed, although it may give rise to
substantial monetary penalties.

By contrast, the term “tax avoidance” describes lawful conduct, the
purpose of which is to avoid the creation of a tax liability in the
first place. Whereas an evaded tax remains a tax legally owed, an
avoided tax is a tax liability that has never existed.

For example, consider two businesses, each of which have a particular
asset (in this case, a piece of real estate) that is worth far more
than its purchase price.

* Business One sells the property and underreports its gain. In
this instance, tax is legally due. Business One has engaged in tax
evasion, which is criminal.
* Business Two consults with a tax advisor and discovers that it
can structure the sale as a “like kind exchange” (formally known as a
1031 exchange, named after the Code section) for other real estate
that it can use. In this instance, no tax is due because (legally,
under Section 1031) no sale took place. Business Two has engaged in
tax avoidance (or tax mitigation), which is completely within the law.

In the above example, tax may eventually be due when the second
property is sold. Whether and how much tax will be due will depend on
circumstances and the state of the law at the time. This is true of
many tax avoidance strategies.
The distinction in the United Kingdom

The United Kingdom and jurisdictions following the UK approach (such
as New Zealand) have recently adopted the evasion/avoidance
terminology as used in the United States: evasion is a criminal
attempt to avoid paying tax owed while avoidance is an attempt to use
the law to reduce taxes owed. There is, however, a further distinction
drawn between tax avoidance and tax mitigation. Tax avoidance is a
course of action designed to conflict with or defeat the evident
intention of Parliament: IRC v Willoughby.[21] Tax mitigation is
conduct which reduces tax liabilities without “tax avoidance” (not
contrary to the intention of Parliament), for instance, by gifts to
charity or investments in certain assets which qualify for tax relief.
This is important for tax provisions which apply in cases of
“avoidance”: they are held not to apply in cases of mitigation.

The clear articulation of the concept of an avoidance/mitigation
distinction goes back only to the 1970s. The concept originated from
economists, not lawyers.[22] The use of the terminology avoidance/
mitigation to express this distinction was an innovation in 1986: IRC
v Challenge.[23]

In practice the distinction is sometimes clear, but often difficult to
draw. Relevant factors to decide whether conduct is avoidance or
mitigation include: whether there is a specific tax regime applicable;
whether transactions have economic consequences; confidentiality; tax
linked fees. Important indicia are familiarity and use. Once a tax
avoidance arrangement becomes common, it is almost always stopped by
legislation within a few years. If something commonly done is contrary
to the intention of Parliament, it is only to be expected that
Parliament will stop it. So that which is commonly done and not
stopped is not likely to be contrary to the intention of Parliament.
It follows that tax reduction arrangements which have been carried on
for a long time are unlikely to constitute tax avoidance. Judges have
a strong intuitive sense that that which everyone does, and has long
done, should not be stigmatised with the pejorative term of
“avoidance”. Thus UK courts refused to regard sales and repurchases
(known as bed-and-breakfast transactions) or back-to-back loans as tax
avoidance.

Other approaches in distinguishing tax avoidance and tax mitigation
are to seek to identify “the spirit of the statute” or “misusing” a
provision. But this is the same as the “evident intention of
Parliament” properly understood. Another approach is to seek to
identify “artificial” transactions. However, a transaction is not well
described as ‘artificial’ if it has valid legal consequences, unless
some standard can be set up to establish what is ‘natural’ for the
same purpose. Such standards are not readily discernible. The same
objection applies to the term ‘device’.

It may be that a concept of “tax avoidance” based on what is contrary
to “the intention of Parliament” is not coherent. The object of
construction of any statute is expressed as finding “the intention of
Parliament”. In any successful tax avoidance scheme a Court must have
concluded that the intention of Parliament was not to impose a tax
charge in the circumstances which the tax avoiders had placed
themselves. The answer is that the expression “intention of
Parliament” is being used in two senses. It is perfectly consistent to
say that a tax avoidance scheme escapes tax (there being no provision
to impose a tax charge) and yet constitutes the avoidance of tax. One
is seeking the intention of Parliament at a higher, more generalised
level. A statute may fail to impose a tax charge, leaving a gap that a
court cannot fill even by purposive construction, but nevertheless one
can conclude that there would have been a tax charge had the point
been considered. An example is the notorious UK case Ayrshire
Employers Mutual Insurance Association v IRC,[24] where the House of
Lords held that Parliament had “missed fire”.

History of the distinction

An avoidance/evasion distinction along the lines of the present
distinction has long been recognised but at first there was no
terminology to express it. In 1860 Turner LJ suggested evasion/
contravention (where evasion stood for the lawful side of the divide):
Fisher v Brierly.[25] In 1900 the distinction was noted as two
meanings of the word “evade”: Bullivant v AG.[26] The technical use of
the words avoidance/evasion in the modern sense originated in the USA
where it was well established by the 1920s.[27] It can be traced to
Oliver Wendell Holmes in Bullen v Wisconsin.[28] It was slow to be
accepted in the United Kingdom. By the 1950s, knowledgeable and
careful writers in the UK had come to distinguish the term “tax
evasion” from “avoidance”. However in the UK at least, “evasion” was
regularly used (by modern standards, misused) in the sense of
avoidance, in law reports and elsewhere, at least up to the 1970s. Now
that the terminology has received official approval in the UK (Craven
v White[29]) this usage should be regarded as erroneous. But even now
it is often helpful to use the expressions “legal avoidance” and
“illegal evasion”, to make the meaning clearer.

Public opinion on tax avoidance

Tax avoidance may be considered to be the dodging of one’s duties to
society, or alternatively the right of every citizen to structure
one’s affairs in a manner allowed by law, to pay no more tax than what
is required. Attitudes vary from approval through neutrality to
outright hostility. Attitudes may vary depending on the steps taken in
the avoidance scheme, or the perceived unfairness of the tax being
avoided.

In the judiciary, different judges have taken different attitudes. As
a generalization, for example, judges in the United Kingdom before the
1970s regarded tax avoidance with neutrality; but nowadays they regard
it with increasing hostility. See the quotes below for examples.

Responses to tax avoidance

Avoidance also reduces government revenue and brings the tax system
into disrepute, so governments need to prevent tax avoidance or keep
it within limits. The obvious way to do this is to frame tax rules so
that there is no scope for avoidance. In practice this has not proved
achievable and has led to an ongoing battle between governments
amending legislation and tax advisors’ finding new scope for tax
avoidance in the amended rules.

To allow prompter response to tax avoidance schemes, the US Tax
Disclosure Regulations (2003) require prompter and fuller disclosure
than previously required, a tactic which was applied in the UK in
2004.

Some countries such as Canada, Australia and New Zealand have
introduced a statutory General Anti-Avoidance Rule (GAAR). Canada also
uses Foreign Accrual Property Income rules to obviate certain types of
tax avoidance. In the United Kingdom, there is no GAAR, but many
provisions of the tax legislation (known as “anti-avoidance”
provisions) apply to prevent tax avoidance where the main object (or
purpose), or one of the main objects (or purposes), of a transaction
is to enable tax advantages to be obtained.

In the United States, the Internal Revenue Service distinguishes some
schemes as “abusive” and therefore illegal.

In the UK, judicial doctrines to prevent tax avoidance began in IRC v
Ramsay (1981) followed by Furniss v. Dawson (1984). This approach has
been rejected in most commonwealth jurisdictions even in those where
UK cases are generally regarded as persuasive. After two decades,
there have been numerous decisions, with inconsistent approaches, and
both the Revenue authorities and professional advisors remain quite
unable to predict outcomes. For this reason this approach can be seen
as a failure or at best only partly successful.

In the UK in 2004, the Labour government announced that it would use
retrospective legislation to counteract some tax avoidance schemes,
and it has subsequently done so on a few occasions, notably BN66.
Initiatives announced in 2010 suggest an increasing willingness on the
part of HMRC to use retrospective action to counter avoidance schemes,
even when no warning has been given.[30]

In 2008, the charity Christian Aid published a report, Death and
taxes: the true toll of tax dodging, which criticised tax exiles and
tax avoidance by some of the world’s largest companies, linking it to
the deaths of millions of children in developing countries.[31].
According to the Financial Times this is part of a growing trend for
charities to prioritise tax avoidance as a key campaigning issue, with
policy makers across the world considering changes to make tax evasion
more difficult. [32]

In 2010 tax avoidence became a big issue in the UK when UK Uncut
started to encourage people to protest at local high street shops that
were thought to be avoiding tax Including Vodafone, Top Shop and the
rest of the Arcadia Group. UK Uncut aims to highlight the fact that
many big businesses and rich businesses men are avoiding paying tax
whilst there are huge public sector cuts. It uses social networking
websites to quickly organise protests in many different places around
the country for days of mass action[33].

Tax protesters and tax resistance
Main articles: Tax protester, Tax protester arguments, and Tax
resistance

Some tax evaders believe that they have uncovered new interpretations
of the law that show that they are not subject to being taxed (not
liable): these individuals and groups are sometimes called tax
protesters. Many protesters continue posing the same arguments that
the Federal courts have rejected time and time again, ruling the
arguments to be legally frivolous.

Tax resistance is the refusal to pay a tax for conscientious reasons
(because the resister does not want to support the government or some
of its activities). They typically do not take the position that the
tax laws are themselves illegal or do not apply to them (as tax
protesters do) and they are more concerned with not paying for what
they oppose than they are motivated by the desire to keep more of
their money (as tax evaders typically are).

In the UK case of Cheney v. Conn,[34] an individual objected to paying
tax that, in part, would be used to procure nuclear arms in unlawful
contravention, he contended, of the Geneva Convention. His claim was
dismissed, the judge ruling that “What the [taxation] statute itself
enacts cannot be unlawful, because what the statute says and provides
is itself the law, and the highest form of law that is known to this
country.”
Definition of tax evasion in the United States

The application of the U.S. tax evasion statute may be illustrated in
brief as follows, as applied to tax protesters. The statute is
Internal Revenue Code section 7201:

Any person who willfully attempts in any manner to evade or defeat
any tax imposed by this title or the payment thereof shall, in
addition to other penalties provided by law, be guilty of a felony
and, upon conviction thereof, shall be fined not more than $100,000
($500,000 in the case of a corporation), or imprisoned not more than 5
years, or both, together with the costs of prosecution.[35]

Under this statute and related case law, the prosecution must prove,
beyond a reasonable doubt, each of the following three elements:

1. the “attendant circumstance” of the existence of a tax
deficiency — an unpaid tax liability; and
2. the “actus reus” (i.e., guilty conduct) — an affirmative act
(and not merely an omission or failure to act) in any manner
constituting evasion or an attempt to evade either:
1. the assessment of a tax, or
2. the payment of a tax.
3. the “mens rea” or “mental” element of willfulness — the specific
intent to violate an actually known legal duty;

An affirmative act “in any manner” is sufficient to satisfy the third
element of the offense. That is, an act which would otherwise be
perfectly legal (such as moving funds from one bank account to
another) could be grounds for a tax evasion conviction (possibly an
attempt to evade “payment”), provided the other two elements are also
met. Intentionally filing a false tax return (a separate crime in
itself[36]) could constitute an attempt to evade the “assessment” of
the tax, as the Internal Revenue Service bases initial assessments
(i.e., the formal recordation of the tax on the books of the U.S.
Treasury) on the tax amount shown on the return.

Application to tax protesters

This statute is an example of an exception to the general rule under
U.S. law that “ignorance of the law or a mistake of law is no defense
to criminal prosecution.”[37] Under the Cheek Doctrine (Cheek v.
United States[38]), the United States Supreme Court ruled that a
genuine, good faith belief that one is not violating the Federal tax
law (such as a mistake based on a misunderstanding caused by the
complexity of the tax law itself) would be a valid defense to a charge
of “willfulness” (“willfulness” in this case being knowledge or
awareness that one is violating the tax law itself), even though that
belief is irrational or unreasonable. On the surface, this rule might
appear to be of some comfort to tax protesters who assert, for
example, that “wages are not income.”[39] However, merely asserting
that one has such a good faith belief is not determinative in court;
under the American legal system the trier of fact (the jury, or the
trial judge in a non-jury trial) decides whether the defendant really
has the good faith belief he or she claims. With respect to
willfulness, the placing of the burden of proof on the prosecution is
of limited utility to a defendant that the jury simply does not
believe.

A further stumbling block for tax protesters is found in the Cheek
Doctrine with respect to arguments about “constitutionality.” Under
the Doctrine, the belief that the Sixteenth Amendment was not properly
ratified and the belief that the Federal income tax is otherwise
unconstitutional are not treated as beliefs that one is not violating
the “tax law” — i.e., these errors are not treated as being caused by
the “complexity of the tax law.”

In the Cheek case the Court stated:

Claims that some of the provisions of the tax code are
unconstitutional are submissions of a different order. They do not
arise from innocent mistakes caused by the complexity of the Internal
Revenue Code. Rather, they reveal full knowledge of the provisions at
issue and a studied conclusion, however wrong, that those provisions
are invalid and unenforceable. Thus, in this case, Cheek paid his
taxes for years, but after attending various seminars and based on his
own study, he concluded that the income tax laws could not
constitutionally require him to pay a tax.

The Court continued:

We do not believe that Congress contemplated that such a taxpayer,
without risking criminal prosecution, could ignore the duties imposed
upon him by the Internal Revenue Code and refuse to utilize the
mechanisms provided by Congress to present his claims of invalidity to
the courts and to abide by their decisions. There is no doubt that
Cheek, from year to year, was free to pay the tax that the law
purported to require, file for a refund and, if denied, present his
claims of invalidity, constitutional or otherwise, to the courts. See
26 U.S.C. 7422. Also, without paying the tax, he could have challenged
claims of tax deficiencies in the Tax Court, 6213, with the right to
appeal to a higher court if unsuccessful. 7482(a)(1). Cheek took
neither course in some years, and, when he did, was unwilling to
accept the outcome. As we see it, he is in no position to claim that
his good-faith belief about the validity of the Internal Revenue Code
negates willfulness or provides a defense to criminal prosecution
under 7201 and 7203. Of course, Cheek was free in this very case to
present his claims of invalidity and have them adjudicated, but, like
defendants in criminal cases in other contexts who “willfully” refuse
to comply with the duties placed upon them by the law, he must take
the risk of being wrong.[40]

The Court ruled that such beliefs — even if held in good faith — are
not a defense to a charge of willfulness. By pointing out that
arguments about constitutionality of Federal income tax laws “reveal
full knowledge of the provisions at issue and a studied conclusion,
however wrong, that those provisions are invalid and unenforceable,”
the Supreme Court may have been impliedly warning that asserting such
“constitutional” arguments (in open court or otherwise) might actually
help the prosecutor prove willfulness.[41] Daniel B. Evans, a tax
lawyer who has written about tax protester arguments, has stated that:

[ . . . ] if you plan ahead to use it [the Cheek defense],
then it is almost certain to fail, because your efforts to establish
your “good faith belief” are going to be used by the government as
evidence that you knew that what you were doing was wrong when you did
it, which is why you worked to set up a defense in advance. Planning
not to file tax returns and avoid prosecution using a “good faith
belief” is kind of like planning to kill someone using a claim of
“self-defense.” If you’ve planned in advance, then it shouldn’t work.
[42]

Failing to file returns in the United States

According to some estimates, about three percent of taxpayers do not
file tax returns at all.[citation needed] In the case of U.S. Federal
income taxes, civil penalties for willful failure to timely file
returns and willful failure to timely pay taxes are based on the
amount of tax due; thus, if no tax is owed, no penalties are due.[43]
The civil penalty for willful failure to timely file a return is
generally equal to 5.0% of the amount of tax “required to be shown on
the return per month, up to a maximum of 25%.[44] By contrast, the
civil penalty for willful failure to timely pay the tax actually
“shown on the return” is generally equal to 0.5% of such tax due per
month, up to a maximum of 25%.[45] The two penalties are computed
together in a relatively complex algorithm, and computing the actual
penalties due is somewhat challenging.

In cases where a taxpayer does not have enough money to pay the entire
tax bill, the IRS can work out a payment plan with taxpayers.

For years for which no return has been filed, there is no statute of
limitations on civil actions—that is, on how long the IRS can seek
taxpayers and demand payment of taxes owed.[46]

For each year a taxpayer willfully fails to timely file an income tax
return, the taxpayer can be sentenced to one year in prison.[47] In
general, there is a six-year statute of limitations on Federal tax
crimes.[48]

Tax shelters

See also: Tax shelter and Tax haven

Tax shelters are investments that allow, and purport to allow, a
reduction in one’s income tax liability. Although things such as home
ownership, pension plans, and Individual Retirement Accounts (IRAs)
can be broadly considered “tax shelters”, insofar as funds in them are
not taxed, provided that they are held within the IRA for the required
amount of time, the term “tax shelter” was originally used to describe
primarily certain investments made in the form of limited
partnerships, some of which were deemed by the U.S. Internal Revenue
Service to be abusive.

The Internal Revenue Service and the United States Department of
Justice have recently teamed up to crack down on abusive tax shelters.
In 2003 the Senate’s Permanent Subcommittee on Investigations held
hearings about tax shelters which are entitled U.S. TAX SHELTER
INDUSTRY: THE ROLE OF ACCOUNTANTS, LAWYERS, AND FINANCIAL
PROFESSIONALS. Many of these tax shelters were designed and provided
by accountants at the large American accounting firms.

Examples of U.S. tax shelters include: Foreign Leveraged Investment
Program (FLIP) and Offshore Portfolio Investment Strategy (OPIS). Both
were devised by partners at the accounting firm, KPMG. These tax
shelters were also known as “basis shifts” or “defective redemptions.”

Prior to 1987, passive investors in certain limited partnerships (such
as oil exploration or real estate investment ventures) were allowed to
use the passive losses (if any) of the partnership (i.e., losses
generated by partnership operations in which the investor took no
material active part) to offset the investors’ income, lowering the
amount of income tax that otherwise would be owed by the investor.
These partnerships could be structured so that an investor in a high
tax bracket could obtain a net economic benefit from partnership-
generated passive losses.

In the Tax Reform Act of 1986 the U.S. Congress introduced the
limitation (under 26 U.S.C. § 469) on the deduction of passive losses
and the use of passive activity tax credits. The 1986 Act also changed
the “at risk” loss rules of 26 U.S.C. § 465. Coupled with the hobby
loss rules (26 U.S.C. § 183), the changes greatly reduced tax
avoidance by taxpayers engaged in activities only to generate
deductible losses.

See also
Wikiquote has a collection of quotations related to: Tax avoidance
and tax evasion

* Double Irish Arrangement
* Bottom of the harbour tax avoidance (Australia)
* Civil disobedience
* David Wynn Miller
* Financial transaction tax – Intended Purpose: Less susceptible
to tax evasion than alternatives
* Gary Becker
* Loophole
* Tax patent
* Stop Tax Haven Abuse Act
* Tax exile
* Tax farming
* Tax haven
* Corporate inversion
* Tax incidence
* Tax protester
* Tax resistance
* Taxation as slavery
* Underground economy (also known as the black market)
* List of individuals with non-domiciled status in the UK

References

1. ^ “The new refugees. (Americans who give up citizenship to save
on taxes)”. Forbes. 1994-11-21.
http://web.archive.org/web/20060227051231/http://www.frissell.com/taxpat/FORBES1.HTM.
Retrieved 2006-12-23.
2. ^ There are certain well-known exceptions to this: Cyprus has a
heavily exploited double taxation relief treaty with Russia; another
frequently used treaty is the double taxation relief treaty between
Mauritius and India. There are also a number of other less well known
and less frequently utilized treaties, such as the one between the
British Virgin Islands and Switzerland.
3. ^ “Pasternak M., and Rico C., Tax Interpretation, Planning, and
Avoidance: Some Linguistic Analysis, 23 Akron Tax Journal, 33
(2008).”. http://www.uakron.edu/law/lawreview/taxjournal/atj23/docs/Pasternak08.pdf.
4. ^ $345B tax gap: Random Tax Audits Return to the IRS, 9 Oct
2007, Morning Edition.
5. ^ 366 U.S. 213 (1961), overruling Commissioner v. Wilcox, 327
U.S. 404 (1946).
6. ^ 274 U.S. 259 (1927)
7. ^ ‹The template Findlaw us is being considered for deletion.›
424 U.S. 648
8. ^ Allingham, M. G. and A. Sandmo [1972] ‘Income Tax evasion: A
Theoretical Analysis’, Journal of Public Economics, Vol.1, 1972, p.
323-38.
9. ^ a b Chowdhury, F. L. Evasion of Customs Duty in Bangladesh,
2006: Desh Prokashon Dhaka.
10. ^ Spiro, Peter S. (2005), “Tax Policy and the Underground
Economy,” in Christopher Bajada and Friedrich Schneider, eds., Size,
Causes and Consequences of the Underground Economy (Ashgate
Publishing).
11. ^ Tomášková, Eva (2008): “Tax Evasion in the Czech Republic” In:
A Brief Introduction to Czech Law. Rincon: The American Institute for
Central European Legal Studies (AICELS), 2008. p. 111 – 121, ISBN
978-0-692-00045-8
12. ^ Chowdhury, F. L. (1992) Evasion of Customs Duty in Bangladesh,
unpublished MBA dissertation, Graduate School of Management, Monash
University, Australia.
13. ^ Stella, P. [1992] Tax Farming – A radical Solution for
Developing Country Tax Problem, IMF Working Paper No. 92/70
14. ^ Alam. D (1999) Introduction of PSI system in Bangladesh: Facts
and Documents, Desh Prokashon, Dhaka.
15. ^ Hood, C. (1986) Privatizing UK tax Law Enforcement?, Public
Administration, Vol. 64, Autumn, 1986, p. 319-33.
16. ^ Chowdhury, F. L. [1992] Evasion of Customs Duty in Bangladesh,
unpublished MBA dissertation, Graduate School of Management, Monash
University, Australia.
17. ^ Stella, P. (1992) Tax Farming – A radical Solution for
Developing Country Tax Problem, IMF Working Paper No. 92/70.
18. ^ “NBR showcauses Cotecna on car import scam“, New Age
19. ^ New York Times, 06 August 2003
20. ^ The term “assessment” is here used in the technical sense of a
statutory assessment: the formal administrative act of a duly
appointed employee of the Internal Revenue Service who records the tax
on the books of the United States Treasury after certain
administrative prerequisites have been met. The term “assessment” has
a separate, non-statutory meaning in the United States, viz. the act
of the taxpayer computing the amount of the tax when preparing and
filing a Federal income tax return.
21. ^ 70 TC 57.
22. ^ See for instance CT Sandford, Hidden Costs of Taxation, IFS,
1973.
23. ^ (1986) STC 548.
24. ^ 27 TC 331.
25. ^ (1860) 1 de G F&J 643 (England).
26. ^ (1901) AC 196 (England).
27. ^ Minimising Taxes, Sears, 1922, Vernon Law Book Co.
28. ^ 240 U.S. 625, 630 (1916).
29. ^ (1988) 62 TC 1 at 197.
30. ^ HMRC goes on £1bn retro warpath, Accountancy Age, 18 Feb 2010
31. ^ O’grady, Sean (2008-05-12). “Tax evasion ‘costs lives of 5.6m
children’”. The Independent (London).
http://www.independent.co.uk/news/uk/home-news/tax-evasion-costs-lives-of-56m-children-826252.html.
32. ^ Vanessa Houlder (2010-11-08). “Tax claims hit reputation as
well as coffers”. The Financial Times.
http://www.ft.com/cms/s/0/c153e27c-eb7d-11df-b482-00144feab49a.html#axzz14mgsdfEK.
Retrieved 2010-11-09.
33. ^ http://www.guardian.co.uk/uk/2010/dec/03/uk-uncut-protests-undercover-police
34. ^ (1968) All ER 779.
35. ^ 26 U.S.C. § 7201.
36. ^ 26 U.S.C. § 7206.
37. ^ Ignorantia legis neminem excusat, or “ignorance of law excuses
no one.” Black’s Law Dictionary, p. 673 (5th ed. 1979).
38. ^ 498 U.S. 192 (1991).
39. ^ The U.S. courts have consistently rejected arguments that
“wages” or “labor” are not taxable as income under the Internal
Revenue Code. For example, see United States v. Connor, 898 F.2d 942,
90-1 U.S. Tax Cas. (CCH) paragr. 50,166 (3d Cir. 1990) (tax evasion
conviction under 26 U.S.C. § 7201 affirmed by the United States Court
of Appeals for the Third Circuit; taxpayer’s argument — that because
of the Sixteenth Amendment, wages were not taxable — was rejected by
the Court; taxpayer’s argument that an income tax on wages is required
to be apportioned by population also rejected); Perkins v.
Commissioner, 746 F.2d 1187, 84-2 U.S. Tax Cas. (CCH) paragr. 9898
(6th Cir. 1984) (26 U.S.C. § 61 ruled by the United States Court of
Appeals for the Sixth Circuit to be “in full accordance with
Congressional authority under the Sixteenth Amendment to the
Constitution to impose taxes on income without apportionment among the
states”; taxpayer’s argument that wages paid for labor are non-taxable
was rejected by the Court, and ruled frivolous); White v. United
States, 2005-1 U.S. Tax Cas. (CCH) paragr. 50,289 (6th Cir. 2004),
cert. denied, ____ U.S. ____ (2005) (taxpayer’s argument that wages
are not taxable was ruled frivolous by the United States Court of
Appeals for the Sixth Circuit; penalty — imposed under 26 U.S.C. §
6702 for filing tax return with frivolous position — was therefore
proper); Granzow v. Commissioner, 739 F.2d 265, 84-2 U.S. Tax Cas.
(CCH) paragr. 9660 (7th Cir. 1984) (taxpayer’s argument that wages are
not taxable was rejected by the United States Court of Appeals for the
Seventh Circuit, and ruled frivolous); Waters v. Commissioner, 764 F.
2d 1389, 85-2 U.S. Tax Cas. (CCH) paragr. 9512 (11th Cir. 1985)
(taxpayer’s argument that income taxation of wages is unconstitutional
was rejected by the United States Court of Appeals for the Eleventh
Circuit; taxpayer required to pay damages for filing frivolous suit).
40. ^ Cheek, 498 U.S. at 205-206 (footnote omitted; emphasis added).
41. ^ See also Spies v. United States, 317 U.S. 492 (1943); Sansone
v. United States, 380 U.S. 343 (1965); Cheek v. United States, 498
U.S. 192 (1991).
42. ^ Daniel B. Evans, The Tax Protester FAQ; downloaded 24 April
2007
43. ^ See 26 U.S.C. § 6651.
44. ^ See 26 U.S.C. § 6651(a)(1).
45. ^ See 26 U.S.C. § 6651(a)(2).
46. ^ See 26 U.S.C. § 6501.
47. ^ See 26 U.S.C. § 7203.
48. ^ See 26 U.S.C. § 6531.

Further reading

* Taxation of Foreign Domiciliaries (James Kessler QC, 5th
edition, 2005, Key Haven Publications) chapter 16 discusses tax
avoidance in context of UK anti-avoidance provisions.

External links

Look up Tax avoidance or Tax evasion in Wiktionary, the free
dictionary.

* Tax Justice Network – research into “the negative impacts of tax
avoidance, tax competition and tax havens”
* Law Enforcement
* The Tax Gap Special report from The Guardian about tax avoidance
by big business
* US Justice Dept Press Release on Jeffrey Chernick, UBS tax
evader
* US Justice Dept Press Release on Robert Moran and Steven Michael
Rubenstein, two UBS tax evaders
* US States Atty for Central Dist of California Press Release on
John McCarthy of Malibu, Calif, UBS tax evader
* Tax Me if You Can – PBS Frontline documentary into tax avoidance

v • d • e

Types of fraud

Financial

Advance-fee (Lottery scam) • Bank • Bankruptcy • Cheque • Credit card
• Forex • Friendly • Insurance • Mortgage • Securities • Tax • Wire

Business related

Billing • Cramming • Disability • Drug • Employment • Fixing •
Identity theft • Intellectual property • Internet • Job • Odometer •
Phone • Quackery • Return • Slamming • Telemarketing

Family related

Marriage • Paternity

Government related

Benefit • Electoral • Medicare • Visa • Welfare

Other types

Charity • Confidence trick • Counterfeiting • Forgery • Hoax • Honest
services • Identity theft • Mail

Retrieved from “http://en.wikipedia.org/wiki/
Tax_avoidance_and_tax_evasion“

Categories: Anglo-American law-centric | Fraud | Tax avoidance | Tax
resistance | Commercial crimes | Tax evasion

* This page was last modified on 29 December 2010 at 01:09.

* Text is available under the Creative Commons Attribution-
ShareAlike License;

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Foundation, Inc., a non-profit organization.

…and I am Sid Harth

Category: News, Views and Reviews

India’s Superpower Euphoria CLXXI

[cogitoergosum]

<a href="http://www.expressindia.com/latest-news/Nitin-Gadkari-cracks-
whip-Joshi-falls-in-JPC-line/731158/">Nitin Gadkari cracks whip, Joshi
falls in JPC line</a>
Agencies

Posted: Dec 30, 2010 at 1424 hrs IST

New Delhi Murli Manohar Joshi, veteran BJP leader and PAC chairman,
has fallen quickly into line after getting a talking-to from his chief
Nitin Gadkari on his ambivalence on the demand for a JPC on 2G scam.

Joshi had appeared to be going against the BJP stand demanding a Joint
Parliamentary Committee probe into the 2G scam, something for which it
had stalled Parliament for an entire session, an unheard of thing in
India.

The controversy was first generated by PM Manmohan Singh offering to
appear before the Public Accounts Committee to answer all querries
related to the 2G telecom scam.

Joshi, who had been ignored by BJP for the last few years as his
influence waned, suddenly found himself under the spotlight. He
indicated his willingness to accept the PM's offer, but stopped short
of actually doing it.

In this interregnum, BJP leader Sushma Swaraj went public on at least
two occasions to impress upon Joshi the importance of rejecting the
PM's offer.

After failing to get any response, Nitin Gadkari was finally roped in
to sort out the issue.

He was successful as Joshi announced that he believed a JPC probe to
be the best option available to sort out the 2G scam, leaving Sushma
Swaraj standing triumphant.

It remains to be seen if there was a quid pro quo, if any, in the
Gadkari-Joshi talk.

30 Dec, 2010, 11.01AM IST,TNN
<a href="http://economictimes.indiatimes.com/news/politics/nation/
citibank-fraud-shiv-raj-puri-opened-78-accounts-in-last-few-years/
articleshow/7189120.cms">Citibank fraud: Shiv Raj Puri opened 78
accounts in last few years</a>

Read more on »shiv raj puri|citibank fraud

Shiv Raj Puri

GURGAON: A major problem with greed is that it prevents people from
using their intelligence fully. And Shiv Raj Puri soft-talked and hard-
tapped his way into that vice with a vengeance: in the last few years,
Puri opened 78 accounts in his name and in the names of his grand
parents, Premnath Puri and Sheela Premnath Puri and in the name of his
mother, Deeksha Puri. They all are co-accused along with Puri.

The accounts are with different financial institutions including banks
and brokerage houses spread across Gurgaon, Delhi and Kolkata.

Religare, Bonanza and India Infoline figure in the list. The banks are
SBI , HDFC , Standard Chartered, PNB, Axis and ABN-Amro.

According to police commissioner SS Deswal, notices have been issued
to the banks to seize all the accounts. “We have formed five special
teams to investigate the case. And we are hot on Puri’s trail.”

28 Dec, 2010, 04.51PM IST, Shailendra Bhatnagar & Mohit Bhalla,ET Now
<a href="http://economictimes.indiatimes.com/news/news-by-industry/
banking/finance/banking/citibank-fraud-rs-400-cr-allegedly-siphoned-
off/articleshow/7178633.cms">Citibank fraud: Rs 400 cr allegedly
siphoned off</a>

* Comments (5)

Read more on »wealth management unit|gurgaon branch|citibank india
fraud

Citibank

MUMBAI: Citibank is probing a Rs 400 crore fraud perpetrated by
certain employees of the bank at its Gurgaon branch in India, atleast
three people told ET Now on condition of anonymity. It is learnt that
the fraud was discovered by accident and that the banks Asia Pacific
fraud risk management team has been camping in India for the past two
weeks conducting detailed investigations and questioning several
employees who maybe suspected of being involved in prosecuting the
fraud.

People familiar with the development told ET Now that the employees
involved have been suspected of selling investment products to clients
claiming that these would generate unusually high returns. The
employees claimed that the products were authorized by the banks
investment product committee and used forged bank documents and
letterheads to prove the same.

The suspected employees then siphoned off the funds raised from the
sale of these products into their personal bank accounts and defrauded
clients to the tune of Rs. 400 crore.

The suspected employees had access to High Net Worth Individual (HNI)
clients of the bank and were in roles which involved servicing their
requirements for investment products, according to a bank employee who
spoke on condition of anonymity.

It is leant that close to 40 clients have been impacted by the fraud
though the number could be much higher as investigations are still
underway.

A citibank spokesperson issued the following statement in response to
queries from ET NOW. "We recently initiated an investigation into a
certain set of suspicious transactions based on documents forged by an
employee involving a few accounts in our Gurgaon branch. We
immediately reported the matter to all the relevant regulatory and law
enforcement authorities. Identified suspicious transactions have been
isolated and we are providing full assistance to the authorities in
their investigations. This issue does not impact other accounts,
transactions or customers of the Bank. Subsequent to our complaint
naming the involved employee and other external individuals who appear
to be perpetrators in these suspicious transactions,the Gurgaon Police
has registered an FIR.”

The fraud may have been discovered by accident according to some of
the people quoted above. According to one of the sources, a senior
official in the consumer banking division was talking to a client who
mentioned that he had recently purchased a product from the bank that
could generate unusually high returns in a short span of time. It was
brought to the clients notice that the bank was not distributing any
such product which is when an investigation into the matter was
initiated.

The investigation may have triggered audits across several branches of
Citibank in India according to another bank official.

ET Now first reported the story at 3 PM IST today.

It is learnt that the employee who has been reported to the law
enforcement authorities has been attending office at the Gurgaon
branch accompanied by his lawyer everyday and is threatening the bank
with dire consequences if action is taken against him.ET NOW first
reported the story at 3 PM IST today.

It is learnt that the employee who has been reported to the law
enforcement authorities has been attending office at the Gurgaon
branch accompanied by his lawyer everyday and is threatening the bank
with dire consequences if action is taken against him.

HIGH-NETWORTH FRAUD

HOW FRAUD WAS COMMITTED?

Citibank’s relationship managers are said to have committed the fraud
with the help of an external party, most likely a brokerage house that
distributes investment products Funds generated by selling the product
to some investment companies and individuals were transferred to
accounts of some brokers, who utilised the money for their
transactions

The employees claimed the products were authorised by Citibank’s
investment product committee and used forged bank documents and
letterheads to prove the same

WHO ARE INVOLVED?

Employee named in FIR learnt to be working as a senior relationship
manager in Citibank’s Gurgaon branch. The staffer may have been
supported by other relationship managers responsible for sales of
investment products to high net worth clients of the bank

WHO ARE AFFECTED?

Close to 40 clients, including some corporate treasuries, could be
affected because of the fraud. It is unclear whether Citibank will
compensate its clients for the losses.

Comments:

Recommended (3)

sk Pantnagar 29/12/2010 at 02:32 PM

Citibank is a high headed; high cost bank, where every thing is a NO
NO. I as a Gold Customer have got account statements of other people
also. Investment advice - that comes is of lower level than childish.
Structured products that they sell, are enclosed in secrecy. Frauds
like this have come out - but there are many that goes hidden.. High
profile bank - and high risk work.
Agree (2)Disagree (2)

REYAZ delhi 29/12/2010 at 09:47 AM

Wre should not blame employee of the bank only for this fraud ,city
bank and INVESTOR at large are responsible for this fraud.Because
working in city BANK is very high pressur and targeted oriented and
the top management alwys greed and pushes all the limits to achieve
target what ever may happen, with high incentive for those who dupe
investor to invest in bank's low yeilding financial products.This
tought employee the trick of how to dupe and make fool of
investor.Second in Gurgaon people have raked in huge black money by
selling or trading land property.These ill gotten money always look
for fincial product which multiply their money immidiatly.So people
with huge unacounted money and highly inteligent people with very
limited money leads to this type of fraud which is very common in
western country.In future we will hear this type of fraud regularly.I
am very happy to see real life TEES MAR KHAN.
Agree (4)Disagree (2)

Ramakrishnan Chennai 28/12/2010 at 08:34 PM
What the employees in USA did is now done by their counterparts in the
highworth and high profile Bank for the rich. Thanks for importing LPG
policies in fraud also.
Agree (4)Disagree (4)Recommend (2)

Ajay Hearts 28/12/2010 at 07:58 PM

This is exactly the reason why the financial institutions around the
world hire the IIM graduates and likes form around the world with a
hefty pay package so they can come up with new ideas and ways of
robbing and stealing on their behalf. So whats the big deal I don't
see any reason for them to be upset about any of this. It is a norm in
the financial industry to steal and rob. But the society calls it
progress. Whatever happened to Gandhivaad? Gandhivaad is an ideology
pillared on nonviolence, truth, simplicity and most importantly self
realization. Gandhivaad is neither bound by nor limited to any one
race, religion, color, culture or nation; it is an action by a
commoner that can topple the mountains of corruption, injustice and
tyranny. Jai Hind. Long Live Gandhivaad.
Agree (4)Disagree (4)Recommend (2)

CA Sreeram Mushty Vijayawada 28/12/2010 at 06:28 PM

It is obvious and they are famous for rogue banking with wide
popularity acting as trend setters for muscle character based recovery
having capability to manage and lobby Reserve Bank of India in their
favour for all possible multiple synonymous charges like late fees
charges, multi auto debit returns charges, over limit usage charges,
interest, penalyty etc., for one and only reason of causing of delay
in loan payments. Further off record payments for No Objection
Certificate for better rating on CIBIL once the loan amounts are
compromised and settled. Let us hope some betterment in the years to
come.
Agree (4)Disagree (2)Recommend (2)

30 Dec, 2010, 11.31AM IST,TNN
<a href="http://economictimes.indiatimes.com/news/politics/nation/
citibank-fraud-police-hunt-for-shiv-raj-puri--parents/articleshow/
7189299.cms">Citibank fraud: Police hunt for Shiv Raj Puri & parents</
a>

Read more on »shiv raj puri|police|citibank fraud

NEW DELHI/GURGAON: Immigration officials at the Indira Gandhi
International (IGI) Airport are on alert to nab Gurgaon bank scam
mastermind Shiv Raj Puri who might try to take a flight out of the
country, sources close to the investigation said.

Puri has allegedly swindled Rs 400 crores from Citibank. He and his
family who live at Hamilton Court have been missing for the past
couple of days.

On Tuesday night, immigration authorities received a request from the
Gurgaon Police to look out for Puri. “A Look Out Circular (LOC) has
been activated. Centralised records are being trawled. The minute he
is tracked, the immigration authorities will detain him,” a senior
immigration official posted at the airport said.

Information available with investigators and at IGI Airport shows that
the accused has not yet made an attempt to leave the country. But they
don’t entirely rule out such a possibility. The bank took long to
lodge an FIR against Puri and three of his relatives. This explains
why they are keeping a close watch at the airport . Gurgaon Police
commissioner S S Deswal confirmed the airport vigil and said: “Yes, a
look out notice has been issued. As a precaution , airports have been
alerted .”

The Gurgaon Police have formed five teams to investigate the fraud.
“We are trying to track down the accused and his family. We are
checking if they had any role in this case. We are questioning senior
officials and those closely associated with Puri,” a senior police
officer said. Meanwhile, on Wednesday, the bank stepped up security to
regulate the entry of people at the DLF-II bank branch.

30 Dec, 2010, 09.39AM IST,ET Bureau
<a href="http://economictimes.indiatimes.com/news/news-by-industry/
banking/finance/banking/citibank-fraud-munjal-controlled-hero-taken-
for-rs-200-cr-ride/articleshow/7187876.cms">Citibank fraud: Munjal-
controlled Hero taken for Rs 200 cr ride</a>

* Comments (5)

Read more on »religare|mumbai|india|hero honda|gurgaon police|fir|
citibank fraud|citibank

Citibank

RELATED VIDEOS
[Citibank fraud: Modus operandi exposed]

MUMBAI: The Citibank employee who perpetrated the Rs 400-crore fraud
not only duped a string of wealthy individuals, but also took one of
India’s biggest business groups for a ride.

A few firms belonging to Munjal-controlled Hero group are learnt to
have invested close to Rs 200 crore in the sham investment scheme that
promised a high rate of return.

A senior Hero group official used his discretion to invest the money
in what initially appeared to be a normal treasury operation done to
deploy surplus cash. The money collected from the Hero group entities
and others was used to buy stocks by routing funds through multiple
bank accounts and several trading and demat accounts with three
brokerages.

There is no evidence at this stage to suggest the Hero group official
was acting in connivance with Shivaraj Puri, the disgraced Citibanker
who devised the fraudulent scheme.

“Citibank officials are in touch with Hero group. They are discussing
the matter ever since the bank sensed the fraud,” said a person
familiar with the ongoing investigation. The investment, according to
the person, was not by the flagship Hero Honda , but by entities that
were holding investible surplus belonging to group promoters.

Hero group officials were not available for comment while an email to
Sunil Kant Munjal, promoter-director of India’s largest two-wheeler
maker, Hero Honda, went unanswered. A Citibank spokesperson also
declined comment.

The police has issued a ‘lookout’ notice alerting airports to track
Puri, who is currently absconding, and other suspects involved in the
fraud. However, according to sources, Puri will present himself before
tha court on Friday.

What has come as a surprise to banking circles is the blatant nature
of the fraud that began with Puri forging a Sebi document that named a
Citibank account as the custodian account for a scheme that indicated
lucrative returns. An account was opened in the name of one Premnath,
who was later found to be a relative of Puri who worked as a
relationship manager with the Gurgaon branch.

In the first leg of the transaction, investors put money in the scheme
favouring the custodian account. In the second leg, the money moved to
accounts of friends and relatives, including those of one Sheila
Premnath and Shivaraj’s mother Diksha.

30 Dec, 2010, 11.05AM IST,TNN
<a href="http://economictimes.indiatimes.com/news/politics/nation/
citibank-fraud-who-is-shiv-raj-puri/articleshow/7189140.cms">Citibank
fraud: Who is Shiv Raj Puri?</a>

Read more on »shiv raj puri|duping customers|citibank fraud

Shiv Raj Puri

Shiv Raj Puri , 32, is an unlikely fraudster. Smart and nattily turned
out, he snared customers with soft words and ability to win trust.

A strapping man with pleasing manners, Shiv Raj is a resident of the
upscale Hamilton Court, Gurgaon. He lives with his parents and wife,
who works as a manager in the same branch. Some years ago, the Puris
moved to Gurgaon from Kolkata. His father, Raghu Raj Puri, is a
businessman who dabbled in stocks. Shiv Raj’s colleagues refuse to say
much about him barring that he’d joined the branch some eight years
ago. His neighbours say the Puris were modest and didn’t really lead a
lavish lifestyle. Shiv Raj was a reticent man who seldom socialised
with other residents of the condominium.

Others said they never really saw anything amiss or out of the
ordinary in him. Shiv Raj’s father has a SUV, which is the family car.

Sources said the accused owned several properties in the NCR. An
investor who Shiv Raj allegedly cheated recalls: “This smart banker
met me one- and-a-half-years ago. He came with a lucrative scheme and
seemed to know his trade well. I was instantly taken in by his soft
talk. He was not pushy like other banking professionals.”

Sudhir Kapoor of DLF II thanks his stars for not having fallen to Shiv
Raj’s charm. “He came home two years ago and tried to convince me to
open an account. He came across as a gentleman. But I wasn’t
interested and, thankfully, turned him down.”

M M Bhalla, former president of Hamilton Court RWA, describes Shiv
Raj’s parents as nice and warm. “They have been staying here for the
past several years. We know them as nice colony residents. I’ve met
Shiv Raj only once. He was always humble.”

Readers' opinions (5)

Recommended (3)

Phadnis Mumbai 30/12/2010 at 12:00 PM

People who have invested huge amounts carelessly, have done so due to
GREED. If they lose the money, rest of us need not blink an eyelid!
Citibank seems to have a very lose control over its employees. Quite
likely, it wasnt a one-man show!
Agree (2)Disagree (2)

Pats Coimbatore 30/12/2010 at 10:45 AM

You are probably right. I know this bank go to any extent to make even
that last 1 rupee out of its customers. They have an MNC mask and high-
networth muscle to bulldose its way through developing/under-developed
nations to establish themselves as great-great bank. Behind the mask,
they are 3rd rated pawn-brokers type. They have true american-blood.
Agree (2)Disagree (0)Recommend (2)

S.B.Karan singapore. 30/12/2010 at 10:26 AM

High risk - High return. When will the HNI learn the lessons? Whether
it is structured products like Leman Bonds sold in Hongkong and
Singapore, portolio assuring high returns in indirect way (not
explicit as it is banned by SEBI), advice on round tripping/layering
thro' tax havens will yield good returns by with high attendant risks
as they always play on the borders of greyness of regulatory norms.
Let the HNIs pay the price and Regulators also will learn the pitfalls
of private banking practices.
Agree (2)Disagree (2)

Murugesan Bahrain 30/12/2010 at 08:46 AM

This bank worldwide has indulged in fraudulent means to make money. I
don't believe that they have such loose controls that any employee can
take money from customers and invest in the name of the bank. I think
the bank was turning a blind eye to such happenings so long as it was
making money. When things were found out or went wrong, they cook up
the story that the found out about the fraud by themselves. The full
truth is yet to come out.
Agree (2)Disagree (2)Recommend (2)

Anil India 30/12/2010 at 11:19 AM

Many international banks are indulging in fraud. What makes it worse
is that the master mind for such cases may not even be in India. The
bank has failed to protect its customers and should be kicked out of
the country. SEBI should recover all dues and punish all those who
committed the offence and also those who should have verified that
"all is well".
Agree (2)Disagree (2)Recommend (2)

30 Dec, 2010, 12.09PM IST,TNN
<a href="http://economictimes.indiatimes.com/news/politics/nation/
citibank-fraud-how-shiv-raj-puri-banked-on-trust-to-dupe-clients/
articleshow/7189492.cms">Citibank fraud: How Shiv Raj Puri banked on
trust to dupe clients</a>

Read more on »shiv raj puri|duping bank customers|citibank fraud|
citibank

MODUS OPERANDI

1. Puri taps investors claiming he operates a custodian account. He
lures investors with high interest on investments showing a forged
Sebi circular. The fake Sebi note is the clincher
2. The investor who wants a lucrative scheme to park his funds is
easily convinced and readily agrees to invest in a scheme recommended
by Puri
3. Puri picks up the cheque from the gullible client and instead of
putting it in schemes he discussed with client puts it where he
desires , mostly in the bourses where he makes a killing
4. Puri is exposed after the branch receives several queries from
customers about the Sebi-okayed high-interest schemes. Bank also
begins probing high-value transactions from some accounts

UNANSWERED QUESTIONS

1. Was Puri a solo operator or did he have accomplices in the branch
Why is it that none of the victims of the scandal have approached the
police against Puri yet Why is it that the bank concerned took so much
time to lodge a police complaint?
2. If Puri has been operating for close to a year and a half now, how
come the bank got to detect it only this month?
3. Who helped Puri forge the bank papers? He is said to have sent his
customers fake statements and dud bank slips
4. How come Puri’s line managers did not get to sniff out the scam?
5. What happens to the investors who have lost huge sums?

30 Dec, 2010, 11.25AM IST,TNN
<a href="http://economictimes.indiatimes.com/news/politics/nation/
citibank-fraud-i-believed-what-puri-said-he-was-very-convincing/
articleshow/7189279.cms">Citibank fraud: ‘I believed what Puri said,
he was very convincing’</a>

Read more on »shiv raj puri|securities and exchange board of india|
relationship manager|citibank fraud|citibank

Viresh (name changed) is one of the nearly two-dozen victims of the
multi-crore fraud engineered by Shiv Raj Puri , the relationship
manager of Citibank .s DLF-II branch. The investor who has been duped
of almost Rs 20 crore recalls how the accused approached him about one-
and-ahalf-years ago. They met at the bank.

He shared with me details of a lucrative scheme and showed me relevant
documents which looked absolutely genuine. I saw no reason to doubt
Puri and made an investment in good faith.

Most of us who have enough liquid cash want to benefit from lucrative
investments. But we don’t really have time to spend on nitty-gritty .
We want good investments but are loathe to invest time in making the
careful choices. Puri exploited this to the hilt and duped several
investors like me and also corporate clients.

The banker swindled investors in two ways. He used to approach big
companies and corporates claiming he had been authorised to manage a
custodian account in Citibank.

He showed us papers -- that have now emerged to be fakes -- to
establish how he had been authorised by his bank and also by the
market regulator Securities and Exchange Board of India (Sebi). The
Sebi documents he showed us claimed that the branch had been
authorised to float schemes which will fetch 18% interest on
investments, particularly in the case of fixed deposits. When we
picked a saving scheme, he got us to sign a number of blank papers.

He claimed he was investing my money in mutual funds of my choice but
put the amount in different schemes using his own accounts. I now
realise he kept dipping into my funds to make investments of his
choice in the stock market.

He also sent online monthly bank statements in time to avoid any
suspicion. But those were also forged. By the time the fraud came to
light, we had lost our savings.

As told to Sanjay Yadav

30 Dec, 2010, 11.28AM IST,TNN
<a href="http://economictimes.indiatimes.com/news/news-by-company/
earnings/earnings-news/citibank-fraudcitibanks-bottomline-may-face-
rs-300-cr-hit/articleshow/7189289.cms">Citibank fraud:Citibank’s
bottomline may face Rs 300-cr hit</a>

Read more on »shiv raj puri|reserve bank of india|relationship manager|
citibank fraud|citibank|bottonline

NEW DELHI: Citibank is likely to face a blow on its bottomline during
the current financial year on account of the Rs 300-350 crore fraud at
its Gurgaon branch.

The Reserve Bank of India’s customer service master circular requires
banks to compensate customers for erroneous debits due to fraudulent
or other transactions, payment of interest for delay in collection of
a cheque, payment of interest on delay in issuing a duplicate draft or
for other unauthorised actions of the bank leading to a financial loss
to the customer.

Officials at the regulatory agency said that Citi would be liable to
compensate customers who lost money due to the fraud that was
allegedly masterminded by Shiv Raj Puri , a relationship manager at
the bank’s DLF-II branch in Gurgaon.

They, however, added that the compensation amount would be determined
by the bank since the RBI master circular requires banks to have
customer compensation policies that are approved by their boards.
Besides, the model policy of Indian Banks’ Association can be used as
the basis for individual compensation policies.

Given the flexibility in deciding the compensation amount, the hit to
Citi because of the fraudulent acts of Puri and his accomplices may
vary. However, experts suggest that the entire amount of the fraud,
which is estimated to be about Rs 300-350 crore, would not have been
lost.

A Citibank executive said that no money was invested in any of the
Citibank schemes. “At no point did Citi seek investment in the scheme
where some of the depositors have invested. It was not a Citi product
the only link that the bank has is with the employee,” the executive
said. However, he added that if needed, the bank would compensate the
victims of the fraud as per the guidelines.

During the last financial year Citibank’s Indian operations had
reported a net profit of Rs 860 crore. While TV reports suggested that
some internal action was expected by the weekend. “Some heads may roll
in Citi because of the fraud,” a bank executive said.

30 Dec, 2010, 01.00PM IST,AGENCIES
<a href="http://economictimes.indiatimes.com/news/politics/nation/
citibank-fraud-gurgaon-police-arrest-banker-shiv-raj-puri/articleshow/
7189788.cms">Citibank fraud: Gurgaon police arrest banker Shiv Raj
Puri</a>

Read more on »shiv raj puri|gurgaon police|citibank fraud|arrest

Citibank fraud: Shiv Raj Puri

RELATED VIDEOS
[Citibank fraud: Gurgaon police arrest banker Shiv Raj Puri]

GURGAON: Shivraj Puri, the alleged mastermind behind a major fraud in
the Citibank branch here, was today arrested.

Talking to Times of India after his arrest , Puri said: "I have
already given full details to the police. I have full faith in the
judiciary. Truth will come out." Check out: The great heist of
Citibank

Top police officials, however, declined to give details including from
where he was arrested. He is likely to be produced before a court
tomorrow.

Meanwhile Police Commissioner S S Deswal told reporters that the size
of the fraud could be about Rs 300 crore.

He said 40 teams have been constituted to crack the case that involved
alleged siphoning off funds taken as investments from high networth
individuals into a personal account of the main suspect Puri and three
of his accomplices.

Deswal said Puri's father Raghuraj Puri is said to be owning a
brokerage firm Norway Martin through which funds were diverted and
invested in the stock market.

Sources said the accused owned several properties in the NCR. An
investor who Shiv Raj allegedly cheated recalls: “This smart banker
met me one- and-a-half-years ago. He came with a lucrative scheme and
seemed to know his trade well. I was instantly taken in by his soft
talk. He was not pushy like other banking professionals.”

Puri opened 78 accounts in his name and in the names of his grand
parents, Premnath Puri and Sheela Premnath Puri and in the name of his
mother, Deeksha Puri. They all are co-accused along with Puri.

The accounts are with different financial institutions including banks
and brokerage houses spread across Gurgaon, Delhi and Kolkata.
Religare, Bonanza and India Infoline figure in the list. The banks
include SBI , HDFC , Standard Chartered, PNB, Axis and ABN-Amro.
According to the police commissioner SS Deswal, notices have been
issued to the banks to seize all the accounts. "We have formed five
special teams to investigate the case. And we are hot on Puri's
trail."

Religare, Bonanza and India Infoline figure in the list. The banks are
SBI, HDFC, Standard Chartered, PNB, Axis and ABN-Amro.