Login : Advocate | Client
Home Post Your Case My Account Law College Law Library

Report No. 29

Appendix 13

Points as to Evasion and Avoidance Discussed in The Report of The Taxation Enquiry Commission (1953-54)

Page etc. of the Report




Report, Vol. II, pp. 189 and 190, paras, 1 to 6 (contain a general discussion on the subject), as to income-tax. Evasion i.e. deliberate distortion of facts after the liability is incurred and avoidance i.e. so arranging one's affairs before the liability is incurred so as to prevent its occurrence or to reduce the incidence of the tax have been discussed.
Avoidance, though legal, was regarded as anti-social. It was suggested, that the Department should keep a vigilant eye on inroads into revenue by avoidance, so that prompt remedial action by legislation is taken by Government.
As regards evasion, it was stated that it could be tackled effectively only by improving and strengthening the enforcement machinery, the existing arrangements were reviewed under the following heads:-
  1. administrative measures adopted for tracing 'new' assessees (i.e. those who have taxable incomes but fail to send in returns), and for verifying the accuracy of the returns submitted by existing assessees, by
(a) external survey;
(b) exchange of information collected from the records of existing assessees available in the Income-tax Department;
(c) Collection and collation of information obtaining from outside sources (including informers);
  1. Special arrangements for dealing with cases of substantial evasion;
  2. legal provisions for enforcing 'back duty',i.e., section 34 of the Income-tax Act, etc.;
  3. public censure as a remedy for evasion;
  4. proper representation in income-tax proceedings;
  5. strict enforcement of collections; and
  6. voluntary disclosure of concealments.
Report, Vol. II, p. 202, paras. 36 and 37 (Income-tax). Recommendations were made to increase the maximum limit of penalty to three times the amount of tax evaded and to provide that abetment or instigation to evasion should be made an offence punishable as the main offence. It was also observed, that prosecutions under sections 51 and 52 of the Income-tax Act, 1922 were seldom resorted to in actual practice.
Report, Vol. II, p. 320, para, 11 (Customs duties). Certain recommendations were made as to the law relating to smuggling.
Report, Vol. II, pp. 353-361, paras 142 to 197. Summaries the various recommendations relating to evasion and avoidance. Most of these concern administrative matters or topics.
Report, Vol. Ill, pp. 72, 73, 74, paras 19, 20, 21 (Sales Tax). Discusses the reasons for evasion and avoidance of sales-tax. (See also pp. 49 and 65, para. 5). At p. 72, para. 19, the practice of showing the sales-tax separately in the cash memo is also discussed as a source of evasion. At p. 74, the following categories of methods of evasion are listed:-
  1. Manipulation of accounts; omission of some of the taxable: sales from books and records;. suppression of other transactions (e.g. purchases) in the light of which the sales can be verified; under-estimation of production, imports and sales by manufacturers and importers; falsified entries in declaration forms and certificates; showing separately sales of bullion and sales of services even when ready-made gold, and silver ornaments are sold; and
  2. Carrying on business without registration; splitting up of business so that the turnover may be below the taxable limit; changing place of business, name of firm, etc., when assessment becomes due, or disappearing altogether from the jurisdiction of the particular State.
Report, Vol. III, p. 99, para. 12 (Stamp duties). Observes that since stamp duty is levied on the instrument, it is theoretically possible that the party may refrain from executing the instrument, but the scope of such evasion is very limited, as an instrument would later be required as legal proof. But undervaluing the transaction is a common method of evasion. Another common method was to show a type of instrument which was not in conformity with actual facts (e.g. pro-note instead of a bond). Practice of blank transfers was mentioned as an example of "avoidance".

Proposal to include certain Social and Economic Offences in the Indian Penal Code Back

Client Area | Advocate Area | Blogs | About Us | User Agreement | Privacy Policy | Advertise | Media Coverage | Contact Us | Site Map
powered and driven by neosys