Income Tax dept to increase reward money for informers, widen network
Under current guidelines, an informer gets ₹1 lakh as an instant reward if the tip-off leads to tax recovery. The rest of the reward money – 10% of the total tax liability with a maximum cap of ₹15 lakh – is subject to the final settlement of the case.
The Income Tax department is drafting fresh guidelines to substantially increase the reward money for informers who provide specific and credible information on tax evasion and benami (proxy) transactions.
According to guidelines issued by the Central Board of Direct Taxes on August 28, 2015, an informer will get ₹1 lakh as an instant reward if the tip-off leads to tax recovery. The rest of the reward money – 10% of the total tax liability with a maximum cap of ₹15 lakh – is subject to the final settlement of the case.
“In a majority of the cases, where defaulters seek legal recourse, informants have to wait for years as final settlements take a long time happening,” said a senior Income Tax official working on the draft guideline. “In one particular case, an informant has been waiting for over two decades to get his due.”
The present guidelines also have other provisions that could discourage informers from helping the government. “The informant currently has to give a written undertaking that he is liable for prosecution if the information turns out to be false. We are in discussions to somehow rephrase it, so that instead of putting fear of prosecution in the mind of informers, we can encourage them without jeopardising the department’s interests,” said another tax official.
Many Income Tax officials believe that a strong network of informers could help uncover more benami properties. “Informants will not come forward to provide information on properties worth several crores when the incentive is so meagre and the process so complicated,” said a tax investigator.
According to a government release on January 11, 2018, the Income Tax department has made a provisional attachment in more than 900 cases of properties under the Prohibition of Benami Property Transactions Act, which came into force on November 1, 2016. “These attachments include plots of land, flats, shops, jewellery, vehicles, deposits in bank accounts, fixed deposits, etc. The value of properties under attachment is more than ₹3,500 crore, inclusive of immovable properties of over ₹2,900 crore,” the release said.
However, others believe that the deterrent factor of penalising people who deliberately provide misleading or concocted information needs to be retained. “Many informants are known to inflate or even manufacture figures in tax evasion complaints just to settle scores with business rivals or people they have personal disputes with. Such complaints are often filed under pseudonyms due to the fear of punitive action. This leads to harassment of innocent people and increases the department’s workload. It’s important to retain this provision. As the maxim says, let a hundred guilty men go unpunished, rather than punish an innocent man,” said SK Goyal, former chief commissioner of the Income Tax department.
Goyal went on to say that informers cannot always expect a quick reward, even if they are genuine. “The system of investigation, assessment and appeals will take years even if the policies are amended. You can’t change the whole process or hasten it,” he added.