Income tax ‘raids’ surge amid poor conviction rate


A survey conducted by the Income Tax Department in the BBC’s officers in Delhi and Mumbai over the last week has raised many questions, especially since it was done barely a month after the public broadcaster released a two-part documentary titled ‘India: the Modi Question’. The government disabled online access to the documentary immediately after its release and also blocked related tweets.

This is not the first time that the Income Tax Department has visited news media houses after publication of critical coverage. Barely a month after the national editor of the Dainik Bhaskar Group wrote an editorial in The New York Times criticising the government’s “failures and deceptions” during the pandemic, Income Tax officials searched over 32 business and residential premises connected to the Group across nine cities for “tax evasion”. They visited Newslaundry and Bharat Samachar’s offices in 2021. Both media houses published reports critical of the pandemic.

While the recent survey has put the spotlight on press freedom in particular, there is growing concern that Income Tax “raids” in general are used to intimidate people who are critical of the Union government. Though the term “raid” has become popular, the Income Tax Act does not contain this expression.

The Income Tax Act allows two types of operations – search and seizure actions, and survey actions. The power to conduct a actions. The power to conduct a survey, such as the one conducted in the BBC’s offices, comes from Section 133A of the Act. Chart 1 shows the number of such surveys conducted by the Income Tax Department across years for which data were available. As the chart shows, the number of such surveys has more than doubled in recent years.

Chart 2 shows the number of search and seizure actions conducted by the Income Tax Department in two five-year periods – FY 11 to FY 15 and FY 15 to FY 20. The chart shows that the number of search and seizure actions has jumped 1.5. times between the two time-periods.

While both these types of actions have surged in recent years, conviction rates have reduced significantly. Table 3 lists the number of prosecution cases filed in court by the Income Tax Department, the number of person convicted, and the number of person convicted as a percentage of cases filed in two five-year periods – FY11 to FY15 and FY16 to FY20. As the table shows, while the percentage share was low in both periods, it further declined in the last five years. The rate reduced by 5% points from 7.3% to 2.4%.

Another factor that can be considered is the compounding of cases. Compounding is a provision where the tax defaulter is allowed to avoid major legal problems by paying a monetary fine in certain cases. Chart 4 shows the number of prosecution cases filed in court by the Income Tax Department and the number of cases compounded in the three-year periods – FY11 to FY13 and FY16 to FY18. The number of cases compounded is half of those initiated in the latest three years, while if formed a much higher share of cases initiated in the FY11-FY14 period. It must be noted that cases compounded may also include those initiated in previous years.

Chart 5 shows a similar surging case-poor convictions’ trend amongst cases filed under the Prevention of Money Laundering Act (PMLA), also an economic offence. It shows the number of cases filed under the PMLA. The cases count has increased sharply in recent. There were only 23 convictions in the 5422 cases filed until March, 2022.

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