No taxation without representation is an ideal but no raid without disclosure of reason is essential in democracy
Confidentiality is essential lest the wily tax evader secrets away his documents and movable properties before the raid party descend on his premises
The American war cry “no taxation without representation” might have been an ideal especially in the context of the oppressive colonial rule it was raised against but no raid without disclosure of reason is the elementary norm in any democratic set up. It is certainly not too much for the asking.
The budget 2017 however seeks to kiss good bye to this salutary basic safeguard in the context of income tax raids and summons for production of books of accounts and documents. Income tax authorities are not bound to disclose what the reasons they believe or suspect for carrying out raids are to any person, any authority or the appellate tribunal.
The Supreme court in the context of reassessment proceedings which is a parallel albeit less adversarial regime vis-à-vis raids in ITO v. Lakhmani Mewal Das  103 ITR 437,445,448 had held that ‘reason to believe’ was not the same as the mere “reason to suspect”. The law then used the expression ‘reason to believe”. But today we find that the law gives itself greater powers and amplitude by consciously using the twin expressions---reason to believe or reason to suspect. The apex court’s reproach and word of caution in the above case has apparently been overruled. Now, whether it is reason to believe or mere reason to suspect neither would be disclosed to the person whose premises are raided or his attorney or indeed to anyone at all.
The Explanatory Memorandum to the finance bill 2017 says that confidentiality and sensitivity are the hallmarks of search and seizure (raid) proceedings. Well, confidentiality is indeed the hallmark of raid proceedings till the search party descends on the suspected tax evader’s premises. But once the occupant of the premises is accosted, he has the basic right to demand and know why he is being subjected to the inconvenience and ignominy often bordering on suspension of right to liberty for the nonce. And by the way, where is sensitivity when reasons for belief or suspicion are not disclosed? The boot is on the other leg---it is the sensitivity of the person being raided that is ignored when he is kept in the dark.
It is significant to note that even the income tax appellate tribunal would be kept in the dark about the reasons and suspicions though its members both judicial and accountant are intelligent enough to surmise them from the case dockets. But that is not the issue. Tribunal is the ultimate fact finding authority because appeals to High Court and from there to the Supreme Court are normally possible only an issue of law. How can the tribunal deal with the case when facts are not disclosed by the tax administration to it? This makes the budget proposal all the more draconian.
It is a small mercy that High Courts and the Supreme Court have not been shut out although the income tax department could take refuge under the omnibus expression “any authority” in the proposed amendment for keeping them as well in the dark.
The Modi government would do well to beat a retreat. Confidentiality was crucial in the demonetisation exercise and hence remonetisation process including printing of replacement notes was not started till demonetisation was set in motion. But raids are a different kettle of fish. To be sure, confidentiality is essential lest the wily tax evader secrets away his documents and movable properties before the raid party descend on his premises. But the government cannot stretch ‘confidentiality” to mean denial of the fundamental right to be told on reaching what the reasons or suspicion for the adversarial proceedings are.
That the proposed amendment is retrospective harking back to 1 April 1962 is a ham-handed attempt to curb judicial powers in respect of the pending cases as well as the ones decided. While citizens cannot be expected to take to streets on this issue affecting as it does only the tax evaders with troubled conscience, it is a worthy cause for PIL. Is Prashant Bhushan listening please?
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