Even if you successfully hide details of tax evasion in your account books and financial records, you could still be nailed with the help of external sources.
The third volume of the book ‘Insights - Contemporary Issues in Direct Taxes,’ by the Income Tax (I-T) department, Mumbai, reveals that open inquires, with the help of external sources, yield better results than searches and surveys.
The book compiles the investigative knowledge of various I-T officials on complex issues of taxation. The department had published two volumes last April, covering the modus operandi used for tax evasion in the film industry, stock market, diamond industry, construction, shipping and the banking sector. The latest volume covers investigation in (bogus) purchases and sales, and sectors such as insurance, trusts and charitable hospitals.
It shows that investigation through open inquiry helps find evidence of bogus purchases and sales in earlier years as well. During searches and surveys, such evidence is found only for a limited period. “Inquiry of transporters, sales tax check post, octroi naka, Weigh Bridge and the Regional Transport Office (RTO) would help examine receipt and delivery of goods,” the book says.
It stresses that inquiries from banks help find the beneficiaries when payments are made to bogus suppliers by cheque, and then withdrawn in cash from the “supplier’s” account. “Showing a payment by cheque helps in inflating expenditure in account books, further helping the assessee evade tax,” a senior I-T official said.
However, it cautions officials to not alert the assessee about the investigation to be conducted.
The book also covers in detail the technical issues pertaining to the insurance sector, trusts, charitable hospitals and educational institution and petroleum and petrochemical industry, which are misinterpreted or misused to evade tax.