Corporates can breathe easy in 2003-04 -- the income tax department will be busy redrawing its search and seizure plans following the changes introduced by the Finance Bill, 2003.
The switchover from block assessment to the earlier system of separately assessing income for each year is likely to occupy centrestage at the meeting of the chief commissioners of income tax (investigation) and finance ministry officials that is held just after the Budget session.
Officials will have to go back to the drawing board to refresh memories of the almost forgotten practice before venturing into search and seizure operations.
The income tax department, which had used the block assessment system in searches and seizures over the past few years, will find the system becoming history from May 31, 2003.
Under the new search and seizure norms, assessing officials will have to ask companies and individuals to furnish returns of income tax in respect of the last six assessment years separately.
They will reassess the income tax arrears for each of these years on the basis of the prevailing tax rates in those years and levy penalties accordingly.
This is different from block assessment, where the total arrears for six years are levied tax at a single rate of 60 per cent, with no additional penalty being imposed.
Government officials said it was difficult to separate the income for each of the six years after a lapse of so many years.
They said block assessment was introduced in the early nineties because most of the assessments under the earlier system were struck down by the appellate authorities.
They said unless the new procedures were fine-tuned, the same problems would erupt, rendering most searches fruitless.
To meet revenue targets, the department had stepped up searches and seizures under the block assessment rules to over 200 cases per tax range in 2002-03, from 40 in the year before.
However, refining the new system will drastically reduce the number of raids that the department can feasibly carry out in 2003-04.
In 2001-02, because of cadre restructuring and the consequent mass transfer of officials throughout the year, the income tax department could hardly take up any fresh case.
The tempo was increased this year but government sources said the changes brought about by the Finance Bill, on the basis of the Kelkar recommendations, had again put the clock back.
The new Finance Bill has also restricted the provisions relating to impounding books and documents, besides doing away with the restriction on the subsequent removal and sale of stocks in trade.
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