Punishment for cooked book stays

Under this provision, those who manufacture false documents to escape tax liability, cannot be prosecuted unless the charges against the persons who have used such papers are established in a court.

Ministry officials said they have given the tax department powers similar to those laid down in the Indian Penal Code, to track down a flourishing trade in production of false vouchers and other trade receipts that has become rampant, especially in Mumbai.

The decision on gift tax would clear the apprehensions expressed by several companies in their representations to the ministry, on whether loans given by them to their employees could fall under the purview of the new Section 2(24) of the Income Tax Act, 1961, introduced by Finance Minister P Chidambaram in the Budget.

The ministry would move an amendment when Chidambaram moves the Finance Bill in Parliament, after it reassembles on August 16. The passage of the Bill through Parliament represents the last stage in the Budget process.

Pros & cons

• The finance minister has introduced Section 27-A in the Income Tax Act, 1961, to provide for punishment with rigorous imprisonment for up to three years for what is termed as falsification of books or documents to evade tax liability
• Chartered accountants and other tax professionals say the powers could be easily used by the department to harass them since there was now no need for the officials to prove any specific instance