"Phone tapping key to nailing tax evaders"

CBDT chairman Sudhir Chandra in an interview with Governance Now

ajay

Ajay Singh | May 10, 2011




Sudhir Chandra, chair­man of the central board of direct taxes (CBDT), occupies a room in North Block whose balcony overlooks the majestic Rashtrapati Bhavan. The centrality of its location is symbolic of its significance to governance. Since time immemorial revenue collection has been crucial to sustain any form of governance. And it is the office of the CBDT chairman that devises and improvises effective methods of tax collection to keep the government machinery running. In an exclusive interview with Ajay Singh, Chandra, a 1973 batch Indian Revenue Service officer, talks about the measures he has initiated to realise the revenue target set by the government. He also candidly discusses the difficulties in the task of raising revenues and the image deficit of the income tax department in people’s perception. Edited excerpts:

I am told that your room has a history attached to it.
This was the room of Lord Mountbatten when he took over as governor general. If you see the bronze plaque on the other side, you will know that the contours of India’s future were determined in this room. There is a balcony attached to the room which overlooks the president’s house. This balcony was sealed in the past. I got it unsealed in order to relive the history while making the future plans for the country’s tax regime.

What exactly were your challenges when you took over as CBDT chairman – a post known as super tax collector of the country?
Let me explain to you the qualitative changes we tried to introduce in the functioning of the CBDT. In the past there was a general impression that IT raids usually netted only small tax­payers. But the situation changed after the IT conducted a massive raid on Madhu Koda (former Jharkhand chief minister). In fact, 480 IT employees assisted by the paramilitary forces carried out simultaneous searches at 71 premises across the country. This was the first raid of its kind. We detected huge amounts of cash and unearthed accounts running into hundreds of crores of rupees. Similarly, raids were carried out on a slew of listed companies and tax evasion of large sums like Rs 300 crore and Rs 500 crore was discovered. In effect, we dispelled the impression that the IT department was after only small evaders. It would not be an exaggeration to say that this carefully crafted strategy worked to the benefit of the department.

You planned this strategy when you were member, CBDT (investigations). I was asking you about your current assignment and the bigger challenges of tax collection and the image problem the IT department has among the taxpayers.
This was the beginning. And it was a good beginning at that. On an average, each raid fetched us Rs 100 crore in tax revenue. When I took over as CBDT chairman on January 1, the roadmap for the future was clearly delineated. You know in the IT department, we have two types of informants: one is paid for their information and another (type) comprises those trying to use the department to settle personal scores. I have clearly forbidden the use of the latter variety. More often than not, this variety of informants tends to lead the department down the garden path. I checked it forthwith.

However, at the same time, we started using technology extensively to get accurate information. We prepared a system called income tax data management system (ITDMS) through which we started 360-degree profiling of possible tax evaders. The efficacy of this system is such that we will come to know all activities of a suspect and his associates without intruding into their privacy. Each piece of information related to the suspect would be downloaded in the system and would be available at the click of the mouse. Once the profiling is complete, it becomes very easy for us to track down the black money.

Did you use this system to deal with sensitive cases as well?
We conducted very deep searches on very sensitive cases. It will not be proper for me to identify them. But we got raids done on mining groups, builders and even senior bureaucrats. The most recent raids on certain bureaucrats were the result of this system. In all, we recovered Rs 30,000 crore in tax revenue on account of these searches in the past 22 months. And this was the big achievement of the department.

How much are you concerned with the image deficit of the IT department among people at large?
This was indeed the biggest chal­lenge. My job was essentially to mo­tivate and inspire employees of the IT department. I took personal interest in ensuring timely promotions and postings of the staff. For the first time, we were able to put on the web­site the list of promotions and post­ings on March 31. Of course, I could not watch the India-Pakistan world cup semi-final and worked through­out the day to get the list prepared. It was a pleasant surprise for the staff to know about promotions and post­ings well in time so that they can pre­pare for their future plans like edu­cation for children. In some cases, officials scheduled to retire on April 1 got promoted a day before and became entitled for better post-retire­ment benefits.

Similarly, I convincingly demon­strated that the southern, eastern and northeastern states are as much part of the mainstream as Delhi and Mumbai so far as taxation is concerned. Earlier, we used to get petitions to get transfers either to Mumbai, Delhi or Ahmedabad. This is no longer the case. Officials posted in not-prefera­ble states are now joining (their duty there) happily. I rejected the practice of keeping a file against an officer on the basis of an anonymous complaint.

After having initiated all these wel­fare measures, I turned to staff and said, “You may have your secrets but you may not be able to keep them for too long.” I asked them to be trans­parent. I directed them to keep the communication network open with the common man and be transparent about the public dealing. I hope this will work.

Are you sure it will address the problem? I think there is still a fear of the IT notice among the middle class, and getting tax refunds from the department remains the most troublesome experience.
I am acutely aware of this problem. This year alone, we have disposed of over 85,00,000 cases of refund as compared to 50,00,000 cases last year. We have refunded about Rs 74,000 crore to taxpayers so far. What is really heartening is the fact that even after this refund, the CBDT collected around Rs 4.50 lakh crore which is more than the revised target of Rs 4.46 lakh crore fixed by the government. This is the real realisation of taxes. You know, I have instructed my staff not to do anything which is unrealistic. I told them, “Padosi ka paisa maarkar ameer nahin banana hai (we do not want to become rich by duping the neighbour).” As of now I can say with a certain degree of satisfaction that the refunds are being made quite expeditiously. Apparently, with the expeditious refunds, we have saved Rs 4,000 crore in interest which would have been accrued otherwise.

But there have been reports of notices being sent to assessees just for the heck of it. And even normal assessees are being harassed on account of mismatch in tax deduction at source (TDS).
There are reports of this kind which we need to address. In fact, my next mission would be to devise a mechanism by which unnecessary notices are avoided. For instance, we intend to prepare a questionnaire to get  responses from the assessees. If the answers are satisfactory, there is no need to pursue the case further. I will ensure this mechanism is put into practice shortly.

Then the mismatch of the TDS is yet another source of consternation. This is precisely why I have been requesting assessees to use e-filing for their returns in order to know about their TDS status. We have also held a series of meetings to resolve the issue at the earliest.

I have read your statement regarding the loss of revenue to the CBDT on account of the double taxation avoidance agreement (DTAA) with Mauritius. How do you keep track of illicit money lodged in tax havens?
On the issue of the DTAA with Mauritius, we have written to the external affairs ministry to take up the case. In fact, we have DTAAs with 70-odd countries. But our major worry is 22 jurisdictions called tax havens like Bermuda, the Bahamas and the Isle of Man. We are in the process of the final stage of negotiations with seven such jurisdictions while we have effected an agreement with five such tax havens to give us critical inputs on investment and backing informa­tion. Our efforts are expected to yield great dividends in short time.

But what about the black money stashed away in foreign countries?
Once these agreements are finalised, we will be able to proceed in an ef­fective manner. But let me tell you an interesting aspect of the whole episode. Of late, these countries have been facing acute moral pressure at international fora like OECD (Organisation for Economic Cooperation and Development). In one such conference when Switzerland offered assistance to a poor African nation, the representative (of the African nation) politely declined the assistance and sought only information about the black money. There has been a lot going on internationally to name-shame those nations which patronise slush monies. This pressure has been working to our advantage.

How effective is phone-tapping as a tool for CBDT?
It is very effective corroboration of our ongoing investigations. We do not go merely by the recorded conversation of a tax evader. Since we have been profiling them quite extensively through the use of technology, it (phone-tapping) serves as an important aid.

Do you think that the CBDT should retain its right to tap phones?
I do not see even the slightest change in the background against which the power of phone-tapping was conferred to us in 2005 by the government in its full wisdom. This explains my position.

By extension, can I ask you if there is a link between illicit money and the threat to national security? Of late there has been a clamour that the phone-tapping should be confined to the issue of national security where as pecuniary offences are not related to the national security.
There is a definite link between the illicit money and a wide range of criminal activities that impinge on the national security issues. In many cases we have come across a huge stashes of money coming from dubious sources. These sources could be narcotics, smuggling and terrorism. There are also cases in which monies earned through illegal means in India are siphoned off to tax havens and routed back from there. How could we be so sure such illicit mon­ies will not be used for terrorism or subversive activities? In fact, I would say that the flow of illicit money comes mainly from social and corporate crime which has a direct bearing on national security.

In one of his letters, a former national security advisor (NSA) had even confirmed that terror money was being pumped into the Indian stock market. What is your perception?
It is not for me to comment on this. But certainly our insistence to have an agreement with certain jurisdic­tions called tax havens is intended to plug this loophole and regulate the flow of monies from dubious sources.

Despite raids and vigilance by the IT department, there continues to be one scam after another. Why is the IT department not able to contain such irregularities?
You see, it is beyond our mandate to check scams. If a natural resource is sold off cheaply, we are not in the picture. If there is betting on any game, the IT department has no locus standi to check it. We only come into the picture when tax is evaded. The moment we come to know about huge money being fun­neled to an entity, we play our role, track the source and levy the tax if required. Since we have been maintaining a 360-degree profiling backed up by detailed analyses, we go after big evaders and bring them to justice.

There is a question relating to Gujarat. Why did the IT department issue notice to the Gujarat government seeking details of the memorandums of understanding (MoUs) signed during Vibrant Gujarat? Was the CBDT used for political purpose?
Let me clarify that the CBDT was in no way involved in the whole episode. The finance minister has already given a detailed answer in parliament on the issue. So far as I know, the notices were issued as part of the routine exercise which was entirely at the discretion of local functionaries of the IT department.

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