Balangir: We have all seen the headlines about seizures worth crores made by income tax (I-T) authorities as they raid people accused of tax evasion. But ever wonder what happens to the cash after it’s seized?
An I-T operation under way for a week and counting has been in the news for seizures described as being among the highest ever — over Rs 350 crore.
The raids involved entities and people linked to Rajya Sabha MP Dhiraj Prasad Sahu of the Congress, including the Odisha-based Boudh Distillery Private limited (BDPL) — chaired by Sahu’s elder brother Uday Shanker Prasad, with the MP’s son Ritesh Sahu serving as managing director — and Baldeo Sahu and Sons, a partner entity.
The amount seized is huge, as evident in the viral photos of giant stacks of cash. In Rs 500 bills, the highest denomination in circulation right now, that would be over 70 lakh bank notes.
As the seizures continued, ThePrint got in touch with officials of the Income Tax Department and banks to understand what follows the raids, and what becomes of the money seized.
What happens to money seized
Speaking to ThePrint, a bank official who has been part of I-T raids said, in cases where the department recovers cash, the bank staffers present are designated ‘panch witnesses’ who serve as independent witnesses.
The official said bank staffers count the cash recovered in the presence of the assesses — the people from whose premises the money was seized — to ensure transparency.
After the process is completed, the investigating officer fills a requisition slip to deposit the money in the income tax department’s treasury account, the official added.
The official said the Income Tax Department has accounts of its own in the State Bank of India for this purpose.
An I-T Department officer said the accounts where the money is deposited can be at the zonal level (one account per zone), or even state level.
Once the search at any place concludes, the investigating team of the I-Tax Department prepares an “appraisal report”. This report has to be completed within 60 days of a raid’s conclusion, said a principal director rank officer of the department on the condition of anonymity.
The appraisal report, the officer added, “quantifies” the seizures made at the raid sites, and the actual value of tax that the assessee is alleged to be evading.
The appraisal report is then sent to the department’s ‘central circle’ — which works directly under the director general of income tax and is headed by the commissioner of income tax (central) — where a “centralised assessment of the case takes place”, the officer added.
As part of the centralised assessment, an officer combines all cases of tax evasion against a firm or individual and assesses the facts after taking into account the submissions and counter-arguments made by the assessee.
“It is a judicial sort of process where assessees are given a proper framework to explain the case,” the officer added.
After the entire investigation is complete, the department comes out with an “assessment order”, which lists the tax liabilities.
If the assessee agrees with the order, the case gets resolved at the stage, the officer said. If not, then the assessee can appeal against the order before the commissioner of income tax for appeals. If their concerns are still not resolved, they can file further appeals with the Income Tax Appellate Tribunal, and then the high courts and the Supreme Court.
While the whole process is ongoing, the money recovered continues to remain in the treasury’s account.
The officer said the money remains in the treasury account until the end of the trial. If the assessee gets convicted, the money gets attached based on an attachment order, the officer added, saying the assessees get the money back if they are cleared.
The first officer quoted above said the department does not seize all the money and valuables they find at a raid site, only the portion “the assessee is unable to explain”.
“The seizure does not depend on the availability of cash. It depends on how far the assessee can explain the source of the cash,” the officer added.
‘Other agencies may step in’
Explaining the scenarios in which an assessee can seek the release of the cash seized from them, lawyer Deepak Joshi, who deals with cases related to tax matters, said all assessees are empowered by Section 132B of the Income Tax Act to file an appeal with the I-T Department within 30 days of the last raid.
However, the decision to release the cash depends on the discretion of the I-T officer assessing the case and the fulfillment of certain conditions by the assessee, he added.
In case the entire amount is unaccounted for, the I-T officer will serve a notice on the assessee raided and seek an explanation for the source and details of the cash.
He added that assessments after raids “ordinarily” take 12 months from the end of the financial year when the raids took place.
He concluded by saying that although there is no upper limit for the duration that the seized amount can be parked idly in the treasury accounts, in some cases, the matter is settled based on the assessment order.
Lawyer Zulfiquar Memon said neither the assessee nor the Income Tax Department can use the money, and the cash will continue to be in the account it was first deposited in (until the investigation is complete).
Even after the assessment order is issued, and there is some amount of money that is found to be accounted for, the evasion of tax on the remaining amount — and the penalty — will more or less make it comparable to the amount seized, he added.
The money seized by the I-T Department can also attract a parallel investigation by other law agencies such as the Enforcement Directorate, which comes into the picture as soon as there is a suggestion of the money being proceeds of crime.
(Edited by Sunanda Ranjan)
Also Read: Income tax officials ‘visit’ Chinese computer-maker Lenovo’s office in India for ‘search op’