INCOME TAX
INSTRUCTION NO. 1886/1991
Dated: July 18, 1991
It is felt that the objective of providing effective deterrence against tax evasion through searches is not being fully realised as our searches are not followed by proper assessment and the levy of penalty and launching of prosecution for tax evasion and fraud despite impressive seizures and surrenders of concealed income. There is, thus, a need to ensure adequate and proper follow-up action in search cases. For this purpose, it has been decided to introduce a scheme of monitoring of investigation and assessment in search cases.
2. Under the aforesaid scheme, the following steps will be taken in the Investigation Wing:
(i) Within one week of the date of the search, the Director of Income-tax (Investigation) will send a note on the search to the concerned Chief Commissioners of Income-tax alongwith a proposal for assigning the cases to the Central Charge, an Assistant Commissioner of Income-tax (Inv.) or any other Assessing Officer. A copy of this note will be endorsed to all the concerned Commissioners of Income-tax.
(ii) The search, including all action pertaining to restraints under section 132(3) of the Income-tax Act, will be concluded expeditiously. The Appraisal Report will be forwarded to the concerned Assessing Officer within 45 days from the date of search and the seized material handed over to the assessing Officer within the specified time limits. The DIT(Inv.) will maintain separate files for each case or group of cases and monitor the progress in respect of these actions.
(iii) The DIT(Inv.) will send a monthly report to the Director General of Income-tax(Inv.). The report will contain information in respect of each search i.e., the name of the case, date of search, the date of forwarding of Appraisal Report, and confirming that seized materials have been handed over. A case will be included in the report immediately after the search takes place and will continue to be included in the subsequent reports till the Appraisal Report is sent and the seized materials are handed over. This report should reach the DGIT(Inv.) by the 10th of the following month.
(iv) The DGIT(Inv.) will send a quarterly report to the Board in respect of cases where Appraisal Reports are delayed beyond 45 days, with reasons thereof. This report should reach the Board by the 20th July, 20th October, 20th January and 20th April.
3. After the receipt of the note regarding the search action from the DIT(Inv.), the CCIT/CIT in whose charge the cases are to be assigned will pass necessary orders for transfer of jurisdiction. He will also ensure the transfer of records. These actions will be completed within a month of the date of receipt of the note from the DIT(Inv.) and intimation in this regard will be sent to the DGIT(Inv.) and DIT(Inv.), Thereafter, the following steps will be taken:
(i) Notices under section 148, wherever required, will be is sued within 6 months of the date of the search, and all relevant assessments pertaining to the search, will be completed within 2 years from the date of the search.
(ii) It will be the responsibility of the DCIT to ensure that the assessment and penalty orders are properly framed. The assessment and penalty orders in search cases will be passed with the prior approval of the concerned DCIT. Where penalty under section 271(1)(c) is not to be initiated, or is to be dropped after initiation, the same will be done only with the approval of the DCIT.
(iii) Any variation in the assessment orders from the findings in the Appraisal Report and reasons thereof, will be clearly recorded.
(iv) If the Assessing Officer/DCIT is satisfied that there is adequate material to justify imposition of penalty for concealment and launching of prosecution, it would not be necessary to await the order of appellate authority on the relevant assessments.
4. For ensuring that assessments in search cases are completed properly, after taking into account all relevant facts and after conducting requisite investigations, the CIT and the DCIT will monitor the search cases, under the overall supervision of the CCIT, as under:
(i) Each CIT will monitor the assessments in at least 5 of the top search cases every year. This would form part of the 20 cases required to be monitored by him under the Scheme of Control Mechanism. The DCIT will monitor the assessments in at least 10 important search cases every year, which would form part of the 35 cases required to be monitored by him under the Scheme of Control Mechanism. The search cases selected for monitoring by the CIT/DCIT, will include all the cases where surrender/seizure/estimated concealment is Rs. 50 lakhs or more.
The CIT will send the list of 20 cases selected for monitoring by him, indicating the search cases included therein, to the CCIT and the Zonal Member, by 30th April every year.
(ii) Monitoring of search cases is to be done in accordance with the guidelines laid down in the Scheme of Control Mechanism issued by the DOMS vide there F.No. 22/1/88-OD-DOMS dated September, 1988.
5. The Board would also be keeping a watch on the comparatively bigger cases of search, i.e. where the seizure/surrender/estimated concealment is Rs. 50 lakhs or more. Each CCIT will, therefore, send to the Board a list of all search cases where seizure/surrender/estimated concealment is Rs. 50 lakhs or more and in which assessments are pending. These lists will be updated every 3 months. The list should be sent so as to reach Member(Inv.) by 16th May, 16th August, 16th November and 16th February every year. For the current financial year the first list may be sent immediately and updated thereafter so as to reach by the aforesaid dates.
A separate narrative report on the qualitative aspects of the assessments in each of the cases included in the aforesaid list will also be sent by the CCIT to Member(Inv.) every quarter. The report will give the progress made in the case, assessment year-wise, and will include all relevant information relating to notices issued under section 148, investigations carried out, nature and quantum of concealment detected, variations from the Appraisal Report, the income determines and the income after appellate orders and also the details of penalty imposed for concealment and prosecutions launched.
6. The above instructions may be brought to the notice of all officers in your region for strict compliance with immediate effect.