«Tax Evasion»

BY
RAJESH ADWANI,DCST

1
 TAX EVASION
RAJESH C.ADWANI,M.E.(CIVIL),LLB
DEPUTY COMMISSIONER OF SALES
TAX,PUNE
EMAIL ID:RCADWANI1993@GMAIL.COM
9226959384
 3

TAX EVASİON
Tax fraud is when someone pays too little tax or wrongly
claims a tax repayment by acting dishonestly.(such as declaring
less income, profits or gains than actually earned; or overstating
deductions).
Tax evasion is an activity commonly associated with
the underground economy.
Reasons & Methods
• Weak Surveillance System
• Rampant corruption in Tax Department
• Complicated tax law and filing mechanism

Overbilling of purchase of raw material

Dummy salary entries created
False petty expense entries ( person expenses as
business expenses)
 Lobbying to government
Bribery of tax officials
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Economics of tax evasion

• In 1968, economist Gary Becker first theorized the economics

of crime. It deals with the evasion of income tax. According to
them, the level of evasion of income tax depends on the level of
punishment provided by law.
• Income tax evasion appears to be positively influenced by the
tax rate, the unemployment rate, the level of income and
dissatisfaction with government.
 6

Government response

 The level of evasion depends on a number of factors, one of

them being fiscal equation. People's tendency to evade income
tax declines when the return for due payment of taxes is not
obvious.(Unvisible)
 Evasion also depends on the efficiency of the tax
administration.
 Corruption by the tax officials often makes control of evasion
difficult. Tax administrations try to decrease these corruptions.
These include, privatization of tax enforcement, tax
farming, and institution of Pre-Shipment Inspection (PSI)
agencies.
 7

• Privatization of tax enforcement for overcoming limitations of

government tax administration in controlling tax evasion. The
assumption is that leakage of revenue will lower under a
privatized regime.
• Tax farming is an old means of collection of revenue. A "tax
farmer" buys a franchise by making pre-payment to the
government. The tax-farmer, then invested with the authority of
the government, goes into the farm and begins extracting taxes
from citizens.
• Pre-shipment Agencies like SGS, Cotecna etc. are employed to
prevent evasion of customs duty through under-invoicing and
misdeclaration.
Tax avoidance

• refers to the legal means by which taxpayers can

reduce their tax liabilities.

• It is lawful to take all available deductions.

• It is also lawful to avoid taxes by making charitable

contributions.
Tax evasion

• refers to illegal activities

undertaken by taxpayers to
escape paying taxes.
 Anyone caught evading taxes is
generally subject to criminal charges
and substantial charges.

‘ it is likely that he will go to prison if he is convicted of tax evasion’

One example ; like the difference btw shoplifting and shopping around.

Illegal, and cause a lot of trouble. That’s legal, in a free market.

Tax evasion ,
causes a significant loss of revenue to
the community that could be used for
funding improvements in

• Health
• Education
• Other gov. Programs.
As a result ;

• allows some businesses to gain an unfair advantage in

a competitive market and some individual to not meet
their tax obligations.
The burden of tax should not be fallen on other law
abiding taxpayers.
TAX EVASION PENALTIES ;

Regulations concerning acts of tax evasion and tax evasion penalties are provided in
All Tax Procedures code. The most important characteristic of the tax evasion
penalties is that, the taxpayers who commit acts of tax evasion, become subject to
penalties of imprisonment.
 17

Offences and Penalties

The 21 offences [Section 122(1) of the GST Act]
1) Making a supply without invoice or with false/incorrect
invoice
2) Issuing an invoice without making supply
3) Not paying tax collected for a period > 3 months
4) Not paying tax collected in contravention of the Act for a
period > 3 months
5) Non deduction/lower deduction of or non payment of TDS
6) Non deduction/lower deduction of or non payment of TCS
7) Availing/utilizing ITC without actual receipt of
goods/services
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Offences and Penalties

8) Obtaining fraudulent refund
9) Availing/distributing ITC by ISD in violation of Section 17
10) Furnishing false information/falsification of financial
records/production of fake accounts/documents with
intent to evade payment of tax
11) Failure to register despite being liable
12) Furnishing false information regarding mandatory fields for
registration
13) Obstructing/preventing any official in discharge of his duty
14) Transporting goods without prescribe documents
15) Suppressing turn over leading to tax evasion
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Offences and Penalties

16) Failure to maintain/retain accounts/documents for the

period and in the manner specified in the Act
17) Failure to furnish information/documents required by an
officer in terms of the Act/Rules or furnishing false
information/documents during any proceeding
18) Supplying/transporting/storing any goods liable to
confiscation
19) Issuing invoice or document using TIN of another person
20) Tampering/destroying any material evidence
21) Disposing of /tampering with goods detained/seized/
attached under the Act
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Quantum of Penalties

• Any taxable person committing any of the 21 offences

liable to penalty which will be the higher of
• The tax evaded/not deposited/refunded, etc. or
• Rs. 10,000 [Section 122(1)]
• Penalty extending to Rs. 25,000 for any person
• abetting any of the 21 offences,
• dealing with goods liable to confiscation
• receiving/dealing with supply of services in contravention of the
Act
• failing to appear before an authority who has issued a summon
• failing to issue/account for invoice required by law
[Section122(3)]
EXTENT OF TAX EVASION IN INDIA
• In India

Only 2 to 3 percent* of Indians pay any income tax. (around

36 million people)

U.S., about 45 percent of the population pays taxes

VERY FEW PEOPLE IN INDIA PAY TAX
• Shift in the Focus of the Income Tax Department (ITD) from Civil
Consequences to Criminal Consequences in Serious Cases of Tax Evasion;
During 2014-15 (upto Dec, 2014) the ITD Has Conducted Searches in 414
Groups, Seized Undisclosed Assets of Rs. 582 Crore; Undisclosed Income
of Rs. 6769 Crore has been Admitted by the Tax Payers During 2014-15
(upto Dec, 2014) the Income Tax Department (ITD) has conducted searches
in 414 groups and seized undisclosed assets of Rs. 582 crore. Undisclosed
income of Rs. 6769 crore has been admitted by the tax payers during such
searches. The undisclosed income detected as a result of further enquiries
is however much more. Besides, 1174 surveys conducted upto November,
2014 led to detection of undisclosed income of Rs. 4673 crore. Focus of
investigation in the Income Tax Department (ITD) had so far been on civil
consequences i.e. revenue augmentation. In its crusade against black
money and with a view to have credible deterrence against generation of
black money, the Government has shifted the focus to successfully
prosecute the offenders in shortest possible time. Wilful attempt to evade
tax is a serious offence punishable under Section 276C of the Income Tax
Act, 1961 with imprisonment upto 7 years and fine. During the current year
628 prosecution complaints have been filed upto December, 2014 56 of
such prosecution complaints relate to offences concerning undisclosed
News Coverage
News Coverage
First GST fraud: 2 directors of steel trading firms held for Rs 7.2 crore evasion

fake purchase transactions.

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BusinessToday.In Last Updated: March 9, 2018 | 16:35 IST

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