Revised procedure for Monitoring and handling of Tax Evasion Petitions (TEPs) - Income Tax - F. No. 414/60/97-IT(lnv. I)

F. No. 414/60/97-IT(lnv. I) Ministry of Finance Department of Revenue Central Board of Direct Taxes Room No. 243-F, North Block New Delhi, the 21st February, 2007 To All Directors General of Income Tax (Inv.) All Chief Commissioners of Income-tax Sir/Madam Sub : Revised procedure for Monitoring and handling of Tax Evasion Petitions (TEPs) - reg. The Board had laid down a revised procedure of handling and monitoring of Tax Evasion Petitions (TEPs) communicated vide Board s letter of even no. dated 19.04.2005. In order to streamline and expedite the disposal of TEPs and to improve the monitoring mechanism, a new procedure, to be operational from 1st April, 2007, is enumerated as under. 2. Creation of Central Registry Unit (CRU) 2.1 All TEPs should converge and get registered at a single place i.e. Central Registry Unit (CRU) in the office of each DIT(lnv.). For Delhi and Mumbai, the CRU will be under the respective DIT(lnv.- I) of these stations. All TEPs received at whichever level, viz. ADIT/ DDIT, JDIT/Addl. DIT, DIT DGIT will be, in the first instance, forwarded to the concerned CRU for registration. The CRU shall also be responsible for maintaining a database of all TEPs and linking new TEPs with other TEPs against the same person received earlier. All TEPs pending on the date of commencement of the new procedure will be entered into the database after physical verification, The Central Registry Unit shall directly report to the concerned DIT(Inv.). It should be headed by a Nodal Officer of the rank of an ITO/ADIT/ DDIT nominated by the DIT(lnv.), and manned by one or two inspectors reporting to the Nodal Officer. 2.2 All TEPs received in the CRU shall be first entered in the database which should have the following fields: i) Serial Number (starts from beginning of every financial year) ii) Date of receipt of TEP iii) Name of Complainant (and address/code) iv) Agency from which complaint received (Public/CBl/CVC/DRI etc.), if any v) Name of Complainee (s) vi) Address of the Complainee (s) vii) PAN of Complainee (s) viii) Number of pages ix) Category in which placed (X/Y/Z), also indicating the origin ( B for Board, V for VIP references, and O for others) x) Unit to which forwarded xi) Unique Identification Number (UIN) xii) Whether any TEP was received against the same person(s) earlier? If yes, UIN of such TEP. xiii) Any other relevant information xiv) Time limit for disposal xv) Date of disposal xvi) Manner of disposal xvii) Concealment detected, if any 3. Unique identification number (UIN) 3.1 After a TEP is received in the CRU, it should be given a Unique Identification Number (UIN). Thereafter, the TEP shall be referred to by the UIN rather than names of complainant or complainee etc. The UIN will be a 10 character alpha-numeric number, which would include crucial details about the TEP for identification/ classification/ reporting purposes. For example, a typical UIN would be as follows: Year Month Four digit Serial Number given in the CRU Unit to which assigned Category Y Y M M 1 2 3 4 3 X 3.2 Therefore a TEP with UIN 060806523X would mean that (a) the TEP is received in the year 2006 (06); (b) in the month of August. (08); (c) is at serial number 652 in the register of Central Registry Unit (0652); (d) is forwarded to Unit fit for enquiry (3); and (e) is categorized as X . The first eight characters of the UIN would be mandatory and will be assigned by the CRU on receipt of the TEP and the last two characters would be assigned after categorization is done. The first eight characters would remain constant and the last two may be edited, but an audit trail for changes would be maintained. In stations where Units are not based on numbers but city-based, each Addl/Joint DIT(Inv.) may be assigned a number for allotting the UIN. 4. Categorisation and allocation In the new system, the Nodal Officer must first verify whether a new TEP needs to be linked to any similar TEP existing in the database. If a TEP against same person exists, the new TEP should be linked to the earlier one. Thereafter, the Nodal Officer must ascertain whether the TEP is prima facie actionable or not. TEPs containing non-specific, vague or general allegations may be filed with the approval of the DIT(Inv.) at this stage itself. Filed TEPs should be part of database and repository and, on their filing, would be indicated by alphabet F in column 9 of the database as well as the last character in the UIN. For instance, the TEP referred to in para 3.2 if filed would have the UIN as 060806523F. (However, U category TEPs, VIP references, Board references and such other references where report has been called for, have to be necessarily enquired into) . The remaining TEPs shall be examined from the point of view of specifics and verifiability of the information on issues which can inter-alia be as under: i) Modus operandi of tax evasion ii) Undisclosed investments/expenditures. iii) Undisclosed bank accounts/lockers etc. iv) Bogus expenses booked or credits introduced in books in bogus names. v) Details of secret godowns. vi) Details of transactions not entered in books of account. 4.2 Based on the specific information available in the TEP in respect of the. nature of allegations, source of complaint and amount of alleged concealment, the TEP shall be categorized by the concerned DlT(lnv.) as follows; Category Basis U References received from the Finance Ministry requiring urgent action (to be categorised by Board) X VIP references Board references (including references from FIU-IND and CEIB) where report has been called for by the Board Cases of serious tax rauds involving new modus operandi which cannot be verified through open enquiry Cases where specific allegations of concealment over Rs. 2 crore (Rs 10 crore for Chennai, Delhi, Kolkata and Mumbai) Y References from other government agencies Cases of specific allegations of concealment between Rs 50 lakhs and Rs 2 crore (for Chennai, Delhi, Kolkata and Mumbai, between Rs. 1 crore Rs. 10 crore) which are of a nature that requires to be investigated by the investigation Wing Z Cases remaining after categorization of U, X Y to be forwarded to the Assessing Officer 4.3 After categorization and allocation, the original TEP should (preferably) be scanned and the scanned image made part of repository of TEPs in the CRU. The original TEP shall be forwarded to the concerned Units. Various authorized officers of the Investigation Wing i.e. ADIT/ DDIT/ Addl. DIT /DIT/DGIT will be given access to the database and repository of the TEPs according to their defined roles/jurisdictions. 4.4 TEPs categorized as U, X Y category should be allocated to various Units for enquiry and disposal. The Z category TEPs should be forwarded to the assessing officers directly from the CRU. In cases where the jurisdiction of Units is territorial, the TEPs should be allocated to various Units as per the territorial jurisdiction. Where a TEP against the same person(s) already exists and has been allocated to a particular Unit, subsequent TEPs against same person should also be allocated to same Unit. TEPs are also received from various agencies like CBI, DR1 etc. in order to ensure better coordination, the allocation of such TEPs may be done in such a manner that all references from a particular agency are handled by one Unit. The remaining TEPs should be allocated to various units on a roster system. 4.5 Once a TEP is categorized and allocated to a Unit, the CRU will give it the complete UIN (including the last two characters) and send the TEP (in original) to the concerned Unit head. 4.6 TEPS received in the Commissionerates shall be categorized by the respective CsIT who shall also constitute a CRU for the purpose. TEPs received in the Commissionerates having prima facie concealment of Rs 50 lakhs or more (Rs 1 crore or more for TEPs pertaining to Chennai, Delhi, Kolkata and Mumbai) should be sent, within 15 days of receipt, to the concerned DIT(lnv.). The remaining TEPs should be sent to the jurisdictional Assessing Officers, after making relevant entries in the CRU. 5. Investigation process 5.1 The responsibility of getting the TEP properly investigated and disposed within the specified time limit shall be with the Unit head. He will first make a preliminary examination of the contents of the TEP and take a decision about the investigation process and the Investigating Officer (IO), of the rank of DDIT/ADIT/ITO, to whom the TEP is to be allocated. TEPs may be assigned to lOs as per following norm: Category Investigating Officer U DDIT/ADIT X DDIT/ADIT Y DDIT/ADIT/ITO 5.2 In case the TEP is a signed complaint, the Addl. DIT may call the complainant to furnish additional information, if required. Cases which need to be processed for search/ survey may also be identified at this stage and assigned to DDIT/ADIT. 5.3 Once a decision about the investigation process and the investigating officer is taken for a TEP, the same shall be forwarded to the investigating officer with specific directions about the investigation process to be adopted in the case - discreet or open enquiry. In cases earmarked for discreet enquiry, the allegations may be first verified with respect to the data available within the Department, including PAN, AST data, CIB data, AIR data etc. Thereafter, spot enquiry by ITI may be resorted to. 5.4 In respect of a case taken up for open enquiry, wherever possible, the relevant points may first be verified from departmental records and/or databases. Efforts should also be made to first gather necessary information about the issues under enquiry from all sources other than the assessee, e. g. banks/ other agencies/creditors or debtors/ purchasers or sellers etc. Open enquiry by issuing summons should be conducted in cases where the allegations are specific and can be verified after calling/examining books/ documents and/ or recording statements. Only when specific issues emerge requiring explanation from the taxpayer, should the process of issue of summons to the concerned taxpayer be initiated. Summons should be issued after approval of Addl/Joint DIT (Inv.). The summons should clearly bring out records/documents required to be produced. The consequent hearing should be focused and to-the-point, in which statement of assessee/ witness should be recorded. Repeated issue of summons to same party, multiple hearings etc., should be avoided. 5.5 The time limit of completion of investigation and submission of final report for various categories of TEP should be as under: (i) For category U , a preliminary Report must be sent to the Board within 15 days of receipt in the Unit; (ii) For category X , the TEP must be disposed within three months from the date of receipt in the Unit. In case of VIP references and such other references where Report is called for from the Board, a Report should be sent to the Board within this period. (iii) For category Y , the TEP must be disposed within six months from the date of receipt in the Unit. 5.6 In case it is not possible to make a final report by the due date, an interim report indicating the action taken and progress made must be submitted by the due date, with an indication of the additional time required. Where the contents of TEP require enquiries to be carried out by other Unit/DIT(lnv.)/DGIT(Inv.), reference should be made to such other authorities and a consolidated report prepared, after incorporating the reports of such other authorities. Further, where any matter requires to be referred to any other investigative agency, the same should be done after seeking prior approval of the DIT(lnv.). There is no requirement to solicit instructions/approval of the Board before making such references. 5.7 If a TEP categorized as X is forwarded to the Assessing Officer, details of investigation carried out in the Investigation Wing must be mentioned in the forwarding letter. Copies of relevant statements recorded, documents obtained etc., must also be enclosed along with the TEP. If the matter pertains to an earlier assessment year, the material forwarded to the Assessing Officer should be such that it constitutes valid reason for reopening the case u/s148 of the income Tax Act. 6. Final report and disposal 6.1 The investigation process in case of all TEPs should be monitored by the Unit head and the DIT(inv.). The final report for each category should include- List of allegations Details of concerns involved including their nature of business, source of income, assessment particulars, PAN etc. Details of enquiry conducted, including survey reports (if any), statements recorded, etc. Findings against each allegations mentioned in the TEP Recommendations for further action 6.2 The final report, should categorically mention that all the allegations have been looked into. The authority forwarding the report should give his specific comments on the recommendations made by the authority below. A copy of the Enquiry Report should be sent to the Board in all cases where report has been called for by the Board. The authority to take a final decision for disposal of a TEP, including its closure, would be as under Category Authority for disposal U DGIT X DGIT Y DIT 6.3 After receiving the enquiry/investigation report from the Investigation Wing, the Assessing Officer should select cases for scrutiny, wherever specifically recommended Cases meriting re-opening should be dealt with in accordance with Section 148 of the Act. Where the inquiry report of the Investigation Wing does not merit any further action, the TEP should be closed with the approval of the jurisdictional CIT. 6.4 The process of enquiry by the Assessing Officer in 2 category cases should be as under : (a) where the Assessing Officer is of the opinion that the case is to he picked up for scrutiny for a particular assessment year(s), scrutiny proposal should be sent for Approval of the CCIT; (b) where the case has to be re-opened for any particular assessment year(s), statutory action u/s 148 of the Act should be taken; (c) where no action on the TEP is called for, the TEP should be closed with the prior approval of the jurisdictional CIT; such TEPs should be kept, for record purposes, with the CRU of the jurisdictional CIT. 7. Other matters 7.1 White finalizing appraisal reports in cases of search the concerned ADIT/ DDIT should ascertain whether any TEP is pending in case of the group and, if so, incorporate the same in his report. 7.2 Once a TEP is disposed and the approved action taken, the TEP folder shall be kept in the custody of the concerned Addl. DIT. The date and manner of disposal shall be entered in the database of the CRU and the TEP shall be treated as disposed. 8. All TEPs received on or after 1st April, 2007 shall be dealt with in accordance with the new procedure . 9. The new procedure may be brought to the knowledge of all officers working in your Region. This issues with the approval of Member (Investigation), CBDT. Yours faithfully (Vikram Sahay) Director, Govt. of India Telefax : 23093902