 January 12th, 1997 |
RAIDERS ON
THE PROWL Enforcement Figures |
|
January 12th, 1997 |
RAIDERS ON
THE PROWL Enforcement Figures |
|
POLITICAL pressure apart, there is also the lure of easy money. A senior Delhi policeman reacting to the financial sleuths' criticism of the police shot back: "Police corruption pales in comparison with that of the financial raiders. Given the kind of people they raid, they can earn more in a single raid than what most corrupt policemen can in a lifetime!" Usually a compromise was reached.
"The final seizure list revealed only a fraction of what was actually uncovered," this policeman claimed. it was finalised to the mutual satisfaction of both the raiders and the raided. Many financial sleuths did not dispute corruption in their departments. Annual excise duty collection was about Rs 30,000 crore and by some estimates an equal amount was being evaded. Given the secrecy that surrounded their operations, corruption was the corollary. Unless the department was supportive and proactive, no investigation could be meaningful, said a top battle-weary income tax official. "For examining and collating documents properly, you need the right atmosphere, where there is no fear of investigations being scuttled from within or without," he said. "That frequently does not exist." | |
| A senior ED official, however, was less despondent. His recipe for effective management was: sideline the bad fellows and put the good ones in crucial positions, something that his department was in the process of doing. He noted that 133 officers out of a staff of around 900 nationwide, mainly middle level enforcement and assistant enforcement officers who actually lead and conduct raids, had been transferred recently in a bid to streamline the department and minimise corruption. |
|
|
"The rule is that no officer at certain levels should remain in the same post for more than five years," he revealed. But there were officers who had spent 20-22 years in the same place. One reason was the political patronage that most of these officers enjoyed. "We are now implementing the five-year rule strictly," this senior ED official said.
The income tax department hoped to stem corruption by shrinking, at every level, the discretionary powers of the officers and preventing their misuse. Over the last few years the tax laws too had been considerably simplified to remove the ambiguities and reduce the scope for corruption. An assistant commissioner maintained that there was little scope for corruption while conducting a raid, since there were many officers present, any of whom might squeal. "The understanding' is more often reached with officers of the assessment wing," he alleged. "But even the assessment that they prepare has no sanctity. Any senior officer who feels the offender has got away lightly can reopen the case anytime over the next eight years. So people are realising that they gain little by bribery!" Despite all these pressures, honest officers abound. "They are unsung heroes," noted a commissioner of income tax. "They rarely get any credit for their integrity, yet they carry on." He related the tale of an officer who was offered Rs 30 lakh to fiddle a particular assessment. The officer refused. "It was the last day of the month. The officer had got his salary, but reaching home, he found he had lost his salary cheque in a public bus. His savings were so low that he decided to seek a loan of Rs 1000 from his boss to keep him going till he was issued a duplicate cheque. When he made his request, the boss who was far from honest and knew all about the bribe offer was shocked. A man without Rs 1000 in his bank account, had turned down Rs 30 lakh!" To reduce corruption one officer even made a pitch for higher salaries. "Our staff members who conduct raids earn Rs 5,000-6,000 a month. They are expected to tackle crorepatis! The temptation to compromise is very strong, specially when you see everyone around, including your boss, doing so.' | |
|
CORRUPTION apart, another charge frequently brought against the financial raiders was that strikes were selective. They targeted only those who had fallen foul of the powers that be: the rest went scot-free despite being prime candidates.
Thus some people in Calcutta's business circles saw the raids on ITC and Shaw Wallace as an attempt to crush industry in the CPI(M)-ruled state, because Union Finance Minister P. Chidambaram was angry with the CPI(M) for criticising his policies. Former Congress minister Krishna Kumar felt that K. Karunakaran was behind the income tax raid on his house, while Buta Singh, also raided by the IT, blamed Narasimha Rao. |
|
A senior ED official, however, refuted the view strongly. "This is an uninformed perception of those who have no idea of how we work," he insisted. "We can only act when we have some evidence. Lots of people may be flouting the law, but unless we have some information against them, we can't do anything. You give us some information to start with about anybody, and see whether or not we go ahead." He noted that in 1995 the ED had made 4,552 inquiries, issued 2,456 show-cause notices, conducted 1,175 raids countrywide and seized Rs 16 crore in foreign exchange and Indian currency. "Where is the selectivity?" he asked. "We had been investigating ITC since July 1995 after certain adverse remarks against the company in an audit report. Later, of course, the Chitalias provided detailed evidence as well. In the case of Shaw Wallace, their own employees' union came to us, pointing out that Rs 70 crore had mysteriously disappeared abroad!" "Corruption may well exist in our department but its scope and extent should not be exaggerated," said a chief enforcement officer in the ED. "it is one of the tactics of law-breakers, once they are caught, to make allegations of corruption against the law enforcers. They charge that they are being 'victimised' because they refused to pay the 'bribe' that was sought. But we know these tactics well, and are not rattled by them." Charges of brutality were also occasionally heard, especially against ED officers. Years ago, a young Sikti who was caught carrying foreign exchange jumped out of the window of the ED's sixth floor office in Deihi. ED officers insisted that he was trying to escape, and slipped as he was climbing down a pipe: their critics claimed that he committed suicide to escape the torture he was subjected to during interrogation. The chief enforcement officer pooh-poohed the charge of physical violence: "Given the kind of influential people we usually deal with, using violence would be foolish. This office is not a police station. We don't even have a proper interrogation room and the questioning is done in the cabin of the officer in charge of the case. But we do bring to bear enormous psychological pressure. If people lie we know how to trap them." | |
|
ONE MORE allegation, especially against the income tax department, was that their raids were often based on unreliable and insufficient information that led to honest folk being harassed.
"I know my political rivals in the Kerala unit of the Congress were sending anonymous petitions against me to the income tax people," said Krishna Kumar, "If the department wanted clarifications, it could have checked with me, instead of rushing to raid. The department does not seem to have made any |
|
|
independent effort to find out whether the allegations had any basis. Nothing was found at my residences in Delhi and Thiruvananthapuram that was not mentioned in my tax returns or which I couldn't explain. The raid only stained my reputation."
The allegation was echoed by a former top executive with a wellknown business house, who quit to go into business on his own. "Suddenly one morning I faced an income taxraid," he recalled. "I have no doubt it was at the behest of my former employer, with whom I had fallen out. Of course, the raiders found nothing." One tax commissioner admitted that they could go wrong if the information provided to them was mala fide or false. "We do try to cross-check the information provided to us, but sometimes people are so secretive about their financial affairs, we may not be able to." But most income tax officers gloat over the "90 per cent success level of our raids" while the Central excise and ED put theirs at over 80 per cent. Unlike the police, the income tax, ED and excise officers did not need a judicial authority to sign their search warrants. In the case of the income tax department, the director (investigation) or area commissioner's authorisation sufficed. In the ED, enforcement officers, and in the excise department commissioners could authorise raids. In addition, excise inspectors could enter any factory to inspect the stocks and check the ledgers. | |
| It was mainly when their informers double-crossed them-to extort money from the targeted person that the raids failed. Admittedly, for both the income tax department and ED informers were one of the main sources. IT officer also did their own sleuthing and sometimes sent information to counterparts in another town about a potential target in that town. |
|
Who were these informers? They were mostly people very close to the targeted person, who had a grudge against him. 'Relatives and disgruntled employees are our best bet," said a tax commissioner. Sons inform against fathers, brother against brother. Employees, especially accountants, make excellent sources, " said a tax commissioner. In the case of the ED, too, family feuds did yield bonanzas, but more often rivalry among business partners was the key. The ED also had a separate class of professional informers, people who were themselves mixed up with or were on the periphery of the exchange racket but who squealed to the ED as well. The carrot-20 per cent of the penalty imposed. A big sum considering that the amounts involved sometimes ran into several crores. The IT department paid 10 per cent to informers, but only after the raided person's assessment was complete, which often took two years or more. The offer found few takers. In contrast, the ED paid 10 percent as soon as a haul was made; the remainder was given after the matter was settled. Great care was taken to keep the informer's identity secret. Some officers even allotted the informer a code number, suggesting that he stay far from the income tax or ED office, and mention only his code number while speaking on the telephone to the officer. "We keep our quarry under both physical and electronic surveillance for a long time," said the ED enforcement officer. "We have some interesting gadgets for doing so, of the sort private detectives use. Unless we find that the person is about to flee, we wait to build up a solid case before raiding him. We try to get documentary evidence, taking the help of bank accounts and income tax returns. There are two stages in an inquiry, the discreet and the formal. In the formal stage we can issue a directive seeking an explanation, we can issue a formal summons or we can raid." Reconaissance of the assessee's property was invariably done, so were inquiries from his bank. But the latter were fraught with risk because the bank manager could tip off the person under investigation. "My modus operandi, when I was in investigation, was to visit the bank in question, and ask to see the bank account of some other person," said this enforcement officer. "Having done so, I'd casually tell the manager, 'Since I'm here, I might as well see a few other accounts too.'Bank managers usually cooperate with us. Thus quietly I would take a look at the account I was really interested in." A commissioner who had raided a business house with establishments in 11 cities said he had visited all the cities, travelled incognito to all the likely spots to be raided and collected road maps of each city. "Then I sent sealed instructions to the chief of investigation in each city. In such cases, invariably, the raids everywhere are simultaneous." The emphasis on secrecy was taken to considerable lengths. While visiting small towns, raiding teams preferred not to check into hotels until late at night, when their raid had already begun. Once a team, which had no choice but to check into a hotel in Asansol, explained that it was part of a marriage party! Even members of the team were not informed too early about the details of the raid they were to undertake. "Once the director (investigation) signs a warrant, it has to be executed at the earliest," said the deputy commissioner. (For everyspot to be raided a separate warrant is signed.) While the deputy and assistant directors (investigation) drew up the teams and the entire strategy, the team members were merely told to assemble at a particular spot at a particular hour. At the meeting, the team leader opened a sealed envelope which informed him,for the first time, of the spot to be raided (a map was enclosed to avoid mistakes), the timing of the raid, the background of the person being raided, what to look for and any other special instructions. "if the raid is going to be long drawn out, even cash from our secret fund, is included in the envelope," an officer revealed. IN MOST raids, especially on offices, the investigating team tackled a plethora of documents-papers, bills, invoices and correspondence of all kinds. "Sifting through these, and unearthing the crucial, Incriminating ones is our most difficult task,' said an ED officer. "More than physical effort, we need mental agility and considerable knowledge of financial matters. We have to find the right documents which will stand up in court." It was for the right documents that the raids were conducted, whether by the IT, ED or excise, stretching over days, sometimes even weeks. Post-search inquiries could take longer. After all, economic offenders always kept their genuine, Incriminating records-human memory being what it was, no one could afford to rely on that alone. It was just a matter of knowing what to look for, and searching hard enough. As a senior IT official in Mumbai commented: "Patience and persistence are the hallmarks of an ace investigator." In a concession to the small-scale sector production up to Rs 30 lakh annually was exempt from excise duty, so most small manufacturers evaded excise by fudging their figures to show their production as less than Rs 30 lakh. The larger companies cheated on valuation: they claimed that their manufacturing costs were much lower than they actually were. In FERA cases there was either under-invoicing of exports or overinvoicing of imports. In both cases they stashed away, in banks abroad, the difference between the actual price paid or obtained, and that officially shown. Then there was hawala, which was compensatory payment, against rupees in India, of dollars abroad, or vice versa. But getting documentary evidence in these cases was very difficult. Why so? "Most of the hawala transactions are purely verbal," an officer noted. "Sometimes accounts are maintained in code, which we are unable to crack. Often one crucial link in the criminal chain is an NRI living abroad, whom we are unable to touch. People don't appreciate how difficult is to get a single piece of paper out of banks in other countries. All kinds of complicated mutual assistance laws apply. Look at the fate of the Bofors papers! There are certain offshore banking havens, like the Isle of Man, UK, where many people keep their unaccounted dollars, but where secrecy laws are very strict." Perhaps only matching the secrecy of the raiders on the prowl. DEBASHISH MUKERJO with B.KRISHNAKUMAR in Mumbal, TAPASH GANGULY in Calcutta, and VINU ABRAHAM In Thiruvananthapuram
|Enforcement Figures | Taxing times in tinsel town | Que fera fera! | | |
 PUGMARKS HOME |
Your Comments
You are visitor # |