Thursday, May 19, 2011

Income Tax Criminal Investigation Would Be Revamped In India

Income tax, especially direct tax, is an important revenue source for government of India. Black money and its safe deposit in foreign jurisdiction is also a big problem for India. Since many jurisdictions are involved in this case, even criminal investigation cannot be done properly. Further, as more information technology is used by tax criminals these days, income tax authorities find it difficult to investigate technological crimes.

The income tax department of India is planning to revamp its tax collection mechanism. Among other crucial initiatives, there is also a proposal to create a directorate of criminal investigation (DCI). The directorate will maintain a centralised repository of data collected from telephone and Internet intercepts, banking and market transactions, cross-border deals, ATM transactions, etc. The department will also develop cyber forensics capabilities and obtain latest forensics tools.

DCI would also be required to tackle the data security cyber security issues. Data and information collected by DCI must be tamper proof and immuned from leakages and cyber crimes. Good and effective cyber security must be put at place to keep the sensitive and secret data out of the reach of cyber criminals.

Media reports indicate that income tax department is currently probing a host of high-profile financial irregularities from and to overseas destinations and is of the view that the next decade will see an increased role on its part in scrutinising such transactions and fund flows.

This will require the income tax department to deploy considerable resource and energy on criminal investigation. Effective criminal investigation will necessarily include a comprehensive international strategy to combat offshore tax evasion, and fund flows that threaten security of the country.

The roadmap seeks to strategise the policies of the department as new technological development, accelerated globalisation, exchange of information between revenue authorities. The department also proposes to hone its cyber forensic skills, keep tab on fund flow relating to money laundering, narcotics and terror and ensure exemplary enforcement against abusive schemes and corporate tax frauds.

The income tax department must stress upon techno legal skills development of its officers dealing with financial crimes, income tax investigations, cyber crimes, tax evasion cases, etc in order to achieve the abovementioned objectives.

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