MCA to scan tax evasion cases
This could spell double trouble for tax-evading companies. The ministry of corporate affairs (MCA) has sought details from the Income-Tax department of companies against whom tax-evasion charges have been framed.
By Souvik Sanyal, ET Bureau |
NEW DELHI: This could spell double trouble for tax-evading companies. The ministry of corporate affairs (MCA) has sought details from the Income-Tax department of companies against whom tax-evasion charges have been framed. The ministry feels that scanning those records could unearth cases of violation of company law.
While tax evasion can be settled through payment of penalty, many offences under company law are punishable as imprisonment for top managers.
A proposal to establish a system wherein the ministry is kept updated on corporate I-T defaults is under consideration. Officials say the move will require setting up an information-sharing network between the two departments. The idea is to leverage on the I-T department���s data network to identify defaulting companies, and then examine if they have breached company law provisions.
Experts do find logic in the move as evasion of taxes often results in distortion of numbers in the company���s financial results, an activity which constitutes an offence under the company law.
Many companies, on being caught evading taxes, pay the penalty to the authorities and then shift the burden of it to their shareholders by fudging their financial records. A recent instance is the case of Mumbai-based Elder Pharma where the ministry procured details from the I-T department to initiate action against the company.
The company, which is now being probed by the ministry���s Serious Fraud Investigation Office (SFIO) for altering its financial records, was earlier caught evading taxes.
Officials feel that the proposal, if effectively implemented, could lead to a reduction in the number of tax evasion in the long term. While tax evaders in most cases shell out a penalty to move out of a prosecution, officials feel the present move might deter them from effecting similar offences.
Company law provisions prescribe stricter punishment for offences, and in many cases carry an imprisonment for the offenders.
While tax evasion can be settled through payment of penalty, many offences under company law are punishable as imprisonment for top managers.
A proposal to establish a system wherein the ministry is kept updated on corporate I-T defaults is under consideration. Officials say the move will require setting up an information-sharing network between the two departments. The idea is to leverage on the I-T department���s data network to identify defaulting companies, and then examine if they have breached company law provisions.
Experts do find logic in the move as evasion of taxes often results in distortion of numbers in the company���s financial results, an activity which constitutes an offence under the company law.
Many companies, on being caught evading taxes, pay the penalty to the authorities and then shift the burden of it to their shareholders by fudging their financial records. A recent instance is the case of Mumbai-based Elder Pharma where the ministry procured details from the I-T department to initiate action against the company.
The company, which is now being probed by the ministry���s Serious Fraud Investigation Office (SFIO) for altering its financial records, was earlier caught evading taxes.
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Officials feel that the proposal, if effectively implemented, could lead to a reduction in the number of tax evasion in the long term. While tax evaders in most cases shell out a penalty to move out of a prosecution, officials feel the present move might deter them from effecting similar offences.
Company law provisions prescribe stricter punishment for offences, and in many cases carry an imprisonment for the offenders.
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