In the year 1997, actor Shah Rukh Khan was felicitated by the income tax department for his contribution to the revenue of the state by being a high income tax paying individual. The events that unfolded that same year would put the movie plot of any movie to shame.
Image Attribution : Bollywood Hungama1
On December 18, 1997 around 150 Income Tax Officials swarmed down on the offices and residences of the high and mighty of Bollywood. These included Shah Rukh Khan, Karishma Kapoor, Madhuri Dixit, Sunil Shetty, Pooja Bhatt, Kumar Sanu, David Dhawan ( father of Varun Dhawan etc.)
The operation was one of biggest to date conducted by the income tax department’ investigation wing, and is supposed to have unearthed Rs. 160.50 million worth of undeclared income from the stars. ( What happened during assessment which is a later process is a different of the story)
The raids ( as per common parlance) are supposed to have created quite a lot of commotion in Bollywood circles. If newspaper reports are to be believed, Shah Rukh Khan’s wife Gauri Khan was heard screaming at IT sleuths for ruining her kitchen. Nearly 3 Crore of undisclosed income was retrieved from the bedroom. Madhuri Dixit’s father was visibly upset that his home was ransacked at a time his daughter was not present in town. The owner of that sweet voice, Kumar sanu cracked while trying to explain the currency notes found hidden in his water tank. Karishma Kapoor could not explain the money and jewellery found in one of her 7 houses. Panic soon spread through whole of Bollywood.
It is said that the likes of Amitabh Bacchan and Govinda wound up their shoots and rushed home. Rumours were out that Pooja Bhatt, daughter of Mahesh Bhatt was seen dumping money out the balcony in true filmi style and yet cash of Rs 4.5 Crore was recovered from her and her father and uncles apparently.
What exactly are “Raids”?
Income Tax raids, popularly known as “Search and seizure” operations are conducted by the investigation wing of the department to bring tax evaders and their unaccounted money to tax. It is probably one of the most invasive powers available to the state which nevertheless is necessary. The taxman is feared for the very power that he possesses during a search operation.
Probably the best guide to how an income tax search proceeds is the movie “Raid” starring Ajay Devgan. A search operation once commenced is like a shot arrow. No amount of threat or coercion can bring it to stop until all proceedings are completed. The preparation for the search operation itself takes months and involves both desk work and field work in ample quantities. The operation itself being very invasive, the department is always out to ensure that a search is conducted only based on solid leads.
The search operation finds it’s sanction under Section 132 of the income tax act. It is one of those larger Sections of the Act where the powers of an income tax authority to conduct search and seizure is elaborated upon. It would be fairly correct to say that this section is also the life and soul of the investigation Wing of the department.
The “Power” wielded by an IRS officer
Unlike what you see in movies, a search operation cannot be conducted on the whims and fancies of a single officer. There are enough checks and balances kept in place to ensure that the bullet is not fired. But once all procedure has been duly followed, then the wheel is set in motion and can’t be stopped.
One way to look at a search operation is like a dance where most IRS officers of a region participate. Officers from across the state are involved in a search operation as per requirement. Recently, a search operation conducted on entry providers in the stock market truly spanned across India with simultaneous searches in Kolkata, Delhi, Mumbai, Chennai and other major cities.
The assessee can also be a variety of persons. The income tax department has raided IAS officers who are chief secretaries, IPS officers, Ministers, Godmen, Businessmen and what not. Those questions on Quora which ask whether an IRS officer is more powerful than IAS officer will be put to shame if it is asked in the context of a search operation. An IRS officer carries the full might of the state with him during a search operation and it doesn’t matter however mighty the person on the receiving end is. They simply can’t stand against it.
It’s not easy to detail everything about a search and seizure operation in a single lost. There have been many cinematic instances and funny incidents during search operations, which I’ll try to elaborate in subsequent posts.
Looking into the life of an IRS Officer, one of the most challenging and interesting parts of his job are assignments in the investigation wing of the department.
PS: Finally, what did happen to the money that was seized during the operation on Shah Rukh Khan? It is said that the whole of the money seized was given back because of a technicality in the assessment of income that was carried out later. Apparently the assessment order was passed after it was time barred. I know it sounds like a whole lot of jargon. May be in one of the subsequent posts I’ll explain what it means.
Keep tuned to know more about the challenges and fun you experience as an IRS officer.
( All views are personal and doesn’t represent the view of the income tax department or the Government of India. All data quoted in the post are available in public domain, in judgements and press reports of the time )