(This story originally appeared in on Feb 8, 2017)

TAX AMENDMENT

Mahesh Shah in seclusion

What he said on TV

Points to ponder

After demonetisation , the Income-Tax department is on an overdrive to conduct searches , raids and serve notices. On Monday, the government even proposed to tweak the Income-Tax law to allow I-T officials to carry out a raid without any evidence. The department has been empowered to conduct raids based on unsubstantiated rumours, too. But even as honest tax payers continue to fear I-T, here is a piece of news that may shake our trust on the credibility of the department. Mahesh Shah , who declared Rs 13,860 crore as undisclosed income and then developed cold feet, will have no action initiated against him.Top I-T sources have confirmed to Mirror that the Mahesh Shah case is as good as closed. Mahesh Shah is a free man. There will be absolutely no action initiated against him. Mirror had reported on December 8 (‘Shah may go scot-free’) that Shah may not have to face any kind of prosecution at all, as his form had been declared invalid by the I-T department and hence held no value. However Mirror’s claims were contradicted by the I-T department.On December 22, Principal Chief Commissioner (Gujarat I-T) B D Gupta had told media, “We will prosecute Mahesh Shah under IPC for making false declaration before a government department.” At least eight I-T officials that Mirror spoke to expressed utter surprise at this decision, wondering why the department was giving up so easily on Mahesh Shah who has cheated not only the government but the entire nation in such a big manner. The I-T officials said there were ways and means to investigate the issue even without arresting Shah.“There are modern methods like narco-analysis and lie-detector that can be used to find out the truth. It is very important for the nation to know why Shah lied about the money, and who are the real culprits behind this,” one of the officials said. A source in the department revealed that it was clear from the very beginning there is no provision under which Shah can be booked, but because the media kept pressurising and mocking officials about their inaction they were forced to say that the IPC approach would be taken. Besides other clauses, the IDS form has a particular clause regarding payment of the tax which says: “In case of non-payment of the (tax) amount as specified above (depending upon the amount of disclosure), the declaration under Form-1 shall be treated as void and shall be deemed never to have been made.”Since Shah failed to pay the first tax instalment of Rs 1,560 crore, I-T officials cancelled his form on November 28, two days before the last date of paying the tax. The source added in Shah’s case even if he made the false claim in the form that the Rs 13,860 crore belonged to him, he cannot be punished under the I-T Act and IPC for giving false information since the form itself holds no value anymore. The I-T department had also claimed that Mahesh Shah’s CA Tehmul Sethna was also going to be booked under IPC. Sethna filed anticipatory bail in response to this.On December 27, a city sessions court rejected the bail because he had based his apprehension of arrest only on basis of newspaper reports about I-T’s claims. The I-T department also told the court that there was no inquiry taking place against him. Responding to the recent development, Sethna said, “I am not surprised by the news. I always knew that there is no provision under which Shah or I can be booked. But since the I-T department made the claim in a press conference I filed for anticipatory bail. The judge had also said in the order that it was not a cognizable offence.”Post-demonetisation, the Income-Tax department has conducted searches, seizures and surveys in more than 1,100 cases and issued more than 5,100 notices till January 19. What’s more, changes in the Finance Act 2017 have been proposed with retrospective effect bringing into the ambit even old cases dating back to April 1, 1962 (under section 132) and October 1, 1975 (under section 132A). This means I-T authorities can now raid any business or individual if they have a reason to believe or suspect that income is being withheld and tax not paid on it. The amendment proposed will remove safeguards currently available to companies and individuals. Meanwhile, political parties demanded a probe in the Mahesh Shah case so that the names behind him could be made public.“We knew since the beginning that the issue would be buried sooner or later. It shows that the persons involved in the scam are influential and aligned with the ruling party. I-T department should not cover up the issue. It must declare all the names. There is several people behind this. I-T should track each one of them, and take action against them. Our party has been demanding a probe in this case since long but the BJP has been turning a deaf ear to everything. All the names should be made public,” said senior Congress leader Arjun Modhwadia. AAP Gujarat media coordinator Harshil Nayak said, “It is quite clear why I-T department is not going to take any action against Mahesh Shah. We have been saying that Shah is only a proxy and was helping known BJP leaders. When I-T went soft on Shah, it confirmed our suspicion.”Mirror visited Mahesh Shah’s house at Mangaljyot Apartments in Satellite on Tuesday and found him living a quiet life. Sources revealed that since the death of his wife Vanita, Shah has cut down on socialising. He is rarely seen mingling with relatives or neighbours. Earlier, Shah used to frequent a paratha house near the society. A source said that the eatery has stopped letting him have food there on credit, and Shah is not seen there much either.Shah, 67, went missing after he failed to pay the first instalment of tax on the declared money. But he quite dramatically reappeared on a live TV interview on a national channel on December 3. On TV, Shah went on to claim that the money belonged to a group of “powerful people who could be politicians, businessmen and officers.” Shah also said he would reveal the names only to the I-T officials. He insisted that the money did not belong to his friends, family or his chartered accountant.1 The Income-Tax department has gone into overdrive post-demonetization but why are big fish like Mahesh Shah who first declared Rs 13,860 crore then developed cold feet being allowed to go scotfree?2 If the I-T department tax is unable to initiate action against Mahesh Shah, why can’t other government agencies take up the case and probe the matter?3 Most I-T sources that Mirror spoke to said there is much more in the Mahesh Shah case than what meets the eye. Who are the real people behind it? Mahesh Shah did not even pay his minimal annual returns regularly yet his disclosure of Rs 13,860 crore did not raise any suspicion.4 Mahesh Shah has already said that he did this for commission and the real people behind him are powerful and influential. Who are these people?5 How could Tehmul Sethna, a responsible chartered accountant, assist a small-time businessman like Mahesh Shah and help him declaring such a large amount without verifying anything? What about the chartered accountant’s responsibility and account ability?6 Even though the I-T department has clarified that it has no power to refuse disclosure, how could they accept Mahesh Shah’s form in the first place? Shouldn’t there be a mechanism or a process to regulate this?7 The I-T department has already served notices to over 19 lakh people. The proposed amendment to the Finance Bill 2017 - with a roughly 55-year retrospective effect - raises the scary prospect that tax sleuths could raid assessees based on a rumour or whim. This has fanned fears of ‘tax terrorism’. “Why are we being harassed while no action is being taken against big fish like Mahesh Shah or his investors. Why has I-T developed cold feet?” questioned businessmen, traders and builders that Mirror spoke to.8 The Mahesh Shah fiasco is a blot on the I-T department, especially for officials in Gujarat. Besides, it is also a failure of the demonetization scheme. A person associated with a co-operative bank in Ahmedabad told Mirror, “Forget curbing black money, lot of fake notes could have made its way in the banks following demonetization. No bank was equipped to check whether the banned notes were fake or genuine. In the process, instead of black money being weeded out, black money has probably made its way into the system.”9 Why cannot a high-level inquiry be instituted in the Mahesh Shah disclosure case? Mahesh Shah who claimed he was working for commission on behalf of rich, powerful and politically influential people has decided against revealing names. Why can strict action and penalty not be initiated against Shah, so that he divulges the name of the real culprits who could then be nabbed.10 If a person can commit a crime of hoarding Rs 13,860 crore, disclose it, refuse to take it forward and still face no action, what message does it send to the general public and the honest tax-payers?