Under the existing provisions, section 278 provides for imprisonment and fine to any person who abets or induces another person to deliver a false statement of account or declaration with an intent to enable the other to evade tax.

It is now proposed to insert a new section 277A to provide punishment with rigorous imprisonment for a term not less than three months but which may extend to three years of imprisonment if any person falsifies books of account or abets any other person to evade any tax, penalty or interest chargeable or imposable under this Act. The Explanation to the proposed section clarifies that it shall be sufficient in any charge to allege the general intent to enable the other person to evade any tax, penalty or interest without specifying any particular instance of sum of tax, penalty or interest which has been or would have been evaded by the other person.

The proposed amendment gives unduly wide powers of prosecution without Tax Department having to prove that such an offence has been willingly and intentionally committed. It may kindly be appreciated that as per the provision as it is now worded, a person may be liable to imprisonment even if no instance of any tax evasion is stated or proved and as such the provision is liable to be misused and may lead to unethical practices, corruption etc.

This would lead to undue harassment to tax professionals who represent their assessees. The imprisonment for three months to three years for falsification of records is too stringent. It important to note that the Chartered Accountants or other professionals work under the discipline of separate enactments i.e. The Chartered Accountant's Act or The Advocates' Act. They can be dealt with under those laws for professional misconduct or criminal action. There is already the legal provision in the Income-tax Act for prosecuting an abettor.

There is a mismatch between the Government's stated intent i.e. controlling hawala transfer and the actual drafting of provision. It is, therefore, suggested that this section should be amended to make it applicable only to hawala operators. The proposal has unnecessarily created fear psychosis in the industry and the professionals, particularly the auditors of the companies.

As per the Explanation, only an information of general nature would be sufficient to take action under section 277A of the Act against a person without proving any criminal guilt of the person or actual connivance to the evasion of tax. It is a well settled canon of criminal law that no person can be prosecuted unless a crime has been proved. Mens rea is an essential ingredient and has to be established beyond doubt. A mere allegation cannot result in prosecution of a person. Accordingly, the proposed Explanation is beyond the well-settled principles of criminal jurisprudence. It is, therefore, submitted that the Explanation to the proposed section 277A be deleted.