The Exemption department of I-T, Gujarat, recorded a disbursal of refunds of Rs 800 crore in 2021 — that is that much fewer revenues. Earlier the Exemption department had the powers to conduct searches and assessments but it’s been two years since the faceless assessment has been implemented, so almost don’t have much work to do.
“We don’t have powers to conduct searches, surveys or even assessments. We are reduced to a department that gives refunds. As the Income Tax Department, we are meant to generate revenue for the Centre but we are just busy disbursing refunds to charitable organisations,” exclaimed a well-placed source in the I-T department.
Role of Exemption Dept
Income of charitable and religious trusts and religious trusts is exempt from tax subject to certain conditions. Over 10,000 charitable organisations in Gujarat are monitored by the Exemption Department.
Since they work for social and community development and not for profit, charitable trusts have received preferential treatment in the Indian Taxation laws since 1886. The taxation of charitable trusts is governed by Chapter III of the Income Tax Act which contains sections 11, 12, 12A, 12AA and 13.
The Exemption office is located in Vejalpur, Ahmedabad. The CIT(Exemptions) is Ritesh Parmar while senior IRS Ravindra Kumar is the Principal Chief Commissioner of Income Tax (PrCCIT) of Gujarat.
Currently, the right to conduct search and seizures is with the Investigation cell of the I-T department but interestingly, in the past year, the cell has not searched a single charitable organisation. “Most charitable organisations and trusts have political funding and so these are not easy territories to handle. Real estate and builders’ lobby are soft targets for catching unaccounted income,” a senior official said.
“Many times, political pressure prevents searches on certain charitable organisations. One call from a politician and the investigation officials might have to go home empty-handed. The whole raid flops and it looks bad upon the Income Tax department. The investigating officer also gets reprimanded by the higher authorities. Due to such reasons, officials often stay away from raiding a charitable organisation in Gujarat,” he pointed out.
“Investigation officers also have to finish their quota of searches and seizures every year. Searching charitable organisations need different background work than a builder – the modus operandi here is different. In a hurry to finish their ‘quota’ of searches, many times charitable organisations get amiss,” another official added.
The coordination between the Exemption department and the Investigation wing of I-T, Gujarat, is poor. The two crucial departments do not work hand-in-hand to tap into charitable organisations, which are known for social work but are also infamous for turning black money into white.
“Gujarat Elections 2022 is just a few months away. The cases of money laundering, registration of fake/dummy political parties and instances of turning black money into white, everything is going to increase fivefold in Gujarat. If the Exemption department is given more authority we can work as a checkpoint to stop such white-collar crimes in Gujarat. But as of now, we have no power,” a senior official of the Exemption wing said.
As the Exemption department does not have the rights to search, survey or assess the organisations, the I-T department misses out on a huge revenue and the charitable organisations also often go scotfree despite their illegal practices.
The exemption department of Gujarat has also appealed to Principal Chief Commissioner of Income Tax (Exemptions) Rashmi Saxena Sahni to give assessment rights to the department.
“As IRS officials working in the Exemption department, we understand the nuances of this domain better. If we are given assessment rights we can identify the fault lines better and eventually catch hold of organisations that are not working as per norms. We have shared our concerns with the Principal Chief Commissioner, we hope to get positive feedback,” said an official from the I-T department.