The Tax Man Comet : Big Fat Weddings Tell Tales

Watch out! That big fat wedding you have planned can be a dead give-away to a lot of unaccounted wealth and off-the-record transactions. It’s better to have it all on record and well accounted for — the tax man is watching!

Unlike the regular tax desk which is manned by a tax officer whose job is to levy tax on you, this desk is manned by a non- serving tax officer who wishes to share his experience of 35 years in the tax department, while discussing tax provisions. It is advantageous to know how the tax department thinks and acts when, as said by Benjamin Franklin, “In this world nothing is certain except death and taxes”

One important job of the income-tax department is to detect black money and collect evaded tax on that. There is a real cat-and-mouse chase between the tax collector and the evader, as real innovative ways are adopted by tax evaders and the department also tries its best by action and legislation to nail them.

One of the simplest and oldest manifestations of black money is fat weddings, celebrated for many days at expensive venues. During my tenure in Mumbai, I picked up several such marriages for enquiry, to send the message that the department was seeing what they were doing, and also to collect tax on the expenditure incurred using black money. The only precaution I took was not to disturb the marriage ceremony. Here, I propose to tell you how we conduct such an enquiry, by discussing one case.

Many tax payers are ignorant of the provision u/s 133A(5) of the IT Act which provides jurisdiction to tax officials to make enquiry in respect of any function, ceremony or event, anytime after the function. The tax officer need not wait for filing of the income tax return. The enquiry conducted by me was under this section

The department got information from market sources that a big fat wedding was to take place. Both the sides were well known business families. Guests from across the country and outside were invited. We learnt that the invitation card itself was designed by a leading artist, and that expensive gifts were handed out, along with the invitation cards. Our first goal was to get hold of an invitation card so as to have information on the various wedding function venues. We succeeded in getting an invitation card without much difficulty from a reliable source. I drew my strategy to discreetly observe the functions on a secret mission mode, for which I selected my team. I kept the main venue for myself. The objective was to identify the service providers and also identify the nature of the expenses without disturbing the ceremony, and without being seen. I visited the selected venue myself, along with my wife, duly dressed for the occasion. We mingled among the crowd and kept on taking notes. While doing my work, one guest identified me, and I made him believe that I was an invited guest like him, but from other side.

Once the marriage ceremonies were over and we had full information about the nature of the expenses and the identity of the service providers, an open enquiry began by conducting a survey action against the service providers. Documentary evidence of the expenses incurred was taken, along with statements from the service providers. We collected information on the number of rooms booked in luxury hotels for the guests, as well as the bills raised by five star hotels for various functions. The main caterer’s bill for catering to guests at the race-course venue of Mumbai was obtained. Significantly, we noticed that in the hotel billings as well as the caterer’s billing, there was direct collusion to supress the actual expenditure. The caterer issued two sets of bills, as did the big hotels. They both issued bills for small amounts, for which payments were received by cheque from the organisers, while the main bills were in bogus names against which cash was received. The bills of the decorators, florists, transporters, make-up artists, etc., were all paid in cash without the name of the party engaging them. The bill amounts charged by leading fashion designers were mind blowing. While analysing the video, we could quantify the jewellery on the person of the bride and close relatives. Equipped with all this information, we roughly made an estimate of the expenditure. Then the last step was to confront both the fathers of the bride and groom. I asked them to give details of expenses incurred from the engagement to the honeymoon, together with bills and source of payment. There was a huge discrepancy between the figure worked out by me and the figure worked out by them, and to a large extent they accepted our estimate and voluntarily paid taxes in several crores. We also subjected the five star hotels, caterers and service providers for an estimation of their unaccounted income collected from these clients. They also concurred and paid taxes on their unaccounted income. Our investigation got huge media attention and our objective was served -- to convey that the display of wealth through fat weddings is not good.

There is a real cat-and- mouse chase between the tax collector and the evader, as real innovative ways are adopted by tax evaders and the department also tries its best by action and legislation to nail them

Many tax payers are ignorant of the provision u/s 133A(5) of the IT Act which provides jurisdiction to tax officials to make enquiry in respect of any function, ceremony or event, anytime after the function. The tax officer need not wait for filing of the income tax return. The enquiry conducted by me was under this section.

Recent trends indicate that big fat weddings are now arranged in foreign countries and guests are flown there for a paid holiday for three to seven days. People overlook that the Government of India has entered into exchange information agreements and information has started flowing in. Also, the Income Tax department has posted senior officers in important countries whose goal is to collect information. Tax payers are therefore advised to spend tax paid money and enjoy peace of mind.

By sK JhA