Section 37A: Power to inquire,investigate offences warranting prosecution under this

[37A. Power to inquire, investigate offences warranting prosecution under this Act and Arrest of a person.- (1) Notwithstanding anything contained in Section 11E of this Act, an officer of Inland Revenue not below the rank of assistant commissioner or any other officer authorized by the Board in this behalf on the basis of material evidence pointing to the commission of tax fraud or an offence warranting prosecution under this act may initiate an inquiry upon approval by the Commissioner. (2) For the purpose of an inquiry under this Act, the officer of Inland revenue shall have the powers of a civil court trying a suit under the Code of Civil Procedure,1908(Act No. V of 1908), in respect of the following matters, namely: — (a) summoning and enforcing the attendance of any person and examining on oath; and (b) requiring the discovery and production of documents and receiving evidence on affidavits. (3) The officer of inland revenue shall complete the inquiry while exercising the powers under the provisions of section 37, 38, 38A, 38B, 40 or any other section of the Act, wherever required within six months. (4) During inquiry proceedings, the officer of inland revenue shall give an opportunity of being heard to the person whose actions alleged to have caused tax fraud warranting prosecution under this Act, confronting the person the details of tax fraud committed or caused to be committed by such person for explanation. (5) The officer of inland revenue shall submit inquiry report along with reasons to be recorded in writing indicating the amount involved in tax fraud worked out as a result of such inquiry to the Commissioner to obtain prior approval for investigation or the closure of inquiry without any further investigation. (6) The Commissioner, on the basis of inquiry report under sub- section (5) and after recording reasons in writing, shall either — (i) approve initiation of investigation, or (ii) require the officer of Inland Revenue to submit such further information or documents as he may direct for his decision; or (iii) close the inquiry by rejecting the report or accepting the report, as the case may be. (7) After approval of investigation under sub-section (6), the officer of inland revenue shall complete investigation within three months and prepare investigation report for submission before the competent court. (8) The three-member committee notified by the Chairman, may authorize the Commissioner to issue warrant of arrest of a person, if it is satisfied on the basis of facts brought before it, that (a) the tax fraud falls within the ambit of sub-clauses (a), (b), (c), (d), (e) and (f) of clause (37) of section 2; (b) the amount involved in tax fraud exceeds fifty million rupees; and (c) it has been established during the course of investigation by the Inquiry Officer that — (i) the accused is intentionally or willfully not joining the investigation after three duly served notices; (ii) the accused is attempting to abscond; or (iii) there are sufficient grounds that the accused would temper with the evidence. (9) Notwithstanding anything contained in sub-section (8), the officer of inland revenue may arrest a person alleged to have committed a tax fraud after obtaining an arrest warrant from the Special Judge in a case of a fraud falling within the ambit of the subclauses of clause (37) of section 2 during the course of investigation if:- (i) the accused is intentionally or willfully not joining the investigation after three duly served notices; (ii) the accused attempting to abscond; or (iii) there are sufficient grounds that the accused would temper with the evidence. (10) Where the person suspected of tax fraud or any offence warranting prosecution under this Act is a company, every director or officer of that company whom the officer of inland revenue has reason to believe is personally responsible for actions of the company contributing the tax fraud or any offence warranting prosecution under this Act shall be liable to arrest; provided that any arrest under this sub-section shall not absolve the company from the liabilities of payment of tax, default surcharge and penalty imposed under this Act. (11) Notwithstanding anything contained in this Act, where any person has committed a tax fraud or any offence warranting prosecution under this Act, the Commissioner may, either before or after the inquiry or investigation, compound the offence if such person pays the amount of tax evaded or sought to be evaded as determined in the inquiry or the investigation along with default surcharge and penalty as provided under this Act. (12) Any person accused of an offence who is arrested under this Act shall at the time of arrest be informed of the grounds of arrest in writing on the basis of which he has been arrested. (13) All arrests made under this Act shall be carried out in accordance with the relevant provisions of the Code of Criminal Procedure, 1898 (Act V of 1898): Provided that no arrest under this section shall be made before the completion of inquiry under sub-section (1) of this section. (14) The accused arrested may approach the competent court for his release on bail under the provisions contained in sections 497 and 498 of the Code of Criminal Procedure, 1898 (Act V of 1898). (15) The purpose of prosecution under the provisions of sections 37A and 37B of this Act shall remain to — (a) create sufficient deterrence against tax fraud; and (b)provide for retribution for commission of tax fraud.;

Effective date: 1990-11-01

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