Tax evasion using business expenditure

Value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession is chargeable to tax under this head.  Perquisites received by an managing partner are added to income from profession  or salary to that partner under the head 'Income  from profession' or salary'. Perquisities orbenefits received during the business  by an assessee other than employees are chargeable to tax under the head 'income from business or profession'.

Repeated querry, has already been answered in a different thread under Experts.

The Queries are : 1. "If a managing partner is extensively misrepresenting personal expenses such as vacations abroad, personal travel expenses, etc and claiming these as business expenses, does this qualify as tax evasion? "

Such false accounting is tax evasion.

2. "I have documentary evidence of this. Under what sections do I report it to the Income Tax officials?"

You may report it, with specific details, to:

a) the Chief Commissioner of Income tax having jurisdiction over that company;

OR

b) the Director General of Income tax (Investigation) having jurisdiction over that company, or over that area.

If there is proof of this fraud, what is the limitation under IT act? Is it only 6 years despite having proof of tax evasion going back 8 years?

The relevant provisions in the Income Tax Act 1961 are:

Time limit for notice.

149. ²⁸[(1) No notice under section 148 shall be issued²⁹ for the relevant assessment year,—

³⁰[(a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) ^30a[or clause (c)];

 (b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more³¹ for that year;]

^30a[(c) if four years, but not more than sixteen years, have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment.]

Explanation.—In determining income chargeable to tax which has escaped assessment for the purposes of this sub-section, the provisions of Explanation 2 ofsection 147 shall apply as they apply for the purposes of that section.]

(2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151.

(3) If the person on whom a notice under section 148 is to be served is a person treated as the agent of a non-resident under section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of ^31a[six] years from the end of the relevant assessment year.

^31b[Explanation.—For the removal of doubts, it is hereby clarified that the provisions of sub-sections (1) and (3), as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012.]

Thus normally the maximum time available is 6 years only, unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment, in which case  it is 16 years.