Unit-2

Introduction

Companies have a moral responsibility towards the society in the pursuit of their growth and
development. A responsible behavior by a company is demonstrated by the extent of its
disclosures and transparency in business and by adherence to the laws applicable to it. These
aspects of governance bring about confidence in the minds of the investors in particular and
the society at large. Proper, timely and accurate disclosures play a large role in establishing a
company as a good corporate citizen.

In context of the companies incorporated in India, the Companies Act, 2013 (the Act) is the
base regulation with which a company is supposed to be managed. The Act which got assent
from the President of India in August, 2013, provides for the mechanism for dealing with
companies who have violated the provisions of the Act in the course of their business
activities. Chapters XXVIII and XXIX of the Act provide for the manner in which a company
would be adjudicated for non-compliances of the provisions of the Act.

Offences under the Companies Act, 2013

Difference between fine and penalty Compounding of an offence Offence which cannot be
compounded Conclusion Offences under the Companies Act, 2013

The terms ‘Offences’ is not defined under the Act. However, a general interpretation of the
term can be derived by analyzing the following definitions. The Macmillan Dictionary
defines the term Offence as, “a crime or illegal activity for which there is a punishment”. As
per Section 2(n) of the Code of Criminal Procedure, 1973 (CrPC), an Offence is defined as,
““offence” means any act or omission made punishable by any law for the time being in force
and includes any act in respect of which a complaint may be made under section 20 of the
Cattle trespass Act, 1871 (1 of 1871);”

A plain reading of these definitions gives a view that an offence is an act committed by not
adhering to the provisions of the law under the purview of which the said action was done or
was about to be done. Therefore, any act done by an officer of a Company which is not in
sync with the requirements of the Act would constitute an Offence. An Offence in a company
may be done either by connivance i.e. when the officers of the Company are aware of an
unlawful act being committed or by inadvertence i.e. when it was done accidently or
unknowingly.
Section 439 of the Act prescribes that all the offences under the Act shall be non-cognizable
except for the offences prescribed under section 212(6) i.e. those involving fraud. A non-
cognizable offence as per section 2(l) of the CrPC means an offence for which, a police
officer has no authority to arrest without a warrant. The Act also provides that the Central
Government may, if required, establish Special Courts for the purpose of providing speedy
trail of offences under the Act.

On establishment of the fact that an offence has been committed by the Company or its
officers, penalty or fine may be inflicted on any or both of them as prescribed under the
Act. Many people use the terms ‘penalty’ and ‘fine’ interchangeably thereby giving an
impression of both having the same meaning. The Act while prescribing punishment for
non-compliance uses the phrase ‘penalty’ at some places and the phrase ‘fine’ at some.
Certainly, both would not be having the same meaning, else the whole idea of using both
the terms would become infructuous. Therefore, in order to understand the intention
behind the law to use these different terminologies, it is first important to understand
the difference between the two.

Securities Fraud
Securities fraud also known as investment fraud or stock fraud, stems from a
variety of deceptive practice in the stock or commodities markets. A person or
entity commits securities fraud when that person intentionally provides false
information or the omits material information that induces an investor to make
purchase or sales decisions. Securities fraud violates both state and federal
securities laws.

Securities fraud is a broad category that includes theft or embezzlement from

investors, manipulation of stock, misstatements of a public company’s financial
reporting, providing misleading or inaccurate information about the underlying
securities in mutual funds and bond funds, and misstatements to corporate auditors.
Securities fraud can also encompass a wide range of other illegal activity,
including violations of the federal securities act of 1933, violations of section 10(b)
of the securities act of 1934, state blue sky laws, insider trading, front running of
trades, and other illicit activity on trading floors of stock and commodities
exchanges.

Securities fraud can also be a crime in which a set of criminal laws set to protect
investors and the securities industry. Securities fraud attorneys help protect
investors from securities fraud violators both in civil litigation and securities
arbitration.

The most common types of securities fraud are insider trading, boiler room fraud,
Ponzi schemes, pump and dump schemes and corporate misconduct.

Insider Trading

Insider trading is another type of securities fraud. There are two basic types of
securities fraud in the insider trading context. First, is where a corporate insider
trades a stock on information that is not publicly available. The second type of
securities fraud in the context of insider trading is where an owner of ten percent of
a company trades shares without adequate reporting.

Boiler Room Fraud

The most common type of securities fraud in FINRA arbitration is a type of boiler
room fraud. Boiler rooms are broker-dealers that apply high pressure sales tactics
to coax clients into investing a particular type of investment – usually micro-cap
stocks or alternative investments that is generally sold for the benefit of
commissions or sold fraudulently.

Ponzi Schemes

Another type of securities fraud common in FINRA arbitration is Ponzi schemes.

A Ponzi scheme is an investment where subsequent investors fund returns to
earlier investors in an effort to mask the fraud. The largest Ponzi scheme ever was
operated by Bernie Madoff and uncovered in 2008.

Pump and Dump Schemes

A pump and dump scheme is yet another common type of securities fraud that
investors should be careful about. A pump and dump scheme usually involves
selling large quantities of micro-cap stock to inflate the price so that the fraudster
can ultimately sell his or her shares at the inflated price leaving the victim holding
worthless shares in the stock.

Corporate Misconduct / Accounting Fraud

Securities fraud can also be a type of corporate misconduct. Securities fraud in the
form of corporate misconduct has received significant attention in the last twenty
years since the Enron scandal of the early 2000s. One type of corporate misconduct
is accounting fraud or accountant fraud. Many accountants over the last two
decades have been the subject of civil litigations for falsifying financial reports and
corporate documents to make a company look profitable when in fact the client
was failing.

Corporate Fraud
The Black Law Dictionary describes fraud as: "All the various means that human naivety can think of, and
which an individual can use to obtain an advantage over an individual by manipulating or suppressing the
facts. Both surprises, tricks, riddles, or dissembling, and all unfairness are part of it.

Corporate Criminal Liability

Corporate criminal liability may be regarded as a crime committed by individuals or associations of

persons who perform certain actions or omissions which are prohibited by law or in guilty minds, for the
sake of the organization or of any entity from an association of persons for the purpose of achieving their
common purpose of obtaining business during their work. In certain cases historically, in which the
principle of holding a company accountable was not implemented, no company had been held responsible
for any illegal activities as an artificial legal person so it could not be detained.
The Concept
In criminal law, corporate responsibility defines the extent to which the actions and omissions of the
natural persons it hires can be liable to a corporation as a legal entity. It is often considered to be an aspect
of criminal vicarious liability, as distinct from the case in which the wording of a statutory crime expressly
imposes liability on the company as the principal or joint principal with a human agent.

The Doctrines established under Criminal Liability

The Doctrine of Vicarious Liability

The accused is responsible for the crime of another person in Vicarious liability. The theory of Respondeat
Superior is based on that doctrine, which implies that the master responds or answers. This doctrine is
applicable to criminal offenses as well as to the responsibility of companies and fines for property seizure.
It has also been concluded that the company is vicariously responsible for actions performed by its
employee as it conducts in the course of its job, with Ranger vs. the major western railway
company [1859]4 De G & J 74. The act and intention of the employee must be credited to the company for
vicarious liability and should be done in the course of the job.

The Doctrine of Identification

It needs organizations to take responsibility instead of the individuals enforcing those policies for the
people with decision-making authority. The doctrine focuses on the reality that the company's purpose and
behavior is the product of the company's employees. Detection of the culprit is the fundamental premise of
this theory.

The Doctrine of Collective Blindness

Under the Collective Blindness doctrine, courts held that firms are liable even though no one was guilty
and deemed the cumulative amount of information of each employee, so that a company may be held
liable.

The Doctrine of Willfulness Blindness

According to that doctrine, the doctrine of intentional blindness is valid when any unlawful or criminal act
is performed and the corporate agent takes no steps or measures to deter certain activities.
The Doctrine of Attribution
The theory of attribution means that mens rea, i.e. the guilty conscience, is assigned to the mind and
resolve of companies, in the case of a penalty or incarceration in the event of an act or omission that leads
to breach of the criminal law. In India, this doctrine is used but in the United Kingdom, it was created.

The Doctrine of Alter Ego

Under this doctrine of Alter Ego, it is described as someone's personality which is not seen by others. The
owners and persons who manage the company are considered as the Alter Ego of the company. The
directors and other persons who manage the affairs of the company can be held liable for the acts
committed by or on the behalf of the company under this doctrine since the corporation has no mind, body,
or soul so the people are the directing mind and will.

Legal Position in India:

In the Indian Penal Code there are offenses that define offenses of a serious nature in which, according to a
corporate body, the penalty prescribed is an obligatory prison term. The corporation was considered liable
to be fined and prosecuted for offenses in the case of Standard Chartered Bank vs. Directorate of
Regulation, In cases where a custodial sentence is required, the Supreme Court rejected the notion that the
corporation should escape indictment.

The Court can not impose the punishment because the company can not be sentenced to jail, but the court
may punish the company by imposing a penalty of fines that could be imposed. Aneeta Hada vs. Godfather
Travels and Tours Pvt. Ltd, [2012 5 (SCC 661)]. The dispute was in this instance related to the
determination of corporate responsibility in a search dishonor, In the case of a corporation, the Supreme
Court questioned the extent of assignment liability.

As a legal person, the corporation is responsible for other people's conduct. The Supreme Court ruled that
in all jurisdictions around the globe regulated by the rule of law corporations and company corporations
can not claim further protection from criminal prosecutions because they are unable to keep men rea in
other cases of Iridium India Telecom Ltd vs. Motorola Inc.[(2011) 1 SCC 74].

In the Indian Penal Code, 1860, "Fraudulent" is described in section 25 of the IPC as "If a person does this
in a fraudulent way but does not do so."
Section 420 describes cheat and fraud when any property or a valuable part of safety is delivered. It also
stipulates the sentence as a term of seven years and is also liable to be fined.

In the Code of Criminal Procedure 1973, The procedural element of all such laws is described in CrPC,
although substantive legislation can be expressed in different statuses (Company Law, 1956, IPC,
Prevention of Food Adulteration Act). The CrPC complies with the trial of offenses under these laws.

Article 4 of the CrPC states that the CrPC shall review and prosecute all crimes pursuant to the IPC and
other rules and that they shall also be subject to legislation at this time.
There are other legislations also which regulate the activities of the corporations like the Companies Act,
2013, The Factories Act, 1948, The Information Technology Act, 2000, etc. but still, we need separate
legislation to regulate the activities of the corporations and also to prevent these Fraudulent activities from
happening in the future.
Major Corporates Frauds in India

Mundhra Scam 1958:

�Life Insurance Corporation of India vs Hari Das Mundhra and Ors.�

This was one of Independent India's first big scandals. The trial in this case led to the accused's conviction,
i.e. HaridasMundhra. Mundhra. The defendant was a businessman who sold forged shares to the Indian
Life Company, causing the LIC to lose 125 crores of rupees. In order to investigate this matter, the Prime
Minister formed a commission led by Justice Chagla. Ultimately, Haridas was convicted and sentenced to
22 years in jail.

Satyam Scam 2009:

M/S. Satyam Computer Services Limited vs. Directorate Of Enforcement, Government of India

Computers Satyam was a leading IT company in the industry. The charges against him showed
reservations of the case which have proven fake in the courtroom. The statements and balances were
drafted. The company's revenue was found to be fake and its share price rose, attracting investors to the
company. After this scam, the lawmakers thought that fraud was one of the greatest in history and the need
for stronger regulations.

Ketan Parekh Scam 2001:

Ketan Parekh vs Securities and Exchange Board Of India

The 12000 crore scam was an investment scam where the convict converted bank money into the market
and invested a large amount of it in a number of companies. Parekh was immediately arrested and
sentenced to a year's stringent detention after a trial.

Sharda Chit Fund Scam 2013:

After a multi agencies survey by the CBI, Income Tax Department, the Government of Bengal declared a
commission headed by Justice Shyamal Sen. Sudipta Sen has been convicted by the jury following a suit in
the Supreme Court and was sentenced to a sentence for imprisonment in the case of small and low-income
investors. This fraud headed them to invest in a chit fund, a promising large income.

India has been inundated with different Ponzi schemes that profit unsuspecting investors in search of
alternative banking options. Little Indians also rely upon informal banking for lack of access to formal
banks. These informal banks consist inevitably of moneylenders charging interest at inflated rates and are
soon replaced in more advanced forms by veiled Ponzi schemes.

The fundraising process is carried out by legitimate activities such as joint investment schemes, non-
transparent debentures and desires, and fraudulent financial fraud instruments such as building and tourism
fictitious undertakings. There are numerous causes of the rapid proliferation of Ponzi schemes, in
particular, in North India, including a lack of knowledge about banking standards, continuously dropping
interest rates, a scarcity of legal proceedings, and protection of patronage.

The Saradha Group's Ponzi scheme has earned investors ' money through the issuance of redeemable
bonds, secured bonds, and promising amazing returns. Local agents in the entire state of West Bengal were
hired and massive investor deposit cash payments were given to grow rapidly and eventually to create a
conglomerate of over 200 businesses.

This union has used money laundering and regulators such as SEBI. In the month of April 2013, a system
totally collapsed and many of its low-income investors went bankrupt and lost about the US $5 billion.
In the group's events, SEBI first noticed anything odd in 2009. It called into question Saradha because the
company had not complied with the Indian Companies Act, which includes a formal prospectus and
categorical authorizations of SEBI, the market regulator, to any company raising capital from more than 50
investors. In expanding the number of firms, the Saradha Party tried to evade prosecution to build a
complex network of interconnected players.

This caused countless problems for SEBI, which worked despite them to investigate Saradha. In 2012,
Saradha decided to turn it on using various fund-raising practices, such as Collective Investment Schemes
(CIS) disguised as packages for travel, real estate ventures, and so forth. Many investors were duped into
investing in a chit fund. This too was an effort to abolish SEBI because chit funds are the responsibility of
the state administration, not SEBI.

Nevertheless, SEBI managed to ascertain that the group was not actually raised by chit funds and directed
Saradha to stop its activities immediately until it had been approved by SEBI. SEBI previously warned the
West Bengal State government about the hoax chit fund activities of the Saradha Party in 2011 but without
profit. SEBI was largely ignored by the government and Saradha until the firm eventually came to power
in 2013.

Following the collapse of the scandal, the Organization was investigated by the Investigative Commission
and a low-income covered relief fund of around USD 90 million. In 2014, in the course of charges of
political inference to the state inquiry, the Supreme Court transferred all inquiries into the Saradha case to
the Central Bureau of Investigation ( CBI).

5. Sahara Group (Case Study)

The two parties have been engaged in an aggressive regulatory dispute ever since 2009 when the Sahara
Group was first put within the SEBI radar leading to Sahara India's Pariwar member, Subrata Roy, arrested
in 2014. SEBI submitted that the option of full convertible debentures (OFCD) has been collected illicitly
by the Sahara India Immobilien Corp (SIRECL) and the Sahara Housing Investments Corp Ltd (SHICL).
Meanwhile, Sahara denied the competence of SEBI to do so.

The Sahara has also been ordered by SEBI, before the Securities Appellate Tribunal (SAT), to provide full
reimbursement to its investors. In August 2012, SAT upheld SEBI 's order and the Sahara demanded that
the Sahara repay the SEBI by depositing it with the Supreme Court. Sahara then said it already paid back
much of the US $3.9 billion to investors, saving US$ 840 million for a small sum it handed over to SEBI.
SEBI denied this, arguing that the details of reimbursed investors were not given. The Supreme Court of
India released in February of 2014 an arrest warrant for the Sahara Chief when Sahara did not deposit the
rest with SEBI and Subrata Roy missed his hearings.

Sahara vehemently rejected all charges and kept defying SEBI, despite allegations of black cash laundering
and the abuse of political links. It continued through the so-called "ridiculous game of the mouse" by the
Supreme Court and eventually succeeded in pinning down Sahara's Chief of Staff Subrata Roy in 2014.
SEBI brought Sahara to justice in this unusual win, but also made an excellent case why the regulator, and
other parties like this, require increased autonomy and punishment.

Early Corporate Fraud Identification and Prevention

The completion of financial and financial control systems loopholes and the streamlining of funds and
credit flows can be a successful technique for financial fraud prevention. Different frauds occur because
the law is manipulated which leads to false profits for the fraudster. The possibilities of fraud are avoided
by routine training, data controls, and other checks and balances.

Various measures through which we can prevent corporates frauds are:

Effective Corporate Governance

Management levels in an organization play various tasks and have a say in the company's plans and
strategies. These managers will work to battle fraud through the inspiration and ethical training of their
subordinates. Failure to regulate companies would lead to an increase in financial statement fraud.

Internal and External Audit

An organization conducts many financial transactions every day, the corporate internal audit department is
the first entity that can perceive fraud. Deloitte found that 53% of cases of fraud have been detected by
internal audit. Companies can track their activities routinely by means of internal audits to detect any
system loophole which could lead to fraud. External audits refer to thorough checks made either by a
governmental external entity or by a private company, while external audits detect very few frauds, and
can be audited to indicate an abnormality in the internal audit.

Whistle Blowing:
A corporation has many companies (clients, shareholders, etc.) dealing with it. It can be beneficial to report
any suspected fraud or any other fraud.

Conclusion
A business can commit fraud in different ways, such as account manipulation and the production of false
monetary information. As an organization, business is of great significance to a country's economic growth
because it generates large quantities of employment and revenue. Corporate fraud, on the other hand, will
make the economy worse and frighten investors. In order to make the corporate output ethically possible,
there should also be some legislation and obligations resulting from the violation of this legislation

Crime in the field of medicine

In India, most of the medical practitioners are found involved in activities like issuance of a false
medical certificate, unnecessary billing, selling sample drugs to patients, etc. These activities are some
of the petty crimes, but few of the well-practiced doctors with a mindset of doing a crime tactically
would help them to escape from punishments, voluntarily involves in the purpose of money-making
to perform some activities like practicing medicine without any qualification and by using a fake
certificate of completing the respective course (these people are termed as quackery), abortion as a
common term but female foeticide as a medical term when especially done for the girl child, organ
trade combined with murder will fall under serious crimes.

Based on the crime done by the doctors every one stays punished accordingly in the eyes of law.
Frequently the doctors committing the petty crimes fall under the concept of cheating as mentioned
under Section 420 and fraud as defined under Section 25 with Section 471 for using a forged
document for a genuine reason as mentioned under the same code.

Meanwhile, each serious crime done by the doctors as mentioned above has respective laws and acts
enacted by the government to stop the inhuman activities of the doctors and punish them accordingly.
These people use the defence of consent given by the patients to them to protect their liability, but the
patients also are liable if they indulge in such activities with a wrong intention and they get excluded
from liability if they are made to believe in the doctor by his activities.

Indian Penal Code and Medical Crime

Cheating:

As mentioned in the Indian Penal Code (IPC) if any act is done to deceive a person with the intention
of either to receive property from others or alter it, constitutes to be cheating. Here the quackery
influences the people of curing them and receives the money, thus it comes to be cheating. The same
applies to any person who deceives any person with a wrongful intention by expressly saying that the
illness of the people can be cured by his prayer.

The Supreme Court in the case of Shri Bhagwan Samardha v. State of Andhra Pradesh[2] took a
positive move by considering that when somebody represents himself to offer prayers to god for
curing the illness and induces the person to give money or any complements for that activity and he
does not get a result, then it is a fraudulent representation and the court can consider that the offence
of cheating as mentioned under Section 420 of IPC has been committed. In such cases, the penalty
extends to a period of 7 years of imprisonment.

Forgery:

According to Section 471 of IPC forgery is committed when a person for the reason of developing
belief over him among others, fraudulently uses a document as genuine and knows to himself that the
document is forged. Here the quacks are the people who use such kinds of false certificates to
establish themselves as a graduated medical practitioner.

Medical Profession-a Business or a Service

The reason for quacks in the medical field is that they view the medical profession as a business rather
than seeing it as a service. Here arises a question whether service requires money? This introduces a
concept of service for the welfare of society. Service which requires no money creates people who do
service for their self-satisfaction, but people giving money for the welfare of the society also involves
service.

Thus, receiving a reasonable amount (considering all the expenses for example fees for nurses,
electricity bills, etc.,) for each service rendered by the medical profession does not become a business.
Quacks enhance this kind of jobs to make profits only, therefore it comes under business but being a
business it should be for the welfare of the people, as it does not satisfies the condition “for the
welfare of the people”, this kind of business is illegal and violates Article 19(1)(g) of the Indian
Constitution which falls as a Fundamental Right.

According to Article 19(1) (g) “All citizens shall have the right to exercise any occupation or to carry
on any trade or business”. The exception is that this right does not increase when the business is
illegal or abandoned by the country.

Involvement of the Legislation

The petty crimes are punishable under the Indian Penal Code. As development gets improved day by
day, different types of crimes also get introduced and practiced on the way of affecting the public. To
add a full stop to these new entering crimes, the legislation also enacts new laws, amends the existing
laws, etc. time to time along with the development of the world. By such means, these are the few acts
that entered the society.

Drugs and Cosmetics act, 1940:

This act regulates the sale, manufacture, and import of drugs and cosmetics within India. Under
Section 6 this act provides the presence of Central Drugs Laboratory for testing sample drugs for the
safety of the users. Section 10A gives the power to the Central Government to stop the import of
unsafe drugs and cosmetics which creates a danger to the public, whereas Section 26A gives the
power of stopping the manufacture of unsafe drugs and cosmetics that disturbs the public interest.
Therefore, this act prevents quackery from its very level of the foundation by preventing the
manufacture, import of unsafe drugs.

The Dentist Act, 1948

It is enacted to organize the dentist into a legal framework and control them from entering into any
malpractices. This act makes the dentist enrol his name in the register of the State Council to confirm
his eligibility for practice. If the doctor violates the rules and ethics mentioned in Section 17A of the
above-mentioned act or involves in any of the malpractices or is convicted for any of the offence then
according to Section 41, the State Council can pass an order to remove his name from the register. By
Section 48 the court has no authority to raise a question against the decision of the council on the
removal of the name. Under Section 49 quacks will be fined with Rs.500 or 6 months of
imprisonment and a fine of Rs.1000 if caught again. This above provision lays a platform to catch the
quacks.

The Drugs and Magic Remedies Act, 1954:

The purpose of establishing this act is to control and prohibit persons making advertisements of
remedies similar to possessing of magical remedies (curing by magic or prayer), to control the
quackery. Section 3 ensures that no person should involve himself in making advertisements in
suggesting the use of any drug for miscarriage, mitigation, treatment or prevention of any disease, etc
as mentioned in the schedule. Section 5 deals with banning advertisements related to magical
remedies and others mentioned in Section 3. The act also deals with punishment of imprisonment to
an extent of 6 months on 1st conviction and imprisonment for 1 year if it continues.

The Medical Termination and Pregnancy Act, 1971:[3]

The reason for the enactment of this act is to stop abortion unnecessarily. Before the introduction of
this bill, the same crime was punished under Section 312 of IPC (intentionally causing miscarriage).
On the base, abortion (miscarriage in medical term) is not a crime unless and until it is done for the
welfare of the mother. In case if the mother would enter into danger because of the birth of the child,
then there is no wrong in proceeding with an abortion.

This act provides some conditions for terminating pregnancy along with the condition seen above.
This allows certain qualifications and places to conduct the termination if it is for the welfare of the
mother. Knowing the gender of the baby in the prenatal stage is a crime in India. Illegally knowing
the gender and conducting the termination if the child is a girl child then it is specially termed as
female foeticide which also constitutes a crime in India. Thus, this act prevents the doctor to conduct
the termination even if the patient gives his consent. Consent of the mother is immaterial and even the
parents get punished if the termination proceeds.

Transplantation of Human Organs Act (THOA), 1994:

This act is enacted to control the individuals who do transplantation of organs as a business, known as
organ trade. Transplantation of organs does not come under a crime unless it is done with consent
accompanied legally. But if the same is done by murdering a person for his organ or to earn money,
then transplanting an organ to another person becomes a crime. In a recent scenario doctor Deepak
Shukla, CEO of Pushpawati Singhania Hospital and Research Institute in Delhi[4] was arrested for the
crime of organ trafficking. According to the report of the Kanpur Chief of Police, the doctor was
involved in helping illegal kidney donation.

Another case held in August 2016 known as Thakur's case[5] establishes that how India's organ
transplant laws protect the organ donors who are often from a poor background and it also lays an
example for the fact that these poor people are also sometimes coerced for making organ donation. In
this case, the operation was almost started by the doctor but the Mumbai Police stopped them before
they retrieved the victim's organ, because there involved payment for the organ.

This breaks the law which bans commercial organ donation. Most probably a middleman gets
involved in this transplantation between the donor and the recipient. In some situations, he acts even
against the will of the donor. In such cases, if the middlemen are arrested the penalty extends to a
period of 5 to 10 years of imprisonment and a fine of between Rs.20 lakh and 1 crore.

Other legislations

The Indian Medical Council Act, 1954 is enacted to deal with the matters connected to modern
scientific medicine. The Indian Medical Council and the State Medical Councils are formed as the
regulators under this act. This regulates and recognizes the universities that grant medical
qualifications to the people. Any committee can be formed under Section 9 of this act for any specific
purpose. Therefore, an anti-quackery committee can also be formed (done in Delhi Medical Council)
to control the involvement of quackery.

Same as the above act Indian Medical Central Council Act, 1970 was enacted to regulate Indian
medicines such as Ayurveda, Siddha, etc. This act prevents the quacks to enter into this medical field.

Other Developing Crime - Related to Medicine

Medical Mafia

Medical Mafia is the expression used to define the unholy trinity of the FDA (Food and Drug
Administrator) and big Pharmacy companies. In the past 30 years, the Nexus has achieved to
understand their ethical operations. The Medical Mafia has originated in the west and now controlling
the whole World. One of the main ways to earn money is through Medical Mafia. Below are some
examples of Medical Mafia and its effects:
Medical Mafia is against the Generic Drug and they require strong patent laws for the medicine in this
field, so the big pharmacy companies will only have the patent rights to sell the medicines for some
disease. Because of this, the price of medicine will be unreasonable.

It does not control only the medicines; rather they have also extended their tentacles to food and other
beverage industry.

In this field, they would receive some percentage of money or some shares with the other companies.
For example, the cancer drug company has a share with the Tobacco manufacturing company.

The Medical Mafia may sell their Propaganda of the company in the name of research.

Bribing of Doctors:
Doctors around the world are paid by the Medical Mafia. Some Doctors may prescribe unnecessary
tests to specific center for particular tests; Because of this they will receive some kickbacks from
those centers. In the case of Medicines, the doctor will not prescribe the medicine based on their
quality or price. They will prescribe the medicine only based on the vendors who have paid them
some money.

The Medical sector becomes more and more commercialized as the doctors begin to ask a commission
from the patients, the number of patients coming to the doctors reducing day by day. Though the
kickbacks are illegal in India the young doctors can't avoid it as there are many student debts available
to them while they were studying, so the upcoming doctors can't survive without the kickbacks.

Medical Representatives have divulged that the big Pharmacy companies are bribing the doctors by
giving tickets for foreign trips, expensive phones, and jewels. Thus, the government of India drags its
feet in 2016 to introduce a uniform code that is Pharmaceutical Marketing Practices.

They also revealed that they were training women for salesmanship and “Management of Customer
Relations”. According to them, 10-20% of the doctors follow the ethics of the Medical Council of
India, whereas other doctors ask some incentives to prescribe their pharmacy company products. Even
sometimes they may threaten their targets and doctors to prescribe their product.[6]

Doctors Cheating Patients:

Doctors will receive kickbacks for the help they do for the pharmaceutical company in making their
product to be sold. In the government hospitals, the doctors will prescribe generic medicines that are
good for health whereas in some private hospitals the doctors would prescribe brand name medicines
to advertise the pharmacy company names[7]; it is because of the above-mentioned reason.

Some doctors are cheating patients with unnecessary tests and medical operations even though it
would be solved easily. Doctors are also cheating the patients by converting a normal delivery into a
caesarean delivery to earn more money from the operation for hospital rent by keeping the patient on
the ventilator for more days.

They also cheat the patient through Insurance. While claiming the Insurance from the patients and not
by cash they will ask the patients to take unnecessary tests and scans to claim more money from the
insurance. Doctors are selling Energy powders which were given by the big pharmacy companies
which may give side effects to the patients.

To earn more money doctors are making a deal with the Pharmacy companies even though knowing
that it hurts poor people economically. Dr. Anil Pichad living in Mumbai revealed that he has been
overcharging the patients as he wants to give commission to the doctors. After he went through a
personal tragedy, he stopped charging over the fee and bribing the doctors.

In Major Pankaj Rai vs the State of Karnataka[8], it states that Major Pankaj Rai's wife Seema was
suffering from a Kidney Ailment. The doctors took Seema to the operation theatre for Kidney and
Pancreas Transplant without her family's permission. Pankaj Rai had to pay 8.25 lakh for the
operation and Seema has lost her life also.

The doctors didn't even tell their families about Seema's death and switched off their mobiles. The
hospital doesn't have a license for the pancreas transplant. The court has ordered that the Respondent
(i.e. doctor) is debarred from performing the surgery. In this case, it tells that the hospital has operated
without a license for pancreas transplant and consent of the patient's family. In this case, it is well
clear that to make money some doctors involve in such kind of unnecessary operation to earn money.

Conclusion:
White-collar crimes are crimes that should be controlled with serious steps. Among all other white-
collar crimes (professional crimes) few professions stand as important among the people. One such is
the field of medicine. Among the other profession, this medical field has its origin even before ancient
times. Every proof related to ancient and historic periods refers to doctors at least in one place. Such
an old and growing service/profession has now become a business for some people.
Though the government enacts various laws to make this honorable profession to release it from the
hands of white-collar crime, it becomes impossible unless every medical practitioner understands the
history of the profession and do their job as a service to the society. Thus, it is rightly coined that
“Good doctors understand their responsibility better than privilege and practice accountability better
than business.”

With the rapid advancement in science and technology, newer forms of intellectual property
protection are emerging. Examples of such protection are seen in the efforts made to protect computer
programmes and software, life forms particularly following developments in the biotechnology etc.
Patent laws of several countries favor patent protection for software innovation. Such countries
include USA, Australia and Singapore, to name a few. However, many other countries which include
India and European nations have more stringent laws concerning patent protection to software
innovation. The Indian Patent Law does not contain any specific provision regarding the protection of
computer software. Biotechnology has been at the core of a number of important developments in the
pharmaceutical, agrochemical, energy and environmental sectors. In particular, progress in the field of
molecular biology, biotechnology and molecular medicine has highlighted the potential of
biotechnology for the pharmaceutical industry. The objective of the study lesson is to provide an
understanding to the students about the patenting of software in India as well as the patenting of
inventions in the domain of biotechnology.

Lesson 11 - Trademarks

A trade mark provides protection to the owner of the mark by ensuring the exclusive right to use it, or
to authorize another to use the same in return for payment. The period of protection varies, but a
trademark can be renewed indefinitely beyond the time limit on payment of additional fees. In a larger
sense, trademarks promote initiative and enterprise worldwide by rewarding the owners of trademarks
with recognition and financial profit. Trade mark protection also hinders the efforts of unfair
competitors, such as counterfeiters, to use similar distinctive signs to market inferior or different
products or services. The system enables people with skill and enterprise to produce and market goods
and services in the fairest possible conditions, thereby facilitating international trade. With the advent
of WTO, the law of trade marks is now modernized under the Trade Marks Act of 1999 along with
the Rules thereunder and is in harmony with two major international treaties on the subject, namely,
The Paris Convention for Protection of Industrial Property and TRIPS Agreement. Trademarks being
an important aspect of the intellectual property, students need to be well versed with the conceptual
and legal framework, and procedural requirements relating to trade marks.

Lesson 12 - Copyrights
Copyright is a right given by the law to creators of literary, dramatic, musical and artistic works and
producers of cinematograph films and sound recordings. Unlike the case with patents, copyright
protects the expressions and not the ideas. There is no copyright in an idea. Just as you would want to
protect anything that you own, creators want to protect their works. Copyright ensures certain
minimum safeguards of the rights of authors over their creations, thereby protecting and rewarding
creativity. Creativity being the keystone of progress, no civilized society can afford to ignore the basic
requirement of encouraging the same. Economic and social development of a society is dependent on
creativity. The protection provided by copyright to the efforts of writers, artists, designers, dramatists,
musicians, architects and producers of sound recordings, cinematograph films and computer software,
creates an atmosphere conducive to creativity, which induces them to create more and motivates
others to create. (xvi) Often students are taught the value of original thinking and the importance of
not plagiarizing the works of others. The objective of the study lesson is to make them realize the
ethical/moral aspects involved in using materials protected by copyright, besides increase their
knowledge and understanding of the copyright law as such, why copyright law exists and where it all
started and the key changes that have occurred in the domain of copyright.

Lesson 13 - Industrial Designs

Industrial design play an important role in the trading of consumer goods or products. Industrial
designs are what makes a product attractive and appealing; hence, they add to the commercial value of
a product and increase its marketability. Today, industrial design has become an integral part of
consumer culture where rival articles compete for consumer's attention. It has become important
therefore, to grant to an original industrial design adequate protection. When an industrial design is
protected, this helps to ensure a fair return on investment. An effective system of protection also
benefits consumers and the public at large, by promoting fair competition and honest trade practices.
That apart, protecting industrial designs helps economic development, by encouraging creativity in
the industrial and manufacturing sectors and contributes to the expansion of commercial activities and
the export of national products. Students should be well versed with the provisions of the design
legislation in India so as to understand what an industrial design is; why to protect industrial designs;
how can industrial designs be protected; and how extensive is industrial design protection. Besides,
they should be well versed with the application filing procedure as required under the law.

Lesson 14 - Geographical Indications

A geographical indication is a sign used on goods that have a specific geographical origin and
possess qualities, reputation or characteristics that are essentially attributable to that place of origin.
Most commonly, a geographical indication includes the name of the place of origin of the goods.
Agricultural products typically have qualities that derive from their place of production and are
influenced by specific local factors, such as climate and soil. Geographical indications are protected in
accordance with international treaties and national laws. Under the Agreement on Trade Related
Aspects of Intellectual Property Rights (TRIPS), there is no obligation for other countries to extend
reciprocal protection unless a geographical indication is protected in the country of its origin. India, as
a member of the World Trade Organization (WTO), enacted the Geographical Indications of Goods
(Registration & Protection) Act, 1999. It is important for the students to know the legal position
relating to geographical indications of goods in India; why do geographical indications need
protection and how geographical indications are protected; who are entitled for registration; which of
the geographical indications cannot be registered; and when is a registered geographical indication
said to be infringed etc.

Lesson 15 - Layout - Designs of Integrated Circuits

In modern technology, integrated circuits are essential elements for a wide range of electrical
products, including articles of everyday use, such as watches, television sets, washing machines, and
cars, as well as sophisticated computers, smart phones, and other digital devices. With the
advancement of this information technology, a new branch in the field of intellectual property
flourished, called as the Layout-Design or the of the semiconductor integrated circuits. Hence, a step
was (xvii) taken by various organizations to pass regulations regarding this issue. One such was the
World Trade Organization, and the result was the TRIPS agreement addressing the intellectual
property related issues. India being a signatory of the WTO also passed an Act in conformity with the
TRIPS agreement called the Semiconductor Integrated Circuits Layout-Design Act (SICLDA) passed
in the year 2000. Considering the significance of semiconductors as a novel branch of intellectual
property, this chapters aims at discussing the concept of Layout-Designs of Integrated Circuits along
with the major provisions of Semiconductor Integrated Circuits Layout-Design Act, 2000

Lesson 16 - The Protection of Plant Varieties and Farmers’ Rights

In the present era of liberalization, globalization and fast paced information technology, intellectual
property rights have emerged as a new global phenomenon. An efficient and effective IPR regime is
one which balances individual incentives and benefits with the wider needs of the society, while, IPRs
are a wellestablished institution in the manufacturing sector, their application to agriculture is still in a
state of evolution. The key issue in the agricultural sector is, quite simply, that some agricultural
innovations are imperfectly appropriable. This imperfect appropriability may reduce innovators’
incentive to invest in the improvement of such crops. Several forms of IPRs employed in the sector of
agriculture attempts to address this issue. Here it is relevant to mention the prevalent legal
mechanisms including patents, plant varieties protection, trademarks, trade secrecy rights and plant
breeders’ rights. India is among the first countries in the world to have passed legislation granting
farmers’ rights in the form of the Plant Varieties Protection and Farmers’ Rights Act, 2001 (PVPFR).
India’s law is unique in that it simultaneously aims to protect both farmers’ and breeders’ rights. The
Indian case assumes immense importance due to the country’s lead in establishing a legal framework
on Farmers’ Rights and also significant as the Indian Gene Centre is recognized for its native wealth
of plant genetic resources. As we have dedicated legislation in the form of The Protection of Plant
Varieties and Farmer's Rights Act, 2000, which works as effective legal system for the protection of
plant varieties, the rights of farmers and plant breeders and to encourage the development of new
varieties of plants, this chapter aims at apprising the students with each and every minute detail of the
Act in order to assistant in the effective implementation of the Plant Varieties Act to recognize and
protect the rights of the farmers in respect of their contribution made at any time in conserving,
improving and making available plant genetic resources for the development of new plant varieties.

Lesson 17 - Protection of Trade Secrets

Knowledge is what happens to information when human ingenuity is applied to it. Information alone
does not confer competitive advantage. Knowledge does. It is human ingenuity that turns information
into knowledge and gives it value. And it is this knowledge that is the underlying value of the
intellectual property or capital of an organization–its relationships, know-how, confidential business
information and trade secrets. Today more than ever, intellectual property also includes confidential
business information, trade secrets, know-how and key business relationships. The various statutes
that have been enacted provide an adequate mechanism of protection to intellectual property rights.
However, some ideas cannot be patented and indeed, some innovators do not want to patent their
ideas as for instance trade secret or confidential information. If a trade secret is really kept a secret,
the monopoly on an idea or product may never end. Once the information is leaked and goes into the
public domain, it is lost forever. Too often, beyond applying for patents on new inventions or
trademarks on new brands, little real attention is (xviii) paid to protecting or securing this less formal
type of intellectual property and consequently the information goes into the hands of the rival
competitors of the business enterprises. The study lesson explains the importance of trade secrets to
the business enterprises whether small, medium or large and why this key strategic asset needs to be
protected

Lesson 18 - Key Business Concerns in Commercializing Intellectual Property Rights

Effective management of intellectual property enables companies to use their intellectual property
rights to improve their competitiveness and strategic advantage. Acquiring intellectual property
protection no doubt is crucial, but its effective management provides much more than just protection
to an enterprise’s inventions, trademarks, designs, copyright or other allied rights. Exploitation of
intellectual property rights can take many forms, ranging from outright sale of an asset, a joint venture
or a licensing agreement. Inevitably, exploitation increases the risk assessment. Valuation is,
essentially, a bringing together of the economic concept of value and the legal concept of property.
The presence of an asset is a function of its ability to generate a return and the discount rate applied to
that return. Acceptable methods for the valuation of identifiable intangible assets and intellectual
property fall into three broad categories. They are market based, cost based, or based on estimates of
past and future economic benefits.

Tax evasion happens when people do not report their actual income under the Income Tax
return. This is considered illegal and the defaulter who hides the actual income can be
punished under the law. You can save tax through legal methods available which require
investing in various schemes and plans but following unfair practices comes under a crime.

For example, not paying the tax or paying less than what is due is considered to be tax fraud.
It is essentially the criminal act of a person or a company attempting to avoid paying their tax
obligations. It includes concealing or fabricating income and falsifying deductions without
proof. Another tax evasion example is failing to declare cash transactions, etc.

People utilize various methods to avoid paying taxes, including filing fraudulent tax returns,
smuggling, falsifying documents, and bribery. Tax evasion is important because it is
considered illegal in India and leads to severe penalties. The penalty for not disclosing income
ranges from 100 percent to 300 percent of the tax.

Types of Tax Evasion

Tax evasion is commonly practiced in the informal economy. This happens majorly because
of two factors, the lack of compliance and the lack of enforcement. One of the most common
ways to evade tax is smuggling. However, there are two broad categories to classify tax
evasion which are explained below:

Evasion Of Assessment
A tax evader by filing a false return can avoid the tax assessment. Fake returns conceal
income and list erroneous deductions. This leads to an incorrect assessment of the tax. In case
the person transfers taxable assets in the books to mislead the Internal Revenue Services
(IRS), it is also considered an attempt to evade the assessment.

Evasion Of Payment
If the taxpayer hides the assets after the tax is due, then it is an attempt to evade the payment.
Concealment of the assessable assets or money in a family member’s or foreign account is a
different way of avoiding tax payments.
Tax Exemptions Vs Tax Evasions

For a layperson, technical terms like tax exemption, tax planning, tax avoidance, and tax
evasion can become quite challenging to comprehend. With little or no understanding of these
critical terminologies, taxpayers may fail to make the most of the benefits these government
provisions offer.

Tax planning and tax evasion are two such terms. The difference between tax planning and tax
evasion is clear and simple to understand. Here’s a tabular comparison between the two most
commonly confused terms: tax exemptions and tax evasions:

Tax Exemptions Tax Evasions

Refer to expenditure, income, or investment on no Refers to avoiding tax payments through

tax levied. illegal means or frauds.

Reduces the overall taxable income Does not alter the taxable income

Undertaken by employing government provisions

Undertaken by using unfair means.
like House Rent Allowance, Life-time Arrears, etc.

Helps taxpayers save their hard-earned

Helps taxpayers save their hard-earned money
money through unlawful, fraudulent
through lawful means
means.

Leads to no penalties if done wisely and as per the

Leads to serious penalties and fines
available provisions

What are Tax Avoidance and Tax Evasion?

Tax evasion and tax avoidance in India are other set of terms that taxpayers often
misunderstand.

Tax Avoidance Tax Evasion

This means reducing tax liability without It implies reducing tax liability by using
violating tax rules. illegal methods.

This is an informal way to reduce income tax This is objectionable and strict legal action
through legal ways. can be taken.

This process occurs before filing the income

This usually occurs after tax liability arises.
tax.

An example of tax avoidance is investing in a An example of tax evasion is keeping money

retirement account. in foreign account.

Having read the meanings of these terms, you can now clearly understand the difference
between tax planning, tax avoidance, and tax evasion and make prudent financial decisions.

Tax Evasion Method

One can evade one’s taxable income through various unfair means. However, the technology
and innovation have made the Income Tax department catch the defaulters. Here are some
common tax evasion methods:

● Misleading financial statements

● Reporting lower income than the actual one

● Not paying tax dues on time

● Justifying the false claim for exemption

● Keeping money in foreign accounts

Tax Avoidance Method

As tax avoidance is basically finding a way to save income in a legal way, it comes with
various methods for the same. Mentioned below are a few methods for every employed person
to avoid tax and still being legal:

● You can claim the Child Tax Credit

 ● You can put money into a Health Saving Account (HSA)

● Opt for a mortgage tax deduction

● Invest in a retirement account

How Do People Evade Tax?

Tax evasion being a common practice among Indian business-class people. They earn loads of
money and find various illegal methods to avoid the trap. These unfair practices are carried by
most people to escape the process of taxation.

Smuggling Instead Of Paying State Border Tax, Import Tax, Etc

In order to avoid paying state taxes, import-export taxes, and customs duties, many people and
businesses resort to smuggling. Smuggling is a punishable act under Indian law, and tax
evasion can result in greater penalties.

Filing Incorrect Income Tax Returns

Submitting incorrect information like understating your income, overstating deductions, or
any other kind of false reporting is a popular income tax evasion strategy. However, this is
illegal.

Maintaining Fake Financial Statements

Inaccurate financial documents like balance sheets and account books can give the impression
of a low annual income. Some businesses also do not keep sale receipts to understate their
income and reduce their tax due for the year.

Using Fake Documents For Tax Deductions

Another tax evasion tactic is getting fake documents made to prove that you are eligible for a
tax deduction, such as a disability certificate to claim tax deductions under Section 80U.

Not Showing Any Income

Many people resort to cash transactions to hide the trail of their earnings. Not having any
income on paper implies that you do not have to pay any tax either. Businesses often do not
produce invoices for their sales. Similarly, landlords may accept only cash payments instead
of bank transfers or cheques for rent.
 Keeping Money In International Bank Account
The Indian income tax authority has no jurisdiction over foreign bank accounts. Some
individuals might keep a bank account outside of the nation to keep money. This is illegal
under the law as this income cannot be determined while calculating taxes. If government
officials get to know about the money in international accounts, one can be punished for
committing this a crime.

Not Paying Tax

A lot of people refuses to pay taxes. Then, despite the tax dues, the person does not make the
necessary payments to the government or people leave the country. The Income Tax
Department keeps on reminding the dues regularly. After giving chances, there are provisions
under which an action is taken against the defaulter.

Offering A Bribe To An Official

Offering bribe is one of the most common ways of coming tax crime in India. Offering a bribe
to an income tax official to change the amount of tax due is another way to evade tax. People
turn to bribes to lower or eliminate any tax record due under their name. Both accepting and
offering the bribe is illegal. Strict actions are taken in case you are caught for the same.

Tax Evasion Examples

Ritika is a server at a restaurant and she earns an amount of ₹2000 every night in the form of
tips. Ritika’s employer does not keep a track of tips as he trusts her to note them down in the
logbook. She deliberately reports a small amount of her total tip income which is just ₹50.
This was an attempt to lower tax burden.

According to the rules, Ritika has to report the tips she received. However, Ritika misstated
her income throughout the income as a result she is a defaulter.

Similarly, Akash is a businessman in Mumbai. He earns crores in a year and to avoid taxes, he
has transferred the income into different bank accounts in other countries through illegal ways.
Keeping money in another country’s bank account to avoid taxes is a crime under the law.
This is another wrong way to escape tax.
Tracking Tax Evasion by Using Tech

Tax evasion can be tracked by using Artificial Intelligence (AI), Data Analytics and Machine
Learning (ML). The transparent taxation platform deploys these technologies to track tax
fraudsters and evaders.

The Central Bureau of Direct Taxation and the Central Board of Indirect Taxes and Customs
uses big analysis to find out the tax defaulters and their penalties.

What are Tax Evasion Penalties?

According to the Income Tax Act, tax evasion should be treated as a punishable offense in
India. This can result in severe penalties. The degree of the fraud perpetrated and the amount
of the owed tax may affect the punishment for tax evasion. Hence it is recommended to take
income tax compliance seriously to avoid any legal action by authorities. Here are some
situations and the subsequent penalties levied in case of each:

Failing To File Your Income Tax Return Within The Due Time
As per subsection (1) of Section 139 of the Income Tax Act of 1961, all taxpayers must file
their income tax return during the tax filing period for each financial year. If anybody does not
file their income tax return for any reason, they have to pay a late fee. This late penalty fee
was ₹10,000 till the financial year 2019-20. However, effective from 2020-21 till date,
anybody filing a belated income tax return is charged ₹5,000 as a penalty. In some cases, the
assessing officer can also decide the value of the penalty, which can be less or more than
₹5,000.

Proving An Incorrect PAN Card Number Or Hiding The Pan Card Number
Failure to furnish accurate information while filing ITR is also a punishable offense. Most
employers ask for the employees’ PAN card numbers at the time of employment. This
information is used while deducting TDS or the tax deducted at source from the employee’s
salary. Here’s the penalty for two scenarios involving a PAN card:

● Hiding the pan card number: In the absence of a PAN card number, the employer

will deduct 20% TDS instead of 10% TDS.

● Providing an incorrect pan card number: In case of an incorrect PAN card number,

you will have to pay a penalty of ₹10,000.

The taxpayer may not provide accurate information in the Income Tax Return submitted to the
authorities. In addition, the assesse may discover inaccuracies in the information provided
after it has been submitted. However, it is possible that the assesse will not be able to correct it
within ten days of submission. Alternatively, the assesse may be aware of the error during the
submission process but fail to notify the Income Tax Department. The penalty amount in such
circumstances can be ₹50,000.

Concealing Or Misreporting Your Income

As per Section 271(C) of the Income Tax Act of 1961, in case of hiding or understating your
income, the penalty can be anywhere between 100% to 300% of the amount of tax that was
due but not paid. Here’s how the percentage is decided:

● A penalty of 10% on the previous year’s hidden or understated income is levied if

the taxpayer owns up to the undisclosed income and declares it. Interest may also
be charged here.

● A penalty of 50% on the amount of income that is hidden or understated, is levied

if the reason behind the under-reporting was a bona fide mistake. This refers to a
genuine mistake that is not committed with an aim to evade tax.

● A penalty of 300% on the amount of hidden or understated income is levied if the

mistake was intentionally made to evade tax. This is also known as a mala fide
mistake.

Income tax officials may feel compelled to raid a location to find the taxpayer’s undeclared
income. Consequently, the penalty will be computed according to Section 271AAB in such
instances.

Not Complying With TDS Regulations

For businesses or employers who deduct and collect tax at source, having a tax deduction
account number (TAN) is vital. Not having a TAN can result in a penalty of ₹10,000. There
are two kinds of frauds that can be committed here:

● Not collecting tax at source: In this case, the penalty is the same as the tax that

was not deducted at the source.

 ● Not filing a TDS return: Just like income tax returns, there is also a due date for

filing TDS returns. If the TDS return is not filed within the stipulated time, the
taxpayer has to pay tax every day after the due tax until the entire payment is made.
The penalty, in this case, can start from ₹10,000 and go up to ₹1,00,000. To avoid
paying this penalty, taxpayers must file TDS returns before the prescribed due date.

Failure To Comply With A Demand Notice

The Income Tax (IT) department can issue a demand notice if inconsistencies are found in the
income tax return. If this happens, the IT department issues a demand notice stating the
amount of tax still owed. The taxpayer is offered 30 days to respond to the demand notice
from the day of receiving the document. A failure to respond and pay the tax due can result in
a penalty.

Not Paying Tax As Per Self-Assessment

Taxpayers who fail to pay entire or a part of their self-assessed tax or interest are considered
defaulting taxpayers. Failure to pay tax as per self-assessment is considered to be tax fraud
under Section 140A (1). In such a case, the assessing officer can levy a penalty up to the total
amount of tax owed to the government. However, if there is a valid reason for not paying tax
as per self-assessment, the assessing officer may waive off the penalty.

Not Getting Audited

If an organization does not get itself audited or does not submit an audit report under Section
44AB, they have to pay a penalty of ₹1.5 lakhs or 0.5% of its sales turnover, whichever is
more. In addition to this, if the taxpayer does not provide a report from an accountant as
mandated under Section 92E, they have to pay a penalty of at least ₹1 lakh or more.

To avoid the penalty, the taxpayer must document all domestic and overseas transactions and
obtain a report from a chartered accountant in India on or before the deadline. In addition, a
penalty of 2% of the value of the transaction (international or domestic) will be applied if any
documents required by the Act are not given or attached under Section 92(D)3.

It should be emphasized that the assessing officer is not required to impose a penalty in all
circumstances where there is a default. The assessee may have been experiencing difficulty
due to circumstances beyond their control.

For example, the assessee may have been unable to carry out ordinary business operations,
such as maintaining books of account due to the hardship. In addition, natural disasters such as
cyclones, floods, and other natural disasters may have contributed to the hardship. In such
instances, the assessing officer has the authority to exclude the assessee from the Act’s
criminal penalties. However, the assessing officer must document the basis for granting the
assessee the exemption advantage in writing.

How to Avoid Tax Evasion?

It can help to be fully aware of the tax rules in the country in order to avoid any tax fraud.
Keeping track of your income, deductions, and exemptions and understanding the underlying
rules about each of these can ensure that you file your income tax return and pay your tax
correctly. You can also help consult a professional financial advisor or tax planner to avoid
delays, lapses, or mistakes.