CBDT asks I-T dept to slap higher tax rate on fraudulently revised ITRs
New Delhi: The Central Board of Direct Taxes (CBDT) has asked the income tax department to increase scrutiny of ITR filings revised after demonetisation and directed it to slap a “higher tax rate” in instances where black money is detected.
On 24 November, the CBDT issued a two-page instruction/directive to all regional chiefs of the I-T department, stipulating the way forward while assessing scrutiny cases selected for suspicious financial activity, post demonetisation.
“Unaccounted income so assessed in scrutiny assessment is liable to be taxed at a higher rate without any set off losses, expenses, etc., under section 115BBE (treatment of tax credits) of the I-T Act,” the CBDT instruction said.
The instructions, accessed by the Press Trust of India, also ask the I-T department that claim of “enhanced sales (especially by business category of taxpayers) may be compared with the central excise/VAT returns”.
“The idea behind the CBDT directive is that the legal provision of filing a revised ITR is not misused and black money is not shown as white in the aftermath of demonetisation by a taxpayer. The assessing officers will comply with these new directions or guidelines in conducting over 20,000 cases of scrutiny, already selected by the department based on their financial activity post note ban,” a senior I-T officer said.
Issuing a stern warning to assessees trying to misuse the provision of revising ITR, the CBDT had earlier said that those altering the ITR forms to “drastically” revise income will face scrutiny and penal action including prosecution. The provision to file a revised IT return under the income tax law has been stipulated for revising any omission or wrong statement made in the original return of income and not for resorting to make changes in the income initially declared so as to drastically alter the form, substance and quantum of the earlier disclosed income, the CBDT had said earlier.
Under Section 139(5) of the Income Tax Act, a revised ITR can only be filed if any person who has filed a return discovers any omission or any wrong statement therein. The CBDT has also asked the assessing officers to check the “genuineness and creditworthiness” of those people to whom the assessee has reported the additional sales in the revised ITRs, post demonetisation on 8 November 2016.
“The source of cash in hands of the person who had made payments to the assessee has to be verified carefully and the past profile of the assessee concerned should be thoroughly analysed,” the directives issued on 24 November said.
The CBDT also directed the I-T department to minutely check and stressed that it would be “crucial to examine the trend and business practices of a particular assessee while ascertaining the legitimacy of the transactions disclosed in a belated return, filed post demonetisation”. In such cases, which are already chosen for scrutiny, it said some instances “might indicate that assessee had filed revised or belated return merely as a cover up to explain the cash deposits in bank accounts”. The tax department had conducted 900 searches between 9 November 2016 and March 2017, leading to seizure of assets worth Rs900 crore, including Rs636 crore in cash.
The searches had led to the disclosure of Rs7,961 crore undisclosed income, official data had said. During the same period, the department conducted 8,239 survey operations leading to detection of Rs6,745 crore of black money.
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