Beware! IT Sleuths On The Prowl

The suspected undisclosed income in these cases could reach as much as Rs 15,000 crore.

The Income Tax department has issued 10,000 reopening notices to companies and individuals in major cities, seeking explanations for apparent discrepancies in their reported incomes.

The notices relate to the 2018-2019 assessment year and such cases cannot be reopened after August 31.

Preliminary estimates suggest that the suspected undisclosed income in these cases could reach as much as Rs 15,000 crore (Rs 150 billion).

The entities involved span India's top cities -- Delhi, Mumbai, Bengaluru, Pune, Chennai, and Hyderabad.

Most of these cases involve suspected bogus charitable donations made under Section 80G of the Income Tax Act, as well as high-value overseas transactions, such as property acquisitions, according to officials in the know.

"It's difficult to pinpoint the exact figure at this stage, as the process of issuing notices is underway. Many cases are at different stages of the process and they (amounts) are typically revised after receiving responses to the notices," said one of the officials.

Business Standard has reviewed some of these reopening notices in connection with alleged fraudulent donations.

According to one notice: 'The NGOs were indulging in accepting bogus donations to earn commission and increase their turnover. The services of middlemen were taken to facilitate such donations and the middlemen kept a signed blank letter pad with them so that certificates could be issued (sold).'

The official revealed that most of the reopening notices have been issued after search and survey actions on the entities in question.

In some cases, the notices have been prompted by information provided by reporting entities, such as banks, financial institutions, jewellers, and real estate firms, which are obliged to report transactions that exceed a certain threshold.

"Data analytics within the department plays a crucial role in identifying undeclared transactions from previous assessment years," another official said.

Under the reassessment legislation (Sections 148 and 148A), taxpayers are allowed to present their case before final reassessment orders are issued.

However, tax experts believe that the process will extend beyond August 31.

"This can be seen as an attempt to secure a foothold in cases from the previous years, extending the department's reach into past assessments that may otherwise become inaccessible in the future," said Mitil Chokshi, partner at accountancy firm Chokshi & Chokshi.

He also noted concerns about potential procedural issues stemming from the rapid pace at which these notices have been issued.

These reopening notices are in line with recent Budget proposals, which allow income tax assessments to be reopened beyond the standard three year period only if the escaped income is Rs 50 lakh or more.

This can be extended to five years from the end of the assessment year.

In search cases, the time limit has been reduced from 10 years to six years from the year of search.

The reopening notices for the 2018-2019 assessment year (or the 2017-2018 financial year) and earlier years under Section 148, or the order under Section 148A, must be passed before or on August 31.

The department has therefore initiated reassessment proceedings, which need to be concluded within nine months from the end of the financial year in which the notices are served, explained officials.

Before issuing a reopening notice, officials typically look at whether reassessment is warranted.

Taxpayers are also given time to respond to the notices, and proceedings may be dropped if the explanations are satisfactory.

In genuine cases, the department even gives taxpayers time to file revised returns.

Feature Presentation: Aslam Hunani/Rediff.com