High-value cash depositors who did not file IT returns after demonetisation under taxman's lens

Last November, CBDT chairman Sushil Chandra had announced that the taxman would be "chasing" people who had made high value deposits after the demonetisation announcement in 2016 but failed to file returns thereafter. "Around 3 lakh notices were sent to persons who did not file returns post the demonetisation [assessment year 2017-18]. These are statutory notices. About 2.25 lakh people filed their returns thereafter," he had said at the time.

But, even now, around 87,000 taxpayers reportedly are yet to comply with the SMSes, emails and even notices issued under Section 142 (1) of the Income-Tax Act by the income tax department. So, the CBDT has now instructed assessing officers (AO) to subject these taxpayers to a 'best judgement' assessment by March 31, where possible, or latest by June 30, The Times of India reported.

In other words, an IT official is now authorised to assess the total income of the taxpayers accused of non-compliance to the best of his judgement. The apex body for direct taxes has also laid down the standard operating procedure (SOP) for these assessments in a March 5 notification addressed to its senior cadre.

"These taxpayers are now on the wider radar of the I-T department as the tax officers have been authorised to gather maximum information about them and scrutinise the total income on the basis of such information," Nangia Advisors managing partner Rakesh Nangia told the daily.

According to the CBDT notification, the taxman can send notices to any person under Section 133(6) for gathering material that would enable closure of the best judgment assessment. This includes additional information of the taxpayers, details of the transactions, fund flow from banks and the like. "Such notices would be issued by the concerned I-T official after a careful appraisal of information at his disposal so that maximum possible additional information can be culled out. Further, a detailed analysis of past income tax returns, if available, should also be made to form an opinion regarding nature of transactions related to demonetisation," the notification reportedly stated.

Significantly, the SOP directs officials to issue a notice to the taxpayers, allowing them an opportunity to present their respective cases before the 'best judgment assessment' concludes. However, according to Nangia, this is not required as per the law since a notice under Section 142(1) has already been issued in these cases. Notices under this section are sent to taxpayers to understand the reason for not filing returns or demanding an explanation on the filed returns, including furnishing additional details.

The CBDT notification further calls for sharing of information, such as details of any identified beneficiaries, among relevant tax officers. The range head may also examine the record of assessment proceedings and issue direction for guiding the AOs in conducting such proceedings.

With PTI inputs