Penalties shall followed by prosecutions-CBDT Chairman. Action shall be taken even before filing return for huge cash deposits with unmatched past profile

Penalties shall followed by prosecutions-CBDT Chairman.  Action shall be taken even before filing return for huge cash deposits with unmatched past profile of the assessees.

Penalties shall followed by prosecutions

CBDT Chairman Shri Sushil Chandra in his latest TV interview has hinted the impending actions that are being planned by the CBDT after 30th December, 2016 in relation to cash deposits in the bank accounts as a result of withdrawal of old bank notes of Rs. 500 and rs. 1000/-

  • The Income Tax Department is having details of the assessee’s bank accounts for last 5-6 years.
  • The profile of the assessee shall be scrutinised and every return shall be matched with it on the computerised database to know the the average range of income of the assessee.
  • If suddenly, there are a steep hike in the deposits in the bank account of the assessee, then the inquiry shall be initiated even before the filing of return of income for Assessment Year 2017-18 by such assessees.
  • Income Tax Department has already received  all the data from the banks for the period from January 2016 till date.
  • The assessee shall have to explain how the sudden increase is attributable to the income of the AY 2017-18 and the means of it.
  • If an assessee is filing return of income in the range of Rs. 50000/- to 60000/- annually only and suddenly he/she deposits cash deposits in crores, then Income Tax Department will not tax it merely for 30% as the income for AY 2017-18 or not impose penalty..
  • Such cases of unmatched income shall attract not only 200% penalty but shall be liable to prosecution as well.
  • Cases of making a false return and verifying its particulars as such would be strictly dealt with prosecution.
  • In the whole Country, the investigation teams have already stared working and conducting raids/surveys on jewellers, builders, hawala dealers.
  • 70 number of surveys have been conducted in last 5 days seizing the cash also.
  • More then 25 crores of cash has been seized in old bank note currency at airports, bus-stands and at different places.
  • The Police is actively assisting the Income Tax Department in conducting surveys/raids.
  • This exercise is not akin to return of Inspector-Raj. Inspectors are deployed only to traces mules planted in queues depositing black money of someone else.
  • Field Inspectors have not been used, only inspectors of Investigation Wing have been deployed

Author’s Note:
The interview of the CBDT Chairman was very much on the lines of the statement given by the Finance Minister. However to give effect to what was expressed, the road will not be easy for the Taxman as the actions taken shall be put to the test of the relevant rules, regulations and the settled judicial views.

Obviously coming days could see few amendments to the Income Tax Act and Rules. Professionals would also need brushing themselves up as they would have hectic schedules arguing the facts and the law before the Income Tax/Appellate Authorities and Court of Law. 

In my view, the Income Tax Department would be at the receiving end in the long run because the CBDT/Government can not make/amend an order/law to give retrospectively effect to any provision which will adversely affect the assessee, secondly income can not be assesssed on surmises or conjectures and In the absence of any cogent material found by the revenue, benefit of doubt has always been given in favour of the assessee, lastly, at appellate level IT Department may have to work very hard to save its ground as the settled law is that a Court of Law interferes not when something is wrong but only when it is shown to be so. 

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