The Income Tax Department will initiate recovery of tax along with penalty from approximately 65,000 assessees who deposited ₹10 lakh or more in their bank account during demonetisation, but did not file return for the assessment year 2017-18 (financial year 2016-17).

These 65,000 plus are part of nearly 3 lakh non-filers with large deposit. After getting notice from the tax department, nearly 2.1 lakh filed their return by March 31, 2018, while other nearly 25,000 only responded after that.

According to a senior Finance Ministry official, tax authorities used its means to approach remaining 65,000 non-filers. “Even notices pasted on the wall of premises of last available address, but there is no response yet. Meanwhile, based on past record, tax officials completed assessment of these assessees and now process to be initiated for recovery,” he said.

The process of recovery

He explained that the process of recovery can be distributed in two parts. First part will involve concerned Assessing Officers and he/she will make effort to recover tax due along with penalty. If there is no success within a year, part two of the process will start, and task to recovery will be passed on to Tax Recovery officer (TRO). TRO will first serve a notice to the defaulter requiring him/her to pay the amount specified in the certificate within 15 days from the date of service of the notice and intimating that in default steps would be taken to realise the amount.

If the amount mentioned in the notice is not paid within the time specified therein or extended time, if given, then TRO will proceed to realise the amount by one or more of the following modes - by attachment and sale of the defaulter’s movable property, by attachment and sale of the defaulter’s immovable property, by arrest of the defaulter and his detention in prison or by appointing a receiver for the management of the defaulter’s movable and immovable properties.

The official said that even at a basic system of tax dues and penalty and assuming deposit of ₹10 lakh, average amount recoverable could be ₹6.5 lakh per tax payer (tax at the rate of 30 per cent plus cess at 4 per cent and 100 per cent penalty). It may be noted that an attempt to reduce tax liability through under-reporting or misreporting of Income will invite penalty under Section 270A (1).

Penalty amount equals to 50 per cent of income that is underreported or tax payable. In case of deliberate under-reporting, the penalty could go up to 200 per cent of underreported or tax payable income. Similarly, for concealing of Income or furnishing inaccurate details penalty under Section 271(1)(c), amounting to 100 per cent to 300 per cent of the tax evaded or meant to be evaded additionally to the tax payable.

Earlier, last month, the Central Board of Direct Taxes came out with a Standard Operating Procedure (SOP) to deal with non-filers. The most important feature of the SOP is the use of ‘best judgment assessment.’ Related provision in the Act prescribes that if any person fails to comply with all the terms of a notice issued under Section 142 (1)1, the Assessing Officer shall after giving the assessee an opportunity of being heard, make the assessment of total income or loss to the best of his judgment.

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