Mission clean up

Mohan R Lavi | Updated on January 11, 2018


Target tax evaders more scientifically

While the Central Board of Excise and Customs is busy issuing Notifications and Circulars in a bid to clear the confusion over various provisions of GST, the Income Tax department is busy issuing Notices allaying concerns over the deposits taxpayers made during demonetisation.

While the jury is still out on whether demonetisation was a success or not, it is clear that the information received was scanty enough to force the tax department to ask for more. Taxpayers received notices immediately after they made their declarations during November/December last year. Most of them responded, clarifying the purpose of the deposits and the reason why they were holding demonetised notes.

Recently, some taxpayers who had responded have received another notice that starts off with a bit of a threat: “ While we have received additional information regarding the deposit/declaration made by you, this notice is being issued to you”. In April, the tax department notified the new ITR forms which added a new column seeking information on cash deposits above ₹2 lakh during the 50-day demonetisation period.

Companies Act

It is not only the Income Tax Act that deals with demonetisation. The Companies Act, 2013 has also been amended, mandating that every company shall disclose the details of Specified Bank Notes (SBN) held and transacted during between November 8, 2016 and December 20, 2016.

Auditors’ of these companies were not spared either. In their audit report, they were supposed to disclose whether the company had provided requisite disclosures in its financial statements as to holdings as well as dealings in Specified Bank Notes during the same period and if so, whether these are in accordance with the books of accounts maintained by the company.

It is obvious that all these measures are being done as a part of the Operation Clean Money, which has assumed various forms and names ever since the government was voted into power.

Targeting all

Based on the declarations made during the demonetisation period, the tax department commenced issuing notices to everyone who filled in the form while banking their demonetised notes. Even government departments such as e-seva centres, which receive cash for statutory payments, received notices.

Considering the huge amount of data in its possession, the department is using data analytics to send out notices to taxpayers and extract information from them. Despite all these measures, there is an impression that the tax department is on a witch-hunt since the ones whom they had planned to target never made any declaration and most of the ones who made the declaration were not their original targets.

The only manner in which the tax department can remove the confusion prevalent in the minds of the tax-paying public is to send out messages to those whose cases are closed that they are happy with the information provided.

The Government has successfully created a sense of unease in the minds of the taxpayer who is now aware that this government is not afraid of treading paths not taken before. All that the Government needs to do is to bank on this sense of unease and target tax evaders more scientifically. They have enough and more data from various sources to do that.

The writer is a chartered accountant

Published on July 19, 2017

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