I-T to assess 80k big cash depositors during demonetisation

MUMBAI: Over 80,000 taxpayers who had deposited significant amounts of cash during the demonetisation period but failed to respond to initial notices sent by the income tax (I-T) department and furnish their tax returns for the financial year 2016-17 will now be subject to a ‘best judgement’ assessment. In a March 5 notification addressed to its senior cadre, the Central Board of Direct Taxes (CBDT) has laid down the standard operating procedure (SOP).

Earlier, the I-T department had issued notices to around 3 lakh individuals under Section 142(1), requiring them to provide details relating to their cash deposits and also to furnish their I-T returns for 2016-17. In 87,000 cases, the I-T department received no response (or in technical terms, the notices were non-complied with). The CBDT has exhorted that the best judgement assessments should be completed by March 31, or latest by June 30.

Nangia Advisors managing partner Rakesh Nangia explains, “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. In other words, the I-T officer is authorised to assesses the total income of such taxpayers to the best of his judgement.”

The CBDT notification explains that the I-T officer can send notices to any person under Section 133(6) for gathering material — such as additional information of the persons, details of the transactions and fund flow from banks — which would enable closure of the best judgment assessment.

“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 states.

The SOP provides that an opportunity of being heard shall be granted to the taxpayer to explain his case. Further, the range head may examine the record of assessment proceedings and issue direction for guiding the I-T officers in conducting such proceedings. Sharing of information, such as details of beneficiaries that are now detected among relevant I-T officers, has also been called for.

Nangia adds, “Though the CBDT directions say that a notice should be given to taxpayers, providing them an opportunity of being heard before completing the ‘best judgment assessment’, the law doesn’t require this since a notice under section 142(1) has already been issued in these cases.”