Tax Department To Scrutinise 87,000 Assessees Who Made Large Deposits During Demonetisation

The income tax department has issued guidelines to its assessing officers to further scrutinise the financials of 87,000 persons who made high value deposits during demonetisation. These assessees were asked for additional information but have not responded to the tax department's queries, according to a government official who spoke on condition of anonymity.

After demonetisation, notices for additional information on high value deposits were issued to 3 lakh people who had not filed tax returns, said the official quoted above. These notices were issued under Section 142 (1) of the Income Tax Act—the section provides for inquiries into income prior to assessment.

Of the 3 lakh, 87,000 people were said to have made deposits of over Rs 2 lakh at the time when high value currency notes were invalidated, said another government official. BloombergQuint could not verify the individual or total deposits made by these 87,000 assessees. An emailed query sent to spokesperson of Central Board of Direct Taxes did not elicit a response.

To assist in this further scrutiny the investigation division of the income tax department will share with assessing officers updated details of the 87,000 assessees' addresses, transaction details and bank account information. After the assessing officers verify the cash deposit information, they can issue assessment orders.

Besides this, assessing officers have been asked to do a detailed analysis of assessees' past income tax returns to check the nature of transactions during demonetisation.

In cases where the final beneficiary of a transaction has also been identified, assessing officers have been directed to forward the details to the officer under whose jurisdiction the beneficiary falls, so that action can be initiated against the beneficiary as well.

The first official quoted above also said the assessments, wherever possible, are expected to be completed by March 31, 2019 or latest by June 30, 2019.

The cases pertain to assessment year 2017-18, and the assessment proceedings have to be closed by Dec. 31, 2019, said Neha Malhotra, executive director at Nangia Advisors (Andersen Global). To expedite closure of these cases and speedy recovery of tax, the government wants the assessment officers to complete their assessments by March 31, 2019 or June 2019, Malhotra told BloombergQuint.