New Delhi, February 23, 2017

CBDT has laid down detailed SOPs on how assessing officers will scrutinise suspicious deposits

The income tax (I-T) department will soon be asking people who have made large cash deposits in the wake of the demonetisation measure to furnish documents like bank statements, passbooks, sales and land records, to crosscheck their claims, LiveMint reported on Thursday. The enhanced tax scrutiny is part of 'Operation Clean Money'.

The I-T sleuths will be looking to verify if the deposits were made from tax-exempt agricultural income, or from cash previously withdrawn from the person's bank account, or, in the case of a business, from income received from unidentifiable persons, the report added.

Nearly half of the 18 lakh people under the I-T department's scanner for suspicious bank deposits, made post the note ban, have been put in the 'doubtful' category, but action against them will follow only after the new tax amnesty scheme ends on March 31.  (Read more)

Under 'Operation Clean Money', the I-T department had sent SMS and e-mails to 18 lakh people, who according to its data analysis had made suspicious deposits of over Rs 5 lakh during the 50-day window provided to get rid of old Rs 500 and Rs 1,000 notes following the demonetisation decision announced on November 8. They had been asked to clarify on the deposits and their source by February 15. As many as 5.27 lakh assessees, out of 18 lakh who were sent SMS and e-mails, had submitted their response till February 12.

How the tax-man will go about his job

The Central Board of Direct Taxes (CBDT) has laid down the detailed standard operating procedures regarding how the assessing officer would verify the source of the cash being deposited, the Mint report added.

1) Cash from unidentified persons: If a business claims that the cash it deposited in its bank account was received from an unidentifiable person, then the assessing officer, according to the report, will look into whether the transaction fits into the usual cash flow of the business concerned. To do this, the officer can access month-wise cash and credit sales records, stock registers and bank statements to sniff out any possible back-dating of sales or bogus sales. Further, the officer will also keep a look out for any abnormal jump in cash sales between November and December. Other factors will also be scrutinised by the officials.  

2) Cash came from previous withdrawals: The report added that in case a person claims that the cash deposited came from cash previously withdrawn from bank accounts, the taxman will look into the pattern of past withdrawals while keeping an eye on how close they were to the note ban's announcement.

3) Claim of agricultural income: Further, according to the report, if a person claims that the cash deposited came from tax-exempt agricultural income, the assessing officer can seek land records to find out whether the income declared falls in line with the land holdings.

4) Business income: The Economic Times reported that the guidelines issued by the CBDT said that in the case of businesses or those persons who have to maintain books of accounts, no additional information would be required to be submitted by that person under verification if total cash out of earlier income or saving is found to not exceed the closing cash balance as on March 31, 2016, in the return for the assessment year 2016-17.

5) Declared black money: Further, according to the ET report, where a person declares that the cash deposit under scrutiny has already been disclosed under the government's Income Declaration Scheme, 2016, then no further verification would be required if the claim is verified to be true. However, in the case of a person who claims that he or she will disclose their black money under the currently active Pradhan Mantri Gramin Kalyan Yojna, verification would be kept "pending".

[The Business Standard]