The Income Tax Department has reportedly issued 10,000 reopening notices to companies and individuals in major cities, seeking explanations for discrepancies in their reported incomes. This action comes alongside the Central Board of Direct Taxes' (CBDT) recent directive to monitor rampant cash transactions in sectors like hotels, luxury brand sales, hospitals, and IVF clinics, urging the department to approach these cases in a "non-intrusive" manner. The notices, related to the 2018-19 assessment year, must be issued by August 31, after which such cases cannot be reopened.
The suspected undisclosed income in these cases, according to a Business Standard report, could amount to as much as Rs 15,000 crore, involving entities across Delhi, Mumbai, Bengaluru, Pune, Chennai, and Hyderabad. Many of these cases involve suspected bogus charitable donations claimed under Section 80G of the Income Tax Act and high-value overseas transactions, such as property acquisitions. BT couldn't independently verify the report.
The reopening notices are part of a broader effort by the tax department to extend its reach into past assessments, especially given the recent Budget proposals. These proposals allow income tax assessments to be reopened beyond the standard three-year period if the escaped income is Rs 50 lakh or more, extending the timeframe to five years from the end of the assessment year. In search cases, the time limit has been reduced from ten years to six years.
Before a reopening notice is issued, tax officials typically evaluate whether reassessment is necessary. Taxpayers are also given an opportunity to respond, and proceedings may be dropped if their explanations are satisfactory. In some cases, taxpayers are allowed to file revised returns if the discrepancies are deemed genuine.
The CBDT has also instructed the tax department to focus on recovering arrear demands, which have seen a significant rise from Rs 24.51 lakh crore in April 2023 to Rs 43 lakh crore by April 2024. To address this, special teams headed by a Principal Commissioner of Income Tax are being formed in each region to act on the top 5,000 cases contributing to this demand.
Additionally, the CBDT is leveraging data mining and analytics to identify potential taxpayers. "New opportunities for identification of potential taxpayers have opened up due to data mining and data analytics," the Board stated, emphasizing the importance of using this data to expand the taxpayer base..
