CBDT to fine-tune tax evasion scrutiny norms

The procedure of identifying possible tax evasion by companies through computer-aided scrutiny selection system (CASS) is being fine-tuned by the Central Board of Direct Taxes (CBDT) for proper scrutiny of tax returns and recovery of dues, said a CBDT member.

“The CBDT has decided to fine tune and upgrade the CASS by including over 100 parameters to ensure that the returns of all companies, which could pose risk to revenue, are covered in the scrutiny,” said CBDT member S S Khan.

He said from April 1, 2008, the government has made it mandatory for all companies and businesses with turnover of over Rs 40 lakh to file tax returns and pay taxes electronically. Consequently, the Income Tax department will have all necessary information about them regarding turnover, tax exemptions, tax payment and so on.

 

In the “identity blind” CASS software, Khan said there is a provision of adopting multiple criteria to select cases for scrutiny by changing parameters so that risk to revenue is minimised. Although, he added the department would continue to select certain cases manually for scrutiny.

The parameters in the software could be annual turnover of the company, net profit, sector and area of operation, besides tax exemption and value of exports.

Under the scrutiny norms, the tax officials issues notice to the assessee to appear in person on a particular day and provide detailed information relating to statements of all bank accounts, matching of money withdrawals with expenses, including those on credit cards besides cross-checking the perks, and scrutinise other incomes like interest-free loans.

The department is expected to select about 5 lakh cases of corporate and individual taxpayers for scrutiny this year.

The CBDT member said to ensure that “risk to revenue” is minimised, the percentage of corporate returns selected for scrutiny is likely to be much higher than the “low risk” tax returns of salaried class.

Growing by 47 per cent, revenue collection from direct taxes stood at Rs 71,648 crore in April-July period this year and is estimated to touch Rs 4,00,000 crore by year.

Referring to the change in parameters for manual selection of cases for scrutiny, he said, although top 500 companies registered with National Stock Exchange or A-category firms at BSE may not be covered under the manual selection process, they could be covered under CASS.

After the scrutiny of about 3.2 lakh tax returns in 2007-08, the Income Tax department had issued notices to taxpayers to pay additional tax of Rs 73,200 crore, out of which about Rs 28,700 crore has been recovered so far.

Referring to the information gathered on high value transactions through Annual Information Reports (AIRs), the CBDT member said this information would be used for selection of individual taxpayers’ cases for scrutiny.

The department is expected to select about 2 per cent of over three crore tax returns filed for scrutiny. These would be processed by about 2,600 officials of the department.

Since the list is likely to prepared at the level of 36 regional computer centres (RCCs) of the Income Tax department, it implies that apart from big cities like Delhi, Mumbai and Bangalore, companies from states of Bihar, Jharkhand, North Eastern region would also be selected for scrutiny.