Tax department to turn on heat on tax evaders

For expanding the base of income tax payers and to bring to light undeclared or underdeclared incomes, the Income Tax authorities have decided to use the data in the annual information returns sent to them by different agencies including banks, mutual funds, registrars of property deals or credit card issuers.

"On studying the information in Annual Information Reports (AIR), we have observed that the number of persons filing I -T returns is substantially lower and we have reasons to believe the income declared by those who have filed returns is considerably low too," Chief Commisioner of Income Tax and Director General for the region S K Sharma said.

Sharma pointed out that the entire Maharashtra circle (this does not include Mumbai, Thane and Nagpur) has just 18,000 assesses who have declared annual income above Rs 10 lakh per year.

"This is obviously ridiculous as we believe there are more than 18,000 in Pune alone who earn above Rs10 lakh annually," he said.

The AIR, introduced in the year 2004-05 make it mandatory for the organisations concerned to supply related data to I-T department.

This includes, among other things, details of bank deposits above Rs 1 lakh, credit card payments of over Rs 2 lakh in a year, property deals of Rs 30 lakh and above, dividend from mutual funds in excess Rs 2 lakh, share transactions of over Rs 1 lakh or receipt in excess of Rs 5 lakh as income from bonds or debentures.

''Everybody talks about the burgeoning Indian middle class of 20 to 30 crore people with high disposable incomes but the number of people filing income tax returns is a very small part of this class'', Sharma said.

Giving the specifics of the new strategy, Sharma said the I-T department will issue show cause notices to those it suspects haven't declared full incomes and if necessary direct them to file returns or revised returns as necessary.

Another area Sharma said would be property deals where there is a major mismatch between the property prices in the market and the prices mentioned in the deal documents.

In addition to the persons who evade capital gains tax arising in such deals, the I-T department will also hold the valuers of such property responsible and debar them from practising their profession.

Similarly, the department will also blacklist or debar tax practitioners or chartered accountants who help the assesses return lease tax than is payable according to law. "We have powers under Section 288 of the Income tax Act to take such action and will exercise the power to uncover hidden income," Shrama stressed.

Elaborating on the extent of possible tax evasion, Sharma said the transactions declared in 2003-04, prior to the implementation of AIRs, numbered 3678 for a value of Rs 3288 crore. The number has gone up to 5251 and the value has zoomed to Rs 22671 crore. The I-T department has received a total of 18,70,410 pieces of information under the AIR for a value of Rs 13,99,886 crore.

Out of this 10,534 are relating to Pune circle, Sharma informed though he did not disclose the value. Those transactions that state the PAN of the parties will be checked with the PAN database to tally the income returns of the concerned person and those who have filed 15H forms will be tracked down to the addresses mentioned in the forms, Sharma elaborated.

In addition to the AIR data, the department is co-ordinating with municipal corporations for property details, electricity supply companies for power consumption and BSNL for phone bill details or the shops and establishments authorities, Sharma said.

"We now have enough information to be able to start the exercise of unearthing the evasion or underdeclaration effectively," Sharma said, adding that the exercise will begin with cases where the suspected evasions are high.

"Then the message will go in the right direction," he said.

"We don't want to create "raid Raj" but will use information about standard of living to persuade people to file returns or file full details where returns are being filed for the 'sake of it,' Sharma stated.

Sharma said there is also a move to bring co-operative banks within the purview of organisations liable to supply AIR details to I-T department.

He also said the Central Board of Direct Taxes has made anonymous donations to educational institutions taxable.

Pune circle collected taxes of Rs 6710 crore during the year 2005-06 and aims at collection Rs 8540 crore during the current year 2006""07 he informed.