Have big unexplained expenses? You can face IT review of past 10 years
IT sleuths can now trace all transactions of an individual, if they are not 'benami'. New reassessment regime allows them to probe any transaction worth Rs 50 lakh or more in the last 10 years
Krishna Veera Vanamali New Delhi
Announced in the recent Union budget, a clutch of changes in the reassessment regime has come into effect from April 1.
One of the prominent changes has caught the attention of individuals and corporate. And they have been rushing to their CA for more clarity.
The change has extended the scope for the Income Tax Department to re-open past assessments.
In the earlier regime, misreported or underreported income in the form of an asset above Rs 50 lakh could have triggered a reassessment of the past 10 years.
Now, the department can go back up to 10 years to scrutinise the finances of a company or an individual if the aggregate income or unexplained expenditure or entries in the book that escaped assessment over multiple years is Rs 50 lakh or more.
If the escaped income or spending is below Rs 50 lakh then the limit for reopening of assessment has been halved to three years from six years.
Unexplained expenditure includes money spent on a big event or occassion, expensive assets, and so on.
If the department finds out that a taxpayer had an “unexplained expenditure”, it can send him or her a notice seeking an explanation, and also may reopen the assessed return.
The department can reassess the income/expenditure in case of an objection from any audit, information from foreign tax authorities, observations in a tribunal or a court order besides relying on the data flagged by Central Board of Direct Taxes’ risk management and CAG.
The department’s INSIGHT platform also helps tax sleuths hunt for potential tax evaders. The INSIGHT portal processes data from various reporting entities.
As many as 5.52 crore individuals filed income tax returns during the assessment year 2018-19. Out of these, about 77 lakh people showed a gross total income below Rs 2.5 lakh. And 2.72 crore individuals disclosed income between Rs 2.5 lakh and Rs 5 lakh.
Income of 1.47 crore people was between Rs 5 lakh to Rs 10 lakh while more than 52 lakh individuals had income between Rs 10 lakh and Rs 50 lakh.
Nearly 2.1 lakh individuals had shown income between Rs 50 lakh and Rs 1 crore. And only about 98,000 people had a gross total income above Rs 1 crore.
Going by the income tax department’s data, there were only about 3 lakh people in India with income of more than Rs 50 lakh in the assessment year 2018-19.
Kuldip Kumar, partner at Price Waterhouse & Co LLP, told Business Standard that considering the 10-year timeline, taxpayers should carefully make the required disclosures in their return forms to avoid notice.
He said that taxpayers should also keep relevant documentary evidence related to their large financial transactions to avoid any inconvenience later on.
Rahul Charkha, partner at Economic Laws Practice says that taxpayers should maintain consistency in the information submitted to authorities, like reconciliation between GST and IT Returns before submission. He also suggests taxpayers to maintain documents of high value spending, including those made on credit cards over the years and records related to property deals.
First Published: Apr 19 2022 | 07:00 AM IST