Income Tax department uses Big Data to catch evaders post note ban

Big Data

As the Income Tax Department uses Big Data to catch evaders, it is asking taxpayers to verify online the deposits they made in their accounts post demonetisation and respond to queries of any mismatch.

The department is using data analytics for comparison of deposits made after the November 8 decision to scrap high-value banknotes with information in its database to identify taxpayers whose cash transactions do not appear to be in line with the tax-paying profile.

With a view to avoiding undue harassment, it has now enabled online verification of these transactions to reduce compliance cost for the taxpayers while optimising its resources. To help taxpayers, it has now brought out a user guide.

The information on cash deposits is now available for online verification “in the e-filing window of the PAN holder (after log in) at https://incometaxindiaefiling.gov.in”, the user guide said.

The cash deposited in an assessee’s account can be verified using the link ‘Cash Transactions 2016’ under ‘compliance’ section of the website. “The details of transactions related to cash deposits during 9th November to 30th December 2016 will be displayed,” it said

The taxpayer needs to confirm that the bank account relates to his PAN. In case the account does not relate to the PAN, a suitable option can be selected and information will go to the tax department. If the account belongs to the PAN holder but the value of deposit is incorrect, a correct entry can be submitted online.

The website also provides for the taxpayer to explain the source of cash deposit digitally without visiting the income tax office, it said. The user guide says the taxpayer is required to give details if cash is claimed to be withdrawn from the bank account. Details should also be mentioned if the cash is received from other persons in the form of cash sales, loan, gift or donations.

In case the cash is claimed to be out of receipts exempt from tax (agricultural income etc but excluding cases of gift and donation), further details can be provided under remarks. “If receipts exempt from tax are not in line with the taxpayer profile or other available information, the case may be selected for verification based on risk criteria,” the user guide said.

If cash is claimed to be out of earlier income or savings, further details can be provided under remarks. If this information is not in line with the taxpayer profile or other available information, the case may be selected for verification based on risk criteria.

The Tax Department will select some cases for verification based on risk criteria. “If the case is selected for verification, request for additional information and its response will also be communicated digitally (either by e-mail or SMS),” the guide said.

The response of taxpayer will be assessed against available information and in case explanation of source of cash is found to be justified, the verification will be closed without any need to visit Income Tax office.

If cash deposit is declared under the tax amnesty scheme, PMGKY, the verification will be closed.
Amit Maheshwari, Partner Ashok Maheshwary & Associates LLP, said, “The guide will serve as a useful tool for taxpayers grappling with these notices. It’s advised that taxpayers take professional help while determining the source of funds as any inaccurate particulars will invite punitive penalties and prosecution. One of the items in explanation of source is if cash is of someone else, it can attract benami law.”

The department is leveraging technology and data analytics to dig into truckloads of data on transactions and cash deposits during November 9, 2016 and December 30, 2016 – the 50-day window provided to deposit the junked Rs 500 and Rs 1,000 notes.

“The online verification has been enabled on e-filing portal (for taxpayers) which will be synchronised with the internal verification portal of the Income Tax Department,” the user guide said further.

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