The Central Board of Direct Taxes (CBDT) is learnt to have asked the income tax (I-T) department to comb tax returns that have been revised in the aftermath of demonetisation. The exercise is to detect any manipulation in numbers to hide black money. The taxmen have also been directed to slap higher tax rate if unaccounted money is detected.

This is how I-T sleuths will spot any wrongdoing. In cases where a sudden spurt in income from sales is reported in the revised returns, the taxman will cross-check the numbers with central excise / VAT returns. And, any discrepancy between the two could trigger further scrutiny leading to penal action, according to a set of instructions sent out by the CBDT to the regional chiefs of I-T department.

“Unaccounted income so assessed in scrutiny assessment is liable to be taxed at a higher rate without any set off losses, expenses etc under Section 115BBE (treatment of tax credits) of the I-T Act,” CBDT said.
Experts say the idea behind the CBDT directive is to check the misuse of the option to file a revised or belated ITR in order to show black income as white.

The department had time and again warned assessees against trying to misuse the provision of revising I-T returns, saying that those drastically altering the forms to revise income will face scrutiny and penal action including prosecution.

Under Section 139(5) of the I-T Act, one can revise a tax return that has already been filed to correct an advertent error or two. However, one cannot make massive changes that would in effect alter the form, substance and quantum of the earlier disclosed income. Any drastic changes will be subject to scrutiny.

“The source of cash in hands of the person who had made payments to the assessee has to be verified carefully and the past profile of the assessee concerned should be thoroughly analysed,” the directives noted.

According to the CBDT, careful examination of revised tax returns would throw up cases where the assessee filed revised / belated return only as a cover up to explain the cash deposits in bank accounts. Taxmen have conducted as many as 900 searches between November 9, 2016 and March this year, leading to seizure of assets worth Rs 900 crore including Rs 636 crore in cash. Official data shows that the searches also led to the disclosure of Rs 7,961 crore undisclosed income.