The finance ministry has quietly initiated the process of opening up the income tax files of politicians belonging to all parties and tallying their income statements with the affidavits filed by them with the Election Commission during the 2009 parliamentary polls.
Verification of the assets declared by the Lok Sabha candidates, many of whom have now become MPs and even ministers, will help the department to assess if they had paid appropriate taxes as declared in their statements with the two different authorities.
The finance ministry initiated the exercise after it found that many of the candidates had made astounding declarations in their affidavits to the EC while initial scrutiny revealed that some of them had paid paltry or no taxes. However, As many as 50% of the candidates in the 2009 LS polls had not furnished their Permanent Account Number (PAN), making it difficult for the department to ascertain the actual income of these people.
Despite this problem, the I-T department hopes to add revenue from many of these candidates whose wealth has seen astronomical growth in the past few years. Not having a PAN or not disclosing it for the purpose of evading tax could invite both scrutiny as well as penalty and prosecution in cases were evasion is proved. Although the penalty for not having PAN is just Rs 10,000, for tax evasion it could be as stiff as between 100% to 300% of the tax evaded.
The department will be scrutinizing of the I-T returns of all Lok Sabha candidates irrespective of whether they ended up winning or not. A letter from the Central Board of Direct Taxes (CBDT) has been circulated to all those MPs whose records are not available with the I-T department or whose PAN has not matched with the department's records.
Sources said the I-T department has asked the candidates to submit their last two years' income tax returns as well as those of their dependents whose names were mentioned in affidavits filed with the EC.
The details sought pertain to assessment years 2006-07 and 2007-08.
The letter said: ``A verification exercise is being carried out by the I-T department, ministry of finance, in respect of affidavits filled by you at the time of filing nomination for the general elections 2009.''
The department has sought to know with which ward or circle the candidates have been filing their returns and if their dependents, as mentioned in their affidavit, have also been filing their income and wealth tax returns.
For fear of being disqualified if statements made in the affidavits were to be found untrue when elected, candidates had made some astounding declarations. One candidate declared assets worth more than Rs 600 crore, while those having assets between Rs 100 crore and Rs 200 crore were found in dozens during the 2009 polls.
Sources said even those who have shown legitimate wealth would have to pay wealth tax on the current market value of their property at the rate of 1% of the value of the assets, barring those which are in the exempted category under the Wealth Tax Act.