The Income-Tax department is all set to slap a penalty of over 20,000 crore on Kashinath Tapuria, an alleged associate of Hasan Ali Khan, the Pune-based businessman who is under investigation for irregular foreign exchange transactions.

Khan, the Enforcement Directorate fears, has stashed away $8 billion in Swiss a bank - an allegation that Khan and UBS, the largest Swiss bank, have denied.

The Income-Tax demand on Kashinath Tapuria, a Kolkata-based businessman and brother of the late Priyamvada Birla , amounted to 20,000 crore.

Provisions under the Income-Tax Act allows the Department to levy a penalty of 100-300% of the income that has been evaded by the assessee.

The department, in all likelihood, will issue the penalty order before March 31, 2011. Under tax regulations, a penalty order must be issued within a specific period after the issue of the assessment order.

Here, that period comes to an end on March 31.

It is learnt that the I-T department is planning to levy a penalty of more than 100%. Tapuria and Hasan Ali Khan are currently in the custody of the Enforcement Directorate, the agency probing the money trail.

Tapuria had repeatedly denied any association with Hasan Ali Khan's transactions except that Khan had once promised to arrange a loan to finance Tapuria's firm.

The department is also set to issue a penalty order on Hasan Ali Khan on the $8 billion he is believed to have transacted through his Swiss bank accounts. With interest, the tax demand on Khan is over 72,000 crore. With the addition of penalty, the I-T liability of Khan could cross 1 lakh crore. The department has already attached his properties in Pune worth 4 crore.

The I-T department is looking for an opportunity to interrogate Khan, after the Enforcement Directorate concludes the ongoing interrogation. The department had first questioned Khan in 2007, when its officials raided his Pune house.