Those who showed a sudden spike in income when filing revised tax returns after demonetisation should now prepare themselves to face scrutiny.

These cases are in addition to the 1 lakh high-risk cases already identified by the income tax department for scrutiny based on information gathered from banks. “Questions need to be asked where there is a sudden spike in income and a revised return is filed,” said a senior income tax official. “We will take them up for scrutiny.”

The department is proposing to be selective and focused instead of going in for mass scrutiny to make the process more effective. It’s also trying to make the exercise non-intrusive, so the limited scrutiny will be completely online, carried out via emails.

Only about Rs 5,000 crore was deposited under the Pradhan Mantri Garib Kalyan Yojana that was launched in the wake of the note swap to give people one last chance to come clean.

With that having come in well below expectations, the income tax department is getting ready to take a look at suspect cases.

A higher revised income could indicate hidden non-tax paid incomes or unaccounted cash from previous years being disguised as a rise in sales, according to officials.

There have been instances of individuals and businesses showing higher income or sales and then a revision in returns filed after demonetisation, apart from reports of high-value purchases.

The tax laws allow for filing revised returns if some income is missed out unintentionally.

Prime Minister Narendra Modi cancelled the legal tender status of Rs 500 and Rs 1,000 notes on November 8 as part of the government’s campaign against black money. The invalid notes had to be deposited with the banks by December 31.

OPERATION CLEAN MONEY 2.0
The Central Board of Direct Taxes (CBDT) has already rolled out the second phase of Operation Clean Money. It has identified about 1 lakh highrisk persons using advanced data analytics.

High-risk categories identified include businesses claiming cash sales as the source of money deposited post demonetisation, cash which is found to be excessive compared to past profiles or industry norms. Large cash deposits made by government or public sector employees and persons who have undertaken high-value purchases have also been identified.

Persons who have used shell entities for layering of funds and where the department did not receive any response after it sent SMSes and mails will also be subject to deeper investigation, which could include search or surveys, officials said.