Income tax dept notifies amendments for sharing taxpayer information
February, 27th 2017
The income-tax department has paved the way for seamless exchange of information between various government agencies to check illegal wealth.
This is significant given the government’s plan to rope in various departments to crack down on shell companies who are suspected to have laundered massive amounts of money following the cancellation of the legal tender of high value currency.
The tax department on 21 February notified amendments to an earlier 2003 notification, seeking to remove any ambiguity about sharing of taxpayer information by the tax department with other government agencies. The amendments will come into effect retrospectively from 2003.
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To be sure, the Income Tax Act does empower the tax department to share information with other authorities dealing with laws related to any tax, duty, cess or foreign exchange or to other notified authorities subject to certain conditions.
However, due to the wordings of a sub clause of section 138 of the Income Tax Act, there was an ambiguity on the interpretation of the clause and question marks were raised if it restrained the tax department from sharing any information. Section 138 of the Income Tax Act deals with the mechanism for disclosure of information in respect of taxpayers under the Income Tax Act.
The tax department has a large volume of data on cash deposits by individuals and companies in bank accounts at its disposal that it is now scrutinizing.
“This clarification shall prove to be timely and useful. In the post demonetisation scenario, a free flow of inter-departmental information shall empower the tax authorities to take requisite action against the tax evaders,” said Rakesh Nangia, managing partner at tax consultancy Nangia & Co. adding this will ensure effective implementation of the government’s anti-black money drive.
Earlier this month, the government announced the constitution of a task force with members of various ministries including the department of revenue, ministry of corporate affairs, the income tax department, the Serious Fraud Investigation Office and other enforcement agencies to ensure coordinated action against shell companies and the professionals who aided in creation and operation of such shell companies.
The government suspects that since only 60,000 of the 1.5 million companies registered in India file their annual tax returns, a large number of these non-filers may be shell companies.
The coordinated crackdown, led by the Prime Minister’s Office, was initiated after instances of massive money laundering came to the fore after Prime Minister Narendra Modi announced scrapping of Rs500 and Rs1,000 notes on 8 November.