Massive Reopening Notices Issued
The Income Tax Department has escalated its efforts to curb tax evasion, issuing 10,000 reopening notices to companies and individuals across major cities. These notices seek explanations for discrepancies in reported incomes, particularly focusing on the 2018-19 assessment year. The department’s action is part of a larger initiative directed by the Central Board of Direct Taxes (CBDT) to monitor rampant cash transactions in sectors such as hotels, luxury brand sales, hospitals, and IVF clinics.
Targeting Suspected Undisclosed Income
The reopening notices must be issued by August 31, as cases cannot be reopened beyond this date. According to a report by Business Standard, the suspected undisclosed income in these cases could amount to as much as ₹15,000 crore. Entities across Delhi, Mumbai, Bengaluru, Pune, Chennai, and Hyderabad are under scrutiny. The focus is on suspected bogus charitable donations claimed under Section 80G of the Income Tax Act and high-value overseas transactions, such as property acquisitions.
Broader Strategy to Address Tax Evasion
This initiative is part of a broader strategy by the tax department to extend its reach into past assessments. The recent Budget proposals have played a significant role in this effort, allowing income tax assessments to be reopened beyond the standard three-year period if the escaped income is ₹50 lakh or more, extending the timeframe to five years. In cases involving searches, the time limit has been reduced from ten years to six years.
Before issuing reopening notices, tax officials evaluate whether reassessment is necessary, and taxpayers are given an opportunity to respond. If the explanations are satisfactory, proceedings may be dropped. In cases of genuine discrepancies, taxpayers are allowed to file revised returns.
Focus on Recovering Arrear Demands
The CBDT has also instructed the tax department to prioritize the recovery of arrear demands, which have surged from ₹24.51 lakh crore in April 2023 to ₹43 lakh crore by April 2024. To tackle this issue, special teams headed by a Principal Commissioner of Income Tax are being formed in each region. These teams will act on the top 5,000 cases contributing to this demand.
Additionally, the CBDT is leveraging data mining and analytics to identify potential taxpayers. The Board emphasized the importance of using this data to expand the taxpayer base, stating that new opportunities have emerged for identifying potential taxpayers through advanced data analysis.
(With inputs from agencies)
