NEW DELHI: Following instructions to tighten monitoring of bank deposits and the current slew of Income Tax raids, the government issued a stern warning to hoarders and those trying to launder black money through the mechanism of revised income tax returns.
In a strongly worded warning, the Central Board of Direct Taxes stated that those filing “drastically” revised income tax returns by including bank deposits made post-demonetisation would “face penal action”.
The warning comes on the back of reports that several people were filing revised income tax returns for the current year in order to pass off hoarded money as income from the current year. A provision of the income tax act allows assessees to file a revised return or declaration of income for previous years in case of any omission or any wrong statement and those using this route are liable to file only a maximum 30 per cent tax instead of 50 per cent as mandated by the new disclosure scheme.
“The provision... has been stipulated for revising any omission or wrong statement made in the original return of income and not for resorting to make changes in the income initially declared so as to drastically alter the form, substance and quantum of the earlier disclosed income,” CBDT said.
Tax experts have reacted positively to the CBDT’s statement, pointing out that it closes a loophole that people were misusing. “Post demonetization, certain taxpayers are filing revised return to declare unaccounted income disguised as current year’s income. They are advised not to do so. Rather they should use the benefit of ‘Pradhan Mantri Garib Kalyan Yojana’. If taxpayers misuse the provisions of revised return, Assessing Officer can invoke Section 271(1)(c) to levy penalty of 100% to 300% of tax evaded. They may also be liable under provisions of Benami Act and indirect tax laws,” said Rakesh Bhargava, Director, Taxmann.
Girish Vanvari, Head of Tax, KPMG in India, concurred. “The recent announcement regarding filing the revised return is another important step taken by the government of India... This will deter tax payers from playing mischief with their past years returns to legitimise their black money,” he pointed out.