MUMBAI: After demonetisation, here comes the black money crackdown. A Mumbai-based jeweller who deposited Rs.100 crore in his bank account in December was summoned by the income-tax department recently. He was asked to submit income-tax permanent account number (PAN) details of all who bought gold or jewellery from him since November 8, when demonetisation was announced.
A New Delhi-based real estate developer who put Rs 25 crore into his account on December 30 has got a formal query from the income-tax department. The developer said the money was “cash on hand“ as reflected in his books of accounts. Tax officials are planning to scrutinise his books of accounts for the past few years.
Real estate developers, jewellers and sellers of luxury goods have come under the I-T department’s scanner as part of the exercise to unearth black money in the wake of demonetisation. Many are currently being summoned and are likely to be slapped with tax notices in the coming months, said tax officials and consultants aware of the matter. The government will also pursue those who may have sought to launder money this year itself, rather than the two-three years it usually takes for the income-tax department to send notices.
A three-member committee comprising top income-tax officials has been formed to amend the rules so that notices for assessment year 2016-17 can be served in 2017 itself, said one of the people cited above.
“The focus is only on those accounts where Rs 1 crore or more has been deposited,“ the person said.“There are around 5,000 such cases, of which at least half would come in the tax net.“ Developers have allegedly sought to pass off black money as cash on hand. “Most real estate developers have large cash on hand but mainly this money is seldom with them as they tend to use it for various reasons,“ said a tax expert. “Many developers deposited large sums of money in banks and claimed this was cash on hand -in reality this was black money.“ The tax department is asking developers to show them their books and tally each cash expense for earlier years.
The key is speedy analysis of masses of data that has been collected in the past few months. “The income-tax department’s need of the hour is a result-oriented analysis of the large volume of demonetisation-related data collected from banks and financial institutions and matching with the taxpayer records so as to red-flag the tax evaders selectively,“ said Rakesh Nangia, managing partner, Nangia and Co, a tax advisory.“We can expect a legislative change department instruction to deal with such cases in an effective and timely manner, ensuring that the impact is not diluted.“
Many jewellers are said to have split up one invoice into multiple ones as PAN details of buyers aren’t needed if a sale is below Rs 2 lakh. The tax department is seeking details so that it can put together the pieces, according to the people cited above.
“The tax department had started raising queries through their online platform and even in some cases where huge cash has been deposited, summons are being sent by director of income tax, intelligence and criminal investigation,“ said Paras Savla, partner, KPB & Associates, a tax consultancy. “We see tax notices may start coming in the next couple of months to those who have deposited large sums.“
While the spotlight is mostly on real estate developers and jewellers, transactions by luxury goods sellers and some doctors are also being examined. One of them is a south Mumbai luxury watch seller who deposited Rs 16 crore in his bank account in mid-December. Another is a Chennai plastic surgeon who deposited Rs 6 crore. The doctor, who’s been sent a query, had been disclosing Rs 2.5 lakh as annual income for the last 15 years.
“While many queries have been raised by tax department, focus will be on the big fish,“ according to one of the persons cited earlier. “In the case of the doctor, the tax department now knows the real income and in future no tax evasion could be done,“ said a tax expert advising the physician. “But as of now the focus of tax department should be on people who may have evaded larger sums of money.”
Credits ET Realty