Source: News Bharati English15 Dec 2016 11:15:48

New Delhi, December 15: Today, income tax IT department has warned taxpayers against misusing the provisions for filing revised tax returns for past years to conceal their undisclosed income. I-T department has issued the order as taxpayers can change figures such as their income, cash in hand and profits by revising their tax returns for previous years.

After the Narendra Modi government’s decision to invalidate high-value currency with effect from 9 November, people have little option but to deposit their old Rs500 and Rs1,000 currency notes into their bank accounts.

But tax evaders have been looking for innovative ways to legalize their unaccounted income. From purchasing gold jewellery with backdated bills to using conduits to exchange currency, the I-T department has unearthed many ways that people are using to hide their unaccounted wealth.

I-T department now fears that revised returns may be used by taxpayers to legalize their black money.

Embeded Object

Instead of declaring the entire undeclared income this year and paying high taxes this year, taxpayers can get away with paying substantially lower taxes by using the route of revised returns provided for under Section 139 (5) of the Income Tax Act.

The government has introduced stringent amendments to the Income Tax Act to levy higher taxes and penalties on tax evaders. Through an income disclosure scheme, it also sought to encourage tax evaders to voluntarily come forward and declare their unaccounted income and escape with a tax and penalty amounting to 50% of this undeclared income.

Embeded Object

The legislation, which is awaiting Parliament’s nod, also proposed to increase taxes and penalties for those who do not opt to make the disclosure. Tax and penalty in these cases could amount to more than 80% of the undeclared income.

“Post demonetization, some taxpayers may misuse this provision to revise the return-of-income filed by them for the earlier assessment year, for manipulating the figures of income, cash-in-hand, profits etc. with an intention to show the current year’s undisclosed income (including the unaccounted income held in the form of demonetized currency in current year) in the earlier return,” the I-T department said in a statement.

“It is hereby clarified that the provision to file a revised return of income u/s 139(5) of the Act 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,” it said.

I-T department has warned tax evaders that instances of manipulation in the amount of income, cash-in-hand, and profits, etc. and fudging of accounts will lead to scrutiny of such cases and may attract penalty and prosecution.

Amit Maheshwari, partner at accounting firm Ashok Maheshwary & Associates LLP, said the government is thinking one step ahead of the black money hoarders who may try to inflate their cash-in-hand balances of prior years.

“This would enable them to pass off the cash deposited between 8 November and 30 December as ‘cash in hand’ deposit and avoid any tax and penalty,” Maheshwari said, adding that the statement clarifies the I-T department’s stand on the matter.