60 per cent of income tax notices on fishy cash deposits returned

MUMBAI: More than half the income-tax notices sent to those who had made suspicious cash deposits, bought expensive goods in cash or made suspicious accounting entries in business during the post-demonetisation days, have bounced or returned, people with direct knowledge of the matter said. This only lends credence to the fact that some of the cash deposited or used post-demonetisation could be black money.

“We had sent about 2,000 notices of which about 60% have returned,” an income tax officer based in Mumbai said.

In most cases where the notices have returned, the taxpayer had not linked his PAN to the emails or provided phantom addresses –– something the taxmen feel was done intentionally to escape income-tax scrutiny. According to another person in the know, the income tax department has formed a team of tax officers who would go after such taxpayers, intensifying the scrutiny. “The special team, which mainly includes local tax officers, is required to investigate and find out where the person or business establishment is. And why they had provided fake email IDs or address,” he added.


“As per the current requirement, the income tax department can serve notice to taxpayers on the email ID as per the records of the income tax department. These email IDs are verified and tagged with the PAN of the taxpayer and therefore taxpayers cannot claim non-service of notice. Even though these notices may be challenged in court, it is advisable to respond to them, otherwise more rigorous scrutiny may follow from the tax department,” said Amit Maheshwari, partner, Ashok Maheshwary & Associates LLP.

The special team of tax officials have started questioning tax consultants too in this regard.

“In some cases, tax consultants would give their email IDs while paying tax of their clients, now this isn’t allowed, but the department still has the data. In many cases, tax consultants who the tax officer suspects to be connected to the suspicious accounts has been questioned,” a tax consultant said.

Industry trackers said while the income-tax department is going hammer and tongs after those who they suspect to hold black money, the whole exercise may be questionable. “This whole exercise of sending notices and summons may not have any statutory backing,” said a tax expert.

This comes at a time when the government is trying to simplify tax filing and minimise the taxpayer’s interaction with taxmen by allowing online filing to the incometax department.

“The government is trying really hard for ease of doing business and recently added the new procedure of e-communication which would be applicable to all incometax proceedings. Now, the tax notices returning or bouncing from email IDs would lead to stringent action by the income-tax department. We hear local tax officers have been assigned to tackle such cases,” said Paras Savla, partner, KPB & Associates.

In some cases, the tax department has also started sending summons to suspicious cash depositors. The income tax department is, for the first time, using data analytics to scrutinise and target suspicious bank accounts. It plans to serve around 60,000 tax notices in the following weeks. Following the note ban on November 8, 2016, many people had resorted to different ways to convert black money they held in the form of old currency notes.