Businesses which report a higher income or revenues due to increased usage of digital payments following the demonetization of Rs 500 and Rs 1000 notes will not trigger reopening of cases of past years, the income tax department informed in a circular.
The Central Board of Direct Taxes sought to allay fears that tax men would resort to harassing businesses by reopening earlier cases where they had reported lower revenues.
“By adopting the digital mode of payment, no financial transactions would remain undisclosed and consequently an enhanced turnover of business might get reflected in the books of accounts. Under the circumstances, an apprehension was raised by the business community that increased turnover in the current year may lead to reopening of earlier years’ cases where the turnover was lower,” the circular read.
However, the circular categorically states that mere increase in turnover in a particular year due to use of digital payments cannot be the only reason that income has escaped assessment in earlier years. “Hence, I-T officers are advised not to reopen past assessments in cases, merely on the ground that the current year’s turnover has increased.” Mere suspicion is not an adequate ground for reopening of earlier years cases, it added.
The latest circular applies to Section 147 of the I-T Act which permits an officer to reopen of past cases, generally up to the past four years, if they have reason to believe that they have escaped assessment.
Tax scheme for undeclared income
The Press Trust of India reports that the government will be notifying another scheme giving tax dodgers another chance to come clean by paying 50% of tax on junked currency deposited in banks post demonetisation. The Pradhan Mantri Garib Kalyan Yojana (PMGKY) provides for 50% taxes and surcharge on declarations of unaccounted cash deposited in banks. Declarants also have to park a quarter of the total sum in a non-interest bearing deposit for four years.