Tax sleuths may invoke Benami Act while probing unexplained cash deposits

Do you have unexplained credits or investments in the books of your company or personal bank accounts? If so, dodging the tax sleuths hunting for black money is no longer your only concern. Now, the Income-Tax (I-T) department is also looking into whether such unexplained credits and investments in personal and corporate income-tax filings are benami transactions. 

Citing unnamed sources who have knowledge of the matter, the Economic Times reported on Friday that tax authorities were also looking into such unexplained credits to ascertain whether they were benami transactions and might even invoke the Benami Act in many cases, whereas until now, such unexplained credit was treated as black money. According to the financial daily, in the wake of the Modi government's demonetisation drive, the aforementioned sources have said that assessment officers would be particularly strict this year, even as the quantum of transactions with unexplained credit has gone up this year. 

This could lead to a greater liability, as far as legal consequences go, for those who have such unexplained wealth. Unaccounted wealth that is treated as black money attracts higher tax while being brought under the Benami Act could open up an assessee to penal action. Speaking to the financial daily, Amit Maheshwari, partner, Ashok Maheshwary & Associates, said that until now, at the time of assessment, taxpayers, who were found to have unexplained credits and investments and could not substantiate them, would offer to pay tax on the concerned amount. However, as Maheshwari explained, with such credits and investments being looked at under the Benami Act, the concerned assessee could face penal and criminal consequences. 

However, tax experts told the financial daily that the I-T department could only invoke the Benami Act if it was able to trace back unexplained cash credit to some other person. In the event that there are unexplained cash deposits in a person's account but they have not been traced back to another individual, then the assessee will only face higher tax and the Benami Act won't be applicable. 

Cracking down on benami property and transactions has been a stated objective of the government. As reported in November, Central Board of Direct Taxes (CBDT) Chairman Sushil Chandra told news agencies that the I-T Department is matching the "tax profiles" of all property registrations of above Rs 30 lakh under the provisions of the anti-Benami Act as action against illicit asset holders is set to intensify. 

Chandra said the taxman is also investigating those shell companies and their directors whose operations were "debarred" by the government as part of the drive to check black money generation through their abuse. The top boss of the I-T department said that by November 2017, the taxman had attached 621 properties, including some bank accounts. Chandra added that the total amount involved in these cases, being probed under the Benami Transactions Act, was about Rs 1,800 crore.

"We will destroy all instruments that are used to convert black money into white. This also includes shell companies. Also, the department is checking the income tax profiles of all properties which have a registry value of over Rs 30 lakh. We get this information under the law. If these profiles are found suspicious or incorrect, action will be taken (under the Benami Act)," Chandra said.  

In fact, the I-T department is taking benami asset cases "very seriously". According to Chandra, the department has opened 24 units all over the country to implement the anti-Benami Act and is receiving information from varied sources. 

According to a separate agency report, by the beginning of November, the I-T department had attached benami assets worth Rs 1,833 crore as part of its "sustained action plan" against such properties.

With agency inputs