Only 39% comply with I-T's online verification to explain deposit source

Of the 1.8 mn, 700,000 explain their deposit source; tax dept to send letters to the rest 1.1 mn

While the income-tax (I-T) department identified 1.8 million people whose cash deposits of banned noted did not appear to be in line with their taxpaying profile for the previous years, only 700,000 have complied with the tax department’s requirement of online verification.

Reaching the 1.1 million remaining depositors is going to be a daunting task, say tax officials. The cumbersome process of getting them to explain their large deposits falls on the I-T department, which is facing a manpower crunch.

The Central Board of Direct Taxes (CBDT) had launched Operation Clean Money, which involved e-verification of large cash deposits made between November 9 and December 30. The I-T department had also issued advertisements asking depositors to check if they were named in the list of 1.8 million people and explain the source of their cash deposits. Tax officials also extended the deadline for this verification from February 10 to February 15.

I-T officials say the department’s current strength of 8,000 assessing officers in the country is not enough to go after the 1.1 million people. Each officer will need to verify details of 1,375 cases, on an average, of such deposits during the demonetisation drive. The I-T department has a sanctioned strength of 72,000, but is operating with 30 per cent vacancy at the moment.

Another big challenge in the process would be to reach out to the actual depositors, as 30 per cent of them are out of reach via e-mails or SMS, said a senior assessing officer with direct knowledge.

The I-T department will now send letters to those who have not replied to the tax query in the given time period, asking them to disclose their source of the cash deposits, said a senior tax official.

Under Operation Clean Money, the tax department has framed around eight categories of questions for filing the response. The questions have been structured in a manner so that people can easily clarify the source of deposits. If the explanation given is not appropriate, the department will provide another opportunity to explain the reasons.

If a person has deposited someone else’s money, he has been given an option of disclosing the name and respective details of the person to whom the cash belongs.

One of the questions also asks how much of this money would be disclosed under the Pradhan Mantri Garib Kalyan Yojana, in which a taxpayer can pay 50 per cent tax and penalty, and come clean.

Meanwhile, considering the exhaustive data profiling required, the CBDT is in the process of hiring an external agency to do the advance profiling of potential tax evaders. “We are in talks with a couple of external agencies to do the data mining. We will finalise the name in a week’s time,” Sushil Chandra, chairman, CBDT told Business Standard.

“The preliminary data mining has been done and we initiated the verification on the basis of the information we have. The enforcement action would be taken in those cases that have indulged in benami transactions or may have misused dormant accounts,” added Chandra.

Advance profiling will help the tax department scrutinise a large number of accounts, which would have been a daunting task if done in its existing system, as the process involves issuing notices, examining the responses and taking appropriate action.

A senior tax official said, “Right now, we are depending on the permanent account number (PAN). We have PAN details of all the 1.8 million accounts. The CBDT had also asked the Reserve Bank of India to let banks not accept cash deposits without a PAN card, if it is over Rs 2.5 lakh. 

The I-T department has also armed itself with data mining programs, which detect tax evasion. Even then, the scrutiny of all the accounts, after getting the details, would be daunting, as a normal case (before demonetisation) could take as long as two years under the current process.

Taxing times for taxmen

• 1.8 million No. of communications sent by taxmen via ads for cash deposits of banned currency
• 7,00,000 Online verification submission of cash deposits
• February 15 Last date for e-filing cash transaction replies to the income-tax department
• 30% Percentage of taxpayers accessible by e-mail
• 8,000 Total strength of assessing officers (AOs)
• 1,375 Average number of cases each AO handles, apart from ongoing assessments