Taxman to assess hidden income

In order to strengthen resource mobilisation, the government announced several drastic measures related to assessment of income in the just-concluded Union Budget 2008-09.

Section 292 C gives an income tax officer the power to levy a tax rate on assets recovered during the search operations if the assessee is not in a position to explain the source of undisclosed income.

This measure is now extended even to surveys which is a mere checking of records after asking the assessee to bring them into income tax office.

Incidentally, officials said that the use of personal discretion to levy tax on unexplained income in case of surveys has been allowed with retrospective effect from June 1, 2002.

Officials said that this may lead to reopening of several survey cases over these years where no action has been taken due to lack of legal immunity to the department.

In another move, to reduce erratic returns filed by assessees "" personal or corporate "" and boost collections , the Union Budget 2008-09 has reintroduced the norm of "prima facie adjustment".

According to official sources, any official in the income tax department will be empowered to make correction in the returns filed without requiring any prior permission for that . The amendment to this effect has been proposed in Section 143, which was introduced in 1989 and withdrawn around 1995-96.

The amendment comes into effect from April 1, 2008. At present, any mistakes found in the income tax returns filed by the assessee is ignored if the amount is less. If the amount is big and has wider policy implication, the case is referred to a commissioner for picking it up for scrutiny assessment.

Scrutiny assessment is a elaborate procedure and only 2-3 per cent cases in a particular commissionerate can be picked up for such exercise. Beyond scrutiny assessment, there is no other way an income tax officer can make any changes in the returns filed by either a personal or corporate assessee.

Similarly, granting a reprieve to the judicial system for income tax cases, the Union Budget has brought an amendment to Section 254. Under this, no appellate tribunal can grant a stay for a case beyond 365 days or one year.

This will expedite the hearings in the tribunal and make it easy both for the I-T department and the assessee to decide on the future course of action.

To make things clearer, the department has, however, clarified that the time limit to vacate the stay stands even if the delay in disposing of the appeal is not attributable to the assessee.

At present, under Section 254 (2A), the income tax tribunal was given a period of four years from the end of the financial year in which the appeal is filed to finish a hearing.