Taxman’s warning: Do not drastically revise Income Tax returns

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New Delhi | Published: December 15, 2016 6:35:22 AM

The Central Board of Direct Taxes (CBDT) on Wednesday warned of penal action against those filing “drastically” revised income tax returns by including bank deposits made after demonetisation.

After the November 8 demonetisation announcement, the government had allowed depositing of scrapped R500 and R1,000 notes in bank accounts till December 30.After the November 8 demonetisation announcement, the government had allowed depositing of scrapped R500 and R1,000 notes in bank accounts till December 30.

The Central Board of Direct Taxes (CBDT) on Wednesday warned of penal action against those filing “drastically” revised income tax returns by including bank deposits made after demonetisation.

After the November 8 demonetisation announcement, the government had allowed depositing of scrapped R500 and R1,000 notes in bank accounts till December 30. But a provision of the income tax Act that allows assessees to file a revised return or declaration of income for previous years is being misused by some to include the hitherto undeclared wealth and escape by paying a maximum of 30% tax instead of 50% on such deposits, under the new income disclosure scheme, ‘Pradhan Mantri Garib Kalyan Yojana’.

“The provision to file a revised return… has been stipulated for revising any omission or wrong statement made in the original return of income and not for resorting to make changes in the income initially declared so as to drastically alter the form, substance and quantum of the earlier disclosed income,” the CBDT said.

Any instance coming to the notice of the I-T department which reflects manipulation in the amount of income, cash-in-hand, profits etc, and fudging of accounts may necessitate scrutiny of such cases so as to ascertain the correct income of the year and may also attract penalty and prosecution in appropriate cases as per provision of law,” it said.

Tax experts welcomed the CBDT’s move. Amarpal Chadha, tax partner and India mobility leader, EY said: “It is a welcome move by the CBDT so that people do not take advantage of the revision provisions under tax law and revise the return of income filed for earlier assessment years for manipulating the income, cash etc.

“However, this may also concern some of the genuine taxpayers who have a requirement to revise the previous year’s return to incorporate foreign income and take any treaty benefit which they could not do in the original return, due to non-availability of information/foreign country tax return etc. These taxpayers should ensure that they maintain adequate documentation to substantiate the reasons for revision of the return.”

Alok Agrawal, senior director, Deloitte Haskins & Sells LLP, said, “Under the existing tax law, taxpayers can file an amended tax return to correct errors, etc. within two years from the end of the relevant financial year. If additional income earned in such previous year which was inadvertently missed is included by a taxpayer in the amended tax return, tax at the applicable marginal tax rates for that year along with interest amounts have to be paid.

The CBDT has indicated that it would focus on tax returns revised by taxpayers in order to ensure that taxpayers with unaccounted cash do not circumvent the higher tax and penalty provisions by including the unaccounted income as part of the revised tax return for a previous year.”

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