CBDT issues new guidelines to officials investigating suspicious deposits post-note ban

Post the demonetisation drive, the Central Board of Direct Taxes (CBDT) has further spread the tax net for catching tax evaders. It has asked Income Tax Department officials to even check CCTV footage at banks to detect fictitious cash transactions.

The officials have been asked to resort to such intrusive measures if they suspect that the tax evaders have managed to backdate their transactions at banks.

Such measures have been delineated in a recent internal document, a Standard Operating Procedures (SOP) for verification of cash transactions relating to demonetisation.

In effect, the document has laid down various procedures for the officers while dealing with people who have deposited their old ₹500 and ₹1,000 notes with banks, but the source of deposit is of suspect.

BusinessLine has reviewed a copy of the document.

The CBDT started collating the huge volume of data on depositors, after December 30, 2016, which was the last date for accepting old notes at banks.

Using data analytics, it has compared the demonetisation data with the existing database of the Income Tax Department and has sent emails to 18 lakh persons, whose cash transactions do not appear to be in line with the existing tax payer’s profile.

The SOP document points out that in the event of suspected backdating of cash sales or fictitious sales by the depositor, the Assessing Officer in his investigation should seek monthly sales summary, which should reflect both cash sales and credit sales.

Relevant stock register entries and bank accounts should also be probed.

The CBDT document further adds that suspected transactions can be also deduced from the abnormal jump in cash sales during November to December 2016, compared with earlier periods. An abnormal jump in percentage of sales from unidentifiable persons should also ring the alarm bells.

Multiple deposits in banks in the late phase of demonetisation, non-availability of stock or attempts to inflate the stock by introducing fictitious purchase and transfer of deposited cash to another account or entity, which is not in line with earlier history should also make the Assessing Officer verify such transactions, the document said.