In a bid to nab holders of benami property, the Income Tax Department has issued notices to nominees in mutual funds, wives of HNIs who don’t file income tax returns, NRIs who may have sold real estate in last few years and even those who had deposited more than Rs 1 lakh during demonetisation, said four people with direct knowledge of the matter. While the exact number of notices could not be ascertained, a senior income tax official told ET there could be around 50,000. The department is seeking additional details about past transactions, source of income and directs people who have not filed returns to do so. 

What stumps tax experts and concerns individuals who have received notices is the fact that prosecution notices have been issued. Not all of the 50,000 notices are prosecution notices, added the official. 

A prosecution notice means the accused could face harsher penalties and can’t just get away by paying fines, as earlier. According to a tax officer in the know, notices are coming on the back of data mining by the department. “We have been trying to figure out about benami transactions. So wherever red flags are raised, we have issued notices,” he said. 

The tax department has also issued notices to those who sold properties in last few years. For instance, an HNI who currently lives in Australia had sold his Delhi apartment for about Rs 5 crore in 2017. The HNI could end up paying penalty and interest on the tax demanded at least, his tax advisor told ET. The prosecution notice could lead to tough penalties and compounding fees. 
“Taxpayers in whose case additions have been made during course of assessment have received show cause notices from the I-T Department for launching prosecution. Till now, taxpayers could pay interest and penalties in addition to tax and that was accepted. Now, they could face jail term and this is creating panic,” said Paras Savla, partner, KPB & Associates, a tax advisory. 

Industry trackers say prosecution provision was invoked only in cases where wilful tax evaders were involved, till now. The case may end up in a magistrate’s court, if the assessing tax officer rejects the explanation given by the tax payer.

Insiders say that the notices which have seen a spurt in last couple of months was a result of data mining exercise conducted by the tax department. 

The tax department is going through a maze of data — phone records, credit card and PAN details, tax returns and even data and information available on social media platforms. “Data collected via various sources leaves a pattern and analytics can raise red flags that tax officers can investigate further,” said a tax official. 

What have surprised many industry trackers is the notices received even by those who had deposited relatively smaller amount in their bank accounts during demonetisation. In some cases notices were issued to individuals who had deposited.`1lakh in their bank accounts. “The tax department has not randomly issued notices. We observed a pattern in data and red flags were raised, and only such transactions are scrutinised,” said another official. 

In many cases, said insiders, notices have been issued to holders of benami properties that includes drivers of some rich individuals, wives and relatives of people who may have bought properties or escaped taxes on some income they earned. #casansaar (Source - ET)