Alarm bells over return of tax inspector raj

The I-T department will look at all “unusual” and “suspicious” deposits made into accounts, even if they are less than Rs 2,50,000.

Written by P Vaidyanathan Iyer | New Delhi | Published:December 10, 2016 2:46 am
demonetisation, inspector raj, inspector raj return, cashless economy, no money, taxman, tax system, income tax department, income tax, narendra modi, Enforcement Directorate, indian express news, india news, economy crush, cash crunch, rush atm, business According to government officials, the Income-Tax department, in close coordination with the Enforcement Directorate, plans to kick off on January 1 a massive assessment exercise of what it alleges is “money laundered” by many during the demonetisation drive. (Representational image)

The possibility of the taxman getting to wield enormous discretionary powers post-demonetisation has set off alarm bells within a section of the government itself.

A large scale swoop by the Income-Tax department in the new year may end up turning Prime Minister Narendra Modi’s “minimum government, maximum governance” mantra on its head. That’s the fear in not just this section of the government but also a large part of India Inc.

According to government officials, the Income-Tax department, in close coordination with the Enforcement Directorate, plans to kick off on January 1 a massive assessment exercise of what it alleges is “money laundered” by many during the demonetisation drive.

The I-T department will look at all “unusual” and “suspicious” deposits made into accounts, even if they are less than Rs 2,50,000. The “big data analysis” can also red flag Jan Dhan accounts, which were hardly active or inoperative, and have now suddenly shown Rs 50,000 deposits, an I-T department official, who did not wish to be named, told The Indian Express.

What this essentially means is a mammoth task of checking approximately 40 crore bank accounts, of which about half are Jan Dhan accounts. Even those who mean good for the government are concerned about harassment of people who had saved money over a period of time, but can now face the taxman’s hammer. For instance, Mukesh Butani, Non-Executive Chairman, BMR Advisors, said, “The intent (of the demonetisation drive) is very good. But the outcome could be negative. Inspector raj, harassment of taxpayers — these are the concerns.”

According to a government official, the I-T department is busy with time-barring scrutiny assessment for financial year 2013-14.

“Normally, we get time till March 31. This year, it has been advanced to December 31. After this, our attention will turn to big data analysis of moneys deposited during the demonetisation drive. Incidentally, this coincides more or less with the end of the demonetisation scheme (December 30). We will start analysing data after December 31,” said the official.

The section in the government which is concerned about the taxman’s stick is worried that housewives accumulating small portions of their spouses’ monthly incomes to build a kitty may end up being unintended victims of a spirited tax drive. Similarly, middle-income households may get saddled with I-T notices for their gradual investments in gold and jewellery. This section feels simple disclosure guidelines should be specified to enable these people avoid any harassment.

A member of the task force on direct taxes, chaired by Vijay Kelkar, said the department has huge constraints both on resources and time. “The size is so large. So, there is a need to work out rational solutions. It has to be rule-based and non-discretionary. There should be some sampling basis,” the member, who did not wish to be named, said. “Otherwise, the return on investment in such investigation may be negative.”

What has irked the government is also a strong likelihood that the entire money withdrawn in 500 and 1,000 rupee notes would return to the system. Earlier, it was anticipated that a significant chunk of up to Rs 3 lakh crore — the size of black money in the system — will not return.

“Launderers are trying to beat the system. We know how to trace them. We will trail them and catch them. Not it is easier for us,” an I-T official said. “We will do our homework. We have a risk management system and will follow standard protocols. We will share information with the Enforcement Directorate on a need-to basis. The ED can make arrests too,” the official said.

A section in the I-T department believes now that the demonetisation decision has been taken, it only makes sense to fight this battle. “A new order will emerge. It will have social implications, in the sense, some genuine taxpayers may face the heat. But that is a price to pay for building a civilised nation of honest taxpayers,” an I-T official said, adding the department did not need extra powers for the exercise.

(Tomorrow: The task ahead. Does the state have the capacity?)

For all the latest Business News, download Indian Express App

  1. D
    Devi Prasad
    Dec 11, 2016 at 10:36 am
    At school exams, even when cheating students are few in number, all students are subjected to checking. No parent objects. Because it is for larger good.
    (0)(0)
    Reply
    1. A
      ashok s
      Dec 10, 2016 at 1:04 am
      If govt announces that each officer gets incentives on black money discoveries as equivalent to the bribe amount . the govt will be in win win situation
      (0)(0)
      Reply
      1. A
        ashok s
        Dec 10, 2016 at 12:49 am
        The real mantra of this exercise was full cash coming inn , then going out. It will make I.t job much easier to track money . but still their are loops like gold and other valuable in excess ,and benami property.
        (0)(0)
        Reply
        1. A
          ashok s
          Dec 10, 2016 at 1:01 am
          We should not preumed that all babu's and officers are corrupt , as of now they ate the hope of this country. Let's help them to clean our society in much better way.
          (0)(0)
          Reply
          1. S
            ss
            Dec 11, 2016 at 11:49 am
            we should automate the processes of Income Tax as far as possible so that it is process oriented and record based so that there is much less discretionary decision from any official . Otherwise the tax inspector raj will arise .
            (0)(0)
            Reply
            1. K
              karthikeyan
              Dec 11, 2016 at 11:54 am
              Another big corruption in the making ????? It will be as per the whims and wishes of the officers and other considerations for sure
              (0)(0)
              Reply
              1. T
                T.R.Krishnamoorthy
                Dec 10, 2016 at 1:03 am
                SOME EMINENT SCHOLAR SHOULD EXPLAIN IN SOME ARTICLE ,ON WHAT IS 'BLACK MONEY'!!!
                (0)(0)
                Reply
                1. G
                  George
                  Dec 11, 2016 at 12:01 pm
                  Wrong comparison. Is harment of taxpayers and of ordinary citizens equal to checking students?
                  (0)(0)
                  Reply
                  1. G
                    George
                    Dec 11, 2016 at 12:03 pm
                    Wrong. umption was that all cash will not come back to the system. This money would be BLACK and made useless. RBI then would be able to print that much more money and govt could use it. All this is now proved wrong.
                    (0)(0)
                    Reply
                    1. Load More Comments