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Monday, 04 September 2017 04:57
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Taxman analysis suggests catching tax-cheats will be easier

Now that it is official that almost all the currency that was demonetised has come back into the banking system, the only way for the government to retrieve lost face is to ensure it is able to catch tax-cheats who thought they had got away. With the government saying it is probing Rs 1.75 lakh crore of suspicious deposits, there is fear a raid-raj will be unleashed and that, after all the tax demands, this will not amount to anything. After all, between FY11 and FY16, disputed tax claims rose 3.6 times while total tax collections rose 1.8 times—as a result, from 23.7% in FY11, disputed taxes as a proportion of collections in that year rose to 46.9% in FY16. While only time will tell if history will repeat itself, the taxman looks better prepared this time around.

So, when 18 lakh persons were identified as having made cash deposits not in line with their tax profile, email/SMS queries were sent to them to keep the process low-key and unobtrusive. Advanced data analytics were used to identify another 5.6 lakh cases, and around 200 high-risk clusters of persons were identified for further action. While salaried persons depositing an average of Rs 4.3 lakh seems excessive, it is difficult to track down so many people; and if corporates deposited Rs 1.4 crore per unit, how does the taxman prove this is excessive? Well, for one, the taxman found that over 36% of those who had deposited cash had never filed their tax returns.

Further analysis is even more interesting for the 13.3 lakh accounts for which the taxman got an immediate response—these accounts had deposits of Rs 2.9 lakh crore. Nearly 60% of people declared their cash as having come from sales. How do you proceed from here? The taxman then looked at sales patterns—how high were the deposits compared to monthly sales, did traders have PAN numbers for those to whom sales were claimed to have been made, how did their cash sales compare to their previous returns; all this resulted in creating a database of 1 lakh persons who were high-risk and had made large deposits. Some individual investigations also helped finalise the risk-parameters—a Hyderabad-based jeweller, for instance, claimed he had taken cash advances worth Rs 90 crore on November 8 from 5,200 customers but he had issued IoUs to just 65 people; in the case of a Patiala-based jeweler, forensic imaging of the digital data showed sales invoices had been backdated; for a Delhi-based bitumen and jewellery trader, it was found all invoices—backdated—were for the same amount of Rs 199,500 and two people who were supposed to have bought gold from him did not exist … In other words, there are many checks the taxman has devised to trap tax-cheats in a relatively unobtrusive way.


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