Your company could face a tax scrutiny if it had introduced fresh capital exceeding Rs 50 lakh last fiscal, or, as in the tax lingo, during the previous year relevant to the assessment year 2008-09.
This is according to the new scrutiny norms by Central Board of Direct Taxes (CBDT).
“The new scrutiny norms are stated to be confidential and insulated against the invoking of the Right to Information (RTI) Act. Therefore, the taxpayers and their counsels would not know on what parameters a case is selected for scrutiny,” said sources close to the development.
While tax scrutiny norms were disclosed last year, this year the tax authorities have brought in a slew of changes; and the non-disclosure of the norms can add to the uncertainty for taxpayers. Sources reveal that businesses with over Rs 30 lakh as payables for suppliers of goods (sundry creditors) and also 30 per cent of the sales turnover may be liable for scrutiny assessment.
Likewise, the new norms also spell out that where the taxpayer has resorted to any transaction liable for annual information report (AIR) such as cash deposit exceeding Rs 10 lakh in savings bank account; acquisition and sale of immovable property exceeding Rs 30 lakh, etc, are also liable for scrutiny in respect of non-network stations. However, in the case of network stations, if the taxpayer furnishes the information in the return which matches with the AIR, then it is not liable for scrutiny, sources said.
There are tighter norms for capital gain transactions also.
Sources say that in respect of capital gain transactions, where the taxpayer seeks exemption under section 54 or section 54F or section 54EC of the Income-Tax Act, and the quantum of exemption is above Rs 25 lakh, then such cases may be scrutinised.
“This new method of selecting the cases for scrutiny on the basis of certain norms could be questioned for more than one reason,” says a tax practitioner, who did not wish to be named.
He feels that the CBDT, by delegating the power to select cases for scrutiny to the assessing authority, (being the field-level officer) could lead to a rampant misuse of power.
Certain taxpayers drawing income from agriculture could also come under the scanner.
For agricultural income the monetary limit is fixed at Rs 10 lakh and, hence, where the agricultural income of the taxpayer exceeds Rs 10 lakh it would be subjected to scrutiny assessment, sources said.
The net for scrutiny has also been cast wide with taxpayers having unsecured loan: with the quantum exceeding Rs 50 lakh and more than 30 per cent of the capital employed by the taxpayer.
With buoyant tax collections becoming regular year after year, many tax practitioners that Business Line spoke to felt that it would have been fair and justified if the scrutiny norms were made public so that transparency in selection of cases for scrutiny and correct collection of taxes could be guaranteed.