Third party data is used for (a) identification of all taxpayers who are liable to pay tax, but do not pay and (b) to ensure that taxpayers discharge their tax liability properly.

1. Information from Reserve Bank of India (RBI)/authorised banks for handling foreign exchange

As part of an exercise undertaken by the DG Audit to verify whether the service tax had been correctly paid on services sourced from outside India, transaction wise data relating to foreign remittances for selected purposes was collected from authorised foreign exchange dealers. Banks, which are authorised dealers of Foreign Exchange, maintain transaction-wise details of amount remitted outside the country. These details include the purpose for which the amount is remitted. There are 36 Purpose Codes that attract service tax liability. This data was used to identify potential taxpayers. It was found that there was a gap between the service tax payable and actually collected. In many cases, the remitters of foreign exchange who appeared liable to pay service tax were not even registered with service tax. ACES data available on service tax registrants and service tax payments was used for this purpose. Investigations have so far resulted in huge recovery.

2. Information from Income Tax

The CBDT maintains data pertaining to deductions effected for various purposes under specific heads.

1 Insurance Commission Section 194 D
2 Commission on Brokerage Section 194 H
3 Rent for use of Property Section 194 I
4 Payment to Service Providers Section 194 J
5 Payment to Work Contractors Section 194 C

 This data is useful for co-relating the service tax liability and income shown to the CBDT.

3. Information from the Central Board of Film Certification (CBFC)

The CBFC provides the details of films produced and owners of copyright, which is useful for identification of service providers. The list of all films produced and their owners with PAN number was obtained and data in ACES was matched to identify potential service tax payers. Many non-registrants were identified in this exercise and service tax was recovered.

4. Information from Ministry of Information and Broadcasting and Telecom Regulatory Authority of India

Annual reports published by Telecom Regulatory Authority of India (TRAI) and the website of Ministry of Information and Broadcasting contain details of television stations, radio stations and cable operators, which is useful for identifying service providers. By using the information available on the website, details of all service providers obtained and the PAN details were matched with ACES database. A large number of non-registrants were identified across the country and action for recovery of service tax taken.

5. Information from Civic Agencies

The information about civil contractors with authorities like the Delhi Development Authority can assist in identifying service providers, particularly in the construction sector. Details of service providers were procured from the civic authorities in Mumbai and Delhi, and their permanent account numbers (PANs) were matched with the ACES database. A large number of non-registrants who were required to register with service tax were identified and action taken for recovery of service tax.

6. Information from State VAT department

Information exchange between centre and state VAT departments have huge potential to detect non-compliance. A project between the CBEC, CBDT and Maharashtra VAT department called ‘Tax 360’ has unearthed huge evasion of duty by taxpayers.

7. Information from other Ministries:

Details of services provided by the Home Ministry by deploying the Central Industrial Security Force (CISF) for security of public installations like refineries, airports etc., and remunerations received were obtained from Home Ministry and service tax liability on such remunerations was recovered.

(Compiled by CA Sandeep Kanoi based on 3rd TARC Report)

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0 responses to “7 Third Party Sources CBEC uses for detection of tax evaders”

  1. Amit says:

    What about confirmation from Vendors and clients.

  2. sowmya says:

    One source which I believe is a very powerful and reliable source is the Auditor- Chartered Accountant.

  3. Hitesh says:

    Very Nice Artical

    All Practical Aspects

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