Identify high-value cash transactions at hotels, hospitals; pursue arrear demands: CBDT to I-T dept

Rampant cash transactions in business sectors such as hotelsSales of luxury brands, hospitals and IVF clinics should be monitored in a “non-intrusive” manner, CBDT has asked the IT department. The highest authority for direct taxes The country’s administration, the Central Board of Direct Taxes, has also asked the Tax Department make “concerted efforts” to recover the backlog of claims which have seen a “sharp increase” since the last financial year.

The CBDT recently released an annual action plan dossier called Central Action Plan (CAP) 2024-25.

Senior officials told PTI that transactions above Rs 2 lakh in cash were required to be reported through a financial transaction statement (SFT) by financial institutions, but that was not happening.

“On examining these reports, it is noted that circumvention of these provisions is widely prevalent,” the Board told the IT department.

“Furthermore, although Section 139A requires PAN (permanent account number) to be provided or obtained in specific transactions, there is no reporting/verification mechanism to determine compliance with this obligation,” it said.

In any case, it said, “high value” consumption expenditure needs to be verified with information about the taxpayer and hence it is imperative to identify the sources that could be involved in possible avoidance. The department identified some of the businesses such as hotels, banquet halls, luxury brand retailers, IVF clinics, hospitals, designer clothing stores and seats in medical colleges with NRI quota, where non-compliance with these rules and large cash transactions were found. “Such sources will have to be identified and a verification exercise could be conducted by seeking information in a non-intrusive manner,” the CBDT directed the tax department.

A senior official said the magnitude of cash in the economy can be gauged from the fact that during the fiscal year 2023-24, the tax department conducted 1,100 searches or raids across the country to check tax evasion, resulting in seizure of assets worth about Rs 2,500 crore, of which Rs 1,700 crore was in cash.

The CBDT also informed IT authorities that “new opportunities have opened up for identification of potential taxpayers due to data mining and data analytics” and effective use of such data can result in “identification of a large number of potential taxpayers”.

“Cases of non-filers and those whose income tax returns do not match the financial transactions they have made are selected based on the rules established through the management information system and are carried out for electronic verification. The result of electronic verification translates into the expansion and deepening of the taxpayer base,” he said.

The Board said the tax department has been given a target of adding 10 per cent more tax filers in the current fiscal year to what was the filer base at the end of 2023-24.

The CBDT also expressed concern over the arrears claim figures which have “surged” in the last few years, saying it has gone up from Rs 24,51,099 crore, as on April 1, 2023, to Rs 43,00,232 crore on April 1, 2024.

“This is a very sharp increase that requires immediate and urgent action,” he added.

“Given past trends in arrears demand and cash collections, it is imperative that concerted efforts continue to be made to reverse the trend of increasing arrears demand and begin the process of reducing the figure to more manageable levels,” he added.

The Board also stated in the action plan that a “special team” headed by a Principal IT Commissioner will be formed in each region by the end of September to act and recover tax arrears of top 5,000 cases, about 60 per cent of the total claim of over Rs 43 lakh crore.

Task forces will track down physical records and other details of the top 5,000 cases with “deeper and faster analysis,” he said.