Income Tax Dept warns public against cash dealings of Rs 2 lakh or more saying that the receiver of the amount will have to cough up an equal amount as penalty.

Govt probes income tax returns and GST claims discrepancy, identifies thousands of shell firms

The government is all set to take action against tax and money laundering with the help of data analysis to detect overstated goods and services tax (GST) claims that do not match up with income tax returns (ITR).

The action against these entities is being launched with notices being sent out. This cleanup operation is followed by the past exercise where potential shell firms were identified and their directors were found fake. Most of these firms were struck off, according to a ToI report.

Officials told the national publication that this is the first time when the government is matching income tax of taxpayers and GST returns. The initial findings indicated the overstatement of GST claims and understatement of ITR. However, the action against these entities might get stringent as recently Supreme Court (SC) refused to protect the GST violators from the arrest.

In the coming months, the revenue department's core focus is seen to be on data analytics as some of the analysis has hinted at discrepancy on the customs front. For instance, in order to claim exports, some traders have shown inflated imports and remitted the funds overseas beyond the requirement. But these exports proceeds are not reflected in their ITRs, as reported by ToI.

The national daily cited an official as saying, "So far, various tax agencies were working in silos but now it’s possible to tally data and go after evaders." Based on preliminary data mapping, thousands of companies were identified, he further added.

The tax authorities have complained of leakages in GST but the state and the Centre's political leadership demanded more time for the new tax regime to settle down. Now that polls are over, in several cases arrests have begun where Manpasand Beverages is a prime example.

Shell companies are used to make bogus claims. The tax officials have come across instances where drivers, gardeners or even slum-dwellers were found as directors of these companies.

In fact, authorities have identified such cases where the slum-dwellers have been made to fill the form to join a delivery service and details like Aadhaar numbers were collected. After that, this information was used to open bank accounts and set up companies.

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