Income tax returns: Here's why you may be scrutinised if you have revised after 8 Nov

CBDT has issued a stern warning to income tax assesses against "drastically" altering the returns forms to revise income. This comes as it found some of the tax payers were revising their returns in the aftermath of the demonetisation of Rs 500 and Rs 1,000 notes.

If you have revised your income tax returns after 8 November, you may need to be careful that what you have done is all kosher.

Here's is a decoder of what the CBDT warning means for the assessees:

Why is the warning issued?

 Income tax returns: Heres why you may be scrutinised if you have revised after 8 Nov

The warning comes in the wake of demonetisation

CBDT feels some taxpayers may misuse the provision to revise the returns filed by them for the earlier assessment year for manipulating income with an intention to show the current year's undisclosed earnings in the earlier filing.

"The provision to file a revised return... has been stipulated for revising any omission or wrong statement made in the original return of income and not for resorting to make changes in the income initially declared so as to drastically alter the form, substance and quantum of the earlier disclosed income," CBDT has said.

What exactly will attract the penal action?

A scrutiny will conducted if the department notices any manipulation in income in the previous year's ITR (income tax return). "Any instance coming to the notice of the I-T department which reflects manipulation in the amount of income, cash-in-hand, profits etc and fudging of accounts may necessitate scrutiny of such cases so as to ascertain the correct income of the year and may also attract penalty and prosecution in appropriate cases as per provision of law," it said.

According to Rakesh Bhargava, Director, Taxmann, a leading publisher of tax and corporate laws in India, if taxpayers misuse the provisions of revised return, the assessing officer can invoke Section 271(1)(c) to levy penalty of 100 percent to 300 percent of tax evaded. They may also be liable under provisions of Benami Act and indirect tax laws.

"The CBDT has indicated that it would focus on tax returns revised by taxpayers in order to ensure that taxpayers with unaccounted cash do not circumvent the higher tax and penalty provisions by including the unaccounted income as part of the revised tax return for a previous year," explains Alok Agrawal, senior director, Deloitte Haskins & Sells LLP.

When can you revise your returns?

Under the Section 139(5) of the I-T Act, a revised ITR can only be filed if any person who has filed a return discovers any omission or any wrong statement therein.

Bhargava of Taxmann said a return of income can be revised only if the original return contains any error or omission or wrong statement therein.

"Post demonetisation, certain taxpayers are filing revised return to declare unaccounted income disguised as current year’s income. They are advised not to do so. Rather they should use the benefit of ‘Pradhan Mantri Garib Kalyan Yojana’," he said.

With PTI

Updated Date: Dec 15, 2016 11:47:54 IST