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

New Delhi: Rampant cash transactions in business sectors like hotels, luxury brand sales, hospitals and IVF clinics need to be checked in a "non-intrusive" manner, the CBDT has asked the I-T department.

The apex body for direct taxes administration in the country -- the Central Board of Direct Taxes -- has also asked the tax department to undertake "concerted efforts" to recover arrear demands which have been witnessing a "steep rise" since the last financial year.

The CBDT recently issued an annual action plan dossier called the central action plan (CAP) 2024-25.

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

"While examining such reports, it is noticed that the circumvention of these provisions is widely prevalent," the Board told the I-T department.

"Further, although section 139A requires PAN (permanent account number) to be provided or obtained in specified transactions, there is no reporting/verification mechanism for determining the 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 therefore, it is imperative to identify the sources which could be involved in possible circumvention.

The department identified some of the businesses, such as hotels, banquet halls, luxury brand retailers, IVF clinics, hospitals, designer clothing stores, and NRI quota medical college seats, where the non-adherence to these rules and large cash transactions was being found.

"Such sources will have to be identified and a verification exercise could be conducted by calling for information in a non-intrusive manner," the CBDT directed the tax department.

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

The CBDT also informed the I-T authorities that "new opportunities for identification of potential taxpayers have opened up due to data mining and data analytics" and effective use of such data may result in "identification of a large number of potential taxpayers." "The case of non-filers and those whose ITRs (income tax returns) do not match with financial transactions done by them are selected based on rules through management information system and taken up for e-Verification. The outcome of e- Verification results in widening and deepening of taxpayer base," it said.

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

The CBDT also expressed concern over the figures of arrear demand "increasing" over the past 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 steep rise which requires immediate and urgent action," it said.

"Keeping in view the past trends of the arrear demand and cash collections, it is imperative that concerted efforts continue to be made to reverse the trend of increasing arrear demand and to initiate the process of reducing the figure to more manageable levels," it added.

The Board also declared in the action plan that a "special team" headed by a Principal Commissioner of I-T be formed in each region by September end to act and recover tax arrears from the top 5,000 cases -- about 60 per cent of the total demand of over Rs 43 lakh crore.

The special teams will locate physical records and other details of the top 5,000 cases with a "deeper and quick analysis," it said.