Income Tax Department to seek out tax offenders using new algorithm

 







Even as many continue to wait for their ITR refunds, the Income Tax (I-T) Department has started reopening old assessment cases with the help of an algorithm. The I-T Department is leveraging ‘INSIGHT’, a platform which spits out the names of tax offenders after sifting through massive data.


Under the new rule, tax officials take an action based on the name generated by the platform. Earlier, old assessments were reopened by tax officials based on some information that the assessee may have concealed some income-related information.


The names are generated randomly. It is possible that tax evasion occurred four years ago and we already have information on the case, an income tax official told Economic Times.


The INSIGHT system is also dependent on the information to be uploaded in order to throw up a name.


After getting tipped by the algorithm, the I-T Department, under the newly created Section 148A of the I-T Act, has to send a preliminary to the concerned taxpayer that his or her information has been flagged for a certain financial year. The system involves informing the assessee that their profile has been marked by the Directorate of Income Tax (Systems) as ‘high-risk VRU (variable report upload) under ‘risk management system’ in accordance with the ‘risk management strategy’ fo rmulated by the Central Board of Direct Taxes. The taxpayer is then given a week to respond, failing which the case is automatically reopened.


The I-T department can issue as many as 50,000 letters under the r section 148A in Mumbai region alone, which contributes 30% of all I-T collections, if the new algorithm generates enough names.


Tax experts lauded the move to give taxpayers an opportunity to explain themselves; the case may not be reopened if a satisfactory reply is received from the assessee, they added.


Rajesh P Shah who heads the international taxation committee of the chamber of tax consultants, told ET, earlier cases were reopened without informing the taxpayer.



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