Deposits of Rs 3 lakh are "justified" if a person has an annual taxable income of Rs 10 lakh and the tax department will "not touch" him.
Providing clarity on scrutiny of deposits made in banks post demonetisation, Income Tax department on Monday said no questions will be asked about deposits of up to Rs 2.5 lakh and only those accounts will be probed that do not match the tax returns.
Using Big Data analytics, the Income Tax Department has segregated different kinds of deposits and large ones like more than Rs 1 crore that do not match with income tax returns filed in previous years will be taken for "layer enforcement".
"There is no need to fear for any genuine person. We will ensure there is no harassment to genuine person," Central Board of Direct Taxes Chairman Sushil Chandra said at CII post-Budget seminar in New Delhi.
The department, he said, has accumulated a large data on deposits made in banks after the government banned old Rs 500 and Rs 1000 notes on November 8.
"We found (and segregated) the data (for deposits) between Rs 2 lakh and Rs 80 lakh and Rs 80 lakh and above. As the Prime Minister has clearly said that (for deposits) up to Rs 2.5 lakh we will not ask (questions), so we have put that data aside at the moment," he said.
The tax department has used its data bank to run all deposits exceeding Rs 5 lakh made during the 50-day window provided post demonetisation to get rid of junked notes, he said.
Giving examples, he said deposits of Rs 3 lakh are "justified" if a person has an annual taxable income of Rs 10 lakh and the tax department will "not touch" him.
Importantly, if companies show a cash in hand in balance sheet of Rs 10 lakh and have deposited Rs 5 lakh, the tax department will not scrutinise those.
"But if you have deposited Rs 5 lakh and you have not filed return of last three years, that I should touch (for scrutiny)," he said. "Similarly if you file income tax return of Rs 2.5 lakh income but you deposit Rs 10 lakh in different bank accounts, I should ask about it."
Even for those explanations can be provided through the tax department's website, he said. "This will also be analysed with data and then it will be closed."
"Only where it is absolutely not matching, action will be taken. And if there is large deposit may be more than a crore of rupees, then I think if it is not matching with ITR filed, then all honest tax payers will agree that that the man should be taken for layer enforcement," he said.
He, however, did not explain what he meant by 'layer enforcement'.
Chandra said individuals with unaccounted deposits have an option of availing of the new tax amnesty scheme, PMGKY and deposit 50 per cent tax.
"Some people have misused (the facility to deposit old notes). One person has put Rs 2 lakh in each employees account, then some dose that is required which will be survey or search.
"We have found that one trustee who was running an educational institution, he put Rs 2 lakh in each employees account and one of them complained, and we searched him and he surrendered around Rs 10 crore," he said.
He said action is required against all person who mis- utilised the window given to people to deposit their holding of old Rs 500 and Rs 1,000.
"Our approach is very clear, very low rate please come (to pay tax). We will persuade through SMS, pay your taxes. If not, something more is required," he said. "Time has come we should be very clear about our tax liability... I will be happy if we can reach to that level where the person should be tax compliant and Section 132 (relating to search), 133A (relating to survey) can be removed from I-T Act."
On the user interface given on the income tax e-filing website to verify deposits and provide clarification, he said already 2 lakh people have logged in on it. The CBDT has sent SMS/emails to 18 lakh people who have made suspicious deposits over Rs 5 lakh during the 50 day demonetisation period.
"They are giving their responses. After seeing their responses we will match with our data bank and then send notice. The notice won't be statutory notice as we will give them another chance by asking them to clarify. If they still do not reply then we will think on how to take the investigation forward. We want to be non-intrusive," Chandra added.
