Tax rules clearly lay down that funds parked in undeclared bank accounts – irrespective of whether the money is being held in local or offshore banks – are considered as income on which full tax and penalty can be levied.
The person in question hoped to escape the penalty by quickly declaring the account details weeks before the notice from the tax department reached him. The point is: will the ploy work?
No, according to a November 3 Delhi High Court ruling.
The court has spelt out that penalty can be levied on a taxpayer even if he or she makes a disclosure of concealed income provided tax officials probing the case have enough evidence to back their claim.
Concealed income is often declared through “revised I-T return” – a procedure that was also followed by the concerned person in the HSBC list. But, as the court said, the tax department can not only recover the amount but also charge a penalty if the tax office has gathered the evidence before the assessee declares the concealed income.
A division bench comprising Justice Ravindra Bhat and Justice R V Easwar gave an order in the case of Usha International Ltd, a public limited company, which originally claimed deduction of 10 lakh it had purportedly donated to a trust but later withdrew the claim of deduction through a revised return.
The assessing officer took a view that the claim of deduction was withdrawn after the I-T department carried out a survey and gathered evidence suggesting that the donation was not a genuine transaction.
The assessing officer held that the company made a donation of 10 lakh to Morarjibhai Desai Gramonati Trust which deposited the cheque in a bank account.
But the tax department officials who carried out the survey after the original return was filed had impounded the company’s books that contain evidence of these transactions.
This evidence was gathered well before the company filed a revised tax return to withdraw its claim of deduction (and therefore agreeing to pay higher tax). Via Economic Times