Taxman can examine third party data, public information to track non-filers

To weed out non-filers of tax returns and initiate proceedings against them, the taxman can now, besides internal records, also use information available with foreign tax authorities in public domain such as third part data, verifiable news reports, as well as social media posts.

“Information available on record…would include all information received from departmental sources, third parties for example banks, financial intermediaries, law enforcement agencies, foreign tax authorities, etc and information available in public domain,” said the Central Board of Direct Taxes (CBDT) while defining a non-filer.

This is part of a set of definitions suggested by an expert committee set up by the CBDT in January this year to recommend standard definitions of certain commonly used terms in direct tax administration.

“All information that is available with third party reporting sources, verifiable data in the open and even transactions under Rule-114 B (mandatory quoting of Pan) that have not been filed with us but may attract tax will be used to find potential tax payers,” said a government official.

The recommendations of the committee have been accepted by the CBDT and the definitions and terms will be used for internal reporting and generation of data.

The clarification is significant given that data from foreign tax authorities would soon be available through the automatic exchange of information pacts while a number of news reports in the recent past have named tax defaulters and evaders.

Similarly, non-filers are now defined as those who are liable to pay tax or file an income tax return in a specific assessment year but their return has not been “entered into the system”.

Meanwhile, assessees have been defined as persons liable to pay tax or against whom any proceeding is pending under the Income Tax Act, 1961.

The CBDT will also count advance tax, self-assessment tax, taxes deducted and collected at source, tax paid against regular assessment, dividend distribution tax as “tax paid”.

Tax base will include those who have filed returns or paid tax for three consecutive financial years before the year under reference while new taxpayers would be those who have paid taxes or filed returns for the first time during the financial year.

Experts point out that though the definitions will be used largely for the CBDT’s administrative work but said that it does provide a lot of clarity.

“Earlier, the term ‘information available on record’ was open to interpretation and the taxpayer could contest the source. Now, there is more clarity,” said Neha Malhotra, Executive Director, Nangia & Co, adding that another important interpretation is that DDT will now be counted as corporate tax that has already been paid.