Review data entry errors: CBDT to staff

In an internal letter dated March 10, the Central Board of Direct Taxes CBDT ) has asked its officials to verify the genuineness of agricultural income claims exceeding Rs 1 crore made by taxpayers in their income-tax (I-T) returns.Agricultural income is exempt from tax and the CBDT has noticed that over the years, several taxpayers have declared significant agricultural income. The CBDT has taken cognisance of a public interest litigation filed in the Patna high court, which states that agricultural income is often used as a conduit for money laundering The period for which high-value agricultural claims are to be verified is April 1, 2010 to March 31, 2013. There are 1,080 cases in this three-year period that will need to be examined. Even if it is assumed that in each case, the claim was for Rs 1 crore and no more, this translates to Rs 1,080 crore of declared agricultural income.In the nine-year period from financial year 2006-07 up to 2014-15, the number of cases with Rs 1 crore-plus agricultural income was 2,746. Taxpayers from cities such as Mumbai (212 cases), Delhi (275 cases), Kolkata (239 cases) and Chennai (181 cases) have declared agricultural income above Rs 1 crore (see table).The misuse of agricultural income has been highlighted before. The Tax Administration Reform Committee, led by Parthasarathi Shome, in its third report in November 2014, had said, "Agricultural income of non-agriculturists is being increasingly used as a conduit to avoid tax and for laundering funds, resulting in leakage to the tune of crores in revenues annually."A white paper on black money released by the CBDT in May 2012 had pointed out: "Giving credit to agricultural income for income tax purposes without verification of claim allows an avenue for bringing black money into the financial system as agricultural income."Elaborating on the modus operandi, a tax official said, "Taxpayers wishing to convert black money into white show proof of ancestral property in villages. They also obtain fictitious receipts from traders of agricultural commodities as evidence that they have produced and sold agricultural produce."CBDT's internal letter draws reference to a PIL before Patna HC which had raised concerns that a few taxpayers may be engaged in routing their illegal or unaccounted money in the garb of agricultural income. By doing so, not only are they claiming exemption on such income but are also engaging in money laundering, said the PIL.Tax officials have been directed to verify whether the scrutiny assessments (in-depth examination of the case) was carried out in cases of taxpayers who had made claims of agricultural income of a crore plus. Where such an examination is pending, tax officers are required to verify the claims.CBDT's letter asks its officials to examine any data entry errors made by taxpayers in their I-T returns which could arise as agricultural income is included for rate purposes. The basic I-T slab rate for income between the Rs 2.5 to Rs 5 lakh is 10%; the next slab I-T rate of 20% applies to income beyond Rs 5 lakh but up to Rs 10 lakh. Those earning more than Rs 10 lakh pay I-T at the basic slab rate of 30%The CBDT does not rule out the possibility that taxpayers could have filled in non-agricultural income as agricultural income in their I-T returns. Such mistakes could have resulted in a higher agricultural income claimFor now, tax officials have to send a status report of cases within their jurisdiction byMarch 20, to enable the CBDT to provide the relevant details to the Patna HC.