Now, tax officers are examining whether such unexplained credits are benami, which means assets or transactions carried out at the behest of another person and seeking information on the source of such credits and transactions. Assessment officers are being particularly strict this year in the wake of the government's demonetisation drive, according to the people cited earlier, who spoke on condition of anonymity. The number of transactions with unexplained credit has gone up this year, they said.
"Until now many taxpayers at the time of assessment would offer to pay tax on unexplained credits and investments if these were raised by the revenue department and (if) the taxpayers were not able to substantiate them. However, one has to be very careful now as such unexplained credits and investments may be examined under the Benami Act and may invite penal and criminal consequences," said Amit Maheshwari, partner, Ashok Maheshwary & Associates.
Tax experts, however, said even now a distinction between unexplained tax credits, where higher tax is applicable, and a benami transaction has to be made. "If a cash credit is unexplained and the tax department can trace back the money to some other person, then only Benami Act can apply," said Dilip Lakhani, a tax expert. "In cases where there are only unexplained cash deposits in the bank account then higher tax is applicable and Benami Act can't be applied," he said. For example, a Delhi-based person who bought a house worth Rs 5 crore when his annual income was Rs 2 lakh. The assessing officer is looking to trigger the Benami Act in this case.
However, in another situation, where a Mumbai-based realtor was found to have taken 20% of the cost of the apartments in cash, the developer would be required to pay higher tax on the cash but this would not be considered a benami transaction, says a tax adviser.