Pandora’s box opens for companies as taxmen begin data crunching

Mumbai: The data analytics tax demands are here — indirect tax authorities have issued notices to companies and individuals based on data collected from income tax filings.The Central Board of Direct Taxes (CBDT), the authority for direct taxes, and the Central Board of Indirect Taxes and Customs (CBIC), the authority for indirect taxes, had agreed to renew the data-sharing pact, first signed in 2015, this July.Tax notices have been issued to several companies after correlating income and service tax data. Essentially, if data from 2014-15 onward showed a company or an individual employed by a company paid substantial income tax but no service tax, authorities have raised questions on how a business earning large incomes escaped the service tax net.Tax notices were issued by indirect tax authorities and companies were asked to cough up 15% service tax on earned amounts. According to a notice reviewed by ET, taxmen have questioned how a company paid lakhs in income tax, but zero in service tax for 2014-15.The focus of the tax department currently seems to be on the informal sector, and in some cases notices have even been issued to astrologers, said people in the know. Data analytics were used to find individuals who claimed to have earned money from companies or by providing services — that data was checked against service tax records.Tax experts say that more collaboration between various government departments is only going to increase. “It is clear that going ahead the tax department will depend more on data analytics between different departments to look at patterns and raise tax demands,” said Abhishek A Rastogi, partner, Khaitan & Co. Industry trackers say that similar notices can also come based on goods and services tax (GST) data.78740190‘Move could Face Litigation’“Greater interaction between authorities is likely to be more now as there is a lot of data analytics happening at various government agencies. With goods and services tax (GST) coming in, data available with the indirect tax department is enormous and the direct tax department too can use that to zero in on those escaping taxes,” said Pratik Jain, partner and leader, indirect tax, PwC India.In July, CBDT also signed a memorandum of understanding (MoU) with the market regulator Securities and Exchange Board of India (Sebi) to share data.Till a few years ago different government authorities would not even talk to each other, let alone share data, said a senior tax official. And many individuals would deliberately submit different numbers and even prepared separate balance sheets for different government departments, he said.Some legal experts say that tax notices issued by the indirect tax department may face litigation on technical grounds. “Period of limitation is prescribed in tax regulations and any extension beyond the prescribed period will be subject to judicial review,” said Rastogi.

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