Standard Operating Procedure (SOP) for handling Suspicious Transaction Reports (STRs). - Income Tax - F.No. 414/FlU/STR/Inv.IV/2012-13/890

F.No. 414/FIU/STR/Inv.IV/2012-13/890 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes 155A, North Block, New Delhi-110001 Dated 13th Feb., 2013 Office Memorandum Sub : Standard Operating Procedure (SOP) for handling Suspicious Transaction Reports (STRs). STRs from FIU-IND contain important information useful for investigation, assessment and recovery under direct tax laws. The number of STRs being received by the Board from FIU-IND is growing rapidly. 2. As per the existing practice, STRs of Category A and others received by the Board in paper format were sent to the DGIT (l CI), who, in turn, disseminated the same to the jurisdictional DsGIT (Inv). The DsGIT (Inv) cause investigation into the STRs through investigating officers below and send feedback to Investigation IV Branch of the Board. 3. FIU-IND has now introduced the process of on-line dissemination of STRs called FIN-NET, details of which have been conveyed separately. The nomenclature of categorization of STRs by FIU-IND also has undergone change and instead of Category A and others, the new categorization is P1, P2, P3, indicating the priority. The feed-back etc also will be on-line in the new system. In the new system, Director/DS(Inv. IV) CBDT is the Nodal Officer who will be sending the STRs to DGs directly. Workshops on the new system are likely to be organized shortly. 4. However, the handling of STRs in the Investigation Directorates/Field formation for the purpose of inquiry and use in assessment proceedings will remain the same even in the new system. 5. It has been observed that at present all the STRs are being handled in the same manner irrespective of the nature of information and their importance. Further, there is no standard procedure and time limit for taking action, records to be maintained and reporting feedback and statistics. As on date, feed back reports in respect of a large number of STRs is pending. 6. In view of the above and for the purpose of streamlining the dissemination, investigation, feedback and accounting of STRs in an effective, efficient and uniform manner, a Standard Operating Procedure (SOP) to be followed by all the Income Tax authorities handling STRs, is laid down as under. This SOP supersedes existing guidelines on the subject and shall be applicable in respect of all STRs received online/offline at the offices of DsGIT (Inv)/DGIT (I CI)//DsIT(Inv)/DsIT(I)/DsIT(CI), as the case may be, on and after 1st Day of March, 2013, till further orders. i. The STRs received in DG s office shall be transferred within 3 (three) days of receipt to the jurisdictional DsIT (Inv)/ DsIT (Intel)/ DsIT (I CI), as the case may be, after entering the following details in a register (electronic form in Excel or other searchable database with secure back-up) : i) Serial no. (starting from beginning of financial year) ii) Name of the main person in the reported transaction iii) PAN of the main person in the reported transaction iv) STR no. assigned by FIU v) Whether any other STR has been received against the same person. If yes, number thereof vi) Date of receipt of the STR vii) Category assigned viii) Due date for sending the feedback to the Board ix) Date of sending feedback x) Unit to which disseminated xi) Date of dissemination to DIT/Addl/Joint DIT unit xii) Date within which report from Addl/Joint DIT unit has been called xiii) Nature of action taken (search, survey, open inquiry) xiv) Brief results of action taken (concealment detected, tax collected, seizure etc, as the case may be) xv) Date of completion of investigation xvi) Date of sending the report to jurisdictional AO, if any xvii) Other relevant details, if any ii. The DG shall ensure that proper records of STRs on the above lines are maintained by authorities below so that the database is useful and the DG office is enabled in effective monitoring and onward transmission of the required feedback to the Board, without loss of time, iii. On receipt of the STR, the DIT shall verify if there any previous STRs, TEPs on the same person and if so, assign the new STRs also to the same Addl/Joint DIT. iv. The Addl/Joint DIT shall carefully go through the STRs and assign Category A (or P1 in the new system) or other important STRs requiring detailed investigation to DDsIT/ ADsIT. Other STRs may be assigned to ITOs. However the process of assignment, with appropriate directions , should be completed within 10 days of the receipt by the Addl/Joint.DlT.. v. Cases fit for search action may be segregated and the Addl/Joint. DIT shall chart a plan of action separately. vi. Before issuing summons, notices etc. an attempt should be made to see if the verification can be done from internal sources such as IT return, ITDMS, AIS, ITS, AIR, CIB, OLTAS, eTDS... etc. so that the assessees are not called upon to furnish data already available with the Department. If the contents of STR can be verified with the help of these sources with reasonable satisfaction, the same can be closed without undertaking any further inquiry and feedback should be sent. vii. If open inquiries are to be made, clarification of the assessee should be asked at the initial stage itself on specific issues. Notice u/s 131 (1A) of income Tax Act. 1961 may be issued in accordance with the law calling for specific details necessary for the issues under inquiry. Calling for general details not germane to the subject matter are avoidable. Personal attendance should be avoided, as far as possible. Repeated personal attendance is certainly avoidable. Production of books of accounts and other documents for 6 years should not be insisted upon as a matter of routine. The nature and extent of enquiries should be commensurate with the facts at hand and the expected outcome. viii. On conclusion of inquiries, if the findings suggest fair possibility of assessment of additional income/wealth, a report should be sent to the AO with copies to the Range Head CIT concerned along with all the relevant supporting material for further necessary action. ix. The inquiry and final disposal of STRs in Category A/P1 cases should be completed within 90 days of receipt and in other cases within 120 days, unless the DGIT decides to keep them pending. x. Add/Joint DIT shall monitor the progress of the work case-wise every month.Similarly, DIT DGIT shall conduct monthly reviews at their levels. xi. Category A/P1 STRs shall be closed by the Addl/Joint DIT only after approval of the DGIT and Other Category STRs shall be closed by the Addl/Joint DIT only after approval of the DIT. xii. Timely feedback Reports (Interim or final) in the format prescribed at Annex-A should be sent to the Nodal Officer of the Board viz., DS/Director-Inv.IV. xiii. The DGIT shall closely monitor receipt, dissemination, investigation, disposal, reporting and confidentiality of STRs and include the progress report in the monthly DO to the Member (Inv) which is to reach him before 10th of the following month. Such progress report may include the following particulars: 1 2 3 4 5 6 7 Category Opening balance in the beginning of the month Received during the month Transferred of during the month Disposed of during the month Pending at the end of the month Pending for more than 120 days, out of col.6 A/P1 Others Total xiv. The above guidelines are not exhaustive. The Addl DsIT/JDIT may take suitable decision on a case to case basis for the situations not stated above. But in doing so, he shall follow the general principles enunciated in the above guidelines so that the investigation process is expeditious and purposeful. 7. The above guidelines may be brought to the notice of all concerned for due compliance. (R.K.Yadav) Commissioner (Inv) Tele-fax : 011-23092177 e-mail : [email protected]