The relevant provisions, contained in Section 115BBE of the Income Tax Act, require the government to tax unexplained money, cash credits, investments, assets and expenditure that an assessee cannot satisfactorily explain at a much higher rate than normal income.
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Many of the cases related to assessment year 2017-18, corresponding to the demonetisation during financial year 2016-17, when the Income Tax Department received information on suspicious cash deposits and transactions and undertook action under its Operation Clean Money initiative.
The cases also arose from information received from other sources, unexplained entries in books and bank accounts, and taxpayers failing to satisfactorily explain transactions or respond to departmental notices.
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The Comptroller and Auditor General found that 1,728 of the 1,902 cases resulted in under assessment or under charge of ₹23,769 crore while 174 cases involved excess assessment or excess tax charge of ₹1,316 crore. In 589 cases involving ₹18,799 crore, assessing officers did not apply the relevant section even though transactions were found to be bogus or their sources remained unexplained.