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Withdrawl of cash by assessee

abhishek (student) (26 Points)

28 July 2014

if an assessee has widdrawn cash of more than Rs. 1cr in a financial year which has already been taxed at source wat would b the tax implications if he has purchased small properties in cash say 25lakhs x4 ?

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5 Replies

Tribhuvan Aditya Singh (Student as well as Self-employed) (3710 Points)
Replied 28 July 2014

this transaction is violating a very imp sec of 40A(3) relating to limit of cash payments..... i am afraid if i.t.dept. comes to know fact of this transaction then it will disallow such payments and tax it again as income of the assessee for the year even though it had already been taxed earlier.

M. N. JHA (CA) (8316 Points)
Replied 28 July 2014

Originally posted by : Tribhuvan Aditya Singh
	this transaction is violating a very imp sec of 40A(3) relating to limit of cash payments..... i am afraid if i.t.dept. comes to know fact of this transaction then it will disallow such payments and tax it again as income of the assessee for the year even though it had already been taxed earlier.

please clear why section 40A(3) attract here ??

Mihir (Wealth Manager) (5293 Points)
Replied 29 July 2014

Little risky. Even if he has paid the taxes on that income, cash transaction will always raise questions, and may open your IT file for scrutiny.

abhishek (student) (26 Points)
Replied 29 July 2014

m not claiming any business expenditure for 40a(3) to be applicable, m using cash for purchase of an asset, the cash which is being used is already been taxed at source, just wana know the treatment of cash that wud b realised at the point of sale of the property.

Tribhuvan Aditya Singh (Student as well as Self-employed) (3710 Points)
Replied 29 July 2014

@ m.n.jha.... as i can recall, sec 40A(3) covers all payments made during a day and not just expenses charged to P&L A/c..... and so accordingly 40A(3) should apply in this case.