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Clash of Cash: 7 Questions by Tax Officer v/s Cash Depositor

CA Umesh Sharma 
on 07 February 2017

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Arjuna (Fictional Character): Krishna, after 1st February 2017 the Income-tax Department is sending tax notices to the taxpayers through e-mails and SMS. How taxpayers will reply to these notices and why are these notices sent to persons who have deposited cash in bank accounts, please explain in detail.

Krishna (Fictional Character): Arjuna, the Income Tax Department has launched an operation catch the tax evaders. The name of this operation is "Swachh Dhan Abhiyan". The Income-tax Department has the information relating to the persons who have deposited cash in the bank accounts during the period from 9th November 2016 to 30th December 2016. With the help of this information, the income tax department has selected different criteria of taxpayers for sending tax notices. In the first batch, the Income Tax Department have sent notices to 18 Lakh people through e-mails and SMS from 1st February onwards. The information regarding this notices has been sent through registered mobile number and e-mail IDs. It is mentioned in the SMS to respond the notices while in e-mails the information of cash deposited is given. After the taxpayer have logged in on the income tax department's website, he can get to know in which bank the cash is deposited. It is said that the taxpayer has to respond to this notice within 10 days. The taxpayer has to give answers online, there is no need of going to Income Tax Department. For this purpose Press Release was issued by the Income Tax Department on 31st January 2017. Even guidelines for answering the notices has been given. 

Arjuna: Krishna, What are the questions asked in these income tax notices?

Krishna: Arjuna, Firstly the taxpayer has to login on the website of Income tax Department. Click on the "Cash Transactions 2016" link under "Compliance" option. This link will show the name of bank, account number and cash deposited in the bank. The user is provided with two options i.e.

1) "The Account relates to this PAN". If this option is selected then the taxpayers have to give the detailed information.

2) "The Account does not relates to this PAN". If this option is selected then Income Tax Department will verify the same. If the first option is selected, the taxpayers have to mention the cash deposited in bank between 9th November to 30th December, 2016.

Later, out of 7 questions, taxpayer has to answer the questions as applicable to him.

Following are the 7 Questions:

1) If Cash is withdrawn out of bank account and from that it is deposited in bank after 9th November then the user has to mention the name of the bank, IFSC code, account number, amount deposited and comments if any.

2) If Cash received from identifiable person and PAN information is available then user has to mention PAN of the person, Name of the person, Nature of transaction, Amount received and comments if any. The Nature of Transactions is divided into 6 options i.e.

  • Cash Sales
  • Loan received in cash
  • Loan repayment in cash
  • Gift received in cash
  • Donation received in Cash and
  • Other Cash Receipts.

3) If Cash received from identifiable person and PAN information is not available then user has to mention name of the person, Address of the person, PIN code,  Nature of transaction (From the above 6 options) and amount  of transaction.

4) If Cash received from Un-identifiable person and no information is available than Nature of transaction(from the above 6 options), amount and comments are to be mentioned.

5) If Cash deposited in account is exempt from tax then Amount and comments are to be given. For example, income received from agricultural goods.

6) If Cash deposited is out of earlier income or savings then Amount and comments are to be given.

7) If Cash deposited is disclosed or to be disclosed under Pradhan Mantri Garib Kalyan Yojna then the amount is to be mentioned.

Arjuna: Krishna, what care should be taken while giving the above information to the taxpayers.

Krishna: The information given by the taxpayer to the Income Tax Department, should be reconciled with the books of accounts and income tax returns filed. Similarly, the bank statements should also be reconciled. If the information given is incorrect then the taxpayer has to face the consequences. Further, the taxpayer can revise the online submitted answer by rectifying it.

Arjuna: Krishna, what will be the consequences if the taxpayer does not reply to the notices or after the reply to the notice what income tax department will do?

Krishna: If the taxpayer does not reply to the notices then he has to face enforcement actions of the income tax. If the income tax department is satisfied with the answer then further notices will not be sent. And if it is not satisfactory then taxpayer will have to face further notices.

Arjuna: What taxpayers should learn from this?

Krishna: If any individual attempts for the tax evasion then he has to face the consequences. Here “as you sow, so shall you reap” proverb is applicable. So now everyone should pay tax on the income and participate in the growth of the country, and should correct the earlier mistakes by paying the taxes. Government should take care in such a way that the taxpayer paying tax should not face any problem, or else those people will face both the consequences of demonetization and will get hit by income tax. It seems that it is new game of Clash of Cash between Tax Officer and Cash Depositor.


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