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This article is in for the interest of general public to avoid any harassment by the Income-tax (IT) Department in future and share it as much as possible for the sake of general public:

After announcement by our PM Modi for withdrawal of Legal Tender Character of the Old high Denomination (OHD) Bank Notes i.e. Rs.500 & Rs.1,000 currency notes, people are in a rush and waiting for banks to be open on Nov 10th, 2016 to deposit their cash in hand so that it would not become only  a piece of paper.

Below are some points mentioned to be taken care while depositing the cash into the bank accounts (Saving/Current) and the IT proceedings if these do not taken care of:

1. Do not deposit cash more than Rs. 2 lakh at one time & 10 lakh cash in a year (1.4.16 to 31.3.17) in saving bank account.

Reason: This is because if you deposit cash more than the above specifies limits, you may get a notice from the IT Department (Explained below in detail). Now your question must be how do IT department will get to know that you have deposited how much cash in your accounts so to remind you the banks must have taken your Aadhar Card number & PAN details in KYC policies and also while filing your IT return for some past few years, IT department have collected such information from you like Aadhar Card, Passport, Bank details etc. Weather you submitted these details to the bank or not, but by virtue of section 285BA of IT Act 1961, all banks are required to give the detail in Annual Information Return (AIR) of 'high value financial transactions'(Account in which cash is deposited more than the above specified limit)to the IT Department by 31st August of the following year.

Advice: Do not deposit in your account above then the specified limit until & unless you can explain the source of that surplus cash. Contact your financial advisor.

2. If you are dealing in some business and have the current accounts, then before depositing the cash into the bank, you must prepare your book of accounts (herein after referred to as BOA’s) upto the date of deposit so then you can deposit the cash as much as you have in your BOA’s. There is no such restrictions to accept the old notes (Upto Dec 30th) if you are recording that sale in your BOA’s until you are dealing in some specified business and require to take some more details from the buyer (E.g: Pan Card in case of sale of jewellery & bullion above the specified limit).

Reason: If you have the cash in your BOA’s then you are having the explanation for the source of the same.

Advice: Some businessman may try to bring the unaccounted cash into their BOA’s by showing bogus sales so before entering such malpractices, consult with your financial advisor.

Before going in further details do we know what black money is?

Black money refers to the sum that you own which is unaccounted i.e. which you have not declared to the income tax department as having earned or received. In simple words, the amount on which tax was payable to the government as per the income tax laws, but, the sum was hidden or not disclosed to the department in order to evade the tax payment

So now I would like to give you a brief of IT proceedings, fines, penalties and prosecution, you may suffer if you are not taking care of above points or if you are having unaccounted money:

CASE-I: Someone who has never filed return deposits unaccounted money

"Let's start with a case study, in which a person has unaccounted money (Black money) with him, and he has not filed any Income Tax Return (ITR) in earlier years. Say, this man has not received any notice from the Income tax department and has been successful in concealing his income so far.

The possible consequences he might have to face as per the provisions of current Income tax laws if he is found to have deposited unaccounted money are as follows:

Launch of new currency notes and ban on old notes of Rs 500 and Rs 1000 will force the assessee to get his cash exchanged or deposit it in banks. While depositing the unaccounted cash into his bank account or exchanging he will have to submit his PAN and other details to the banking officials. This would make the likelihood of his case being caught by the Income-tax Department very high.  As a result, he would be likely to get any one of the following notices from the income tax department asking him the source of this amount deposited by him in the bank:

1. Notice under section 142(1):

This notice would require him to furnish his ITR within the time period allowed in the notice which is normally 15 days. Further, the Assessing officer (A.O) would require him to produce his books of account, other documents and information. You might be astonished but here the A.O has powers even to enquire about your personal belongings and can ask you to submit your personal books of accounts. This notice can ask for information relating to the 3 years immediately preceding the financial year for which assessment is to be made.

Generally, this notice would come along with a notice under section 144, 148 or 153A.

If you don't comply with notice under section 142(1):

If the assessee does not comply with the directions, conditions specified in the notice, then he might have to face best judgement assessment under section 144 - this means that the A.O will assess your income and impose tax and penalty as per his own judgement. Also, in this case, the A.O would not be liable to issue you any show cause notice under section 144 meaning that you would not be given any opportunity to convince the AO that section 144 should not be imposed on you.

Further, not complying with the notice directives would lead to a prescribed fine. Apart from this, you might end up in prison for up to 1 year.

Also, a penalty of Rs 10,000 will be levied on you for not complying. However, this penalty would not be imposed in case you satisfy your A.O. that there were reasonable causes for not complying with the notice directives in time (such as death in family)

2. Notice under section 148:

You might receive a notice under this section in which case you would be subject to 'income escaping assessment.' This assessment is done under section 147 and the A.O has very wide powers while doing this assessment.

Here the A.O can open your assessment for the last 6 financial years i.e. he can ask you to explain source of your income , provide income related proofs etc for the last 6 years.

The A.O can ask for all the documents he thinks are necessary for him to compute your true income and finally assess your correct income and thereafter issue you a notice under section 156 demanding the amount of tax payable by you (as re-calculated by him), along with interest and penalties and prosecution.

3. Assessment under section 153A i.e. income tax raid:

After detecting your unaccounted income deposits, the tax department may decide to conduct an income tax raid at your place to find out other assets like gold, property papers, benami transactions etc in your possession/ ownership. In such a case you would not get any advance notice. Such search and seizure proceedings are the most aggressive step which can be taken by the income tax department and hope that you are not the one who gets in its ambit.

4. Directions under section 144A:

If your income tax return for any year is already being assessed under any section other than the normal self assessment, then your case could be hurt if you are detected depositing unaccounted income. The tax law permits the joint commissioner to instruct your A.O to take a stricter view of your case pending before him.

CASE-II-Someone who has not declared full income in returns filed

Let us take the case of a person who has filed the ITR for earlier years but the income declared in his returns is way less than what he was actually earning/receiving. Consequently, he has been evading tax. The consequences these people might have to face as per the provisions of current Income tax laws are as follows.

1. Notice under section 143(2):

You might receive a notice under section 143(2) which simply means that your case has been picked up for scrutiny by the income tax department. Now you would be asked to submit the evidences to substantiate the income declared in your ITR. For the financial year 2015-16, a notice under this section can be issued till 30.9.2017(assuming you filed your return in F.Y 15-16). In the notice, the A.O can ask for books and accounts for any number of previous years.

Finally, an assessment order under section 143(3) will be issued to you along with a notice to pay additional tax, interest thereon and penalty charges.

2. Notice under section 148 and section 153A can be issued here as well as illustrated above.

So I request you all that before you land up yourself in a tax scrutiny assessment, please take care of above all points and contact your financial advisor.


Published by

CA Keshav
(Student CA Final )
Category Income Tax   Report

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