My company is a partnership firm, they keep somewhat around 40 lacs to 50 Lacs in their Cash A/c. The turnover of the company is around 18 crores. Is it feasible to keep such a ransom amount as cash balance. Also there are no expenses against the same. Will it create any problem in future or will it attract any scrutiny by an assessing officer. I have tried and asked my boss about the physical cash but he says there is no physical cash available of such amount but book shows some what around 40 lacs cash. Please let me know the effect of it in the long run.
15 April 2012
There is no limit prescribed for holding cash anywhere in the act except W.T Act where the limit of only Rs. 50,000/- has been fixed and above that is liable for W.T.
If your company has borrowed funds and the money is lying in cash in hand then the ITO may disallow the interest on your cash holding as you have not utilised the borrowed funds and unnecessary paying the t interest or otherwise the cash balance shown is nothing but false cash in hand.
You should have the cash in hand insurance policy to justify your cash holding
15 April 2012
It is very necessary to hold the cash balance physically as shown in books of accounts, otherwise it may leads to contraversy at the time survey or IT raids. The difference amount between physical cash and cash balance recored in books on the day end will be considered as income if sources are shown or if it concealed then auch difference amount penalised u/s 271 (1) (c)
16 April 2012
While I agree with the other experts in part or full, I humbly feel that this issue cannot be addressed in this forum. I mean there is no one answer to this and may necessitate professional assistance.
CAclubindia
