Authentication of Cash Deposit by Income Tax Department

Authentication of Cash Deposit by Income Tax Department

After the scenario of demonetization, large cash deposits were done. As a result, income tax department initiated a robust inspection and maintained documents such as bank statements, passbooks, sales and land records. Furthermore, the income tax department shall make the documents available to the taxpayer, so that he or she can claim the large cash deposited by them. This amount can be acquired either from income, which is excluded from tax when it is agricultural income or the cash is obtained from an anonymous person. In the latter case, cash can also be withdrawn from own bank accounts.

What is Operation Clean Money?

After large cash is deposited in bank accounts, a new initiative is taken by the income tax department. The primary aim of this initiative is to scrutinize the foundation of all cash deposits. This is done in order to verify if the source of income is generated from a legally affirmed income. In addition, details of almost 10.9 million accounts are retained by the income tax department. These details show that there exists deposits that extend from Rs 2 lakhs to Rs 80 lakhs and deposits were made in the interval between 10th November and 30th December. Furthermore, nearly 14,800 accounts have also been recognized with deposits beyond Rs. 80 lakhs. Notices were sent to 1.8 million taxpayers who have made cash deposits beyond Rs. 5 lakhs, that are not in association with their income tax returns by the income tax department .The Central Board of Direct Taxes or CBDT has put forward a detailed customary operating procedure, which acts as a guideline for the assessing officers. This contributes to confirming the foundation of the cash deposits as declared by the taxpayer as a share Operation Clean Money. To clarify this further, let us assume that when a business assigns the cash deposits to cash acknowledged from indistinguishable entities, then the officer in charge will have to corroborate whether the dealings are in association and in accord with the customary cash flow of the corporation .The officer is eligible to examine information such as monthly sales summation with the division of cash and credit sales mentioned in it. In addition, the officer may examine stock registers and bank statements to make sure there are no back-dating of cash sales or conjured corporation transactions.

What is the role of assessing Officers in Operation Clean Money?

The role of an Assessing officer is as follows:

1. Firstly, the Assessing Officers has the responsibility to look for an aberrant skip in cash sales from November till December period. This is mainly done in case of non-identifiable persons.
2. In case of multiple deposits in the bank accounts in the closing stages of the demonetization period, then the non-availability of stock as well as escalated stocks that enables fabricated purchases or bank transfers to other accounts or units, but are not associated with the preceding transaction patterns, then such deposits will be verified.
3. When the deposits are accredited to the cash extracted from bank accounts, then the Assessing Officer shall verify the pattern of withdrawals as well as how close in proximity they were against the declaration of demonetization.
4. Under any circumstances, if the deposits have been differentiated as agricultural income, then the assessing officer has the right to demand the land records to corroborate if the earnings acknowledged are correlated to the land holdings.

PAN and Information Certification

1. Evaluation is necessary when individuals are required to deliver their PAN if they already have it. In the absence of a PAN, one has to apply instantaneously for PAN to NSDL or UTIISL.
2. It is also essential to elucidate the source of the high-value funds or deposits and/or expenditure. In addition, it should be verified whether these are suitably accounted for or justified in the income tax return filed by the taxpayers.
3. In case of entities, those who have not appropriately provided an explanation for the elevated value transactions, they are required to pay due to taxes and file the income tax return within the existing financial year. This process is mandatory. In order to provide such information, an individual does not have to the visit tax office. Details can be forwarded by speed or registered post.
4. Furthermore, there exists penal damage when PAN is not obtained or reported. When proper taxes are not paid, and then the penalty can be imposed can reach up to 300% of the unpaid tax. In some cases, there is a probability of prosecution in some cases.

What is need of Field Visit?

Tax officials are required to visit the premises of the high-value shareholders or depositors or spenders on some occasions. Under such circumstances, the taxpayer must substantiate the identity of the tax official prior to providing of information in the approved document. The taxpayer may contact the Assessing Officer or the Additional or Joint Commissioner or the Commissioner concerned in case of any grievance or complaint. Moreover, the appointed tax official is obligated to provide the telephone numbers of his supervisory officers. Income Tax Department has authorized online authentication of high-value transactions. This step was taken to decrease the acquiescence cost for the taxpayers while optimizing its capital. When an individual receives a mail or SMS or a notice is sent, then the person is required to respond within 10 days. The reply to this notice has to be presented in two phases.Firstly, the individual has to recognize whether the transaction information belongs to him or her. During every transaction, a message will be shown, the individual has to choose between:

“The account relates to this PAN” Or “The account does not relate to this PAN”.

When the individual chooses, “The account relates to this PAN”, then the individual has to disclose the details of the transaction.

In conclusion, “Authentication of Cash Deposit by Income Tax Department”, provides crucial information, which is necessary for all taxpayers.