​​Respond to IT mails to avoid Taxman's visit.

CBDT issues Standard Operating Procedures to verify taxpayers’ cash transactions

SECTION 143 OF THE INCOME-TAX ACT, 1961 - ASSESSMENT - GENERAL - STANDARD OPERATING PROCEDURE (SOP) TO BE FOLLOWED BY ASSESSING OFFICERS IN VERIFICATION OF CASH TRANSACTIONS RELATING TO DEMONETISATION
INSTRUCTION NO.3/2017 [F.NO.225/100/2017/ITA-II]DATED 21-2-2017

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Operation Clean Money: 7.3L explain cash deposits made during demonetisation

About 40% of people who were told to explain their cash deposit during the demonetisation period have done it by the February 15 deadline set by the income-tax department.

“7.3 lakh people have logged online to offer their explanation,” a senior government official told ET. The I-T department had asked 18 lakh people to explain their cash deposits.

“The department will now decide the next course of action for the 10.7 lakh people who have not responded,” he said.

The department had last week extended the deadline for providing explanation for deposits and also issued a set of clarifications through FAQs to address all queries.

It had, under 'Operation Clean Money' initiative, sent SMS and emails to 18 lakh people with deposits of over Rs 5 lakh during the 50-day window that was seen to be inconsistent with their income.

The department has roped in outside experts to work on the data to catch more suspect transactions.

It is expected to come up with a new list of people for enquiry after deeper analysis of the data for the demonetisation period.

I-T sleuths are now examining the responses offered by 7.3 lakh assesses. The department expects many of them to avail the Pradhan Mantri Garib Kalyan Yojana, 2016, by March 31, paying 50% tax and putting 25% of the amount in four-year interest free deposit.

Tax experts ET spoke to say the I-T department may have to send formal income tax notices to the 10.7 lakh people who have not offered any explanation for their deposit as SMS and email correspondences do not have any legal backing.

This is likely only after March 31 when the Pradhan Mantri Garib Kalyan Yojana ends, as there is a chance some of these people declare these deposits under the scheme.

Read more at:
http://economictimes.indiatimes.com
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Expect a visit from taxman if you've ignored I-T Dept's email

Income Tax officials could soon be at your doorstep if you have deposited a huge amount during the note-swapping exercise last year, and have not yet explained the source of the cash. "We have tried to keep the exercise non-intrusive. But if people have not come forward, then some kind of verification is needed especially in cases that involve deposits of large sums," a senior income-tax department official told ET.

Under the 'Operation Clean Money', the I-T department had sent out SMSes and e-mails to about 18 lakh people who deposited over Rs 5 lakh each during the 50-day window from November 10 to December 30, because the desposits did not tally with their income.

The depositors were asked by the I-T department to explain the source of the money by logging in to its portal. By February 15, about 7.3 lakh people responded to the emails and explained their deposits.

According to the official, the department is now contemplating issuing notices or carrying out surveys in cases where no response has come or the replies are unsatisfactory.

"In cases where responses are not satisfactory, notices would be issued. In some cases where big sums are involved and response is not satisfactory, surveys could be carried out," the official said, adding that people could be also asked to come to income-tax offices or tax officers may pay them a visit.
People with unexplained deposits during the demonetisation period have the opportunity to avail the Pradhan Mantri Garib Kalyan Yojana (PMGKY) by paying 50 per cent tax and depositing 25 per cent in non-interest bearing scheme for four years.

Incidentally, the I-T department is soon expected to send out the next batch of emails and SMSes, beginning the part two of the 'Operation Clean Money', which will target suspicious deposits below Rs 5 lakh identified through data analytics.
The department is examining the voluminous data received from banks on deposits made during the 50-day period. It is also hiring external experts to work on the data to identify splitting of deposits or use of other means to evade notice.
Read more at:
http://economictimes.indiatimes.com

The department is examining the voluminous data received from banks on deposits made during the 50-day period. It is also hiring external experts to work on the data to identify splitting of deposits or use of other means to evade notice.

Read more at:
http://economictimes.indiatimes.com/articleshow/57265638.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
Income Tax officials could soon be at your doorstep if you have deposited a huge amount during the note-swapping exercise last year, and have not yet explained the source of the cash. "We have tried to keep the exercise non-intrusive. But if people have not come forward, then some kind of verification is needed especially in cases that involve deposits of large sums," a senior income-tax department official told ET.

Under the 'Operation Clean Money', the I-T department had sent out SMSes and e-mails to about 18 lakh people who deposited over Rs 5 lakh each during the 50-day window from November 10 to December 30, because the desposits did not tally with their income.

The depositors were asked by the I-T department to explain the source of the money by logging in to its portal. By February 15, about 7.3 lakh people responded to the emails and explained their deposits.

According to the official, the department is now contemplating issuing notices or carrying out surveys in cases where no response has come or the replies are unsatisfactory.

"In cases where responses are not satisfactory, notices would be issued. In some cases where big sums are involved and response is not satisfactory, surveys could be carried out," the official said, adding that people could be also asked to come to income-tax offices or tax officers may pay them a visit.
People with unexplained deposits during the demonetisation period have the opportunity to avail the Pradhan Mantri Garib Kalyan Yojana (PMGKY) by paying 50 per cent tax and depositing 25 per cent in non-interest bearing scheme for four years.

Incidentally, the I-T department is soon expected to send out the next batch of emails and SMSes, beginning the part two of the 'Operation Clean Money', which will target suspicious deposits below Rs 5 lakh identified through data analytics.
The department is examining the voluminous data received from banks on deposits made during the 50-day period. It is also hiring external experts to work on the data to identify splitting of deposits or use of other means to evade notice.

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Operation Clean Money gets Overwhelming Response

Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
New Delhi, 13th February, 2017
.
PRESS RELEASE
Income Tax Department’s Operation Clean Money gets Overwhelming Response

The Income Tax Department(ITD) had initiated ‘Operation Clean Money’ on 31st January, 2017 for the e-verification of large cash deposits made during 9th November to 30th December, 2016. Email and SMS were sent to 18 lakh taxpayers for submitting online response on the e-filing portal.

The operation has seen an overwhelming response and till 12th February, 2017 more than 5.27 Lakh taxpayers have already submitted their response. Out of the 7.41 Lakh accounts confirmed by the 5.27 Lakh taxpayers, the cash deposit amount has been confirmed in more than 99.5% accounts.The Department is encouraged to note that taxpayers have increased the cash deposit amount in nearly 90,000 accounts and provided details of additional 25,000 bank accounts in which cash was deposited. The explanation of cash deposit submitted by the taxpayer is being analysed in the context of nature of business and business profile in the earlier returns of the tax payer.

This exercise has identified around 4.84 lakh taxpayers not yet registered with the e-filing portal. SMS has been sent on the mobile number of these unregistered persons.Income Tax Department is keeping a vigil on the PAN holders who have still not registered on the e-filing portal or who have not yet submitted their online response.Such taxpayers are advised to register themselves at the e-filing portal https://incometaxindiaefiling.gov.in.and submit online explanation.In order to facilitate online responses, the last date for their submission has been extended up to 15th February, 2017 and a detailed Frequently Asked Question (FAQs) has also been issued to assist the taxpayers in submitting their response. The taxpayers should submit their response within this further extended period with a view to avoid enforcement actions under the Income-tax Act and other applicable laws.

(Meenakshi J Goswami)
Commissioner of Income Tax
(Media & Technical Policy)
Official Spokesperson, CBDT.

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​Tax Dept need not reveal reason for raid even to Appellate Tribunal, proposes Budget 2017

Budget 2017 was delivered at a time when one is still reeling under the impact of demonetisation. In fact, the actual process of unearthing unaccounted wealth has already started. 

The Central Board of Direct Taxes (CBDT) recently identified and sent communication to 18 lakh individuals asking them to explain cash deposits made in their bank accounts. It will also be sending notices to holders of those accounts where a potential tax evasion has been detected. 

The role of the Income-tax Department (ITD) will be important in making the defaulters accountable and pay up for any tax evasion. Budget 2017 has put forth at least four proposals to help the ITD take necessary action. 

Power to call for information 
Budget 2017 proposes that the power in respect of inquiry or proceeding may also be exercised by the Joint Director, the Deputy Director and the Assistant Director. And for this, they need not seek prior approval of higher authorities. 

The existing provisions of Section 133 empower certain I-T authorities to call for information for the purpose of any inquiry or proceeding under the I-T Act. But in a case where no proceeding is pending, these powers shall not be exercised by any I-T authority below the rank of the Principal Director or Director or the Principal Commissioner or Commissioner without the prior approval of such authorities. Budget 2017, however, proposes to grant powers to Joint Director, the Deputy Director and the Assistant Director too. 

Reason to believe to conduct a search, etc., not to be disclosed 
Under Section 132, the IT authority, based on the information in his possession, and if there is 'reason to believe' or 'reason to suspect' of circumstances, may authorise another authority to carry out search and seizure operation. Also, under Section 132A, he may authorise some other officer or another IT authority to deliver books of account, documents or assets of the assessee to the I-T authority so authorised. 

However, as per Budget 2017, certain judicial pronouncements have created ambiguity in respect of the disclosure of 'reason to believe' or 'reason to suspect' recorded by the I-T authority to conduct search under Section 132 or to make requisition under Section 132A. 

Budget 2017, therefore, proposes to insert an explanation to Section 132 and Section 132A to declare that the 'reason to believe' or 'reason to suspect', as the case may be, shall not be disclosed to any person or any authority or the Appellate Tribunal. 

Helping hand to I-T Department from CBDT 
It is well acknowledged fact that the I-T department will be short of manpower when it comes to collecting post demonetisation data. The IT authority may issue notice under Section 133C calling for information and documents for the purpose of verification of information in its possession. 

But sending notices itself can take a long time. And therefore, the CBDT is helping in centralised issuance of notices and calling for information and documents for the purpose of verification of information in its possession, processing of such documents and making the outcome thereof available to the Assessing Officer for necessary action, if any. 

Extension of power to survey charitable trusts 
Budget 2017 proposes to empower an I-T authority to enter any place at which an activity for charitable purpose is carried on. Currently, the provisions of Section 133A empower an I-T authority to enter any place of business or profession, but exclude activity for charitable purposes. 

Read more at:
http://economictimes.indiatimes.com
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Disallowance of depreciation under section 32 and capital expenditure under section 35AD on cash payment

Under the existing provisions of the Act, revenue expenditure incurred in cash exceeding certain monetary threshold is not allowable as per sub-section (3) of section 40A of the Act except in specified circumstances as referred to in Rule 6DD of the Income-tax Rules, 1962. However, there is no provision to disallow the capital expenditure incurred in cash. Further, section 35AD of the Act , inter-alia provides for investment linked deduction on the amount capital expenditure incurred, wholly or exclusively for the purposes of business, during the previous year for a specified business except capital expenditure incurred for acquisition of any land or goodwill or financial instrument.

In order to discourage cash transactions even for capital expenditure, it is proposed to amend the provisions of section 43 of the Act to provide that where an assessee incurs any expenditure for acquisition of any asset in respect which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft or use of electronic clearing system through a bank account, exceeds ten thousand rupees, such expenditure shall be ignored for the purposes of determination of actual cost of such asset.

It is further proposed to amend section 35AD of the Act to provide that any expenditure in respect of which payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account, exceeds ten thousand rupees, no deduction shall be allowed in respect of such expenditure.

These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years
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Deduction of tax at source in the case of certain Individuals and Hindu undivided family paying rent

The existing provisions of section 194-I of the Act, inter alia, provide for deduction of tax at source at the time of credit or payment of rent to the account of the payee beyond a threshold limit. It is further provide that an Individual or a Hindu undivided family who is liable for tax audit under section 44AB for any financial year immediately preceding the financial year in which such income by way of rent is credited or paid shall be required to deduction of tax at source under this section.

Therefore, under the existing provisions of the aforesaid section, an Individual and HUF, being a payer (other than those liable for tax audit) are out of the scope of section 194-I of the Act.

In order to widen the scope of tax deduction at source, it is proposed to insert a new section 194-IB in the Act to provide that Individuals or a HUF (other than those covered under 44AB of the Act), responsible for paying to a resident any income by way of rent exceeding fifty thousand rupees for a month or part of month during the previous year, shall deduct an amount equal to five per cent. of such income as income-tax thereon.

It is further proposed that tax shall be deducted on such income at the time of credit of rent, for the last month of the previous year or the last month of tenancy if the property is vacated during the year, as the case may be, to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.

In order to reduce the compliance burden, it is further proposed that the deductor shall not be required to obtain tax deduction account number (TAN) as per section 203A of the Act. It is also proposed that the deductor shall be liable to deduct tax only once in a previous year.

It is also proposed to provide that where the tax is required to be deducted as per the provisions of section 206AA, such deduction shall not exceed the amount of rent payable for the last month of the previous year or the last month of the tenancy, as the case may be.

This amendment will take effect from 1st June, 2017.
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No sec. 14A disallowance when no exempt income is earned during the year

Where there is no exempt income in relevant year, there cannot be a disallowance of expenditure under section 14A in relation to any assumed income

Refer:[2017] 77 taxmann.com 257 (Madras)
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Sachin Tendulkar gets favourable ruling from ITAT in capital gain tax case

Where assessee's major income constituted of income from sports endorsement and that entire investment in shares was made out of his own funds and investment in shares with Portfolio Managers was a meagre percentage of assessee's total investments, income on sale of shares and mutual funds was to be taxable under head capital gains and not business income

• The Assessing officer had treated gains arising on sale of shares as business income on ground that assessee had engaged the services of Portfolio Managers (PM) for which a huge amount of PMS charges were paid to them. However, it was noted that investment in shares with PM was merely to the extent of 4.8 per cent of assessee's total investments. Further, it was also noted that assessee had always disclosed amounts invested in shares under the head investments. Moreover, in view of CBDT Circular No.6 of 2016 dated 29-2-2016) and Circular No.4 of 2007 dated 15-6-2007, the initial choice of characterization of share portfolio as investment or stock in trade was with assessee and the assessee had exercised its choice and kept the same as part of investments. The Assessing Officer did not have liberty under the law to thrust his opinion upon the assessee, so long as the assessee followed his choice on consistent basis. Thus, income on sale of shares and mutual funds was to be taxable under head capital gains and not business income
Refer:[2017] 77 taxmann.com 305 (Mumbai - Trib.)
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Quoting of PAN in all the existing bank accounts and other measures

Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
***
PRESS RELEASE
                                                                New Delhi, 8th January, 2017
Quoting of PAN in all the existing bank accounts and other measures
 
Income - tax Rules have been amended to provide that bank shall obtain and link PAN or Form No. 60 (where PAN is not available) in all existing bank accounts (other than BSBDA) by 28.02.2017, if not already done. In this connection, it may be mentioned that RBI vide circular dated 15.12.2016 has mandated that no withdrawal shall be allowed from the accounts having substantial credit balance/deposits if PAN or Form No.60 is not provided in respect of such accounts. Therefore, persons who are having bank account but have not submitted PAN or Form No.60 are advised to submit the PAN or Form No. 60 to the bank by 28.2.2017.
2. The banks and post offices have also been mandated to submit information in respect of cash deposits from 1.4.2016 to 8.11.2016 in accounts where the cash deposits during the period 9.11.2016 to 30.12.2016 exceeds the specified limits.
3.It has also been provided that person who is required to obtain PAN or Form No.60 shall record the PAN/Form.No.60 in all the documents and quote the same in all the reports submitted to the Income-
tax Department.
4.The notification amending the relevant rules is available on the official website of the Income-tax Department i.e. www.incometaxindia.gov.in
 
(Dr. Binod K. Sinha)
Commissioner of Income Tax
(Media and Technical Policy)
Official spokesperson, CBDT
.
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