I-T Department tightens its scrutiny of cash deposits post note ban

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    The tax department will verify if the cash transactions shown are in line with the normal business during the given period of a year.

    Tightening its scrutiny of cash deposits post the note ban, the Tax Department is closely looking at any business entity showing a sudden spurt in cash sales in November and December in a bid to detect the possible tax evasion.

    In every case of abnormal increase in cash sales, the Tax Department will match the sales and inventory data claimed by any company, enterprise or trading establishment with those of prior months to find out if black money was being camouflaged as business sales, according to a PTI report.

    On the taxman’s radar are traders and business establishments that have shown a sudden rise in cash sales or inventory purchase immediately after November 8 when the government unveiled its decision to demonetise old 500 and 1,000 rupee notes.

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    “There are instances of business entities depositing higher taxes (VAT and excise duty) after claiming a rise in sales or inventories being cleared,” a senior government official told PTI, adding that the government had allowed use of the junked currency to pay statutory dues in the immediate aftermath of demonetisation.

    The tax department will verify if the cash transactions shown are in line with the normal business during the given period of a year. For this, taxmen will look into monthly sales summary with break-up of cash and credit sales as well as historic bank statements to identify cases of back-dating of cash or fictitious sales.

    “The idea is to catch anyone using the garb of a business entity to convert unaccounted cash (black money) to white using the 50-day period provided to deposit holding of old currency in bank accounts,” the official said.
    Any growth in cash sales during November 9 to December 30, 2016, or any abnormal jump in percentage of cash sales to unidentifiable persons compared to the earlier history is also going to attract the I-T glare.

    Transfer from bank accounts after the cash is deposited to any entity not related to the business will also be closely examined, he said, adding that cash donations will also be looked into. Non-availability of stock or attempts to inflate stock by introducing fictitious purchases will also be part of the investigation.

    The official said that like individuals, any company, partnership or proprietorship can also avail of the tax amnesty scheme — the Pradhan Mantri Garib Kalyan Yojana (PMGKY).

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    They can disclose unaccounted cash, pay up 50 per cent tax, deposit another quarter in a zero-interest bearing 4-year deposit and claim amnesty.

    The tax department, however, will ascertain if the tax is actually being deposited and evidence of the deposit being made before closing the verification, he added.

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