On November 8, 2016, the Prime Minister of India, Narendra Modi had announced the Demonetization of all Rs 500 and Rs 1,000 banknotes as a surprise. It also announced the issuance of new Rs 500 and Rs 2,000 banknotes.
Earlier, CBDT had launched the “Operation Clean Money (OCM) to check black money post demonetization and have given deadline to assessing officers for completion of assessments in Operations Clean Money cases by end of the July.
Now, the Principal Chief Commissioners of Income Tax and Principal Director Generals of Income Tax directed to the Central Board of Direct Taxes (CBDT) that Along with continuation of the handling of cases related to demonetization, a checklist for verification of cash deposits has been prepared to assist the assessing officers so that exceptional cases can be taken up for further study.
A 17-point checklist has been drafted and issued by Income Tax Department to tax commissioners across the country.
Checklist will be updated on the department’s server for further action, which will help to examine all unaccounted cash deposits made between November 9, 2016 and December 31.
The aim behind such verification checklist is to broad the scope of department and deep to catch those who deposited unaccounted cash during demonetization.
Highlights of checklist are:
- In a bid to seize illegal cash, 17-point checklist will help to track those who deposited unaccounted cash during demonetization.
- The checklist also says that if a taxpayer disputes the amount, the correct amount has to be mentioned after checking with the bank.
- The particulars in the checklist are – return filing compliance, total income of the taxpayer in 2016-17, gross total income (including exempt income) of the taxpayer in FY 2016-17 and percentage of cash deposit to gross total income (including exempt income).
- Other verification check points are whether the quarterly VAT return is revised in the post demonetization period,
- If small part of the cash is deposited in or withdrawn from the bank despite having huge cash in hand,
- If there are large changes in the purchase and sales figures between the original and the revised VAT returns and if the changes are for genuine reasons.
- The examination of monthly cash sales and cash deposits lists the period from April 2015 to November 8, 2016.
- The assessment procedures as – if the books of the accounts have been rejected, if additions have been made u/s 68 to 69D and if tax is calculated as per section 115BBE and if penalty u/s 271AAC has been levied.
Process followed by assessing officers:
The assessing officers will have to check on the checklist with regard to the nature of deposit on assessment of the explanation provided by the taxpayer and the quantum of unaccounted deposits as determined by the assessing officers.
Actions to be followed by assessee:
While responding to the assessing officer, assessee has to file if the explanation was acceptable, partially acceptable or not acceptable.
The nature of the deposit option could be sale or advance for sale of land or any other capital asset, gift, repayment of loan and cash in hand.