Made a large cash deposit? Get ready for tough scrutiny
If you have made large cash deposits in the aftermath of demonetisation, you should brace for tougher scrutiny from the tax department and keep documents like bank statements, passbooks, land records and sales records handy.
The tax department will soon ask you to furnish these documents to support your claims of these large cash deposits being made either from income exempt from tax such as agricultural income, cash received from unidentifiable persons in the case of businesses, or cash withdrawn from own bank accounts.
Following the large cash deposits in bank accounts, the tax department started Operation Clean Money to scrutinise the source of all cash deposits to check if they were from legally declared income. The tax department has data on 10.9 million accounts where deposits ranging from ₹2 lakh to ₹80 lakh were made in the period between November 10 and December 30. Around 148,000 accounts were also identified wherein deposits of more than ₹80 lakh were made. Of this, it has sent notices to 1.8 million taxpayers who have made cash deposits of more than ₹ 5 lakh that are not in line with their income tax returns.
The detailed standard operating procedure released by the Central Board of Direct Taxes (CBDT) lays down guidelines for the assessing officers to verify the source of the cash deposits claimed by the taxpayer as part of Operation Clean Money.
For instance, if a business attributes the cash deposits to cash received from unidentifiable persons, then the assessing officer has been directed to check if the transactions are in line with the normal cash flow of the business. Further, more than one deposit in the bank accounts towards the end of the demonetisation period, non-availability of stock or inflated stocks by bringing in fictitious purchases or bank transfers to other accounts or entities that are not in line with the previous transaction patterns will be scrutinised.