For the aim of illustration, let’s assume a dealer who, for exchanging his Specified Notes, deposits the identical in his checking account, representing gross sales within the abnormal course of enterprise. On the finish of the monetary 12 months, he affords the surplus of revenue over expenditure to tax. Throughout the course of the evaluation proceedings it’s for the AO to determine that the mentioned deposits represents revenue from undisclosed sources. If the assessee is unable to supply passable clarification relating to the supply of the revenue, the AO might try and deal with the identical as ‘unexplained funding’ (from undisclosed sources) underneath part 69 of the Act, and impose tax underneath part 115BBE at most marginal charge of 30%. Moreover imposing tax, the AO might try and invoke penalty proceedings underneath part 270A as ‘misreporting’ of revenue. Nevertheless, no deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee in computing his revenue. As well as, penalty can be imposed handled it the identical as ‘misreporting’. The judgments of the Supreme Court docket on the subject material throughout earlier demonetization drives might be referred to. A 3-judge bench of the Supreme Court docket in Srilekha Banerjee and Ors. v. Commissioner of Earnings Tax, Bihar and Orissa, following the sooner judgment in Mehta Parikh & Co. v. Commissioner of Earnings Tax, Bombay, held that if there may be an entry within the account books of the assessee which reveals the receipt of a sum, it’s essential for the assessee to determine, if requested, what the supply of that cash is. It said that the Division can not act unreasonably and reject that clarification of the assessee to carry it in any other case. It said that if, nonetheless, the reason is unconvincing and one which deserves to be rejected, the Division can reject it and draw the inference that the quantity represents revenue both from the sources already disclosed by the assessee or from some undisclosed supply. It said that earlier than the Division rejects any proof, it should both present an inherent weak spot within the clarification or rebut it by placing to the assessee some data or proof which it has in its possession, and the Division can not by merely rejecting unreasonably clarification, convert good proof into no proof.
Different Points Along with discharging legal responsibility underneath the Act, the assessee has to duly take into account obligations underneath oblique tax legislations, given the knowledge change channels between numerous arms of the Income. Relying on the character of enterprise, the assessee could also be known as upon to correlate the deposits underneath State VAT legal guidelines, excise legal guidelines or underneath the Finance Act, 1994, in direction of service tax additionally. Additional, assessee ought to be cautious whereas making claims of sources as loans or advances in direction of property transactions as sections 269SS and 269T prohibits money transactions in extra of Rs. 20,000 for accepting or advancing loans and deposits or in relation to switch of an immovable property, whether or not or not the switch takes place. Provisions with regard to assortment of tax at supply underneath part 206C and quoting of PAN of the patrons must be borne in thoughts by bullion merchants who make money gross sales above specified limits (bullion exceeding Rs. 2,00,000 and jewelry exceeding Rs.5,00,000) and by sellers who obtain sale consideration in money exceeding Rs. 2,00,000 on the market of any items. Extra importantly, consideration possibly drawn to part 276C which accommodates provisions for launching prosecution for wilful try and evade tax. The part has been additional amended to offer for rigorous imprisonment (between six months to seven years) the place the quantity sought to be evaded, or tax on under-reported revenue exceeds Rs. 25,00,000. #legaladviceonline #legaladviceonline india #legaladviceonline free #legaladvicefor startups #legaladviceonline free india
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