There has been a poor response so far to the 1,000,000 notices that have been sent by the Income Tax (I-T) department to assessees following the demonetisation announcement on 8 November 2016, with only around 9,000, or 0.9%, having responded to such notices until 19 February. The deadline for filing replies to the I-T notices is 30 March 2017.
According to an I-T official, the department had sent 1,000,000 notices seeking the “sources of income” of those who deposited cash in excess of Rs 2.5 lakh in their bank accounts after the demonetisation announcement.
The I-T official said: “Nearly half of those who replied said that they had held hard earned cash and they have the relevant receipts to justify the cash. They said the government’s sudden decision to scrap higher denomination old notes forced them to deposit the cash in their bank accounts.”
Interestingly, many of those who replied to the I-T department claimed that the cash they deposited in banks was part of the loan borrowed from relatives.
Earlier, The Sunday Guardian had reported that the I-T department has started sending notices after a nationwide inquiry under Section 133 (6) of the Income Tax Act (power to call for information).
The notices were issued to individuals and firms after banks reported “unusual or suspicious” volumes of cash deposits in their bank accounts.
“The notices were in the form of summons to people having income mismatch with the cash deposits in their bank accounts. The people who have been sent notices are expected to produce the book of accounts along with bills/vouchers or documents to explain the cash deposits after demonetisation,” the I-T official cited above said.
The notices mention the dates and amounts deposited by individuals and firms in old currency and seek the furnishing of the books of accounts with the I-T department and a 60-day time limit for explanation of their books of accounts had also been given.
According to the I-T department, in the first phase of investigation, it was found that almost 10 lakh individuals and firms have deposited cash in excess of Rs 2.5 lakh over and above what they had revealed to the I-T department in the same year.
“Cash deposits above Rs 2.5 lakh could attract tax and penalty and authorities might take away 90% of the money if there is an income mismatch, according to the government’s decision,” an official said.