Government
of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
North
Block, New Delhi
Instruction
No. 03/2017
Dated
21st of February, 2017
Subject:
– Standard Operating Procedure (SOP) to be followed by the Assessing Officers
in verification of Cash transactions
relating to demonetisation – regd.-
Post
demonetisation of Rs. 500 and Rs. 1000 notes on November 8, 2016, several
malpractices has been noticed. The Income Tax Department is enquiring/seeking
information and analysing instances of deposits to identify cases involving
risk of tax evasion. Based upon vast amount of information of cash deposits
collected and analysed by CBDT, a number of persons have been identified in
whose case the cash transactions did not appear to be in line with their
profile available with the Income-tax Department (‘ITO’) . In such cases, it
has been decided to undertake on -line verification of select transactions
through jurisdictional Assessing Officers (‘AOs’).
2. OVERVIEW OF ONLINE VERIFICATION
The online verification has been
enabled on e-filing portal (for persons under verification) which will be
synchronized with the internal verification portal (AIMS module of ITBA) of
ITO. The salient features of online verification mechanism are as under :
2.1
ITO has enabled online verification of these transactions to reduce compliance
cost for persons under verification while optimizing its The information in
respect of these cases has been made available in the e filing window of the
PAN holder (after log in) at the portal https://incometaxindiaefiling.gov.in.
The PAN holder can view the information using the link ‘Cash Transactions 2016’
under ‘Compliance’ section of the portal. The person under verification will be
able to submit online explanation without any need to visit Income Tax office.
2.2
Email and SMS were sent to the persons under verification for submitting online
response on the e filing Such persons who are not yet registered on the
e-filing portal (at https://incometaxindiaefiling.gov.in) should register
immediately by clicking on the ‘Register Yourself link. Registered taxpayers
should verify and update their email address and mobile number on the e filing
portal to receive electronic communication .
2.3
The user guide, quick reference guide and frequently asked questions (‘FAQs’) are
available on the portal for assisting the person under verification for
submitting online
2.4
Cases meeting the low risk criteria will be closed centrally . Cases which are
not closed automatically will be pushed in batches to the AO for verification .
2.5
The AO will be able to view each information record, information as submitted
by the person under verification for each record and also capture the
verification In case additional information is required, the AO will be able to
send a request for additional information electronically. The person concerned
will also be automatically informed about the request for additional
information by email and SMS. The information request will be visible to the
person under verification with a hyperlink for uploading information. All the
additional documents (including supporting evidence) are required to be
submitted online.
2.6
The response filed by person under verification will be appraised against
available information . The uploaded information can be downloaded by the
Assessing Officer. In case explanation of source of cash is found
justified, the verification will be closed by the AO electronically without any
physical interface with the person concerned.
3. REFERENCE DOCUMENTS
A Cash Transactions 2016 User Guide and Frequently
asked Questions (‘FAQs’) has been prepared to help the persons
under verification so that the process of furnishing online information is
clearly understood (available in the help section of thee-filing portal home
poge). Further, a ‘User Guide for Verification of Cash Transactions on ITBA
– AIMS Module’ (‘Verification Guide) has also been prepared for assisting the
AOs involved in the verification process. It is advised that all stakeholders
may go through the documents before filing response/initiating action.
4. ENSURING ONLINE RESPONSE
It is seen that many persons in the
target segment have still not registered with e-filing portal. Further many
registered persons who are under verification have not yet submitted online
response. Pr. CCIT/CCIT/Pr. CIT/Range Heads are expected to give publicity and
organize meetings with the taxpayer community and CAs/Bar Associations to
educate them about the online verification facility and its benefits. So far,
communication with the person under verification has been made under section
133C of the Income-tax Act, 1961(‘Act’). In cases where online response has not
been submitted, AO shall generate a letter from the Verification portal on ITBA
to the person under verification for submission of online response (except when
immediate survey is contemplated) on the e-filing portal and ensure its
service . This process should be completed within 7 days of availability of
information on the portal.
5. CONDUCTING VERIFICATION
At the outset, it should be clearly
understood that this exercise relates to preliminary verification of
information only and the same should not be construed as conducting scrutiny or
in-depth authentication . The entire process envisages end-to-end
e-verification in which the concerned person would be required to
electronically file his response on e-filing portal which shall be examined and
monitored electronically by the tax department through Online Verification
platform (ITBA) . The two systems are harmonized in a manner so that the
person under verification is not required to attend the Income-tax office
personally under any circumstance and at any stage during the verification
exercise. It has been endeavour of CBDT to identify and target the potential
cases through e-verification so that possible instances of grievances arising
from the process of verification are minimized.
5.1
The online verification should be focussed and limited to the issue under
verification the outcome of which is either ‘Acceptable’ or ‘Non-Acceptable’.
The queries raised should be relevant and limited in number since this is a
preliminary verification process only .
5.2
The Assessing Officer is required to verify each information record
individually and take a decision about each record being ‘Acceptable’ (where
the nature and source of cash deposit for that particular record is explained
by the person under verification to the prima-facie satisfaction of the
Assessing Officer) or ‘Non-Acceptable’ (where the Assessing Officer is not
satisfied with the explanations offered by the person under verification
based on the information available) . For each ‘Non-Acceptable’
information record, the undisclosed income will have to be ascertained
and recorded along with verification remarks on the portal [the format has been
reproduced in the Verification Guide] .
5.3
The information relating to cash transactions and response submitted by the
person under verification will be visible to the Assessing Officer and his
supervisory officers .
5.4
The Assessing Officer will also be able to send a request for additional
information, if required. The information request would be communicated to the
PAN holder with a Hyperlink for uploading the information. The uploaded
information can also be downloaded by the Assessing
5.5
It is reiterated that no independent enquiry or third party verifications are
required to be made by the Assessing Officer outside the online Whatever
information is necessary during verification, the same has to be collected
through the person under verification using online platform only. Even
telephonic queries are to be avoided.
5.6
While conducting verification, seeking additional information and drawing
inference regarding source of deposits in bank or other accounts, for general
and broad guidance of the AOs, the source specific verification guidelines has
been given in the Annexure with a view to maintain consistent
approach during If the sources informed by the person under verification are
other than those indicated in the Annexure, suitable parameters should be
decided by the AO in consultation with the range head and Pr. CIT concerned.
5.7
It should be ensured that the communications made online with the persons under
verification should be in very polite language without containing any element
of threat or warning . No show cause of any kind should be
5.8
The verification of a particular case shall be complete only when:
(a)
each information record reflected in that case gets verified and has been
marked either as ‘Acceptable’ or ‘Non-Acceptable’ (with mentioning of
undisclosed income in the latter category); and
(b)
Approval has been given by the supervisory authority as prescribed at Para 7 of
this instruction .
5.9
If no satisfactory explanation is provided, the undisclosed income may be
quantified considering the facts of the case. Brief summary of verification may
be mentioned under verification remarks.
5.10
The cases under the ‘Non Acceptable’ category would get escalated back to the
Directorate of Systems and may lead to advance processing of such cases for
further handling as cases involving possible tax evasion.
5.11
In case the person under verification does not respond within the time frame
prescribed, it might lead to a possible inference that the cash deposit under
verification is prima-facie undisclosed and consequently the AO may treat these
cases under the ‘Non Acceptable’ category with relevant
5.12
A holistic view should be adopted looking into the various aspects of the
circumstances leading to deposit of cash (e.g. family-size, financial statusand
background of person) and uniformity in approach must be adopted while forming
a view about quantum of undisclosed
6. ADHERENCE TO THE TIME-LIMIT
DURING VERIFICATION
6.1
It shall be necessary to complete the process of online verification as quickly
as possible so that the option to avail the benefits under the Prime-Minister Garib Kalyan Yojana, 2016
(‘PMGKY’) can be exercised by the persons under verification by the prescribed
date for the said It will be desirable if the additional information required
from the person under verification is communicated to the taxpayer within 5
working days (wherever considered necessary), from the receipt of online
information from such person.
6.2
The CIT concerned should frame the intervening timelines depending upon the
number of cases and content of information handled by the Assessing Officer in
the charge.
6.3
The Additional/Joint CIT will monitor the adherence to the above time schedule
and guide AOs wherever required.
7. APPROVAL FROM HIGHER AUTHORITIES
7.1
After all information records of a particular person have been verified by the
AO, he would be required to take approval for closure of verification from the
prescribed approving
7.2
If the total value of transactions is below Rs. 10 lakh (Rs.25 Lakh in Delhi,
Mumbai, Kolkata, Chennai, Bangalore, Pune, Hyderabad and Ahmedabad), the
prescribed approving authority will be Additional/Joint CIT heading the For
cases where the total value of transactions in a particular case exceeds the
above limits, the prescribed approving authority will be the Pr. CIT concerned.
7.3
The above approvals would be through online portal only for which the procedure
has been specified in the Verification
7.4
The time-frame prescribed above in Para 6 will be inclusive of the time
involved in granting approval by the prescribed approving
8. DEALING WITH NON-COMPLIANCE
In cases where online response has
not been submitted even after service of letter, the ITS profile of such PAN
holders may be viewed to access information reported in earlier returns and
under TDS/AIR/CIB. In case the cash deposit is not in line with the earlier
return or information profile of the person under verification, necessary facts
may be collected inter-alia by exercising the powers under section 133(6) with
the approval of prescribed authority. In appropriate cases depending upon the
online response or otherwise, survey action u/s 133A can be considered.
During survey, where there is suspicion of back dating or fictitious cash
transactions , CCTV recording of the cash counter at relevant banks may also be
checked, if necessary. Reference can also be sent to the Investigation wing in
appropriate cases.
In
cases of intrusive actions [133(6)/133A/ref. to lnv. Wing], the outcome needs
to be reported by the AO in the online portal also .
9. INITIATION OF PENALTY PROCEEDINGS
UNDER SECTIONS 269SS/269T OF THE ACT
In case, the transaction being loan
received/repaid in cash above the permissible threshold comes to notice,the AO
may consider initiation of penal proceedings under the relevant provisions
separately .
10. FACILITATION
10.1 DIT(I&CI)
has been designated as the local resource person for supporting the field
formation in the e- verification process.
10.2
In case of technical difficulty, ITBA helpdesk and contact persons given in
ITBA instruction may be contacted.
10.3
Further, clarifications would be issued by CBDT as and when required.
11. The above may be brought to the
notice of all concerned .
(Rohit
Garg)
Director-ITA.II, CBDT
Director-ITA.II, CBDT
F.No.225/100/2017/ITA-II
Annexure
Source
Specific General Verification Guidelines
1. Cash out of earlier income or
savings
1.1
In case of an individual (other than minors) not having any business income, no
further verification is required to be made if total cash deposit is up to 2.5
lakh. In case of taxpayers above 70 years of age, the limit is Rs. 5.0 lakh per
person. The source of such amount can be either household savings/ savings from
past income or amounts claimed to have been received from any of the sources
mentioned in Paras 2 to 6 below. Amounts above this cut-off may require
verification to ascertain whether the same is explained or not. The basis for
verification can be income earned during past years and its source, filing of
ROI and income shown therein, cash withdrawals made from accounts etc .
1.2
In case the individual claims that cash deposit includes savings of other
person(s), the necessary information is required to be submitted under Para 4
or Para 5 below, as the case may be.
1.3
In case of an individual having no business income, if the cash out of earlier
income or savings exceeds the above mentioned threshold, the AO needs to
consider the remarks provided by the person under verification and seek further
relevant During verification, the AO needs to consider the information provided
by the person concerned, income earned during past years, source of such
income, filing of ROI and income shown therein, cash withdrawals made from
accounts etc. before quantifying the undisclosed amount, if any . In case the
person under verification has filed return of Income, a reasonable quantum can
be considered as explained while quantifying the undisclosed amount, if any.
1.4
In case of persons engaged in business or requirement to maintain books of
accounts, no additional information is required to be submitted by the person
under verification if total cash out of earlier income or savings (sum of
responses for all cash transactions) is not more than the closing cash balance
as on 31st March 2016 in the return for AY 2016-17 . However, if the AO has
reason to believe that the closing cash balance as on 31st March 2016 has been
increased by revising the return or backdating transactions in the books of
account, further verification may be carried
1.5
In case of persons engaged in business or required to maintain books of
accounts, if total cash out of earlier income or savings (sum of responses for
all cash transactions) is more than the closing cash balance as on 31st March
2016 in the return for AY 2016-17, the AO needs to consider the remarks
provided by the taxpayer and seek relevant information, e. closing balance as
on 31st March 2016 as reflected in the books of account . During verification,
the AO may consider the information provided by the person under verification,
income earned during past years, source of such income, filing of ROI and
income shown therein, cash withdrawals made from accounts etc. before
quantifying the undisclosed amount, if any.
1.6
If the person under verification has claimed that the cash deposit has been
disclosed in IDS 2016 and if the same is found to be correct, no further
verification should be made.
1.7
In case, there is information or apprehension/ suspicion that a particular bank
account(s) has been misused for money laundering/tax evasion/entry operations
in shell companies, the monetary cut-off or cash-balance based cut off
prescribed in clauses above requiring no-verification, shall not be applicable.
2. Cash out of receipts exempt from
tax
2.1 If the cash is explained to be out of receipts exempt from tax, and the same is not in line with the earlier returns filed by the person under verification, the AO needs to consider the remarks provided by the person and seek relevant information (e.g. records of land-holding and other relevant evidences in case of agricultural income), to form appropriate view and quantify unexplained income .
3. Cash withdrawn out of bank
account
3.1
The AO needs to consider the remarks provided by the person under verification
and seek relevant information e. copy of bank statement/passbook to form
appropriate view and quantify unexplained income.
3.2
Bank statement/passbook may be verified to confirm the name of the account
holder . The date and amount of cash withdrawals and cash deposits in the bank
account may be matched to verify whether claim that the cash deposited is out
of cash withdrawn out of bank account is Further removed in time the withdrawal
is from the date of demonetization i.e. 8th November, 2016, the more suspicious
it looks. The AO should take a balanced view in analyzing the time gap from the
point of view of normal human behaviour and specific circumstances of the case.
4. Cash received from identifiable
persons (with PAN)
4.1
No additional information is required to be submitted by the person under
verification as the information will be pushed to the AO of the identifiable
persons (with PAN).
4.2
In case the identifiable person (with PAN) does not confirm the transaction,
the response will be referred back for further verification.
4.3
In case of a gift, it may be seen whether the same is taxable in t he hands of
the recipient under section 56(2) of the Act.
5.
Cash received from identifiable persons (without PAN)
5.1
The AO needs to verify if the cash receipts are not in line with the normal
practices of concerned business as mentioned in the earlier returns of Income
after considering the remarks provided by the taxpayer, nature of business and
earlier history before seeking additional
5.2
In case of other cash receipts, strategies for verification may be made in
consultation with the CIT so that consistency is maintained in the entire
charge based on nature of transaction.
6. Cash received from
un-identifiable persons
6.1
The AO needs to verify if the cash transactions or its quantum are not in line
with the normal practices of concerned business as mentioned in the earlier
returns of
6.2
During verification, the AO may seek relevant information e.g. monthly sales
summary (with breakup of cash sales and credit sales), relevant stock register
entries, bank statement to identify cases with preliminary suspicion of
back-dating of cash sales or fictitious sales. Some indicators for suspicion of
back dating of cash sales or fictitious sales could be :
i
Abnormal jump in the cash sales during the period Nov to Dec 2016 as compared
to earlier
ii
Abnormal jump in percentage of cash sales to unidentifiable persons as compared
to earlier history.
iii
More than one deposit of specified bank
notes in the bank account late in
the demonetization period
iv
Non-availability of stock or attempts to inflate stock by introducing
fictitious purchases.
v
Transfer of deposited cash to another account/entity which
is not in line with earlier history.
6.3
In case of receipt of cash on account of donation, indicators similar to above
may be kept in mind.
6.4
In case of other cash receipts, strategies for verification may be made in
consultation with the Pr. CIT.
7.
Cash Disclosed/To be disclosed under PMGKY
7.1
In case the taxpayer mentions that the Cash Disclosed/to be disclosed under
PMGKY, the same may be verified.
7.2
If the process of disclosure is informed to be pending, verification
can be kept pending till the evidence is furnished.
7.3
The verification should be closed on the basis of evidence of disclosure made
under PMGKY