Taxation of Deposits Made With Bank in SBNs

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Taxation of Deposits Made With Bank in SBNs

Income Tax Returns for the Assessment Year 2017-18 were selected for scrutiny via e-proceedings for those Assessees, who have deposited more than Rs. 2 Lakhs in cash in Banks after 8th November 2016, being the date on which Demonetization was announced by our honorable Prime Minister of India.

Cash Books, Sales Invoices, Receipt Books were uploaded on the directions of the Assessing Officers. ascertaining the level of cash transactions during the period, were called for by the Assessing Officers and Assessment Orders were passed which resulted in huge demands.

The deposits in SBNs (old Rs. 500 & Rs. 1,000 currency) in excess of the closing cash balance as on 08.11.2016 were added with the returned income either under the Income Tax Act 1961. even though such credits were genuinely supported by cash memos/invoices, the parties from whom such cash was collected were identifiable, etc., and the Assessing Officer has found nothing new other than the receipts found in Books of Account and subsequent deposits made in Banks.

In certain cases due to interest under Section 234, the total demand exceeds the income added.  Income Tax Act to tax the deposits made in Banks in SBNs. It is suspected that such high pitched demands are made in order to give a picture to the public that demonetization has resulted in a huge collection of taxes, which will spoil the morale of the honest taxpayer.

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