Receiving cash without any explaination will be taxed at 80%

Introduction

Black money is fundamentally, that quantum of pay which was not disclosed to government and henceforth no expense was paid, despite the fact that the source is lawful. Black money gets white and lawful if duty and punishment at the pervasive rate is paid.

Corrupt money is something which is acquired by bribes. The source is likewise illicit and it can't get genuine by making good on charge. Any whole discovered credited in the books of the citizen, for which he offers no clarification about the nature and source thereof or the tax authorities are not satisfied by the clarification offered by the citizen, is named as cash credit.

Section 68 of the Income Tax Act explains the provisions related to tax treatment of cash credit.

What is section 68 of the Income Tax Act?

Section 68 relates to cash credits. As indicated by Section 68, where any total is discovered credited in the books of an assessee kept up for any earlier year, and the assessee offers no clarification about the nature and source thereof or the clarification offered by him isn't, in the assessment of the Assessing Officer (AO), good, the whole so attributed might be charged to annual expense as the pay of the assessee of that earlier year.

Where the assessee is an organization (not being an organization wherein the general population are generously intrigued), and the sum so credited comprises of offer application cash, share capital, share premium or any such sum by whatever name called, any clarification offered by such assessee will be considered to be unsuitable, except if:-

1. Where the assessee is an organization (not being an organization wherein the general population are generously intrigued), and the sum so credited comprises of offer application cash, share capital, share premium or any such sum by whatever name called, any clarification offered by such assessee will be considered to be unsuitable, except if:-
2. this shall not apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred in section 10(23FB).
3. such explanation in the opinion of the AO aforesaid has been found to be satisfactory

Conditions to be fulfilled for applicability of section 68 are explained below in basic words:-

Following conditions can be stated to attract the applicability of section 68:-

1. Assessee has to maintained 'books'
2. There has to be credit of amounts in the books maintained by the taxpayer of a sum during the year
3. The taxpayer offers no explanation about the nature and source of such credit found in the books or the explanation offered by the taxpayer in the opinion of the AO is not satisfactory.
4. If the taxpayer is a closely held company and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such company shall be deemed to be not satisfactory, unless:
• the person, being a resident in whose name such credit is recorded in the books of such company, also offers an explanation about the nature and source of such sum so credited; and
• such explanation in the opinion of the Assessing Officer has been found to be satisfactory.

If the above conditions gets satisfied , then sums so credited may be charged to tax as income of the taxpayer of that year.

Let's know about section 115BBE:-

According to Section 115BBE, where the total income of an assessee:-

• includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the return of income furnished under section 139; or
• determined by the AO includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, if such income is not covered under clause (a), the income-tax payable shall be the aggregate of:-
• the amount of income-tax calculated on the income referred to in clause (a) and clause (b), at the rate of 60%.; and
• the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in point (i)

Penalty under section 271AAC:-

As indicated by Section 271AAC, the AO may, for a situation where the income determined incorporates any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D for any earlier year, the assessee will take care of by method of punishment, notwithstanding charge payable under section 115BBE, a whole processed at the pace of 10% of the tax payable

It means penalty @10% is automatic once AO determines income referred to in section 115BBE

It is thus clear that once AO makes addition under section 68, tax will be payable at 60% of the addition made without deduction of any expenditure or allowance. In addition to this surcharge at the rate 25% of such tax ie 15% is leviable. Also, penalty @ 10% of tax payable in addition to tax (including surcharged) of 75% i.e 7.50%. Hence, total tax works out to be approx 80% of addition made under aforesaid section.

The Income Tax office has likewise over and over cautioned against infringement of money exchange rules. Actually, the office has set up admonitions on its site with respect to this. The transition to check money exchanges over a limit is planned for controling dark cash and advancing computerized economy.

It is advisable to accept payments through account payee cheque or demand draft which enables the taxpayer to know the identity of payer. Even if the payment is from bank drafts or account payee cheques it is essential to know the source of the same.

AO may ask for various details such as mode of payment, bank account of the lender evidencing the transaction/cash flow statement of the lender etc. It is advisable to collect address /PAN of the depositor in order to collate necessary documents as and when the need arises.