Suspect DeMo cash deposits again come under scanner

The Narendra Modi government has renewed its efforts to detect tax evasion that may have taken place during demonetisation. In a fresh advisory to Income Tax officers, the Central Board of Direct Taxes (CBDT) has said that even banks and borrowers of a taxpayer could be called to explain suspicious cash deposits or lending.

The advisory, which is in the form of a guidance note, has even asked the officers to examine if the deposited cash was declared as streedhan , a gift given to the woman in a Hindu marriage. It is not classified as dowry.

A senior IT official told BusinessLine that given the volume of cash during demonetisation, the Department is going behind suspected tax evaders with renewed vigour.

This is the fourth major advisory from the CBDT. Earlier, two Standard Operating Procedures were also issued to deal with such cases.

In suspected tax evasion cases where the origin of deposited cash has been declared as a loan, the tax Assessing Officer (AO) has been asked to seek details of the lender, such as name, address, PAN number and income-tax returns.

The AO also has to independently ascertain the veracity of the transaction and creditworthiness of the lender. If required, the lender should be produced by the assessee and cross-examined by the AO, the official said.

The official said that if the deposited cash during demonetisation was declared as repayment of a loan by the taxpayer, a similar procedure, checking the records of the borrower and cross-examining him/her could be carried out. A similar set of procedures will have to be followed if the cash is declared as gift.

However, in cases of streedhan , complications could arise if the cash had been given many years ago and the person who made the gift is no more, the official added.

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