Will I get Noticed by Income tax dept,if I deposit Cash in Bank?

Question :  For the past 4 to 5 years, I am working and earning money and I have been adding this money in my house itself to build our house. But now we have canceled our plan to construct the house.  So I want all that money to be deposited in my bank accounts to make a Fixed deposit. I don’t have taxable income, so I didn’t fill income tax return till now.  So now my question is, how can I deposit all the income (say around 8 Lakhs) that I have earned in those years in to my bank accounts. Is there a proper way to do so, will I get in trouble from IT department for income tax if I deposit it in my account, because it may be seen as I have earned this money in a single year. How could I differentiate all that income. Please Help ?

Answer :

  1. Whoever originally earned the income needs to provide evidence of how the income was earned, whether as salary income from employment, business income, investment income, winning the lottery, among other sources.
  2. Documentation can take the form of employment and income confirmations from the employer. In the case of business owners, proof of the existence of their business, proof of the investor’s ownership of the business, financial statements from the business for the past 5 years, and an explanation for how the business owner either started the business from nothing or purchased the business. If the business owner purchased the business, then it needs to be documented how he or she acquired the funds to purchase the business. Similarly, in the case of investment income, the investor needs to document the income from the investment and show how he or she originally acquired the funds in order to make the investment.
  3. Many assessees do not file tax returns or routinely under report their income on the tax returns, but it becomes necessary to provide other convincing evidence of how much the person really earned legally, based on bank account statements.
  4. The department views the reporting of income on the tax returns as a good indication, though not conclusive, that the income is not being derived from criminal activities, since major criminal activities such as drug trafficking, racketeering, loan sharking, money laundering, Money derived from Hawala transactions, terrorist money, un accounted money of other person etc., generally entail the use of cash that does not circulate through regular banking channels and is not reported on tax returns. The department does look for patterns of transactions that are indicative of such money laundering. However, where sufficient evidence is submitted indicating that the assessee is earning income from legitimate business or other earning activities to make an income as returned in the income it will be accepted.
  5. In order to get satisfied that the income declared is out of “Revenue income” out of salary the income tax officer may resort to :
    (a) summoning and enforcing the attendance of any person and examining him on oath;
    (b) requiring the discovery and production of documents;
    (c) receiving evidence on affidavits;
    (d) requisitioning any public record or copy thereof from any court or office;
    (e) issuing commissions for examination of witnesses or documents;
    (f) any other matter which may be prescribed.”6.In case where the explanation of the assessee regarding the source of a disputed amount is not accepted, the question still remains whether it is a revenue income. It is not in all cases that by mere rejection of the explanation the character of the disputed item as revenue income can be deemed to be established. Each case has to be judged on its own merits for this purpose.

7.The Income tax officer may reject the assessees explanation that the amount was a revenue receipt from salary and may presume it to be from undisclosed sources.

8.If it was salary income, the amount should be credited in the assessees Bank account on month to month basis and also should make withdrawals from this bank account certain reasonable amounts for the personal expenses of the assessee.

9.Othewise the Income tax officer may presume that these amounts are advanced by her husband or father to be deposited in her account with the bank.

10.Even if it is argued that the amount came out of the savings of of salary income “salary received by cash”, it cannot ipso facto be traced to the assessee as his/her income.

 

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