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Standard Operating Procedure (SOP) to be followed by the Assessing Officers in verification of Cash transactions relating to demonetisation - Income Tax - Instruction No. 03/2017

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..... cation 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 .....

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Standard Operating Procedure (SOP) to be followed by the Assessing Officers in verification of Cash transactions relating to demonetisation - Income Tax

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..... on 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 identi .....

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Standard Operating Procedure (SOP) to be followed by the Assessing Officers in verification of Cash transactions relating to demonetisation - Income Tax

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..... e, 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 .....

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Standard Operating Procedure (SOP) to be followed by the Assessing Officers in verification of Cash transactions relating to demonetisation - Income Tax

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..... 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 design .....

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Standard Operating Procedure (SOP) to be followed by the Assessing Officers in verification of Cash transactions relating to demonetisation - Income Tax

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..... ing 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 ma .....

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Standard Operating Procedure (SOP) to be followed by the Assessing Officers in verification of Cash transactions relating to demonetisation - Income Tax

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..... n 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 ano .....

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Standard Operating Procedure (SOP) to be followed by the Assessing Officers in verification of Cash transactions relating to demonetisation - Income Tax

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