Income Tax Notices on Black Money Depositors

Black Money is the amount of income that people do not declare to or hide from the income tax department to avoid paying the full income tax. 8th November, 2016 is a day that most people who have unaccounted income will want to forget because on this day, the Government of India declared its ban on the Rs.500 and Rs.1,000 notes. This de-monetization has created a lot of problem for black money hoarders and they should get ready to face penalties as per the Income Tax Act, if they are caught.

Consequences to be faced by Black Money Depositors:

The ban on Rs.500 and Rs.1,000 notes has forced everyone in the country to exchange or deposit their cash in banks. During this process, people have to show their ID Proof to the banks. If someone is found exchanging or depositing unaccounted cash in his/her bank account, then he/she will most likely face an enquiry from the Income Tax Department.

People who have never filed ITR (Income Tax Return) should be ready to receive the following notices if they are thinking of depositing unaccounted money in banks:

  • Notice under Section 142(1) – As per this notice, any individual depositing black money will be asked to present his/her Income Tax Returns within the notice period, which is generally 15 days. The Assessing Officer may ask him/her to display the accounts book, some other documents and details. The law allows Assessing Officers to question individuals about their personal belongings. Through the use of this notice, the department can seek any information about 3 financial years prior to the year for which the individual is being assessment. Notice under Section 142(1) generally comes with notices under Section 148, 144 or 153A.

    If the individual who is being assessed does not fulfil the conditions or comply with notice under Section 142 (1), then he/she will be assessed under section 144. As per section 144, the assessing officer will calculate the individual’s income and impose tax and penalties according to the Income Tax Act. This section does not require the Assessing Officer to provide any show cause notice.

    A minimum fine of Rs.4 per day will be charged if an individual fails to comply with the notice and it may go up to Rs.10 per day. If he/she does not comply with the directives after the fee is imposed, then he/she may be jailed for a period of up to 1 year. In this case, a penalty of Rs.10,000 may be charged for non-compliance.

  • Notice under Section 148 – Individuals may get a notice under Section 148, wherein they will be subjected to ‘Income escaping assessment’. This assessment is done as part of section 147. This section allows the Assessing Officer to check the assessment of past 6 years. The officer may ask individuals to provide income proof, reveal income source, etc. The officer is also allowed to ask for any documents that he/she might need to calculate the real income of the person being assessed. After calculating the correct income amount, the officer may ask the person through a notice under Section 156 to pay tax as per the new calculation, interest, penalties, etc.

    Check This: Section 148

  • Income Tax Raid (Assessment under Section 153A) – If the Income Tax Department identifies unaccounted income deposits, it can choose to conduct an income tax raid to find information about other assets that are owned by the depositor. The assets can include property papers, gold, etc. The income tax raids allow the department to search and seize any unaccounted item. Income tax raids are conducted suddenly and people do not receive any notification in advance about the same.
  • Directions under Section 144A – In case, an individual’s ITR for a year is already being assessed under a different section apart from the regular self-assessment, then he/she may face a lot of problems if case the department finds out that he/she is depositing undeclared income. The joint commissioner in this case can ask the Assessing Officer to be strict while reviewing the individual’s case.

    Recommended : How to pay Income Tax which is Due

People who have filed ITR, but have not declared the full amount that they have actually earned should be ready to receive the following notices:

  • Notice under Section 143(2) – This notice is sent to people whom the income tax department wants to scrutinise. The person being scrutinized may be asked to provide proof of the income that has been declared by them in their ITR. The Assessing Officers may also ask for accounts and books of any number of years. Individuals will then receive an assessment order under section 143(3) along with another notice to pay interest, extra tax and the penalty charges.
  • Depending on the case, the income tax department can choose to send notices under Section 148 and 153A in this case as well.
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