Checklist for verification of cash deposits during demonetisation

The income tax department seeks to comb through cash deposits made during the demonetisation period. Recently, the department has issued a 17 point checklist to income tax commissioners across India to verify the legality of the cash deposits. 

The checklist issued is part of the income tax assessment of cases relating to demonetisation. The checklist would assist assessing officers in the verification of the cash deposits and identifying cases for further examination. The assessing officers are required to examine all cash deposits made during demonetisation, between 9 November 2016 and 31 December 2016. 

A taxpayer who contests the unaccounted cash deposits highlighted by assessing officer has to specify the correct amount after checking with the bank account.

The particulars mentioned in the checklist consist of verifying filing of income tax returns (ITR), total income reported in the ITR for FY 2016-17, and percentage of cash deposited to gross total income. The gross total income would include exempt income earned by the taxpayer during FY 2016-17.

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The assessing officer has to verify the nature of deposits made and the quantum of deposits with the explanation offered by the taxpayer. He/she have to record whether the explanation was acceptable, partially acceptable, or not acceptable. The nature of the cash deposits may be anything ranging from receipts from the sale of land or advance from the sale of land or any other capital asset, gifts, loan repayments, or just cash on hand. 

The checklist also includes a verification of the quarterly VAT returns filed during the demonisation period. The assessing officer will verify whether the VAT return was revised subsequently. The assessing officer will also verify for any large changes in the purchases and sales figures filed in the original and revised VAT returns. The assessing officer would verify whether the revision has been for genuine reasons. 

The assessment procedures included in the checklist include an examination of the books of accounts and any subsequent rejection of the books, if additions are made towards unaccounted cash deposits, and whether any tax demand is made and penalty imposed.

The officer would also examine the monthly cash sales and cash deposits during the period from April 2015 to 8 November 2016.

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