Cash on hand -demonetization

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

16 December 2016 cash on hand Rs. 3 corer in the books of accounts,
But no any physical cash on hand.

what will be consequences under income tax act 1961?

Advocate

Advocate (Expert)
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17 December 2016 You have to deposit entire Rs 3 Crore of cash in hand in your bank account of your firm after demoneitisation of HVN. you can also show this huge amount in payment of your personal withdrawals/ businee expences on or before 8.11.2016.
but if you carry the same , than at the time of filing your Income tax return, Assessing officer must asked why you not deposit this amount to convert into new currency and that may leads him to reject your accounts and making best judgement assessement.
BETTER , YOU HAVE ATTEMT TO ADJUST THE SAME IN PAYMENT OF YOUR CREDITORS OR SHOWING ADVANCES IN SMALL FRACTIONS IN SOME GOOD NAMES WHOM YOU CAN CONVINCE IF NEED DURING ASSESSEMENT PROCEEDINGS.

Advocate

Advocate (Expert)
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17 December 2016 Let's suppose you would had physically and in actually have this Rs 3 Crores cash balance ,you would have to more cautious about that security as any unwanted fire explosion in that place or any theft therein might be results you to lost all such OLD CURRENCY NOTES.

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Querist : Anonymous

Querist : Anonymous (Querist)

20 December 2016 my question is

books of account me 3 crore ka cash on hand he aj but physical money on hand nahi he. to kya hoga?

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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18 July 2024 If a business or individual declares a significant amount of cash on hand in their books but does not have physical cash to substantiate it, there could be potential consequences under the Income Tax Act 1961 in India. Here’s a breakdown of the possible implications:

1. **Assessment by Income Tax Authorities:**
- The Income Tax Department may scrutinize the discrepancy between the declared cash in books and the actual physical cash on hand.
- Assessing officers may conduct inquiries to determine the source of the discrepancy and whether there are any undisclosed incomes or unexplained cash holdings.

2. **Taxation on Undisclosed Income:**
- If the declared cash on hand cannot be substantiated with physical cash or valid explanations, it might be treated as undisclosed income.
- Under Section 69 of the Income Tax Act, if cash credits are found to be unexplained, they can be added to the total income of the taxpayer and taxed accordingly.

3. **Penalties and Interest:**
- Depending on the circumstances, penalties and interest may be levied under Sections 271 and 234A, 234B, and 234C of the Income Tax Act for under-reporting or non-disclosure of income.
- Penalties can be up to 300% of the tax sought to be evaded, depending on the severity and intent behind the discrepancy.

4. **Documentation and Justification:**
- It is crucial for businesses and individuals to maintain proper documentation and evidence to support the cash balances declared in their books.
- In the absence of physical cash, other documents such as bank statements, transaction records, and explanations for cash movements may be required to substantiate the cash balance.

5. **Amendment and Rectification:**
- If there are genuine errors or discrepancies in reporting, taxpayers can rectify their records by making necessary amendments in subsequent filings or through a process of rectification under Section 154 of the Income Tax Act.

In summary, declaring a significant amount of cash on hand in books without having physical cash to substantiate it may lead to inquiries and scrutiny by income tax authorities. It is essential to ensure that all cash balances are accurately recorded and supported with proper documentation to avoid potential tax implications and penalties under the Income Tax Act.