The black money is widespread and rampant in the country. In fact, it is parallel to the mainstream economy. We all accustomed to it in making our transactions especially purchasing an immovable property, expenditure in hospitals, college education, mining, and so on. No one is exception to it. We also know how a government comes into power.
We are very much aware that indulging in black money transactions is illegal and know that “Ignorantia juris non excusat” meaning thereby “person who is unaware of a law may not escape liability for violating that law merely because he or she was unaware of its content”. Though we know our activity is illegal, we hoard the black money as required in the community we are living. It is a kind of custom prevailing in the country from time immemorial.
Customary provisions in the income tax law
We also know that, the custom prevails over law. Certain customs of these type were incorporated in the Income Tax Act itself. A few of them are:
Section 33AB: Tea, Coffee, Rubber development account;
Section 43CA: Accepting consideration as per stamp value of immovable property for computing business income;
Section 44AD: Presumptive taxation of trading activity):
Section 50C: Accepting consideration as per stamp value of immovable property for computing capital gains;
Section 56(2)(vii): To include the value of any property received without consideration or for inadequate consideration for taxability as ‘Income from other sources’; etc.
While inserting the above sections, the then legislative sole motive was to taxing well-crafted transactions those escaping from tax-net. This means taxing the money that never accounted at just normal rates.
So, the government itself, encouraged the public to observe this practice for its sustenance and holding the public responsible for the ubiquitous nature of black money now.
Failure to regulate black money
No government could in fact regulate the black money. Certain measures were taken by the previous government as well by the then Finance Minister Shri Pranab Mukherjee in Finance Act 2012, such as declaration of foreign assets by the assessees, TDS on sale of immovable property, TCS on sale of Bullion and Jewellery in excess of Rs. 2 lakhs, taxing of unexplained income @30% etc.
Before demonetizing 500 and 1000 notes, the government would have:
- repealed all these presumptive nature of provisions from the Income Tax law;
- improved the banking habits of the people of the country;
- encouraged to deposit the demonetized notes of 500 and 1000 instead of exchange.
The government would also not have:
- monetize 2000 notes;
- proposed to monetize 1000 notes in the future;
Presumptive tax provisions to be repealed
If the measures taken by the government to curb black money turns out to be successful, then all the transactions would occur through a bank account. Hence, there is no need to retain the presumptive provisions in the income tax law.
Cash depositors are stopped by various provisions of the Income Tax Act from denying penalty or at taxing cash deposits at higher rates:
- Taxing of unexplained income vide section 68 read with section 115BBE;
- Penalty for accepting or giving advance for purchase of immovable property including agricultural land as per sections 269SS and 269T;
- Fixing of penalty under section 270A; etc.
Conclusion
Anyway, a bold and admiring step taken by the government so lately but at right time of Information Technology era. We are cornered…… no escape route….. just pay the tax and enjoy.
Hoping for a better future through the mainstream economy.
CAclubindia
