As per the latest step taken by the Government with regard to the demonetization, Rs. 500 and Rs. 1000 will not be considered as legal tender and they are to be replaced with the new currencies of Rs.2000 and Rs. 500. Thus, all the cash in hand is required to be deposited in the bank in exchange of the new currencies printed by RBI.
To analyze the Income Tax Act, 1961 we come across that under the Income Tax Act, 1961 one can deposit a large sum of cash in bank, show it as income from 'other sources' in the current assessment year, and pay 30% (plus surcharge, education cess and secondary and higher secondary education cess as applicable) on it. To be able to levy income tax penalty on your deposit, the government will have to be able to prove you didn't earn this cash in the current assessment year. However, the onus of proof is upon to assessee to explain the source of income to the Assessing officer. The source of income should be established by material on record / evidence. The sum determined shall be taxable in the financial year in which it is credited.
On analysis of the Benami Transaction Property Transaction Act, 1988 and on understanding of Benami transaction would mean a transaction or an arrangement -
A. where a property is transferred to, or is held by, a person, and the consideration for such property has been provided, or paid by, another person; and
the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration, except when the property is held by -
i. a Karta, or a member of a Hindu undivided family, as the case may be, and the property is held for his benefit or benefit of other members in the family and the consideration for such property has been provided or paid out of the known sources of the Hindu undivided family;
ii. a person standing in a fiduciary capacity for the benefit of another person towards whom he stands in such capacity and includes a trustee, executor, partner, director of a company, a depository or a participant as an agent of a depository under the Depositories Act, 1996 and any other person as may be notified by the Central Government for this purpose;
iii. any person being an individual in the name of his spouse or in the name of any child of such individual and the consideration for such property has been provided or paid out of the known sources of the individual;
iv. any person in the name of his brother or sister or lineal ascendant or descendant, where the names of brother or sister or lineal ascendant or descendant and the individual appear as joint-owners in any document, and the consideration for such property has been provided or paid out of the known sources of the individual; or
(B) a transaction or an arrangement in respect of a property carried out or made in a fictitious name; or
(C) a transaction or an arrangement in respect of a property where the owner of the property is not aware of, or, denies knowledge of, such ownership;
(D) a transaction or an arrangement in respect of a property where the person providing the consideration is not traceable or is fictitious;
Furthermore as per the provisions of PBPT Act - clause D of sub section 9 of section 4 - in a transaction or an arrangement in respect of a property where the person providing the consideration is not traceable or is fictitious it shall be considered as a Benami Transaction and the person who is held guilty of entering into a Benami Transaction shall be punishable with rigorous imprisonment for a term which shall not be less than one year, but which may extend to seven years and shall also be liable to fine which may extend to twenty-five percent of the fair market value of the property. - Section 53(1) and 53(2) of PBPT Act.
Also if any person who is required to furnish information under this Act knowingly gives false information to any authority or furnishes any false document in any proceeding under this Act, he/she shall be punishable with rigorous imprisonment for a term which shall not be less than six months but which may extend to five years and shall also be liable to fine which may extend to ten per cent. of the fair market value of the property. – Section 54 of PBPT Act.
Thus, it is important for understand the Benami Property Transaction Act along with the Income Tax Act to understand the impact of depositing the undisclosed income.
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