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Preventive assessment?

10 November 2018

Assessment made on the basis of cash deposits in the bank account of a petty business man. He has lent his bank details to a business man to accommodate the cash received for the work of doing borewell drilling in the farms. Being a rural area the clients who got borewells installed paid by cash into the bank account of the person who has given bank details. After the work was over, about a year, the business man received the amount from the lender and went back. He is not traceable. Huge cash deposits is assessed and demand in the name of lender who has got stuck with a demand and penalty on his head. The I.T. department pressuring him to pay the taxes or face prosecution. He cannot file appeal without paying 20% of tax demand. Who has to make the next move in the given situation, and how?

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2 Replies

Rohit jain (Chartered Accountant / Company Secretary) (221 Points)
Replied 11 November 2018

You have to prove the following things to AO:
1. All these amounts which were deposited in your bank account were capital receipts on your part which you have returned
2. Prove that the other person has offered the amount to tax and have already paid advanve tax on it.

otherwise, AO is correct in his place to issue notice u/s 68

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Nitesh bind (Student CA Final ) (12692 Points)
Replied 13 November 2018

In my opinion you have to prove through to AO that it was amount as Capital Receipt. And this can be Only be Proved if the Other person on whose behalf you have received money is traceable and he accepts that this amount was received on his behalf and he has shown this receipt as his income.

Next option is to File the appeal (but you Have to pay the 20% of Demand and nothing can be done about that) and then prove there through the help of Land owner (where Borewell drilling was done) and the Other Business man (if possible).

If No action taken then AO will certainly proceed with Tax and penalty for cash credit under section 115BBE(+) Sec 271AAC which has now become VERY HARSH and which will come around 84.975%.

Thanks.

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