Will I get Income Tax Notice if I deposit Cash in Bank?

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  1. nehaj

    nehaj New Member

    For the past 4 year, I am working and earning money and I have been adding this money in my house itself to buit our house. But now we have canceled our plan to construct the house.
    So I want all that money to be deposited in my bank accounts to make an fd.
    I don't have taxable income, so I didn't fill income tax return till now.
    So now my question is, how can I deposit all the income (7,80,000) that I have earned in those years in to my bank accounts. Is there a proper way to do so, will I get in trouble from IT department for income tax if I deposit it in my account, because it may be seen as I have earned this money in a single year. How could I differentiate all that income.
    Please Help
  2. @nehaj,
    what I don't understand is why you have not been keeping your money into the Bank either in the form of FDs or simply in your Savings Bank Account. Today no person will ever want his/her money keep idle for such a long time. Even if you wanted to buy/build a house you could have deposited your money into the bank.
    Now, You can do so but the total income may be considered as the income for the year in which you deposit it into the Bank. Consult a professional before depositing all your hard earned money before depositing it.
  3. nehaj

    nehaj New Member

    Sir, firstly Thanks for your reply
    You are right, I have consulted to an local income tax advisor in my town. He has suggested me a way to deposit all my income in my bank accounts.
    He said, he will file my previous two years and current year return. And then I can deposit the money while he does that. So I want to ask is that a correct way, and is there any thing else Which i should be careful about.
  4. Karan Batra

    Karan Batra Well-Known Member

    Yes, this method is correct.

    You can file Belated Return of Income Tax for the past few years and disclose this Income in the Income Tax Return.

    After this disclosing the income in the income tax return, you can deposit this amount in the bank account
  5. nehaj

    nehaj New Member

    Thank you so much for the quick response sir
    I didn't had knew that I will get the answer so fast.
    One More thing i want to know that what are the points i should remember while doing the adjustments because no one want any income tax notices coming their way.
    also this income tax return thing is new for me, so I don't want to do any single mistake.
    Please guide
  6. Karan Batra

    Karan Batra Well-Known Member

    You can only file belated return for Financial Year 2013-14 and 2014-15 and not for years before that.

    From next time onwards, try to file all your income tax returns on time
  7. Karan Batra

    Karan Batra Well-Known Member

    @Shilpa. : You have done an excellent analysis. You have gone in detail and analysed the scenario and given very good advice.
  8. Karan Batra

    Karan Batra Well-Known Member

  9. Chandrashekar M

    Chandrashekar M Active Member

    Thank you Mr.Karan & Shilpa for referring it to me. My answer is not different from what all of you gave,
    1. Whoever originally earned the income needs to provide evidence of how the income was earned, whether as salary income from employment, business income, investment income, winning the lottery, among other sources.
    2. Documentation can take the form of employment and income confirmations from the employer. In the case of business owners, proof of the existence of their business, proof of the investor’s ownership of the business, financial statements from the business for the past 5 years, and an explanation for how the business owner either started the business from nothing or purchased the business. If the business owner purchased the business, then it needs to be documented how he or she acquired the funds to purchase the business. Similarly, in the case of investment income, the investor needs to document the income from the investment and show how he or she originally acquired the funds in order to make the investment.
    3. Many assessees do not file tax returns or routinely under report their income on the tax returns, but it becomes necessary to provide other convincing evidence of how much the person really earned legally, based on bank account statements.
    4. The department views the reporting of income on the tax returns as a good indication, though not conclusive, that the income is not being derived from criminal activities, since major criminal activities such as drug trafficking, racketeering, loan sharking, money loundering, Money derived from Hawala transactions, terrorist money, un accounted money of other person etc., generally entail the use of cash that does not circulate through regular banking channels and is not reported on tax returns. The department does look for patterns of transactions that are indicative of such money laundering. However, where sufficient evidence is submitted indicating that the assessee is earning income from legitimate business or other earning activities to make an income as returned in the income it will be accepted.
    5. In order to get satisfied that the income declared is out of “Revenue income” out of salary the income tax officer may resort to :
    (a) summoning and enforcing the attendance of any person and examining him on oath;
    (b) requiring the discovery and production of documents;
    (c) receiving evidence on affidavits;
    (d) requisitioning any public record or copy thereof from any court or office;
    (e) issuing commissions for examination of witnesses or documents;
    (f) any other matter which may be prescribed."

    6.In case where the explanation of the assessee regarding the source of a disputed amount is not accepted, the question still remains whether it is a revenue income. It is not in all cases that by mere rejection of the explanation the character of the disputed item as revenue income can be deemed to be established. Each case has to be judged on its own merits for this purpose.

    7.The Income tax officer may reject the assessees explanation that the amount was a revenue receipt from salary and may presume it to be from undisclosed sources.

    8.If it was salary income, the amount should be credited in the assessees Bank account on month to month basis.and also should make withdrawals from this bank account certain reasonable amounts for the personal expenses of the assessee.

    9.Othewise the Income tax officer may presume that these amounts are advanced by her husband or father to be deposited in her account with the bank.

    10.Even if it is argued that the amount came out of the savings of of salary income “salary received by cash”, it cannot ipso facto be traced to the assessee as her income.

    Over all, we need to see Whether Moral or Ethical Values. merit consideration in tax matters? I give few examples.

    People take undue advantage of the department because, a section of Government is corrupt. But an Eye for an Eye will leave the whole world blind. When I want to be a dishonest tax payer; and I want to justify it because others are dishonest, whole country will be reduced to a country of dishonest people. Then the country can go insolvent. Many countries are insolvent today.

    Most people are honest in their private dealings. They wont cheat an individual in their business or personal matters even if they have a chance to cheat without being caught. They find it okay to cheat Government. After all, Government is an abstract, entity.

    Another way of looking at it: Government is not the owner of the country. It is only an administrator not withstanding its arrogance. Government consists of officers, they are human beings and they are people. When I cheat on taxation, I am cheating 125 crores of people. Not just the Government.

    Society runs on greed and fear. Those who refuse to be pushed around by greed and fear will be side lined by majorities at many levels. Ultimately it is an individual’s choice.

    Mahavir Bhagwan has said: Dharma starts with Vivek . Dharma means a life lived with morals and ethics, with love and truth. Vivek means the process of distinguishing Shubh and Labh and then following Shubh . ( Shubh means that which helps spiritual evolution. Labh means that which is beneficial materially.)

    Should I be moral/ ethical? Why? What is the benefit (Labh) by being ethical? are not new questions. People from all walks of life have raised these questions since the beginning of society. Because we are in tax practice, we relate this issue with tax practice. Others relate this issue with their own field of activity.

    This is actually a dilemma or even an internal confrontation between mind and intellect. The mind pulls towards temptations (Labh) and intellect pulls towards morals (Shubh). It is always a personal fight, personal struggle. Neither debates nor sermons can help anyone. One who can win over all temptations is called Mahaveer.

    May I quote something from Mahabharat: The Prince of Hastinapur Duryodhan ordered Vastraharan of the queen of Indraprastha (present Delhi ). None of the persons including seniors opposed Duryodhan - except two persons: Vidurji & Vikarna. Draupadi asked for help and on failing to get any help questioned the silence by entire Sabha. She said:
    न सा सभा यत्र न सन्ति वृद्धाः
    वृद्धाः न ते ये न वदन्ति धर्मम्
    धर्मो न सो यत्र न चास्ति सत्यं
    सत्यं न तद् यच्छलनानुविद्धम्
    English translation: Where there are no wise old men, it is not a conference. Those who do not support Dharma, are not wise old men. That which is not based on Truth, is not Dharma. That which is obtained by misrepresentation and fraud, is not Truth.

    Duryodhan makes a statement in this situation
    जानामि धर्मम् न च मे प्रवृत्ति
    जानामि अधर्मम् न च मे निवृत्ति
    English translation: I know the Dharma. But I cannot practice it. I know what is Adharma. But I cannot leave it.

    You will find answers to the questions, somewhere within and not without these words. Please take decisions to the best of your conscious.

    --Warm Regards
    Last edited: Mar 10, 2016
  10. Nikil Mohan

    Nikil Mohan Member

    It is strange that the person who has asked the question, has no courtesy to thank a senior person who took his valuable time and answered his words of wisdom. The effort put by Ms.Shilpa was also not recognized and thanked by the person who put the question ?

    Strangely this is the attitude of my brothers and sisters who are seeking answers in this open forum. Many experts and many chartered accountants do not wish to spare few minutes to answer the queries in this forum, because it is a thankless job, leave alone they do not get any fees to answer the questions. There is nothing that you loose, to say a word of thanks when you get answers to your question. Hope good attitude and good thoughts come to our people.

    In my two decades of professional experience, I have seen people coming to me to file the return and declare the income as per their wish. If I tell the consequences of such risks they always walk out of my office and go to some other auditor practicing in small roads, gully’s without any qualifications calling themselves as “Auditors and Tax consults” We also lose our files as the files gets migrated to the persons dancing to the tunes of the assessee’s mind frame.

    Without teaching and preaching, I just want to give my solution to the question put by Ms.Neha. I am aware that I will not be thanked for my answer, but as a dedication and respect to that senior person of age and experience who have answered and to encourage the upcoming young professional Mrs.Shilpa, I am giving my answer to the best of my knowledge and experience.

    Salary Income of Rs.1,95,000/- per year which is below the taxable income cannot be accumulated in the form of “Cash” and it cannot be aggregated as “accumulation of cash” for number of years and it cannot be deposited in bank of Rs.7,80,000 on a fine day without paying single paise tax to the nation. In legal terms it is called colorable devise, I can quote the judgment of supreme court and the words of Hon’ble justice Lord Chinnappareddy, which clearly described “what is the meaning colorable devise to avoid payment of taxes”

    The Best way for you to put your monthly salary “received in cash” into the bank month to month as you receive your salary. You should have your pay slip or some proof of having received your salary. At any point of time if your salary exceeds taxable income you can save to the maximum extent U/s.80c. You can withdraw from your bank account as much as you can for your personal expenses. If your husband is taking care of your family it is fine, you can accumulate the entire or partial salary receipts into your bank account supported by your pay slips. Then it will be easy for you to explain your honesty to the Income tax dept. There is double advantage of such savings, since you and your husband can jointly approach the bank for housing loan. The banker will be happy to give you loan by looking at your savings history. Housing loan and interest benefits can be jointly availed by both of you in your Income tax returns. I feel this is the only way you can plan your taxes. Please remember tax planning is ethical and has legal support.
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