Ignorance of SC Judge about Demonetization & Black Money

Unsubstantiated Observations of SC Judge Nagarathna about Demonetization & Black Money

The big painful jolt of demonetisation creates the right psychological milieu for the war against black money. With the strides made in digitisation of tax returns and bank records together with PAN, AADHAR and KYC regulations will provide a preliminary positive feedback on the black money of excessive cash deposited. Many non-tax payers have now become tax payers as they & their transactions have been brought in tax net.

How Income Tax law & Department tracked Cash Deposits above Rs. 2.5 lakhs

a)????? Any cash deposits in such notes in banks, beyond the specified limit of ?250,000, attract deeper scrutiny from income tax authorities.

b)????? The notification also said that the permanent account number (PAN) needs to be compulsorily quoted in case of cash deposits exceeding Rs 50,000 on a single day, or over Rs 2.5 lakh during demonetization period.?

c)?????? The government has warned to impose a 200% penalty on cash deposits above ?2.5 lakhs and to tax them, if there is an income mismatch.?

d)????? The government had kept a close eye on high-value bank deposits using AI to detect unaccounted money by identifying high value Cash deposits.

e)????? The Income Tax Department (ITD) in India tracks any cash deposit exceeding ?10 lakh in a financial year (2016-2017).?This includes any cash deposit across all the savings accounts, current accounts & FDs in a Financial Year (from April 01 to March 31) and these are reflected in Annual Information Return (AIR in Form 26AS).?The Central Board of Direct Taxes requires banks to report cash deposits if they exceed ?10 lakh in a financial year, in any account.

f)?????? If anyone had deposited more than ?2.5 lakh in their account, they had to justify the deposit and if they fully explain the cash deposits, that cannot be treated as unexplained money.

g)????? If a notice is issued by IT Department, it will ask the person to explain the source of income, need to provide documents supporting his claim regarding the source of money. Notices under different sections are just the starting point. The penalties, interest, etc. vary depending on the outcome of the proceedings.

h)????? Never filed returns:?Such individuals can receive a notice under Section 142(1). The person is required to file the returns or produce relevant information and records as demanded by the assessing officer. If this is accompanied by a notice under Section 143(2), the person is required to attend the proceedings.

i)??????? After scrutiny, if the officer is satisfied with the explanations, he will issue a clean chit, otherwise he will state the discrepancy between the reported income and actual income and calculate the tax demand. This order will be supported by a notice of demand under Section 156.?

j)??????? If the person doesn’t comply with the notice, the officer will calculate the tax liability based on his own assessment taking into account amount of cash deposited and not explained by the person. If an assessee has been called upon to produce books of accounts under Section 142(1) and fails to do so, the tax authorities have reason to believe that such an assessee has in his possession money, bullion, jewellery or other valuable articles representing income that has not been disclosed. The department may then exercise its power of search and seizure.

Increase in taxpayers & tax collections post demonetisation

a)????? Number of income tax payers rose by 1 crore in fiscal year following demonetization. Number of corporate tax and personal income tax payers has risen by 32 % and 60 %, respectively, in first seven years of Modi government.

b)????? During the period November 2016 to March 2017, the Income-tax Department conducted search and seizure actions in 900 groups leading to seizure of ?900 crore, including cash of ?636 crore and admission of undisclosed income of about ?7,961 crore.

c)?????? Growth rate of 18% for F.Y. 2017-18 in net direct tax collections over F.Y. 2016-17, which was highest in the preceding seven financial years, indicated the positive impact of demonetisation on the level of tax compliance in the country.

d)????? In F.Y. 2017-18, Personal Income-tax (PIT) Advance Tax collections increased by 23.4% and PIT Self-Assessment Tax by 29.2% over those for F.Y. 2016-17, corroborating the premise that demonetisation and the subsequent use of bank deposit data by the Income-tax Department had a major impact on voluntary tax payments by the non-corporate / individual taxpayers.

e)????? A growth rate of 25% was achieved in the number of Income Tax Returns (ITRs) filed with the Income-tax Department during F.Y. 2017-18. It was the highest rate achieved in the preceding five years.

f)?????? During F.Y. 2017-18, the number of new ITR filers was about 1 crore 7 lakh as compared to 85.51 lakh during F.Y. 2016-17. In earlier years, the number of new filers was between 50 lakh and 66 lakh. There is, therefore, a clear upswing in the new tax filers during the F.Y. 2016-17 and F.Y. 2017-18, which can be attributed to higher level of compliance due to transfer of cash into the formal channels as a result of demonetisation.

g)????? A growth rate of 17.2% was achieved in the number of returns filed by corporate taxpayers during F.Y. 2017-18. It was more than 5 times the growth rate of 3% in F.Y. 2016-17 and 3.5% in F.Y. 2015-16.

h)????? As tax net widened, number of tax payers doubled while tax collection saw close to 50 % increase during the last four years.

i)??????? The parallel black economy of India is estimated to be around half of India's current GDP of $2.60 trillion (in 2017).

j)??????? Surge in Indirect Tax: Indirect tax collection till November 30, 2017 was at Rs 7.35 lakh crore as compared to full year target of Rs 9.27 lakh crore. With introduction of GST, movement of goods is tracked with e challans and these tricks are checked at many places resulting in many business transactions coming in tax net, which in effect is avoidance of black money.

k)????? Increase in direct tax buoyancy: Since demonetisation, direct tax buoyancy has more than doubled from 0.6 times in FY16 to 1.3 times in FY17 and 1.7 times in FY18.

l)??????? Hawala transactions: The brightest spot is the end of Hawala racket and rising property prices. Hawala is the way of transferring money from a different country to India in Indian denominations. Although illegal, the people in this racket make their money white through this process in different countries. To attract more people to remit through this form, they pay a premium over the existing exchange rates.

m)??? Black Money: In total, Rs 69,350 core was recovered under Income Declaration Scheme and Black Money and Imposition of Tax Act, and another Rs 5,000 crore under PMGKY. Demonetization is an established practice in monetary policy to tackle black money. The idea of demonetization is good but it has to be taken into consideration that most of the black money is kept in the form of land, buildings or gold or kept abroad. Black money is a continuous flow as a part of the illegal and legal activities that are part of the socioeconomic system.

n)????? Jewelry and Real Estate Business: The liquidity squeeze caused by demonetisation will be negative across sectors with high level of cash transactions. Real estate, jewellery, retailing, restaurants, logistics, consumer durables and luxury brands, cement and some segments in retail/SME lending space will be facing challenges to continue with old methods of doing business.

o)????? Fake currency: RBI report says that detection of fake Rs 500 & Rs 1,000 notes decreased by 59.7 and 59.6 % respectively after demonetisation.

Ignorance of SC Judge Nagarathna about Demonetization & Black Money

“Demonetization was a way of converting black money into white’, says Supreme Court judge Justice Nagarathna. How can Supreme Court Judge make such wild, sweeping argument without considering the Law & process?

?? Is she qualified to make such statement, did she consider data before making such sweeping statement?

?? Is she having any political agenda or ignorant or is seeking publicity?

?? Is she qualified to become SC judge?