The case is selected for scrutiny by CASS (Computer Aided Scrutiny Selection) for the Assessment Year 2019-20 and the officer sends notice of hearing to the Assessee to attend the office on a particular day with supporting documents such as Books of Account, vouchers, Bank Pass Books etc., in support of the Return of Income filed. The Assessee has filed Return of Income declaring a Total Income of Rs. 3,00,000/- (Rs. Three Lakhs only) and the resultant tax after TDS has been paid in full in time as Advance tax and Self Assessment Tax. The Assessee maintains regular Books of Account supported by bills and vouchers, which were produced before the Assessing Officer and after verifying the Books of Account, Bank Pass Books and other records the Assessing office has completed the Assessment after adding a sum of Rs. 3,00,205/- (Rs. Three Lakhs and Two Hundred and Five only) due to insufficient drawings on the following grounds:

Particulars Amount (Rs.)
Use of Credit Card at Hill Station for Hotel Accommodation 15,200
Use of Debit Card for purchase of Furniture 34,500
NEFT to son for personal expenses 45,520
Purchase of Mobile Phone through e-Wallet 55,000
Use of Petro Card for purchase of fuels 22,512
RTGS to a Travel Company for Foreign Travel 55,000
Expenditure made through various Mobile Apps. 72,473
TOTAL 3,00,205

The above stated expenditures are spent out of a Bank Account which was not disclosed in Books of account.

Personal Drawings as per Books is Rs. 2,40,000/- only which is spent for Rent, Monthly drawings for house hold expenses, Local travel etc., The above expenditures are not shown as Drawings in the Books of Account.

In addition to applicable taxes and interest penalty is also to be paid.

From the Assessment Year 2017-18 onwards levy of penalty is mandatory for these types of additions.

Cash Less Economy will land the Assessees in difficulty if all the digitized transactions are not disclosed in the Return of Income.

The above illustration is a hypothetical situation which may become a reality if the Assessees who are caught in the Digital World are not cautious enough. All the transactions under one PAN would be consolidated from all Bank Accounts since PAN has become mandatory for all Bank Accounts exceeding the normal limits.

Having more than one Bank Account and declaring one Bank Account in the Income tax Return will land the Assessees in great difficulty.

Republished with Amendments

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  1. Nagendran says:

    What the author describes is correct since it is assumption basis. Owing to digitization, Govt will get all your expense details. Hence, assessee should disclose his factual income.

  2. CA. M. Lakshmanan says:

    What is said is correct; more time is spent on returns filed leaving a lot of potential assessees Scot free. A lot of documents are registered by the Regn Department if the value does not exceed Rs. 5 Lakhs without PAN and if exceeds with PAN or Form 60/61. But action taken by the I.T. Authorities on these transactions to rope in new assessees is not sufficient.

  3. vswami says:

    Facts set out are confusing – is it not ?
    Assessment year as said is 2017-18 (?); also said, for that year- (for which the relevant previous year will be that only ending 31, 2017 ?) – a return of income was filed, after making payments of tax, including on self-assessment ? !
    Beg to be corrected, if self were to be confused ; and if a different view is possible !!

  4. Arun Jain says:

    This is nice that Government is well equipped then ever before, However, the focus of Govt should be on wider area of tax, In our country there is huge opportunity available to widen the tax net. By restricting the tax authorities to existing assesses, shall keep limited opportunity, They should go for other areas too.

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September 2021