No penalty on high denominations notes deposited into bank if such amount is declared in return of income by paying appropriate tax

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The article below is extracts of the Professional opinion given by CA Rasesh Shah, Surat

Generally I refrain from expressing any professional opinion on Social Media. However, in view of prevalent panic created by certain media over imposition of penalty on unaccounted cash of high demonetization that are deposited into bank, I give my professional opinion as under:

If unaccounted cash are deposited into bank and appropriate tax (maximum 30% plus surcharge) is paid on this additional income, no penalty for under reporting or misreporting can be imposed by assessing officer u/s 270A of Income tax Act, which has been newly introduced from current year. Even, tax payer is not required to substantiate source of income and income can be declared without disclosing head of income. This is because penalty for concealment can be levied only on difference between assessed income and returned income. This view is based on bare reading of section 270A itself. So penalty of 200% under no circumstances can be levied on such income disclosed in return of current year. With due respect, I have to say that The news paper headlines that ‘200% penalty on unaccounted cash deposits of over ₹ 10 lakh’ published in today’s Times of India and other media including TV are misleading and unnecessarily creating panic situations.

Based on such reports, there are many messages being circulated that you shall only get Rs. 7 on depositing Rs.100 into Banks and being panic there are informal reports of common men giving away Rs 100 to get Rs. 65 after paying huge commission to agents involved instead of paying appropriate taxes and bringing the money into circulation and help in nation building.

I therefore advise not to sell the notes at discounted prices or deposit the cash into bank accounts of other benami persons in fear of penalty. Further, do not claim any bogus expenses or bogus loss to gain more trouble. Do not manipulate accounts by creating bogus cash on hand. Be sporty and pay tax honestly to buy peace by building capital. This disclosure by paying tax at maximum of 30% will be advantageous showing the same as income of the current year compared to IDS where rate of tax was 45% because the said scheme was meant for income earned in previous years.

Disclaimer : The above article is the extract of Legal opinion given by CA Rasesh Shah and compiled by CA Mehul Shah who are partners of the firm Rasesh Shah and Associates based at Surat and Ahmedabad. The Authors are members of Institute of Chartered Accountants of India and can be reached at or 9723459572.

The contents of this document are solely for informational purpose. It does not constitute any recommendation of firm. Neither the authors nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this document nor for any actions taken in reliance thereon.

Readers are advised to consult their CA or professional for understanding applicability of this article in the respective scenarios based on different facts.