Section 285BA: High Value Transactions & Mandatory Return Filing

SECTION 285BA- HIGH VALUE TRANSACTIONS & MANDATORY RETURN FILING

Statement of Financial Translations or SFT refers to information related to certain high-value transactions which specified persons are required to report to the income tax department. The SFT was earlier known as ‘Annual Information Return (AIR)’. The objective of SFT or AIR was to curb black money and widening the tax base. Section 285BA of the Income Tax requires specified reporting persons to furnish statement of financial transaction. Rule 114E of the Income Tax Rules, 1962 specifies that the statement of financial transaction is furnished in Form No. 61A.

It is mandatory that specified reporting entity/person shall furnish a statement of financial transaction or reportable account as per Section 285BA of the Income Tax Act,1961.

In order to furnish statement of financial transactions, specified forms are required to be submitted as per Rule 114E of Income Tax Rules, 1962 referred to as “Statement of Financial Transaction (SFT)

Section 285BA- Obligation to furnish statement of financial transaction or reportable account.

(1) Any person, being—

(a) an assessee; or

(b) the prescribed person in the case of an office of Government; or

(d) the Registrar or Sub-Registrar under the Registration Act, 1908 ; or

(e) the registering authority empowered to register motor vehicles under the Motor Vehicles Act, 1988 ; or

(f) the Post Master General ; or

(g) the Collector referred to in Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 ;
(h) the recognized stock exchange ; or

(i) an officer of the Reserve Bank of India ; or

(j) a depository referred to in the Depositories Act, 1996 (22 of 1996),

(k)a prescribed reporting financial institution;

(l) a person, other than those referred to in clauses (a) to (k), as may be prescribed,

who is responsible for registering, or maintaining books of account or other documents containing a record of any specified financial transaction, under any law for the time being in force, shall furnish an annual information return, in respect of such specified financial transaction which is registered or recorded by him during any financial year beginning on or after the 1st day of April, 2004 and information relating to which is relevant and required for the purposes of this Act, to the prescribed income-tax authority or such other authority or agency as may be prescribed.

(2) The annual information return referred to in sub-section (1) shall be furnished within the prescribed time after the end of such financial year, in such form and manner as may be prescribed.

(3) For the purposes of sub-section (1), “specified financial transaction” means any—

(a) transaction of purchase, sale or exchange of goods or property or right or interest in a property; or

(b) transaction for rendering any service; or

(d) transaction by way of an investment made or an expenditure incurred; or

(e) transaction for taking or accepting any loan or deposit

Provided that the Board may prescribe different values for different transactions in respect of different persons having regard to the nature of such transaction. Note: Prior to Finance Act, 2019, reporting was to be done if value of transaction was more than 50000. Now this limit has been removed by Finance Act, 2019

(4) Where the prescribed income-tax authority considers that the annual information return furnished under sub-section (1) is defective, he may intimate the defect to the person who has furnished such return and give him an opportunity of rectifying the defect within a period of thirty days from the date of such intimation or within such further period which, on an application made in this behalf, the prescribed income-tax authority may, in his discretion, allow; and if the defect is not rectified within the said period of one month or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, such return shall be treated as an invalid return and the provisions of this Act shall apply as if such person had failed to furnish the inaccurate information in the statement.

(5) Where a person who is required to furnish a statement under sub-section (1) has not furnished the same within the prescribed time, the prescribed income-tax authority may serve upon such person a notice requiring him to furnish such return within a period not exceeding thirty days from the date of service of such notice and he shall furnish the annual information return within the time specified in the notice.”.

(6) If any person, having furnished a statement under sub-section (1), or in pursuance of a notice issued under sub-section (5), comes to know or discovers any inaccuracy in the information provided in the statement, he shall within a period of ten days inform the income-tax authority or other authority or agency referred to in sub-section (1), the inaccuracy in such statement and furnish the correct information in such manner as may be prescribed. (7) The Central Government may, by rules made under this section, specify— (a) the persons referred to in sub-section (1) to be registered with the prescribed income-tax authority; (b) the nature of information and the manner in which such information shall be maintained by the persons referred to in clause (a); and (c) the due diligence to be carried out by the persons for the purpose of identification of any reportable account referred to in sub-section (1).

MANDATORY RETURN FILING

Requirement to file ITR by persons making large cash deposits in current account New proviso to Section 139 was inserted by Finance (No.2) Act, 2019 w.e.f 01.04.2020 which provided that any person who has deposited an amount or aggregate of the amounts exceeding Rs. 1 crore in one or more current account maintained with a banking company or a cooperative bank shall be obligated to file his return of income for that previous year. It is noteworthy here that limit of Rs. 1 crore cash deposit in the current account is to be taken as person wise and not current account wise. A question arises here that whether direct cash deposits made by others such as customers, friends, relatives etc in the current account of the assessee would also be taken into account for the limit of Rs. 1 crore. Going by the spirit of the new provision, direct cash deposits by others should be counted in the depositor’s limit and not in the account holder’s limit.

SECTION 13A

Exemption of Income in the hands of political Parties- Political parties which is registered with the Election Commissioner of India, are exempt from paying income tax. To avail exemption political parties are required to submit a report with Election Commissioner of India and furnish details of contribution received in excess of Rs. 20,000/- from any person. No donation of Rs. 2,000/- or more is received otherwise than by an account payee cheque/draft/use of electronic clearing system through a bank account or through electoral bonds

SEC 13B READ WITH RULE 17CA

For availing the benefit of exemption u/s 13B, an electoral Trust shall accept contributions only by way of an account payee cheque or account payee bank draft or by electronic transfer and shall not accept any contribution in cash.

PAN Card mandatory for Deposits, Withdrawals above INR 20 Lacs in a year

CBDT has notified transactions wherein it is mandatory for a person to obtain PAN. The board has notified new Rules 114BA & 114BB and amended Rule 114. A person, depositing/withdrawing cash aggregating to Rs. 20 lakh or more in a FY, with one or more bank/post office, shall be required to apply for allotment of PAN atleast 7 days before entering into such transactions. PAN is also mandatory for opening a current account or cash credit a/c.