[Sawyer]

Originally Posted by SDP

I am just highlighting the sheer amount of effort and time this gentleman is going to waste now to justify his action and intentions.

More shocking to me is how the government is going to waste its time in running after peanuts; they could have done this easily via the normal processes in place, triggered by the Rs 2.5 lakhs limit. And there ought be a prioritisation process by value: on second thoughts, maybe for the place where this IT dept is located, this is a huge amount.
A notice like this, out of the normal assessment processes, is normally worth the effort for only much larger deposits, in crores.
Honest tax payers running a business get notices from IT all the time, we take them in our stride. And I read this notice to see if personal presence is demanded, which is rarely the case; I could not find it, so if I received it, I would just depute my accountant to deal with it and keep my eye on where it needs to be; my business.
My accountant will satisfy the ITO that all is above board and there ends the matter. How could it end any other way for an honest tax payer?!

Originally Posted by mayankk

IN agreement with why ask for trouble.

Again, for an honest tax payer, these notices aren't unknown, and we deal with them all the time and we have an organisation to do this for us. It is no trouble if there is no income to hide.

[SDP]

Originally Posted by Sawyer

...
Honest tax payers running a business get notices from IT all the time, we take them in our stride. And I read this notice to see if personal presence is demanded, which is rarely the case; I could not find it, so if I received it, I would just depute my accountant to deal with it and keep my eye on where it needs to be; my business.
My accountant will satisfy the ITO that all is above board and there ends the matter. How could it end any other way for an honest tax payer?!
...

In this particular case, what might be the reason that the notice has been issued in the first place? What's your take?

[400notout]

Originally Posted by sgiitk

Have you figured out how many day will 1cr take in 500 rupee tranches. I think it is something like 20,000 days, is over 50 years.

Sorry for not being clear. By 500 I was referring to a lowest probable wage amount and not depositing in 500 rupees tranches. Some other Bhpians had mentioned more clearly that this amount can be fragmented to various suppliers who in turn could make labour/material payments. The calculation was in that context.

[Sawyer]

Originally Posted by SDP

In this particular case, what might be the reason that the notice has been issued in the first place? What's your take?

I have no way of giving you that answer other than a guess:
A report received from the bank because the aggregate amount exceeded Rs 2.5 lakhs.

A lot of this notice is a waste of time in most cases, going by what my bank told me: I don't recall the number, I think it was Rs 10 lakhs, but for any single deposit more than 10 lakhs, a declaration is required about the source of the deposit, a copy of the IT returns for the last 2 years, and audited balance sheet of last two years. Now this is information that is easily given, but at the same time, all the bank can do is take the paperwork and forward it to their head office, who will, I suppose, hand it over to the IT department. The bank cannot verify any of it, obviously, so all that has been done is more and more paperwork to be created, handled, correlated and filed. Bureaucrats gone berserk.

All an utter waste of extra effort, because the IT department is anyway going to ask for all this information at the time of the assessment. And for all deposits that are above the trigger limit, the PAN of the depositor is known and on record. So why have the already stressed Banks loaded with this extra work?!

[SDP]

Originally Posted by Sawyer

I have no way of giving you that answer other than a guess:
A report received from the bank because the aggregate amount exceeded Rs 2.5 lakhs.

This is not a individual, but a business. So the 2.5Lakhs limit doesn't really apply in my opinion.

A lot of this notice is a waste of time in most cases, going by what my bank told me: I don't recall the number, I think it was Rs 10 lakhs, but for any single deposit more than 10 lakhs, a declaration is required about the source of the deposit, a copy of the IT returns for the last 2 years, and audited balance sheet of last two years. Now this is information that is easily given, but at the same time, all the bank can do is take the paperwork and forward it to their head office, who will, I suppose, hand it over to the IT department. The bank cannot verify any of it, obviously, so all that has been done is more and more paperwork to be created, handled, correlated and filed. Bureaucrats gone berserk.

All an utter waste of extra effort, because the IT department is anyway going to ask for all this information at the time of the assessment. And for all deposits that are above the trigger limit, the PAN of the depositor is known and on record. So why have the already stressed Banks loaded with this extra work?!

In my opinion, the Govt Dept is taking the extra effort and generating additional paperwork just to eliminate (or reduce) the possibility of money laundering.

Question is - why do something that can potentially be considered as money laundering and would waste your and your CA's time filing supporting documents that you might have already shared and few more?

[heavenlybull]

My take on that IT notice is that they are actually after the person who gave this gent 4.51 lakh in old notes in the first place. For all we know he may have a huge stash of old unaccounted currency that he is now trying to get rid of by paying up outstanding payments. The odd amount of 4.51 instead of 4.5 indicates to me its some kind of pending payment he received from someone.

[Sawyer]

I think the 2.5 lakhs applies to everyone.

And why would I do it, if I had a cash driven business, but still honestly run?

Very simple; only businessmen know how easy it is to lose business and sales and how hard it is to get them back. And I would also do it, if I needed the income for any of my legitimate needs. As a business man, the customer pays my salary and puts the food on my table in a very real sense that is not known, felt or understood by salaried employees working for companies because they rarely see what is a direct connection between daily sales and their assured monthly salary.

Finally, I would do it in the interest of customer service, much like the people quoted in the TOI report. Don't you think that the restaurant owner, Hemant Kadam, is doing his community a genuine service in helping them in a crisis? Look at it objectively, he is also reducing the lines in the banks and ATMs in doing what he is doing, so he is doing the government a favour as well, however little its impact may be on the government itself.

Complying with requirements that are easily complied with is just extra photocopying expenses; not a big deal.

Really, to me the question is: why NOT do it? Trust me, the economy that is winding down will not just automatically and effortlessly wind up again.
PS: what would happen in this forum on this thread if corporate India was to say, sorry gents, no salary from November 8 to December 31, no sales; we will see about January salary once we get to actually see what the end of 50 days has brought about.

[SDP]

Originally Posted by Sawyer

....

And why would I do it, if I had a cash driven business, but still honestly run?

....
Really, to me the question is: why NOT do it? ...

You seem to be taking a very Utopian view of the situation and avoiding touching the 'money laundering' angle.

Let me ask this in a different way:
1. Is it 'possible' that the person who is still trying to pay by old 500/1000Rs notes is indeed a black-money hoarder and NOT a common innocent man who is doing it just because its easier (and legal as per you)?
2. If the Govt is trying to plug this exact possibility by putting a few guidelines in place, why should one still do it and increase the overall paperwork generated, thereby creating a diversion and reducing the possibility of actual money laundering cases would get buried in a heap of notices? Not wanting to lose a customer and customer-service are valid reasons, but doing Govt a favour? Nah .. in fact you (I don't mean 'you') are just creating more challenges for the Govt and exposing loopholes.
3. Since you are from the taxation field, what's your take on how many (in approx percentage terms) traders and businessmen are completely honest when it comes to declaring income and paying tax?

[Sawyer]

Please give me one example of money laundering that can be done in today's context for the kind of continuing use of the old notes I have been talking about till now, and I will see if I can then respond with reference to that specific example. It is too broad a thing to talk about generically, this money laundering term. I am not saying I will definitely have a good answer, but in generic terms, I definitely have no chance of being able to give a good one.

And IMO, the Utopians are the believers that in 50 days all will be back to normal. I dearly wish I could be one of those, I would not then have started to move my investment portfolio from equity investments to debt funds.

To your question 3, your guess is as good as mine. I now run a consulting business, so we are both equally ignorant, I suspect.
PS: my alarm bells started ringing very loudly two days ago; a friend that had booked a Innova with a 6 month waiting list got a call that the car is ready. He is thrilled, I am changing my investment portfolio allocations. Are you also going to suggest that I should not be doing that to do the GOI a favour?!

[Turbanator]

Guys, I have a query

Scenario Housewife - Cash available with a housewife for about Rs 10 Lac. She saved about 1 lac to 1,5 Lac from her husband's Tax paid Income for past 10-15 Years for marrying her daughter or son or just saved as a security and kept in safe or locker. If I am not mistaken there is no rule which debars or penalise someone to hold money in cash. Now if she deposits money in Bank, IT guys are surely going to send her notice. But where is she wrong ? I am sure there must be many persons like her who have saved money for many years and kept in cash for some reasons.

[Sawyer]

Originally Posted by Sawyer

Please give me one example of money laundering that can be done in today's context for the kind of continuing use of the old notes I have been talking about till now

Let me help you in selecting the one example I asked for above, by listing the kind of businesses that I have referred to till now, and you tell me how the money laundering will happen there and I will respond to your example:
1. Chemist
2. Bakery
3. Petrol Pumps
4. Restaurants
5. Vegetable vendors
6. Tyre repair, car service, and road tolls
7. Seller of agri commodity like seeds and the like
8. Mutton/Fish market
9. Construction materials
10. Taxi/auto/Uber cabs
I could think of ten others, but this is enough of a choice?

Originally Posted by Turbanator

if she deposits money in Bank, IT guys are surely going to send her notice. But where is she wrong ?

Unfortunately for her, she will probably have to spend time before the IT people, explaining all this. She might have to show her husbands IT records - hopefully, he had paid tax! Oops, sorry, I just read that he has, so no worries at all.
She hasn't done any wrong, and she will be fine; but because it takes some skill and not be nervous before the ITO, she is best advised to appoint and take a good CA with her to represent her case well.

[Turbanator]

hopefully, he had paid tax!

Ok, Let's say if his husband is below IT return limit and she has still saved money - 50,000 Per Year for past 10 Years or case 2 if she also works part time and has saved major earnings of her. I am sure there will be enough cases like this. Will arguments of IT hold good in court in case one does not agree to finding of officers ?

[SDP]

Originally Posted by Sawyer

Please give me one example of money laundering that can be done in today's context for the kind of continuing use of the old notes I have been talking about till now, and I will see if I can then respond with reference to that specific example. It is too broad a thing to talk about generically, this money laundering term. I am not saying I will definitely have a good answer, but in generic terms, I definitely have no chance of being able to give a good one.
...

I believe I gave you the example.
Let me be more specific - A Doctor operating his own small clinic. Typical consultation charges 200-300 Rs per patient. All cash. At the end of the month, the net income after deducting all expenses is let's say 1 lakh. He shows half of that and pays tax on that part. So 50K per month is undeclared and therefore black. In one year, 6lakh Rs in cash. Then 8th Nov announcement happens. What does he do? He goes to a electronic goods shop in the neighborhood run by a good Samaritan and buys a few items and pays 2Lakh in cash ... using old notes that were stored somewhere in his house or clinic till now. The shop-owner deposits the money in his current account the next day and pays tax on that. Everybody is happy. But take a step back and look at what happened. The Doctor just managed to escape the net set up by the Govt and managed to convert his black money to electronic goods which he can enjoy or even sell to somebody else.

Govt laid down a guideline that nobody (except a small list) should accept the old notes so as to stop all such efforts by people to convert their black money in cash to other forms and our good Samaritan shop-owner ended up helping the wrong side.

[Sawyer]

Originally Posted by SDP

I believe I gave you the example.
He goes to a electronic goods shop in the neighborhood run by a good Samaritan and buys a few items and pays 2Lakh in cash ... using old notes

First of all, I have never quoted this example of a white good store anywhere in my posts, so it isn't the kind of thing I have spoken off approvingly on this thread as a civic service, and such a store as a good Samaritan. This is what we in business call a capital goods purchase and can be still be easily handled as such by putting it in the same category as other capital goods. All that is needed to be done to prevent laundering was a notification that any establishment other than the kinds of service establishments like the ten I HAVE mentioned for a good reason and others like them, that accepts these notes need to obtain the PAN of the buyer. Doctor trapped, job done.

BUT: The other thing to note is that the white goods store would not suffer from lack of business because of demonetisation because they are already accepting credit cards widely. Finally, for an electronic store, this would not have been rampant money laundering; any money launderer that has some sense would understand that exchanging black money for a washing machine that he doesn't really need, but is buying just to launder the black money in addition to clothes is a stupid idea. But if he still does that, and submits his PAN detail, good luck to the fool.

Back to MY question of you now: an example of the kind of things I have spoken about on posts here, and I have given you a choice of 10 to choose from?

I look forward to that very much

PS: and again Government only said that some establishments WILL accept these notes. There is no law in place to support the converse implication, although the converse implication exists and has caused the panic. As I have already written many times here. But lets not go back to that!

[poloman]

Originally Posted by Sawyer

I look forward to that very much

Suppose I have 5L of black money and restaurants have permission to accept 500 and 1000 rupee notes. You have 50 days to launder this money. A big restaurant with 1L sales per day can cook his books by 10K every day to absorb this money and convert this to white. He may pay 30% tax on this. But he can charge 40% premium from the black money holder who may very well agree to this and will get back 3L.