The Annual Information Return that the income-tax department of India gets from various agencies contains a treasure trove of information for a tax officer to work upon. All tax payers should be aware of this and also of how the AIR affects their tax assessments. This presentation takes you through the AIR and also the reports of the Central Information Branch (CIB). I have also dealt with the tax aspects of the recent demonetisation of Rs. 500 & Rs. 1,000 currency notes by the Govt of India.

1. AIR
BEWARE!
CA AMEET PATEL
14th November, 2016

2. Sometimes, air can harm
you
• Ask the residents of Delhi
• They will tell you what happens when AIR
is neglected

3. In Tax parlance also,
AIR
is equally important

4. What is AIR?

5. To keep a watch on high value transactions undertaken by
the taxpayer, the Income-tax law has framed the concept of
statement of financial transaction or reportable
account (previously called as ‘Annual Information
Return (AIR)’.
With the help of this statement, the tax authorities will
collect information on certain prescribed high value
transactions undertaken by a person during the year.

6. So,
technically, its no longer
AIR
but
FTRA

7. Who has to file an FTRA?
Statement of financial transaction or reportable
account is to be filed
• by certain prescribed entities
• and in such statement they are required to
furnish the details of specified financial
transactions or any reportable account
registered/recorded/maintained by them
during the year.

8. Who has to file an FTRA?
• the REGISTRAR or SUB-REGISTRAR appointed under section 6 of the
Registration Act, 1908;
• the registering authority empowered to register MOTOR VEHICLES under
Chapter IV of the Motor Vehicles Act, 1988;
• the POST MASTER GENERAL as referred to in clause (j) of section 2 of
the Indian Post Office Act, 1898;
• the COLLECTOR referred to in clause (g) of section 3 of the Right to Fair
Compensation and Transparency in Land Acquisition, Rehabilitation and
Resettlement Act, 2013;
• the recognised STOCK EXCHANGE referred to in clause (f) of section 2 of
the Securities Contracts (Regulation) Act, 1956;

9. Who has to file an FTRA?
• an officer of the RESERVE BANK OF INDIA, constituted under section 3 of
the Reserve Bank of India Act, 1934;
• a DEPOSITORY referred to in clause (e) of sub-section (1) of section 2 of
the Depositories Act, 1996; or
• a prescribed reporting financial institutions

10. BANKS
Sl.
No.
Nature and value of transaction Class of person (reporting
person)
1
(a) Payment made in cash for purchase of bank
drafts or pay orders or banker's cheque of an
amount aggregating to ten lakh rupees or more
in a financial year.
A banking company or a co-
operative bank to which the
Banking Regulation Act, 1949
applies.
(b) Payments made in cash aggregating to ten
lakh rupees or more during the financial year for
purchase of pre-paid instruments issued by
Reserve Bank of India under section 18 of the
Payment and Settlement Systems Act, 2007.
(c) Cash deposits or cash withdrawals
(including through bearer's cheque) aggregating
to fifty lakh rupees or more in a financial year,
in or from one or more current account of a
person.

11. BANKS / POST OFFICES
Sl. No. Nature and value of transaction Class of person (reporting person)
2
Cash deposits aggregating to
ten lakh rupees or more in a
financial year, in one or more
accounts (other than a current
account and time deposit) of a
person.
(i) A banking company or a co-operative
bank to which the Banking Regulation Act,
1949 applies (including any bank or banking
institution referred to in section 51 of that
Act);
(ii) Post Master General10 as referred to in
clause (j) of section 2 of the Indian Post
Office Act, 1898.

12. BANKS / POST OFFICES /
NBFC / NIDHI
Sl. No. Nature and value of
transaction
Class of person (reporting person)
3
One or more time
deposits (other than a
time deposit made
through renewal of
another time deposit) of
a person aggregating to
ten lakh rupees or
more in a financial year
of a person.
(i) A banking company or a co-operative bank to which
the Banking Regulation Act, 1949 applies (including
any bank or banking institution referred to in section 51
of that Act);
(ii) Post Master General as referred to in clause (j) of
section 2 of the Indian Post Office Act, 1898;
(iii) Nidhi referred to in section 406 of the Companies
Act, 2013;
(iv) Non-banking financial company which holds a
certificate of registration under section 45-IA of the
Reserve Bank of India Act, 1934 (6 of 1934), to hold or
accept deposit from public.

13. BANKS / CREDIT CARD
COMPANIES
Sl. No. Nature and value of transaction Class of person (reporting
person)
4
Payments made by any person of an
amount aggregating to —
A banking company or a co-
operative bank to which the
Banking Regulation Act, 1949
applies (including any bank or
banking institution referred to
in section 51 of that Act) or any
other company or institution
issuing credit card.
(i) one lakh rupees or more in cash;
or
(ii) ten lakh rupees or more by any
other mode, against bills raised in
respect of one or more credit cards
issued to that person, in a financial
year.

14. BOND ISSUERS
Sl. No. Nature and value of
transaction
Class of person
(reporting person)
5
Receipt from any person of an
amount aggregating to ten
lakh rupees or more in a
financial year for acquiring
bonds or debentures issued
by the company or institution
(other than the amount
received on account of
renewal of the bond or
debenture issued by that
company).
A company or institution
issuing bonds or
debentures.

15. IPO COMPANIES
Sl. No. Nature and value of
transaction
Class of person
(reporting person)
6
Receipt from any person of an
amount aggregating to ten
lakh rupees or more in a
financial year for acquiring
shares (including share
application money) issued by
the company.
A company issuing
shares.

16. COMPANIES
Sl.
No.
Nature and value of
transaction
Class of person
(reporting person)
7
Buy back of shares
from any person (other
than the shares bought
in the open market) for
an amount or value
aggregating to ten lakh
rupees or more in a
financial year.
A company listed on a
recognised stock
exchange purchasing its
own securities under
section 68 of the
Companies Act, 2013.

17. MUTUAL FUNDS
Sl.
No.
Nature and value of
transaction
Class of person
(reporting person)
8
Receipt from any person of an
amount aggregating to ten
lakh rupees or more in a
financial year for acquiring
units of one or more
schemes of a Mutual Fund
(other than the amount
received on account of
transfer from one scheme to
another scheme of that
Mutual Fund).
A trustee of a Mutual
Fund or such other
person managing the
affairs of the Mutual
Fund as may be duly
authorised by the
trustee in this behalf.

18. FOREX DEALERS
Sl.
No.
Nature and value of transaction Class of person
(reporting person)
9
Receipt from any person for sale
of foreign currency including
any credit of such currency to
foreign exchange card or
expense in such currency through
a debit or credit card or through
issue of travellers cheque or draft
or any other instrument of an
amount aggregating to ten lakh
rupees or more during a financial
Authorised
person as referred to
in clause (c) of
section 2 of the
Foreign Exchange
Management Act,
1999.

19. SUB REGISTRAR
Sl.
No.
Nature and value of
transaction
Class of person
(reporting person)
10
Purchase or sale by
any person of
immovable property
for an amount of thirty
lakh rupees or more
or valued by the stamp
valuation authority
referred to in section
50C of the Act at thirty
lakh rupees or more.
Inspector-General
appointed under
section 3 of the
Registration Act, 1908
or Registrar or Sub-
Registrar appointed
under section 6 of that
Act.

20. TAX AUDITEES
Sl.
No.
Nature and value of
transaction
Class of person
(reporting person)
11
Receipt of cash payment
exceeding two lakh
rupees for sale, by any
person, of goods or
services of any nature
(other than those specified
at Sl. Nos. 1 to 10)
Any person who is
liable for audit under
section 44AB of the
Act.

21. But its not only the AIR or
FTRA that you need to
worry about
You also need to know
CIB

22. CIB
In 1975, the Income Tax Department formed
the Central Information Branch (CIB) for
strengthening tax data-base. Initially, CIB
operated under the supervision of DGsIT
(Investigation). This was later brought under
the Directorate of Income Tax (Intelligence)
in June 2007.

23. CIB
The key function areas of DCI are
(i) widening of tax base through identification of stop filers
and non-filers
(ii) Deepening of tax base by providing information for proper
selection of cases for scrutiny assessments
(iii) through collection, collation of information from internal
as well as external sources and its dissemination to
Assessing officers (AOs) and other users in I.T. Dept.
It also collects information relating to financial transactions like
investment, expenses, payment of taxes, etc and details of
persons who are involved in some specified activities. The
mandate also provides for identification and investigation of cases
of tax evasion arising out of criminal matters, having any financial
implication punishable as an offence under any Direct Tax Law.

24. So, the ITO has two
tools with which he can
confront a tax payer
with massive dose of
information
AIR/FTRA & CIB

25. What the ITO has with him

26. What the ITO has with him

27. What the ITO has with him

28. What the ITO has with him

29. What the ITO has with him

30. How does this affect you?
• If return of income is not filed
• If return of income is filed

31. If return of income is not
filed
• Based on the transactions reported against
your PAN, you may get a notice for non
filing
• You will need to explain why you have not
filed the return
• Mostly the replies are to be given online

32. Examples

33. Examples

34. If return of income is not
filed
• Even if you have not given your PAN, you
will get a notice
• Non filers have got notices stating that PAN
is not mentioned in the document
• Do not under estimate the power and extent
of the analysis by the Income-tax
department of the data that they get through
AIR/FTRA & CIB

35. If return of income is filed
• Based on the transactions reported against
your PAN, you may get a notice for scrutiny
• You will need to match the reported
transactions / information with your return /
books of account

36. Demonetisation of
High
Denomination
Currency Notes

37. 8/11
• The PM dropped a bombshell through his
address on TV
• Rs. 500 & Rs. 1000 notes are no longer
legal now
• How does this affect you?

38. • Most households in the country
would have a few of the high
denomination notes which are
now no longer legal tender
• What to do with these notes?

39. There are 2 aspects involved:
1. Depositing the money into
the bank or exchanging it for
new notes
2. Income-tax implications

40. Based on public
statements by the
Revenue
Secretary:

41. Scenario 1 –
House wife / Retired Person
• Deposit of cash upto Rs. 2,50,000 in
each account will not attract suspicion
and inquiry
• It will not be reported also

42. Scenario 2 –
Any other person
• Deposit of cash upto Rs. 2,50,000 in
each account will not attract suspicion
and inquiry
• It will not be reported also

43. Scenario 3 –
Businessman
a) Deposit of cash upto Rs. 10,00,000
b) Deposit of cash in excess of Rs.
10,00,000

44. Scenario 3(a) –
Businessman
Deposit of cash upto Rs. 10,00,000
i) Need to ensure that it can be explained
ii) Questions could be asked
iii) Scrutiny may be attracted

45. Scenario 3(b) –
Businessman
Deposit of cash in excess of Rs.
10,00,000
i) Need to ensure that it can be explained
ii) Questions could be asked
iii) Scrutiny may be attracted
iv) If the amount does not match with the
returned income, it will be added to the
taxable income

46. Scenario 3(b) –
Businessman
If that amount is added to your income
then:
i) It will be considered as “tax evasion”
ii) You then pay tax + interest
iii) You also pay PENALTY

47. Need proof that
the government is
serious about
this?

48. Then see the e-filing website

49. New section added already!

50. Can you show the cash as
current year’s income?
• Several messages on Whatsapp & Email
saying that tax + interest + PENALTY @
200% will be payable
• Is this correct?

51. PENALTY @ 200%
• Section 270A is being referred to
• This section talks of “unreported income”
• When you offer income to tax, can it be
said to be “unreported income”?
• Too many complications involved here

52. Penalty @ 200%
• Will they or will they not?
• Every case is different
• Facts of each case will be
looked at
• Scrutinies will be widespread
and many

53. Matching of cash deposited
• With current year’s books / income
• With earlier years’ income
• With other factors (debtors’ aging;
seasonal sales pattern, TCS returns (for
scrap sales) etc
• IS IT REALLY CURRENT YEAR’S
INCOME? This question is supremely
important

54. So, what to do?
• Don’t panic
• Don’t act in haste
• Think 100 times before depositing cash
into the bank
• Consult an honest tax consultant before
taking action
• DO NOT RELY ON WHATSAPP
MESSAGES / EMAIL / MEDIA REPORTS

55. Thank You
ameet.patel@mca.co.in
You can contact me on:
@patelameet