Clause 31(b) - Details of any specified sum taken or accepted in an amount exceeding limit specified in section 269SS (i.e, Rs. 20000/-).
Clause 31(b) - Reporting Specified Sum Transactions Exceeding Rs. 20,000
Clause 31(b) of the tax audit report pertains to the reporting of details related to specified sums taken or accepted by the assessee that exceed the limit specified in section 269SS of the Income Tax Act, which is Rs. 20,000 or more.
Section 269SS of the Income Tax Act, 1961 (ITA) prohibits the acceptance of a loan or deposit of more than Rs. 20,000.
The purpose of this section is to prevent the use of cash for tax evasion. By requiring that loans and deposits of more than Rs. 20,000 be made by cheque, bank draft, or other non-cash means, the government hopes to make it more difficult for taxpayers to conceal income or assets.
Exception:
There are a few exceptions to Section 269SS. For example, the section does not apply to loans or deposits made:
- By a bank or other financial institution
- By a government or local authority
- In the ordinary course of business, such as a loan from a customer to a shopkeeper
- In connection with a loan or deposit that is secured by a mortgage or other security
If a person violates Section 269SS, they can be penalized with a fine of up to Rs. 10,000.
Here are some additional things to keep in mind about Section 269SS:
- The section applies to both loans and deposits. A loan is defined as a sum of money lent on the understanding that it will be repaid with interest. A deposit is defined as a sum of money placed with someone else for safekeeping or investment.
- The section applies to the person who accepts the loan or deposit, not the person who makes it.
- The section applies to the amount of the loan or deposit, not the number of loans or deposits. For example, if a person accepts two loans of Rs. 19,000 each in a single day, they would be in violation of the section.
- The section applies even if the loan or deposit is made in foreign currency.
Here are some examples of transactions that are subject to Section 269SS:
- A real estate developer accepting Rs. 21,000 cash deposit from a customer
- A businessman accepting Rs. 20,000 cash loan from his friend
- A company accepting Rs. 20,000 cash deposit from a supplier
Here are some examples of transactions that are not subject to Section 269SS:
- A bank accepting Rs. 20,000 cash deposit from a customer
- A government department accepting Rs. 20,000 cash payment from a taxpayer
- A shopkeeper accepting Rs. 20,000 cash payment from a customer for goods sold
- A company accepting Rs. 20,000 cash loan from a financial institution that is secured by a mortgage
Definition of Specified Sum:
"Specified sum" includes any amount receivable in relation to the transfer of immovable property, whether received as an advance or under any other arrangement. This includes sums received at the time of sale, advance payments, booking amounts, or any other payments made in connection with property transactions.
Reporting Requirement:
The sub-clause mandates reporting of each specified sum transaction taken or accepted during the previous year that exceeds Rs. 20,000.
It covers both advances and any other sums received in connection with property transfers.
Scrutinizing Specified Sum Transactions:
The tax auditor should thoroughly review all the accounts and agreements related to property transactions through which the assessee has received specified sums. This includes analyzing agreements for the sale or transfer of immovable property and identifying any payments received in connection with these transactions.
Importance for Real Estate Builders and Dealers:
Real estate builders and dealers are particularly affected by this clause, as their business often involves receiving various payments from customers in connection with property transactions. They must ensure accurate reporting and provide necessary details, even if the information is voluminous.
Verification of Account Payee Status:
Similar to Clause 31(a), if the specified sum is accepted by cheque or bank draft, the tax auditor must ascertain whether these instruments are account payee instruments. Verifying the account payee status is essential to ensure compliance with tax regulations.
Reporting Practical Difficulties:
Suppose the tax auditor is unable to verify whether specified sums were accepted through account payee instruments due to a lack of evidence. In that case, this should be clearly stated in the tax audit report.
The tax auditor can express the inability to verify and include a disclaimer in Form 3CA/3CB regarding the absence of evidence.
In conclusion, Clause 31(b) aims to ensure transparency and compliance in property transactions by reporting specified sum transactions exceeding the prescribed limit. Real estate transactions involve substantial amounts, and this reporting requirement helps prevent the use of unaccounted cash in property dealings. The role of the tax auditor is pivotal in verifying and accurately reporting these transactions, thus contributing to a robust financial reporting system and adherence to tax laws.