Recommendations of black money SIT: Banning cash transactions of above Rs 3 lakh and others

The Special Investigation Team (SIT) on blackmoney has recommended ban on cash transactions of above Rs 3 lakh and restricting cash holding with individuals to not more than Rs 15 lakh to curb illegal wealth in the economy.

The SIT headed by Justice M B Shah (retd), submitted its fifth report to the Supreme Court on methods to curb black money in the economy. The panel felt that large amount of unaccounted wealth is stored and used in form of cash. "Having considered the provisions which exist in this regard in various countries and also having considered various reports and observations of courts regarding cash transactions the SIT felt that there is a need to put an upper limit to cash transactions," an official statement said.

SIT recommended a total ban on cash transactions above Rs 3 lakh and "an Act be framed to declare such transactions as illegal and punishable under law." It also felt that, given the fact of unaccounted wealth being held in cash which are further confirmed by huge cash recoveries in numerous enforcement actions by law enforcement agencies from time to time, the cash transaction limit can only succeed if there is a limitation on cash holding.
"SIT has suggested an upper limit of Rs 15 lakh on cash holding," the statement said.

In case any person or industry required holding more cash, it may obtain necessary permission from the Commissioner of Income Tax of the area, the panel opined. 

SIT suggested amending the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, by incorporating the provision that "undisclosed foreign income and assets would vest in the Union of India". "Once it is held that under the law, property vests in Union of India, the person who is holding the said property outside the country shall have to prove that it was acquired legally and/or held after obtaining necessary permission from the RBI," it said.

Citing the recent disclosure in the Panama Papers Investigation, the panel was of the opinion that unless there is the deterrent provision, it would be difficult to get back the stashed money outside the country. Stating that in some of the Panama cases it is contended by the assessees that they have obtained the permission from RBI before depositing the amount in foreign countries, SIT said such information is not given by the assessees to the Income Tax authority.

Hence, it is suggested that before investing any amount or purchasing any property outside the country, the assessee must inform the concerned jurisdictional Commissioner of Income Tax Department of the State.
"It should be made clear that even if the permission of RBI is not required for investing or purchasing the assets outside the country, the assessee must inform the concerned jurisdictional Commissioner of Income Tax Department of the State, before investing or purchasing the assets outside the country," it said.

The SIT in its report suggested that there should be a provision under the Income Tax Act that any transaction involving more than Rs 3 lakh shall be "invalid and illegal and would be a punishable offence, if amount is not paid by account payee cheque or account payee bank draft or use of electronic clearing system through a bank account." Limits on cash transactions would discourage white collared criminals or harden criminals from money laundering and dealing in unaccounted / black money, it said. "This would also discourage corruption to some extent." "May be that corrupt persons would find out ways and means by accepting the gold or ornaments or

constructed premises. However, it would prevent to a large extent funding of terrorism and organised crimes and transferring unaccounted money from one destination to other through Angadias or by any other method," it said.

Also, cash withdrawal of more than Rs 3 lakh from any bank account in a day should consider as a suspicious activity and the concerned bank should report it to Financial Intelligence Unit (FIU) & the concerned Income tax Department, it said.

SIT said limitation on the cash transaction can succeed only if there is limitation for cash holding. Maximum limit, it said, may be fixed between Rs10 to 15 lakh.
"In addition, starting from the next year, all banks including co operative banks be directed to notify any income or withdrawals of more than Rs 3 lakh to the Directorate General of Income Tax (Investigation) Authorities of the State and to the FIU," it suggested. 

Here are the recommendations : 

1) No cash transaction above Rs 3 lakh:

The commission said "an Act be framed to declare such transactions as illegal and punishable under law." 

2) Banks should deem cash withdrawal of more than Rs 3 lakh as suspicious activity 

The report recommends that for such transactions banks should report it to Financial Intelligence Unit and Income Tax department. 

3) Limitation on cash-holding 

The SIT recommends a cash-holding cap of 10-15 lakhs. If a company or individual needs to keep more cash, it can take permission from Commissioner of Income Tax of the area. 

4) All banks including co–operative banks should be directed to notify any income or withdrawals of more than Rs.3,00,000/– to the Directorate General of
Income Tax (Investigation) Authorities of the State and to the FIU.

The SIT believes it will increase disclosure of black money under the IDS scheme. 

5) The recommendation also include Amendment in the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015

6) SIT has suggested that before investing any amount or purchasing any property outside the country, the assessee must inform the concerned jurisdictional Commissioner of Income
Tax Department of the State. 

This recommendation has been made in the wake of the Panama paper revelation. 

With PTI inputs