Demonetisation of high denomination bank notes. - Income Tax - 1140/CBDT

INSTRUCTION NO. 1140/CBDT Dated : January 21, 1978 Introductory- The High Denomination Bank Notes (Demonetisation) (Printed below) Ordinance, 1978 (No.1 of 1978) (hereinafter referred to as the Ordinance) provides for the demonetisation of certain high denomination bank notes and for matters connected therewith or incidental thereto. This has been found necessary in the public interest as the availability of high denomination bank notes facilitates the illicit transfer of money for financing transaction which are harmful to the national economy or which are for illegal purposes. 2. Preliminary work:- In order to ensure that the objects of the ordinance are fulfilled speedily and effectively, guidelines regarding action to be taken immediately have been issued vide the Board's telex/telegram F.No.414/3/78-IT(Inv), dated 17th January, 1978 (Printed below). As advised therein, the planning and coordination of all work relating to the Ordinance is to be done by the Commissioner and in multiple Commissioner Charges by Commissioner I. the declaration tendering the high denomination notes is to be made in triplicate. it is presumed that as suggested in the above telex/telegram, arrangements have already been made to collect one copy each of the declaration from the banks and further action, as suggested therein, for survey of the business premises of declarants who have declared Rs.10,000 or more, is being taken to sign, stamp and place marks of identification on the cash book and other records of prime entry in which the cash in question is accounted for. Under section 133A, survey can cover any place where books of account, etc., relating to the business or profession are stated to be kept. If the I.T.O/ADI conducting the survey has reason to suspect that the declarant is deliberately avoiding production of relevant books and records, he is to contact the I.A.C/D.D.I.or the CIT for necessary instructions. After stamping and signing the current books, the officer may examine the persons concerned under section 133A and where necessary, under section 131 if it appears prima facie that the books do not account for the notes declared or the explanation for the source of the notes is unsatisfactory. Such examination under section 131 may also be needed in cases in which there are no accounts or the declarant derives income from a source other than business or profession. This work is to be attended to by the Assistant Directors of Inspection in all cities where they are posted and the concerned Income-tax officers at other places. The stamping and signing of books in respect of declarations of Rs.10,000 or more in business cases is to be completed within 3 days of receipt of declaration from the bank and as many Income-tax Officers as may be needed and available, may be deployed to help the Assistant Directors and Income-tax Officers dealing with the declarations to stick to schedule. Likewise, owners of notes of the total value of Rs.10,000 or more who derive income from sources other than business, may be examined under section 131 with reference to the declaration made by them or on their behalf. This work is to be attended to with speed, the object being that along with the information contained in the declaration and that elicited through survey under section 133A and/or under section 131, a complete explanation on the source of relevant funds should be available from the declarant and if any of the notes tendered are alleged to represent borrowings, from the person(s) from whom money is alleged to have been borrowed. 3. Enquiries regarding declarations below Rs.10,000 may ordinarily be taken up after the declarations for the higher amounts have been enquired into. These enquiries may be made by the Income-tax Officers concerned unless in a particular case, the Commissioner of Income-tax considers it necessary to entrust the enquiries to an Assistant Director of Inspection. 4. If a person makes a declaration at a place other than where he is assessed or falls to be assessed, the officer collecting the declaration from the bank will prepare two attested copies thereof. If the place of assessment falls in the same CIT charge, he will forward the declaration (in original) R.P.A.D. to the Income-tax Officer concerned for necessary action, retaining one attested copy with himself and forwarding the other attested copy to the Commissioner of Income-tax (by name). However, if the place of assessment falls in the charge of another Commissioner of Income-tax the declaration should be forwarded for necessary action R.P.AD. to the Commissioner concerned (by name), an attested copy being simultaneously forwarded to own C.I.T. for information. 5. Sub-section (5) of section 7 of the Ordinance provides for the bank refusing to accept a declaration which is not complete in all material particulars. Information regarding the declarations which are refused to be accepted should also be obtained from the banks for similar action. 6. Further follow-up action - Further enquiries as may be necessary are also to be completed expeditiously. In respect of persons who are assessed in the Central Charges, these enquiries will be made by the assessing officers themselves under the immediate guidance of the IACs and CsIT. In other Charges, while the assessing Income-tax Officers will conduct the enquiries in respect of declarations involving amounts below Rs.25,000 under the guidance of their IACs., cases involving declaration of Rs.25,000 or more will be enquired into by the Assistant Directors of Inspection in consultation with their respective DDIs (or IACs. where there is no DDI)/CIT. In cases where investigations are already being made under the supervision of the Director of Inspection (Investigation) or Director of Inspection (Special Cell), the enquiries will be made under their supervision. Delay in processing these cases must be avoided and every effort made to complete the enquiry by the 30th April, 1978 in all the cases and frame assessments, wherever called for, by 31st August, 1978. Even if the finalisation of the assessments requires more time for any reason, the necessary enquiries regarding the high denomination notes will have to be completed by the 30th April. This is a schedule which should not be altered on any account. Instructions regarding detailed investigation of these cases have been issued by the Directorate of Inspection (Investigation) under their D.I.(Inv)/34-Coord./77-78, dated 21st January, 1978. While dealing with these cases, the provisions of section 175 and section 281B should not be lost sight of. It need not be stressed that while the interests of revenue are to be duly safeguarded, no cause should be given for any complaint of harassment etc. 7. History sheet, registers and reports- In respect of each declaration involving high denomination notes of the total value of Rs.10,000 or more, a history sheet should be maintained by the Income-tax Officer concerned as per Annexure I. Proper maintenance of an updated history sheet will not only enable the Income-tax officer to furnish the requisite statistical information without of much time and energy but will also help him, the IAC and CIT to keep a constant watch over the progress of disposal of the case. In addition, every Income-tax Officer will maintain a register of the declarations received by him in the proforma annexed (Annexure II); a simplified register being maintained by the IACs/Cs.I.T. as per Annexure III. For and from the month of February, 1978, a monthly progress report regarding disposal of these cases will be made by all Commissioners of Income-tax to Director of Inspection (Research Statistics) in the form annexed (Annexure IV) so as to reach him by 10th day of the following month. The D.I. (R S) will issue a monthly review showing Chargewise progress of work by the 15th for circulation to all the Commissioners and the Board. Commissioners of Income-tax will also advise the D.I(Inv) in a brief narrative form at monthly intervals as to the progress of enquiries in respect of declarations of rupees one lakh or above pointing out any difficulty experienced in their quick disposal. 8. The original declarations received from the bank are to be kept by the assessing Income-tax Officers in their personal custody. 9. Appraisal Report to the Chairman- Along with the monthly report regarding important developments for the month of January to be made to the Chairman, each Commissioner will in an Annexure give his critical appraisal of the impact of the Ordinance so far as his Charge is concerned. This may be done in a narrative form and should be supported by adequate statistical data. Mention should be made therein of the arrangements made to stick to schedule of completion of all work arising out of the Ordinance by 31st August, 1978 and any particular difficulties in this regard. In multiple Commissioner Charges, this may be done by the Commissioner I in consultation with his colleagues.