Unaccounted cash in bank locker? Taxmen may knock at your door

By: | Updated: December 11, 2018 11:49 AM

There is no bar in keeping the cash in the bank lockers but it may attract investigation by the income tax department. Tax officials may require explanation to understand the source of every receipt or property

bank lockers, income tax, Unaccounted cash in bank locker, income tax department, Misuse of bank lockersBank lockers are one of those essential spots which tax officials are likely to search in order to identify any possible tax evasion.

Development of an economy depends on the robust taxation system of the country. Any unexplained investment or cash found with a taxpayer is bound to raise questions from the tax department. In such cases, the taxpayer has to explain source of such investments or cash with documentary proof. Tax officials have the power to check any suspected place where any valuable item such as money, bullion, jewellery or any books of accounts are expected to be found. Bank lockers are one of those essential spots which tax officials are likely to search in order to identify any possible tax evasion.

Misuse of bank lockers
People keep their cash and jewellery in bank lockers to safeguard against theft and other loss. However, certain taxpayers may misuse the bank locker to keep their undisclosed income, i.e., black money. Many a time, taxpayers contend that the source of cash and other valuables found in the bank lockers are merely long terms savings or gifts received from relatives and friends. Such taxpayers should maintain adequate documents to prove the source of the cash and other valuables kept therein. The taxpayers should not live under the impression that a general statement about the source will always spare them.

The tax authorities have a right to investigate further and demand documentary proof to substantiate the statement.

These principles also find place in the interpretation made by the Delhi Income Tax Appellate Tribunal (ITAT) in a recent ruling. In this particular case, the taxpayer had stated that the cash found in the bank locker were gifts and savings accumulated over a long time. The tax officer rejected her contention, as the bank statements provided by her could not validate her claim. It was noted that the amount of withdrawal was not commensurate with the cash found in the bank locker and thus, the tax officer held the entire amount as unaccounted income. However, the ITAT upheld the findings of the first appellate authority by treating the partial amount of cash as reasonable savings on estimated basis.

It was noted that there were regular withdrawals from the bank account, jointly owned by the taxpayer and her husband. It was kept in mind that the taxpayer could have saved some amount from the money withdrawn after meeting the household expenses. On the aforesaid basis and considering that the taxpayer was earning income herself and regularly paying taxes, the partial amount was treated as savings and gifts received by her to the extent as found in line with her income. Balance amount was treated as unaccounted income.

Source of receipt
There is no bar on keeping cash in bank lockers but it may attract investigation by the income tax department. Tax officials may require explanation to understand the source of every receipt or property. Adequate safeguards must be there to address any investigation by the tax officer in respect of the cash kept in the bank locker by maintaining proper evidence to substantiate the source. Otherwise, the cash maintained should be consistent with the earning capacity of the taxpayer. These steps by tax officials may escalate the efforts of the taxpayers but do not cause any harm to the honest taxpayer.

(The writer is executive director, Nangia Advisors LLP. With inputs from Radhika Arora)

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