TAX TALK-29.05.2017-THE HITAVADA
CA. NARESH JAKHOTIA
To curb circulation of black money, filing of statement of financial transactions (SFT) has been made mandatory by different categories of taxpayers.
No SFT to be filed if there is no reportable transaction
- With reference to column in The Hitavada Dated 22.05.17 on filing of SFT, I have a query. Whether the limit of Rs. 2,00,000/- i.e., whether it is for a single invoice or it pertains to the whole year? [Kartik Kejdiwal- email@example.com]
- With reference to filing of Statement of Financial Transactions (SFT), please clarify regarding cash receipts of Rs.2 Lakh or more. Reporting under serial No. 11 in Rule 114 E for receipt of cash payment exceeding Rs. 2 Lakh is a single limit or amounts received in cash from a person during the year are to be aggregated? To be more specific:
a. Rs.3,25,000/- received in a day from one person - SFT is required to be filed?
b. Rs.1,75,000/- received on 30.06.16 and Rs. 1,50,000/- received on 15.9.2016 - Total is Rs. 3,25,000/- - whether SFT required ?
c. One cash memo issued for Rs. 3,25,000/-, no details of buyer are there - SFT is required?
d. One invoice is raised for 5 Lakh but amounts received in cash as Rs. 1.50 Lakh, Rs. 1.60 Lakh & Rs. 1.90 Lakh on different dates, SFT is required ?
e. More than one invoices raised each below Rs. 2 Lakh but cash received in a lot more than 2 Lakh. SFT is required?
f. In case of no cash transaction, whether a nil return has to be filed by persons liable for getting their accounts audited u/s 44 AB ? Please oblige by your early reply. [firstname.lastname@example.org]
- Quoting of Permanent Account Number (PAN) has been made mandatory in number of cases u/s 139A read with Rule 114B of the Income Tax Rules-1962. One such requirement is with regard to sale or purchase of goods or services for an amount exceeding Rs. 2 Lakh. PAN quoting is mandatory if individual sale transaction exceeds Rs. 2 Lakh.
- To keep a track of high value cash transactions, every person [who is required to get its books of accounts audited u/s 44AB of the Income Tax Act-1961] is now compulsorily required to file an annual statement titled “Statement of financial transactions (SFT)” incorporating the details of all the cash receipt exceeding Rs. 2 Lakh in cash against such sale.
- Lot of confusions prevails as to the quoting of PAN & its reporting in SFT.
a] Quoting of PAN:
PAN is mandatory only if the amount exceeds Rs. 2 Lakh per transactions. In short, if individual bill is not exceeding Rs. 2 Lakh then PAN quoting would not be mandatory. If purchaser has purchased the goods at various occasions and at each occasion bill amount is not exceeding Rs. 2 Lakh even then PAN would not be required.
b] Reporting in SFT:
At various places in rule 114E, “aggregating to” is used which is missing when it comes to the Point No. 11 (which requires reporting of cash receipt exceeding Rs. 2 Lakh by the seller) in sub-rule (2) to rule 114E. Same conclusion could further be drawn after reading sub-rule 3 to rule 114E. Accordingly, reporting in SFT would be required only if the payment exceeding Rs. 2 Lakh is received in cash in a day. It is further validated by CBDT vide clarification dated 23/12/2016 clearly conveying that the reporting requirement under SFT is there on receipt of cash payment and no aggregation is required for SFT reporting. “Per Transaction” used in the said CBDT circular is probably pertaining to the transaction of receipt of money.
c] Whether Filing of Nil SFT is mandatory:
i) In case there is no reportable transaction, no SFT (i.e., Form No. 61A) is required to be filed.
ii) Income Tax Department Reporting Entity Identification Number (ITDREIN) is mandatory only if there are any reportable transactions. No ITDREIN is needed if there is no transaction.
iii) A new simple functionality titled "SFT Preliminary Response" has been provided at the e-Filing portal for the reporting persons to indicate that a specified transaction type is not reportable for the year. It is advisable to file "SFT Preliminary Response" even if there is no reportable transaction.
iv) CBDT has issued a press release dated 26/05/2017 aptly clarifying that registration of reporting person (ITDREIN registration) is mandatory only when at least one of the Transaction Type is reportable & not otherwise.
- The due date for filing first such SFT is 31.05.2017. SFT is to be filed in Form No. 61A & is in addition to the regular Income tax returns. There is a penalty of Rs. 100 per day for delay & if the default continues even after receipt of notice, penalty of Rs 500/- per day would be there [Section 271FA]. Filing of inaccurate information will attract penalty of Rs 50,000/- [Section 271FAA].
Coming to few specific issues in the second query & considering “Per Transaction” used in the said CBDT circular as pertaining to the transaction of receipt of money, the following is my personal opinion:
(a) If Rs. 3.25 Lakh is received against single bill, reporting in SFT would be required.
(b) Since receipt of Rs. 1.75 Lakh & Rs. 1.50 Lakh is on different dates, no SFT reporting would be required as no aggregation of amount is required in view of CBDT circular dated 23/12/2016.
(c) Since the individual bill amount exceeds Rs. 2 Lakh, quoting of PAN is mandatory. Further, since receipt exceeds Rs. 2 Lakh, SFT reporting is also required. If the transaction is carried out without PAN compliance, penalty for non-quoting of PAN u/s section 272B (i.e., Rs. 10,000/-) could be there.
(d) Since none of the receipt (against bill amount of Rs. 5 Lakh) is exceeding Rs. 2 Lakh, no reporting in SFT would be required. Further, no aggregation of amount is required in view of CBDT circular dated 23/12/2016.
(e) As the receipt of payment is exceeding Rs. 2 Lakh, SFT reporting would be required.
(f) Filing of Nil SFT is not required if there is no reportable transaction. However, it is advisable to file "SFT Preliminary Response" even in cases where there are no reportable transactions.
[The possibility of divergent view cannot be overruled. Department could interpret the “per transaction” with reference to “transaction of sale/service”. It would be better if CBDT comes out with more detailed clarification on the issue.]
The author is a practicing Chartered Accountant from Nagpur. Readers may send their direct tax related queries at
SSRPN & Co
10, Laxmi Vyankatesh Apartment
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or email it at email@example.com].