Identity of buyers in case of cash sales

The Central Board of Direct Taxes (CBDT) has sought through Centralised Processing of Information received in respect of Cash Deposits sought under Operation Clean Money details about Identity particulars of Buyers in case of Cash sales of goods and services by Assessee.


The Bombay High Court has in the matter of R.B. Jessaram Fetehchand vs Commissioner Of Income-Tax (1970) 75 ITR 33 (Bom) Held :
“In the case of a cash transaction where delivery of goods is taken against cash payment, it is hardly necessary for the seller to bother about the name and address of the purchaser.”


The above judgement of Bombay High Court has been quoted with approval by the Kerala High Court in the matter of M. Durai Raj vs Commissioner Of Income-Tax on 6 March, 1971, –
“As observed in the Bombay High Court in R. B. Jessaram Fatehchand v. Commissioner of Income-tax, there is no need to have complete particulars of the names and addresses of customers in the case of cash transactions, and the absence of such particulars in the sale bills would not be a ground for not accepting the books of account of an assessee. “


The issue was also raised before the Lucknow B Bench of the ITAT in the matter of Kamlesh Kumar Jaiswal vs. Department Of Income Tax (ITA No.534/LKW/2011) has followed the Bombay High Court judgement (supra) with the following remarks –
“To interpret in proper perspective, even though the sales were not verifiable as in the impugned case, the Hon’ble court held that lack of verification of cash sales could not be a valid ground for rejection of books of accounts.”


To say the least, there is generally no legal requirement / obligation mandated by law even now to record the details, namely Name and Addresses of buyers making cash purchases below prescribed amounts especially in Retail transactions.


Further, a new sub-section (3) has been proposed to be inserted to Section 133C by Clause 54 of the Finance Bill, 2017 to enable the CBDT to “make a scheme for centralised issuance of notice and for processing of information or documents and making available the outcome of the processing to the Assessing Officer.” The amendment will come into Force on 1st April 2017 after the Finance Bill, 2017 receives the assent of the President of India. 

However this is a unique case where actions (namely Operation Clean Money) have been implemented by Government before the law which would have given them the power to do so has actually come into force.

The entire exercise of Operation Clean Money appears to be extraneous queries and administrative overreach by the CBDT / Income Tax Department.


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