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Govt cannot deny access to taxed money: Legal experts on cash withdrawal cap

black money crackdown Updated: Nov 21, 2016 08:15 IST
Bhadra Sinha
Cash withdrawal

People stand in long queue to withdraw cash from an ATM at MG road in Gurgaon.(Parveen Kumar/HT Photo)

Legal experts have questioned the NDA government’s order to restrict withdrawal limits of account holders following demonetisation, saying the authorities cannot deny access to one’s “legitimate and taxed money”.

Former banker and income tax advocate Yudhister Sharma said although the Reserve Bank of India (RBI) rules allow 50 withdrawals every six months from a savings account, there is no ceiling on the amount. “There cannot be such a restriction,” Sharma told HT.

Last week, senior advocate Kapil Sibal had argued before the Supreme Court that government cannot curb his right to access his “legitimate money”.

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“How can they restrict me to withdraw just Rs 24,000 a week. It is possible that my expenses cross one lakh. Why should I not be allowed to get my money? The government is custodian of my money,” he told a bench headed by the Chief Justice of India, in a bid to impress upon the court to issue an order to do away with the restriction.

Sibal asserted there was no law to back the government order. What the former minister pointed out was that in effect demonetisation had frozen one’s constitutional right to have unhindered access to one’s money.

Senior counsel Pradeep Tara, an expert on income tax law, also questioned the order. “There is no legal backing to this kind of a decision. They might give an explanation that it is being done for smooth administration of the country, but legally it is impermissible,” he said.

A notice at the Bhutan Market on demonetisation of currency in Agartala, Tripura (PTI Photo)

Doubts have also been raised over the proposal to impose 200% penalty on deposits that cross Rs 2.5 lakh limit.

Tara said no penalty can be imposed unless there is an assessment. “If there is an abnormal increase in the assessed income then only one can be penalised. However, this too is subject to legal challenge.” But, Tara said there is no bar on professionals charging their fees and there are no rules that standardise professional receipts.

“Suppose, a professional last year got a receipt of Rs 20 lakh then where is the bar that during current financial year he or she cannot earn Rs 50 lakh,” he explained.

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Another income tax law expert Kavita Jha said under the current scheme misreporting or under-reporting is illegal. “However, after demonetisation there will be declaration of one’s income. Therefore, one cannot penalise a depositor.”

According to Jha, penalty can be imposed if there is “huge mismatch” in the income earned this year and the returns filed during the previous two years.

Sharma said the scheme will lead to a spurt in litigation. “IT department can impose penalty if it is able to prove that the depositor did not wilfully disclose the amount. It is incorrect to bring everybody under scrutiny if the deposits exceed Rs 2.5 lakh.”

“Suppose there is a senior citizen. As per law his earnings up to Rs 3 lakh are exempted. If, he deposits Rs 4 lakh in his account then legally he can only be taxed for the extra one lakh and that too up to 10%. The authority cannot put such a person on a par with those who wilfully evade taxes,” Sharma said, adding that several innocent people may get harassed subsequently.

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