Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include statutory audit, internal audit, direct tax, transfer pricing, GST, bank audit, propriety audit, cost accounting, internal financial controls and risk advisory.

Wednesday, May 30, 2018

Analysis and requirements of Form 61A - whether optional or mandatory for Persons subject to Tax Audit


Filing of Form 61A was required to be filed last year also but the penal provision has made it more important. Late filing and default in filing or filing in accurate statement attracts heavy penalties. Maximum penalties are not prescribed as per Income Tax Rules but penalty per day Rs.500/- and Rs 100/- is very high. That is why analysing and filing of Form 61A is very important. Here are salient features of Form 61 so far as nature of transactions to be covered and filing requirements as per the statute.


I. STATUTORY REQUIREMENT TO FILE FORM 61A
Section 285BA (1) of Income Tax Act 1961 requires specified reporting persons to furnish statement of Financial Transactions.  Rule 114E of Income Tax Rules, 1962 specifies that statement of financial transactions as required to be furnished under section 285BA (1) of Income Tax Act 1961 shall be furnished in Form 61A only.

II. TRANSACTIONS TO BE REPORTED IN FORM 61A
Further Rule 114E of Income Tax Rules, 1962 specifies 13 classes of transactions that are required to be reported in Form 61A pursuant to the requirements of section 285BA (1). This list of specified transactions is not hereby reproduced for the purpose of maintaining brevity
(Refer our previous article “Form 61A: Specified Financial Transactions due date 31st May 2018, its applicability, Penalty & Procedure” published on our website on 29 May 2018).
III. ASSESSEES WHO ARE LIABLE TO TAX AUDIT U/S 44AB ARE ALSO REQUIRED TO FILE FORM 61A
a.       Earlier under Annual Information Report (AIR) Regime, tax auditees covered u/s 44AB were not required to file AIR.
b.       However, as per Rule 114E of Income Tax Rules 1962, Tax Auditees covered u/s 44AB are expressly required to file Form 61A in case they have registered a reportable transaction during the relevant FY i.e. FY 2017-18.
IV. IN DEPTH ANALYSIS OF REQUIREMENT TO FILE FORM 61A BY TAX AUDITEES COVERED U/S 44AB.
Base Rule:  As per Rule 114E, if a tax auditee covered u/s 44AB of Income Tax Act 1961 receives cash payment exceeding Rs. 2 Lakhs for sale of goods or services of any nature then, such a person shall be liable to report such transaction in Form 61A.           
AGGREGATION CASH RECEIPTS FROM A PARTY DURING THE YEAR IS IRRELEVANT
Requirement to file Form 61A shall not arise even if cash receipts in aggregate exceeding Rs. 200000/- has been recorded by a person during a FY. Cash receipts has be examined transaction wise against each invoice to see whether cash exceeding Rs. 200000/- has been recorded against a sale invoice for an amount exceeding Rs. 200000/-.
ANALYSIS: A person who is liable to tax audit u/s 44AB shall required to file Form 61A only if he has received cash exceeding Rs. 200000/- against as sale invoice for an amount exceeding Rs. 200000/-
S. No.
Nature & Particulars of Transactions
Requirement to file  Form 61A
1
Each sale bill below Rs.2 lakhs and aggregate sale during the year to a party below Rs.2 lakhs
Not Required
2
Each sale bill below Rs.2 lakhs and aggregate sale during the year to a party above Rs.2 lakhs
Not Required
3
Any of the sale bill to a party above Rs.2 lakhs but all receipts from the party are by way of cash.
Required
4
Any of the sale bill to a party above Rs.2 lakhs but all receipts from the party are through banking channel like ECS / NEFT / RTGS / Account payee crossed cheque or draft
Not Required

Note: Where any of the sale bill to a party is above Rs.2 lakhs but the receipts are mix of both cash and through banking channel then the receipts are to be appropriated sequentially to the earliest bill and in that manner the receipt of cash for bills above Rs.2 lakh is to be identified for reporting in SFT.
REQUIREMENT TO FILE FORM 61A IN CASE OF RECOVERY FROM DEBTORS OUTSTANDING AS ON 1ST DAY OF FY
a.       In case of recovery from debtors for an amount exceeding Rs. 200000/- in cash then for the purpose of determining  requirement to file Form 61A it has to be examined whether there existed any sale invoice for an amount exceeding Rs. 200000/- in the relevant year when actual sale was made to the said debtor.

b.       If there exists any sale invoice for an amount existing Rs. 200000/-, then it has to be examined whether cash payment exceeding Rs. 200000/- has been received against this sale invoice.  Reporting requiremrent of Form 61A shall arise only if cash exceeding Rs. 200000/- has been received against a  particular invoice for an amount exceeding Rs. 200000/-
CONCLUSION:  
From the above discussion it can be concluded that reporting requirement under Form 61A shall arise only if there is a cash receipt exceeding Rs. 200000/- against a particular invoice form an amount exceeding Rs. 200000/-.


Contributed by: Mr Tanveer Alam at Sandeep Ahuja & Co

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