Supplementing the Government’s efforts in promoting a ‘Digital’ economy, the CBDT has issued a Circular [No.40 of 2016] clarifying that businesses need not be worried about impact of ‘increased turnover’ as a result of accepting digital payments, virtually assuring them that such a Turnover spike would not trigger scrutiny of past years’ Tax filing.

In a rather interestingly worded Circular, the Apex administrative body of Tax Department notes:

“By adopting digital mode of payment, no financial transactions would remain undisclosed and consequently an enhanced turnover of business might get reflected in the books of account.”

The Circular goes on to allay apprehensions that increased turnover in the current year on account of digital payments would not lead to reopening of earlier years’ cases  by the Assessing officer. Mere increase in turnover because of use of digital means of payment or otherwise cannot be a “reason to believe” that income has escaped assessment; the Circular clarifies.

Our Comment:

The Circular is welcome inasmuch as it clarifies that increased turnover on account of digital means of payment being introduced would not lead to past scrutiny. The language employed in the Circular however is prone to being interpreted as providing this assurance to Businesses which have not been accounting their sales properly:

“Take a clean break from the past, bring the cash component of your Business into formal mode by accepting digital payments, don’t worry about its consequences on the past devious behavior – we’ll let bygones be”

The move is a pragmatic one no doubt. Morally correct? why waste our thinking faculties debating this- lets just call it one more amnesty!