Income Tax Notice: If the Income Tax Department has suddenly sent you a notice, do not panic. It is possible that one of your bank transactions or income details may have alerted the system. Know why this notice comes, what it means, and how to respond wisely.
Income Tax Notice: Recently, Mangal Prasad of Kaushambi (Uttar Pradesh) won Rs 4 crore by entering the Dream11 fantasy sports platform for just ₹ 39. Mangal Prasad, who works in a plywood factory, is to get Rs 2.44 lakh out of 4 crore after deducting tax. If Mangal Prasad does not give correct information in the Income Tax Return (ITR), then the Income Tax Department can also issue a notice to him and ask where he suddenly got so much money from.
The Income Tax Department can actually send a notice to anyone under Section 133(6) of the Income Tax Act, 1961. However, this does not mean that you have done something wrong or that an investigation has started against you. According to experts, this is part of the routine process, whose purpose is only to gather information.
What does Section 133(6) say?
According to tax experts, Section 133(6) empowers tax authorities to seek financial information from any individual or entity, irrespective of whether any assessment or investigation is pending or not. Such notices are often sent when there is an anomaly in tax returns, high value transactions in an account, sudden increase in income, or unusual deduction claims.
Which documents does the department ask for?
If the Income Tax Department finds anything unusual, it usually asks for some documents to confirm things. Such as:
Bank statements
Purchase-sale agreements of property or other assets
GST returns
Invoices and bills
Loan-related documents
Contracts with customers or vendors
Sometimes such notices can also be sent to third parties who are involved in any transaction with the concerned taxpayer, such as banks, vendors or traders.
What to do after receiving a notice?
If you receive a notice from the Income Tax Department, there is no need to panic. In such a situation, you should take steps keeping some things in mind:
Verify the notice: Check that the notice is from an authorised officer and carries a valid Document Identification Number (DIN).
Understand the notice: Clarify the nature of information sought.
Collect documents: Collect all the required documents and ensure they are accurate and up-to-date.
Send a response: Submit the information through the income tax e-filing website. In case of submitting a hard copy, take a copy of the receipt.
Request an extension: If it is not possible to gather the information within the stipulated time limit, a formal extension can be sought.
Is this notice a sign of trouble?
Tax experts say, absolutely not. They say that a notice issued under section 133(6) is only for seeking information and no legal action can be initiated on its basis.
How to avoid such notices in future?
Taxpayers should maintain transparency in their financial transactions. Here’s how you can avoid unnecessary tax notices:
Avoid large cash transactions, especially in cases related to real estate or jewellery.
Give accurate and honest information in income tax returns.
There should not be any serious discrepancy between returns and banking/business data.
Experts believe that most notices are sent due to discrepancies in data. If your information is correct, then there is no need to worry. If you receive any such notice, you can also submit the correct information by taking advice from a professional tax expert.
