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 has 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 2.44 lakhs out of 4 crores 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 been started against you. According to experts, this is part of the routine process, the purpose of which is only to gather information.
What does section 133(6) say?
According to tax experts, section 133(6) gives the tax authorities the right to seek financial information from any person or entity, whether any assessment or investigation is pending at that time or not. Such notices are often sent when there is an anomaly in the tax return, a high value transaction in an account, a sudden increase in income, or an unusual claim of deduction.
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 a 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, steps should be taken by keeping some things in mind:
- Confirm the notice: Check that the notice has been sent by an authorized officer and it contains a valid Document Identification Number (DIN).
- Understand the notice: Make it clear what is the nature of the information sought.
- Gather documents: Collect all the necessary documents and ensure that they are accurate and updated.
- Send a reply: Send 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 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 the notice issued under section 133(6) is only for seeking information. No legal action can be initiated on the basis of it.
How to avoid such notices in future?
Taxpayers should maintain transparency in their financial transactions. This can help you 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 the return 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 such a notice, you can also submit the correct information by taking advice from a professional tax expert.
