Explore circumstances triggering Notice U/s Section 133(6) of the Income Tax Act, 1961. Uncover how technology aids the Income Tax Department in identifying tax evasion, including cases of fake deductions, underreported income, unsecured loans, and scrutiny of financial transactions. Understand the importance of prompt response to notices and the potential penalties for non-compliance. Author CA. Shiv Kumar Sharma provides insights to help navigate through these situations.
In the era of technology and artificial intelligence, now collection of information about anything is more easy, reliable, time and cost effective. Now, you can gather information about anything on a single click. Now, a day’s Income Tax Department has also become smart and gathering information from different sources like SFT Reports, Income Tax Return Filed by Assess, there social media accounts etc. In a recent case, a famous youtuber has been caught by Income Tax department due to under disclosure of his income. They are using technology very effectively to gather more and more information about any person before taking any action against him. This practice help them to recover more and more taxes from tax evaders and to avoid further litigation at higher level like at CIT(A), ITAT, Courts etc. In this blog, we will discuss about some circumstances under which generally notice U/s 133 (6) of Income Tax Act, 1961 are issued.
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Claiming of Fake Income Tax Deductions/ Exemptions
Few months back, a large number of cases were caught by income tax department, where Income Tax refund has been claimed by assesses without any documentary proof. In these cases, income tax department has issued notice to them U/s 133(6) of Income Tax Act, 1961 and asked documentary proof of all these deductions. They have to reply to these notices within specified time period otherwise per day late fee may be levied on the assessee due to non compliance of notice U/s 133 (6) of Income Tax Act, 1961
Under Reporting of Income
As we all know, all major financial transactions are covered under SFT Reporting/ TDS/ TCS Provisions. While Filing ITR, if we ignore these reports and tries to escape income, then you may receive notice U/s 133 (6), asking you to provide details of your bank accounts, bank statements, FD Details, share market transaction related details etc.
In India, it is normal practice that, if we require loans for short term then we approach our relatives for unsecured loans for that particular period and after that we return the same to them. But, during assessment proceedings the AO has the power to issued notice U/s 133(6) of Income Tax Act to the person who has given the loan to verify its authenticity and loan giving capacity of lender.
Party Ledger Balance Confirmation
During Scrutiny proceedings, it is normal practice that, AO sends letter to the person from whom purchases/ expenses has been booked to confirm authenticity and genuineness of transaction. They issues notice U/s 133(6) and ask them to provide the required details within specified time period. If there is any major variance found, then case of that person may also be opened.
Calling of Information from Registrar, Bankers etc
Section 133 of Income Tax Act, 1961 gives immense power to tax authorities to call information from any person even from bankers, registrar, stock brokers etc. They ask information from 2-3 parties on same issue and cross verify them, if any variance found then defaulter may be penalized.
Confirmation of Foreign Transaction
If you are dealing in foreign transactions, then it is necessary to maintain proper record of all transactions. Like GST Invoice Copy, export/ import related documents, Import Export Code, LUT Number, Shipping bill details, etc. If there is any fault found in foreign transactions then it is difficult to caught foreign party then all dues will be recovered from Indian person. So, adequate attention and care should be taken while dealing in foreign transactions.
Author’s Note: As per general observation, peoples ignore notice received U/s 133(6) of Income Tax Act, 1961 or delay in giving reply to this notice, mostly Salaried Class and NRI persons. Adequate attention should be given to penalty u/s 272A(2) of the Income Tax Act, 1961 which is Rs.500/- for every day during which the failure continues. So, it is in favour of assessee to give prompt reply of these notices. If you have no proper knowledge of Income Tax law and has no proper drafting skills, then you may take the help of professional. Because, providing wrong information or half information may invite tax demand or may lead to scrutiny notice.
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Disclaimer: This article is for the purpose of information and shall not be treated as solicitation in any manner and for any other purpose whatsoever. It shall not be used as legal opinion and not to be used for rendering any professional advice. The author will not be held responsible for any lose, if occur after using above information. Kindly consult your professionals before taking any action. This article is written on the basis of author’s personal experience and provision applicable as on date of writing of this article. Adequate attention has been given to avoid any clerical/arithmetical error, however; if it still persists kindly intimate us to avoid such error for the benefits of others readers. The Author “CA. Shiv Kumar Sharma” can be reached at mail –shivsharma786@gmail.com and Mobile/WhatsApp–9911303737
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