Manu Gawri

A capture of a picture of notice sent by Dy. Director of Income tax to M/s Sitaram enterprises that is spreading on social media, has created quite a ruckus in the business and tax consultant communities.

As per the content of the notice the assesse company is asked to explain the sources of income deposited by it into the bank account in wake of demonetization of 500 and 1000 notes. The notice also indicates that the assesse company has deposited INR 4,51,000 into its bank account.

The Finance minister, Arun Jaitley, in his press address said that the Income tax department will closely monitor the money deposited into banks,beyond INR 2,50,000.

Hence, the notice is sent to the assesse company, as it had deposited amount in excess of INR 2,50,000.

As per the income tax act the assessing officer has the power to call for information under section 133(6). So essentially the notices for calling of information will be sent to all the assesse who have deposited in excess of 2,50,000, by exercising power under this section only.

Legal Sanction as per the Income Tax Act:-

Section 133 gives power to the assessing officer to call for information. Sub section 6 of this section narrates that,the AO has the power to direct any person, banking company or from any of its officer, to furnish any information in relation to such points or matter as maybe specified in the notice, where the assessing officer is of the opinion that such information will be useful, or relevant to, any “inquire” or proceeding under this act.

It is pertinent to note that the word “inquiry or” has been inserted before the words “proceeding” by Finance act 1995, in this section.

The word “inquiry”, as per the dictionary meaning is an “act of asking for information”. This word, added by the finance act 1995, gives an arbitrary power to the assessing officer to call for information from any person. Further on analysis of this section, its safe to conclude that this section only grants the power to call for information for the purpose of this act.

In order to eliminate the arbitrary nature of this power, second proviso to this section states that this power can only be exercised by the Director or Commissioner of income tax and if the AO is below the rank of Director or Commissioner then this power can only be exercised after their approvals.

The court also affirms the power given by this section to the AO in the case of Kathiroor Service Cooperative Bank Lid & others VS CIT (CIB) & (SLP(c) No. 21114 of 2011). In this case the question arose that weather the Department has the power to call for information even if there is no proceeding pending before the AO. The court under this case analyzed the meaning of word “inquiry” added by the finance bill 1995.

The apex court held that the power is well available in the hands of authorities as the word “inquiry” is enough to enable the AO to require any information u/s 133(6), the court was of the opinion that the power of 133(6) of general “inquiry” are just issued by the department to ensure that the person, having taxable income has complied with the Income Tax Act.

Hence, the notice under this section is valid, if prior approval of Director or Commissioner of income tax and if the AO is below the rank of Director or Commissioner.

Present Scenarios:

The notice issued by the department to M/s Sitaram enterprises for depositing more-than INR 2,50,000 is a valid notice as Dy Director of Income Tax issues it. The assesse company will have to prove the source of income.

Such notices are given by the taxation authorities to check instances of tax evasion, money laundering and black money

Similar notices have also been issued to other assesses like charitable trusts, cooperative banks

Notices issued are completely under the legal sanction of the act.

The department has also paced ahead its survey operations on real estate companies, bullion traders and suspected hawala operators.


The department has all the legal sanctions and powers, required to it for issuing such notices to assesse. Further the assesse has to also comply with the notices.

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Tags : black money (729) Demonetization (476)

9 responses to “Cash Deposit more than 2,50,000, department is sending notices”

  1. YASHVANTH says:

    Dear sir,

    some person deposited 2.5 lakh before amendment , they were not filling, now any issues

  2. Ashim Gangopadhyay says:

    if a person has drawn 18 lakh cash for marriage purpose before 8th Nov ..and wants to deposit back ..what is the way out . He is a businessman .

  3. Ashim Gangopadhyay says:

    if a person has drawn 18 lakh cash for marriage purpose before 8th Nov ..and wants to deposit back ..what is the way out

  4. Ashim Gangopadhyay says:

    If the assessee has declared income and paid advance tax then A O can not issue notice there is no prima facie evidence of under reporting or mis reporting . How evr if there is mis match , the A O can issue notice . Hence AO must check all these details before exercising powers u/s 133(6)

  5. Gajendra Purbiya says:

    Dear Sir,

    AIR are to be filed by Banks by 31st August, 2017 following the end of current FY. How these information are reaching Department on live basis.

  6. says:

    Dear Editor Sir,
    What is the status of depositing less than Rs.2.50 Lakhs? If a person is filing return of Rs 7. to 8.00 lakhs out of salary income and deposits 2.00 lakhs, will he be sent the notice?

  7. S.Srinivasan says:

    Dear Sir,
    The sections and the legal provision given the power to the authorities to ask the explanations no doubt in it. Normally after filing the IT return if the deposit is not reflected in the account and the proper supporting is not provided the officers will send the notice called for explanation. But now the persons before filing the IT return getting the notice. This doubt is to understand the provisions. Could you please explain the same.

  8. Deep says:

    Dear Editor, can you please tell how IT can send notice if bank has to report only those Current accounts with deposit over 12.5 lakh.
    It is bit confusing as notices should be send only after returns are filed. Please clear my doubt

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