What will happen if you file your ITR wrongly to claim full refund?

Introduction

Have you imagined when ITR filing is so simple, still why are you required to go to a Chartered Accountant or a professional to get it filed? The simple answer to this is a danger of getting notice of Calling for Information as per the Section 133(6) of the Income Tax Act, 1961, this is so dangerous that it can impose heavy fines and penalties on you, in this article, let’s discuss this in detail.

As I discussed, there is a Section 133(6) of our Income Tax Act which gives the power to the income tax authorities to gather information that seems to be necessary for the purposes of getting tax revenue, hence you are not required to be afraid in case you get the notice if you have rightly filed your return.

As this section gives power to income tax officer who wishes to obtain information from any person and by law ask him/her to furnish information or documents which is relevant to a tax inquiry or any income tax proceedings

Who are liable to be summoned as per Section 133(6)?

The Income Tax Department have the power to summon anyone who may have pertinent financial records or knowledge, including Banks or financial institutions, Employers, Other key informants, or the taxpayer or assessee himself.

Scope and Purpose of this section

The main purpose of this section is to allow income tax authorities to collect information which seem to be relevant to any inquiry or any further proceedings as per the Income Tax Act. This information may be used for assessing or reassessing the income of a assessee, Determining his tax liability or it might be any other purpose that is related to taxation.

During an inquiry or the proceeding, an income tax officer may issue a written notice to any person, requiring them to provide specific information or documents. The notice must clearly state the purpose for which the information is required.

In other words, Section 133(6) allows the tax authorities to obtain contracts, agreements, bills, vouchers, books of accounts, and other relating information and documents. They also have the authority to view and copy such papers.

Example an assessee have invested in PPF which is allowed to be taken deduction as per section 80C of income tax and inserted amount of 150000, then he needs to provide passbook of PPF to proof that he have actually invested there, if it is proved to be fake then misreporting of income sections will be applied, with penalties up-to 200% of tax evaded including interest.

In other ways, Mr Shubham has purchased goods worth Rs. 10 lakh from Mr Anubhav but did not disclose the details of the transaction when filing taxes, with intention to evade taxes. If the income tax department selects Mr Shubham for additional scrutiny, it may send a notice u/s 133 (6) to obtain information about this transaction, and case regarding misreporting might be imposed on him.

Let’s discuss the action under the Income Tax Act for under-reporting or misreporting of Income as per section 270A: 

As per section 270A, Income Tax Department may direct a person to pay a penalty if he under-reports or misreports his income

– Be prepared to provide proof for all claims as requested by the Income Tax Department

– Authorities often find false refund claims

– Common tactics include falsely reporting losses to reduce taxable income and claim refunds

– Severe penalties apply for misreporting income or presenting false losses

What is the quantum of penalties?

– Under reporting of income: Penalty of 50% of the tax due on under-reported income

– Misreporting of Income: Penalty of 200% of the tax due on misreported income

– Penalties are in addition to the tax due

– Misreporting penalties apply for deliberate false information

– It may lead to imprisonment or sale of personal assets for recovery

Conditions and limitations under Section 133(6)

The requisition of documents must be in connection with an investigation or action under the Income Tax Act, hence the notice must outline the necessary books or documents, their location, and the time of their production, The notice should include an explanation of the request’s motivations, also the notice under Section 133(6) may be appealed by the assessee or the taxpayer, which we will discuss at the later stage of this article.

Who is covered in this section?

The section is broadly worded, allowing tax authorities to issue notices to various entities, such as Individuals, Companies, Partnership firms or LLPs and any other person who wish to possess relevant information

Is there any penalty in case of Non-Compliance?

Non-compliance with a notice which is received as per the Section 133(6) may invite penal provisions as per the Section 272A(2)(c) of the Income Tax Act, 1961. The penalties can range from a fixed monetary penalty to more harsh penalties depending upon the amount of tax which have been  evaded.

What needs to be done in case of receipt of notice?

Upon receiving a notice under Section 133(6), the recipient or the assessee might take a professional help or is himself require to provide the information which is required by the department in form and manner that is prescribed, in case they do not have the appropriate information, then also they are required to Inform the department regarding the same.

What are the steps for accessing the e-Verification Section?

Taxpayers may have an access the e-Verification section through the following steps:

Step 1: Login to the income tax website using valid credentials that are PAN number & Password

Step 2: On the Dashboard or the screen that appears after login, click Pending Actions then go to e-Proceedings.

Step 3: Under Self go to For your Action tab, and then click on View Notices.

Step 4: Click on the ‘Notice/Letter pdf’ button on the screen for downloading the notice copy, then you can click on ‘Submit Response’ for replying for the same.

Step 5: In the response screen, you have the option to choose either full response or partial response and then submit it.

Step 6: Upon submission, you will receive a confirmation with a Transaction ID & Acknowledgement Number on your email ID

Now the main part, can we appeal against this notice u/s 133?

The recipient of a notice under Section 133(6) may file an appeal with the Commissioner of Income Tax (Appeals) within 30 days of the service of notice.

Maximum penalty that could be levied under Section 133(6)

As per Section 272A, which sets a maximum penalty of Rs. 10,000 for each failure or default, also the additional penalties and interest charges will also apply in the case of non-compliance.

Even the non-compliance can lead to higher-level actions by the income tax department, which includes potential fines as well as imprisonment.

What are the other options to reply to this notice if you actually provided wrong information or claimed refund wrongly?

In that case, you can rectify your mistake by filing an updated return or also after receiving a notice under Section 133(6), the income tax department may on it’s own request you to file updated or revised returns by form ITR U, but filing an revised or updated return promptly may prevent adverse outcomes, which may prove to be harsh on assessee.

Conclusion

Section 133(6) of the Income Tax Act, 1961, serves as a vital tool for income tax authorities to ensure proper compliance and accurate tax reporting. Understanding the scope, requirements, and consequences of this provision is crucial for taxpayers to navigate tax inquiries effectively.