Section 133(6) of the Income Tax Act: How to Respond to an Income Tax Notice

Receiving an income tax notice can be a horrible experience for many individuals and businesses. If you've found yourself in this situation, it's important to understand that you're not alone, and there are clear steps you can take to respond effectively. Section 133(6) of the Income Tax Act gives the tax authorities the power to request information or documents from you to verify your income and tax returns. In this blog, we will break down what Section 133(6) means, why you might receive a notice, and most importantly, how to respond to it properly.

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Table of content

Section 133(6) of the Income Tax Act: An Overview

Who can File a Notice under Section 133(6)

Time Limit Applicable to Section 133(6)

How to Respond to a Notice Issued under Section 133(6)

Penalty for Failing to Respond to a Notice under Section 133(6)

Conclusion

Most Asked Questions

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Section 133(6) of the Income Tax Act: An Overview

Certain employees of the income tax department may be required by Section 133(6) to provide information and proof to any taxpayer in connection with tax-related inquiries and actions. The statute gives assessment officers and other department officials the ability to conduct investigations and issue notices requesting information. Taxpayers who declare lower income or withhold income sources may receive such letters. They may also be given for incorrectly claiming exemptions and deductions from income taxes. Notices under this section may also be sent for reasons such as inaccurate or incomplete tax returns, ongoing income tax department investigations, or refusals to file ITRs. 

Section 133(6) provisions are listed as follows: 

• Any person, including the assessee, may give notice according to Section 133(6). 

• As per the guidelines in this section, any information on any subject or account that the designated authorities believe will be pertinent or helpful to any investigation or legal action under the Income Tax Act may be requested. 

• The information can be requested whether or not there are ongoing legal processes; it is not necessary for there to always be current legal proceedings. 

• Both the pending proceedings and the status of the proceedings can be determined by calling the information. 

• The request for information has no time limit.

Not only can the department notify a taxpayer under Section 133(6) of the Income Tax Act, but it can also notify anyone who has information about the transactions of the individual in question. Upon receiving such notices, the recipient is expected to reply with the necessary data. Regarding these inquiries, people are expected to assist the income tax authorities. 

Illustration 1:

X paid Y Rs. 20 lakh for various items. However, when filing his taxes, X did not disclose certain details about this transaction. If the Income Tax Department decides to investigate further, it may issue a notice under Section 133(6) to collect additional information regarding this transaction. Once the invoice details are provided, X will be required to file revised tax returns and make any necessary adjustments.

Illustration 2:

Before relocating to the USA for work in FY 2020, Z was an Indian citizen. He continues to earn income from various investments in India but has not filed an Income Tax Return (ITR) for this income. In response, the Income Tax authorities issue a notice under Section 133(6) requesting Z to submit all bank and demat statements that reflect his income from both India and abroad. If Z fails to provide these documents within 20 days, he may face penalties from the Assessing Officer (AO).

Who can File a Notice under Section 133(6)

The following individuals may submit notices for information about tax inquiries and proceedings in accordance with Section 133(6): 

• Officer of Assessment (AO) 

• Deputy Commissioner (Appeals) 

• Co-Commissioner 

• Commissioner in Common (Appeals) 

• Chief Commissioner or Director General 

The aforementioned authorities are granted to individuals holding a position higher than assistant director or assistant commissioner in cases of taxpayer noncompliance in nations where the Double Taxation Avoidance Agreement (DTAA) is in effect. 

Time Limit Applicable to Section 133(6)

The provisions of Section 133(6) are not subject to a set time restriction. According to the clause, the income tax department may, at any time, request information on accounts, matters, and views about tax proceedings or inquiries. You must reply right away if you have received a notification about arrears in your tax return. Additionally, you must cooperate with the department and provide any supporting documentation or other proof within the notice's specified time range.

How to Respond to a Notice Issued under Section 133(6)

The way you respond to a notice under Section 133 (6) is crucial. As previously said, you must respond as soon as possible, providing the relevant officer with all the information and supporting documentation they need. The following procedures must be followed to reply to a notice under Income Tax Act Section 133(6):

• Read the notification carefully to find out what documents or information are being asked, as well as when you must respond. Penalties may result from ignoring the notification or from not responding within the allotted period.

• Assemble the notice's mentioned documents and data. Make sure your claims are backed up with reliable evidence.

• You can either turn in your paperwork in person at the department office or react online via the Income Tax e-filing system. In general, online submission is more convenient and faster.

• To turn in your response and supporting documentation, according to the guidelines on the notice or the electronic filing system. Depending on whether you have all the information requested, you may have to select between providing a "Partial Response" and a "Full Response."

Penalty for Failing to Respond to a Notice under Section 133(6)

The following may happen if you don't respond to a notice from the income tax department or if they don't think your response is good enough: 

• According to Section 148 of the Income Tax, the Assessing Officer sends you a second notice after finding your tax returns to be invalid. This notice mandates that the person file amended income tax returns and, within the allotted period, explain any arrears.

• In addition to declaring extra income or withdrawing claims for exemptions and deductions for which there is insufficient evidence, the department may request that the taxpayer file amended tax returns. 

• Section 272A (2) of the Income Tax Act imposes penalties for noncompliance with the AO's instructions. The penalty can be as little as Rs. 100 each day up until the filing of amended returns, or it can be more severe. 

• If the inquiry reveals false income claims or deductions, the taxpayer will be required to pay 200% in penalties for evading taxes, together with penal interest at the rate of 12% per year. In addition to fines, incarceration might come from prosecution. 

Conclusion

Finally, make sure to reply right away if you receive a notice under Section 133(6) of the Income Tax. Respond with the necessary details, and if necessary, enlist the assistance of a specialist such as a chartered accountant. To address any problems, it is important to keep records about tax filing for a minimum of ten years. Think about speaking with a tax specialist if you have any questions regarding the notice or need help getting your response together. They can guarantee that your answer is precise and comprehensive, reducing the possibility of legal problems. If you have any questions about taxes, you can talk to experts.

FAQ

Q1. What is an income tax notice under Section 133(6)? 

When there is suspicion of underestimated or misreported returns, authorities from the Income Tax Department are authorised to summon taxpayers under Section 133(6) of the Income Tax Act and require them to provide additional information or evidence. With the power to conduct investigations, officials can send out notices to collect the information they need.

Q2. Who can be summoned under Section 133(6)?

In the course of investigations and processes, the Income Tax department is vested with extensive authority to obtain information. They are authorised to summon anyone who may have pertinent financial records or knowledge under Section 133(6) of the Income Tax Act. They can therefore request information from banks, employers, and other key informants in addition to the taxpayer. Anyone called upon under this section is required by law to answer and produce the records or information that are sought. Such a summons carries consequences, including fines and other legal issues.

Q3. What is the scope of Section 133(6)?

Section 133(6) has a wide range of applications, including the ability to obtain contracts, agreements, bills, vouchers, books of accounts, and other pertinent documents. The authority to view and copy such papers is likewise covered by this provision.

Q4. What are the conditions and limitations under Section 133(6)?

Requisition of documents may only be used in connection with any investigation or action conducted in accordance with the Income Tax Act. The notification ought to outline the necessary books or documents, along with the location and time of their production. The notice ought to include an explanation of the request's motivations. A notification delivered under Section 133(6) may be appealed against by the person or entity that received it.

Q5. How can you appeal against a notice under Section 133(6)?

When a notice under Section 133(6) is served, the person or entity may, within 30 days of the notice's service, file an appeal with the Commissioner of Income Tax (Appeals) challenging the demand.

Q6. What is the maximum penalty levied under Section 133(6)?

The Income Tax Act's section 133(6) stipulates the penalty for non-compliance with notices. Section 272A sets a maximum penalty of Rs. 10,000 for each failure or default. Failure to abide by these notices may also result in further penalties and interest charges.

Q7. Is income tax notice a serious issue?

It is not always the case that receiving an income tax notification indicates that you have broken any laws. It just means that the Income Tax officer is looking for your explanation because they are not convinced about a mismatch.

Q8. Can I ignore the income tax notice?

The income tax department is authorised to have an expert evaluation performed if you do not revert to an income tax notice. This enables them to determine the full extent of your tax liability. It is therefore in your best advantage to respond to any income tax letters as soon as possible.

Q9. What happens if you fail to comply with Section 133(6) of the Income Tax Act?

When a taxpayer disregards instructions from a notice issued under Section 133 (6), the income tax department takes the matter to a higher level. One could argue that noncompliance obstructs the department's ability to function. This may lead to jail time and fines ranging from modest to significant. 

Q10. What is the timeline to respond to a notice under Section 133 (6)?

There is no set time restriction mentioned in Section 133(6). This clause gives the income tax department the power to ask for information at any time regarding accounts, matters, and views about tax inquiries or actions. Should you receive a notification about arrears in your tax return, prompt action and attention to the matter will help resolve the income tax department's concerns and guarantee that all criteria are met.

Q11. Can I file an updated return after receiving a notice under Section 133(6)?

Yes, to remedy any inaccurate data, the income tax department may request that you file updated or revised returns in a notice received under section 133 (6). This notification will specify when revised returns must be filed. To prevent the aforementioned outcomes, you can proactively file an amended return if you discover any errors in your ITR filing.