Section 133(6) of the Income Tax Act: Time Limit, Case Laws, Penalties, and Responding to Notices

Section 133(6) of the Income Tax Act: Time Limit, Case Laws, Penalties, and Responding to Notices

The Income Tax Department enforces tax regulations with utmost seriousness, taking swift action against any discrepancies. In July 2023 alone, over 1 lakh notices were issued to taxpayers suspected of underreporting or misrepresenting their income. Under Section 133(6) of the Income Tax Act, notices may be sent to individuals whose tax filings appear questionable.

Have you received such a notice? Here’s what you need to know about Section 133(6):

• Introduction to Section 133(6)
  
  

• Time limit for Section 133(6)
  
  

• Relevant case laws
  
  

• Authorities authorized to issue notices
  
  

• How to respond to notices under Section 133(6)
  
  

• Penalties associated with Section 133(6)
  
  

What is Section 133(6) of the Income Tax Act?

Section 133(6) grants specific officials within the Income Tax Department the authority to request information and evidence from taxpayers as part of tax-related investigations and proceedings. This provision allows assessing officers and other authorized personnel to issue notices for gathering necessary details.

Notices under Section 133(6) can be issued to taxpayers for underreporting income or failing to disclose certain income sources. They may also be sent in cases where deductions or exemptions have been wrongfully claimed. Additional reasons for receiving such notices include incomplete or incorrect tax filings, ongoing investigations by the Income Tax Department, or failure to submit an income tax return (ITR).

Under this section, the Income Tax Department is authorized to issue notices not only to taxpayers but also to any individual or entity possessing relevant information regarding the taxpayer’s transactions. Anyone receiving such a notice is required to provide the requested details, and cooperation with the department during such investigations is expected.

Failure to comply with the instructions mentioned in the notice may result in the Assessing Officer imposing a penalty for non-compliance.

Time Limit for Section 133(6) of the Income Tax Act

There is no specific time restriction under Section 133(6). The Income Tax Department has the authority to request information related to accounts, financial matters, or opinions relevant to tax inquiries and proceedings at any time.

If you receive a notice concerning pending tax dues, it is crucial to respond promptly. Ensure you comply with the department’s request and submit all required documents or evidence within the timeframe specified in the notice.

Case Laws for Section 133(6) of the Income Tax Act

To better understand how Section 133(6) applies to taxpayers, let’s examine a few case laws:

Case 1: Mr. A purchased goods worth ₹10 lakh from Mr. B but failed to disclose this transaction while filing his tax returns.

If the Income Tax Department selects Mr. A for further scrutiny, it may issue a notice under Section 133(6) to gather details regarding this transaction. In response, Mr. A must provide the relevant invoice details and, if necessary, submit revised tax returns to rectify any omissions.

Case 2: Mr. X was an Indian citizen until the financial year 2020, after which he relocated to the USA for work. Despite earning income from multiple investments in India, he has not filed an Income Tax Return (ITR) for these earnings.

In this scenario, the Income Tax Department issues a notice under Section 133(6), instructing Mr. X to furnish all relevant bank and demat statements reflecting his earnings in both India and abroad. He is required to submit these documents within 20 days, failing which the Assessing Officer (AO) may impose penalties.

Who Can Issue a Notice Under Section 133(6) of the Income Tax Act?

Under Section 133(6), the following officials are authorized to issue notices requesting information related to tax inquiries and proceedings:

• Assessing Officer (AO)
  
  

• Deputy Commissioner (Appeals)
  
  

• Joint Commissioner
  
  

• Joint Commissioner (Appeals)
  
  

• Director General or Chief Commissioner
  
  

For cases involving non-compliance by taxpayers in countries where a Double Taxation Avoidance Agreement (DTAA) applies, the authority to issue notices is extended to officials holding a rank of Assistant Director or Assistant Commissioner and above.

---

How to Respond to a Notice Under Section 133(6) of the Income Tax Act?

When you receive a notice under Section 133(6), it is crucial to respond promptly and professionally. As mentioned earlier, you must submit all required details and supporting documents to the designated officer without delay.

For instance, if you have claimed House Rent Allowance (HRA) and receive a notice regarding arrears, you must provide salary slips and rent receipts as proof. Similarly, if your notice concerns a Leave Travel Allowance (LTA) claim, you should submit copies of invoices, hotel bookings, and travel tickets to substantiate your claim.

Who Can Issue a Notice Under Section 133(6) of the Income Tax Act?

The following officials are authorized to issue notices under Section 133(6) for tax assessments and inquiries:

• Assessing Officer (AO): The primary authority responsible for issuing these notices, handling tax assessments and investigations.
  
  

• Commissioner of Income Tax (CIT): In cases requiring higher authority, the CIT has the power to issue notices.
  
  

• Additional Commissioner of Income Tax (Addl. CIT): This officer can issue notices when it falls within their jurisdiction.
  
  

• Deputy Commissioner of Income Tax (DCIT): Similar to the AO, the DCIT can issue notices as part of tax assessments and inquiries.

Who Can Be Summoned Under Section 133(6) of the Income Tax Act?

Under Section 133(6), the Income Tax Department has the authority to summon individuals or entities believed to possess information relevant to a tax assessment or inquiry. Those who can be summoned include:

• Any Individual: This applies to both taxpayers and non-taxpayers who may have knowledge of a taxpayer’s financial activities.
  
  

• Associates and Related Parties: Business partners, directors, or family members associated with the taxpayer can be summoned if their information is considered relevant.
  
  

• Bank Officials: Representatives from banks or financial institutions may be called upon to provide details about a taxpayer’s bank accounts, transactions, or loans.
  
  

• Accountants and Financial Advisors: Professionals managing the taxpayer’s accounts or providing financial guidance can be required to furnish relevant records.
  
  

• Other Relevant Entities: Companies, firms, or organizations holding crucial information related to the tax inquiry may also be summoned.

Modes of Submission

You can respond to a Section 133(6) notice through one of the following methods:

• In-Person Submission: Submit the necessary documents at the designated Income Tax Department office.
  
  

• Online Submission: Use the official income tax e-filing portal to upload your response digitally.
  
  

If you are uncertain about how to draft your response, it is advisable to seek assistance from a tax consultant or a qualified chartered accountant.

Key Tips for Responding to a Section 133(6) Notice

• Review the Notice Thoroughly: Understand why it has been issued and what information is being requested.
  
  

• Verify Your Income Sources: Cross-check your bank statements and other records to ensure accuracy.
  
  

• Provide Honest and Accurate Information: Avoid submitting misleading or incorrect details.
  
  

• Request an Extension If Needed: If you are unable to submit the required information within the given timeframe, contact the tax department to request additional time.
  
  

• Disclose Your Tax Advisor’s Details: If a chartered accountant or tax consultant handles your tax filings, include their name and contact information in your response.

Penalty for Non-Compliance Under Section 133(6) of the Income Tax Act

Failure to respond to a notice issued by the Income Tax Department or providing an unsatisfactory reply can lead to the following consequences:

• Invalidation of Tax Returns: The Assessing Officer (AO) may consider your tax returns invalid and issue a fresh notice under Section 148 of the Income Tax Act. This notice requires you to refile your income tax returns and provide an explanation for any discrepancies within a specified timeframe.
  
  

• Revised Tax Filing Requirement: The department may instruct you to submit revised tax returns, disclosing any additional income or withdrawing exemption and deduction claims that lack proper supporting evidence.
  
  

• Penalties Under Section 272A(2): Non-compliance with the AO’s directives can result in a penalty under Section 272A(2) of the Income Tax Act. The penalty may range from ₹100 per day until the revised returns are filed to a more substantial monetary fine.
  
  

• Severe Penalties for Misreporting Income: If the investigation uncovers misreported income or wrongful deductions/exemptions, the taxpayer may be liable to:
  
  

• Penal interest at 12% per annum
  
  

• A penalty of up to 200% of the tax evaded
  
  

• Prosecution, which could lead to imprisonment
  
  

Key Takeaways

If you receive a notice under Section 133(6), it is crucial to respond without delay. Ensure that your reply includes all required details and supporting documents. If you are uncertain about how to proceed, consider consulting a chartered accountant or tax professional for guidance.

Additionally, it is advisable to retain tax-related documents for at least 10 years to address any future disputes or inquiries from the tax department.