Legal consequences of not reporting to income tax dept when called

811 votes

the Income Tax department has issued hundreds of notices seeking "source" of funds from individuals and firms who have deposited huge amounts of cash in banks using the scrapped Rs 500 and Rs 1000 currency notes after November 8. Officials said the taxman has begun a country-wide enquiry in this regard and has issued notices under section 133 (6) of the Income Tax Act (power to call for information) in various cities and towns of the country. They said the notices were issued after banks reported to it certain cases of "unusual or suspicious volumes of cash deposits" in their accounts, primarily beyond Rs 2.5 lakh. "The notices are being issued where the department feels the cash deposits made in the demonetised currency is suspect. This is part of the vigil that the taxman has deployed to check instances of tax evasion, money laundering and black money in the wake of the demonetisation of the two high denomination currencies on November 8," they said. The notices issued by the department cite the date and amount deposited by an entity in the old currency in the bank as it goes on to seek "supporting documents, books of accounts and bills to explain the said cash deposits" from them. "If you are assessed to Income Tax, then you shall also file the copy of Income Tax Return of last two years," an I-T department notice issued in this regard said. In the wake of the demonetisation declared by Prime Minister Narendra Modi on November 8, the department has also stepped up its survey operations against real estate players, bullion traders and suspected hawala operatives to check the illegal use of the scrapped currency and subsequent generation of black money. The taxman has also deployed a similar check at cooperative banks and in one case in Mangalore it found that old currency worth Rs eight crore was exchanged by five societies which had accounts in a cooperative bank there. I would like to clear that such notice is compulsary for the IT departmentas per direction and instructions of government to issued to all the person who deposit his account beyond Rs 2.5 lakhs. Now I will come on the point that what steps you should taken if any one received notice from IT department. The deadline to convert and deposit demonetized currency has elapsed. If the deposited amount is below ₹2.5 lakh, then you do not have to worry about paying tax on it. However, the Income Tax Department will send you a notice if your deposited amount exceeds ₹2.5 lakh. Who all are likely to get a notice from the Income Tax Department? Banks have been directed by the government to furnish the following details: Individuals who have deposited over ₹2.5 lakh in open fixed deposit accounts or savings accounts.Individuals who have deposited over ₹12.5 lakh in their current accounts. Upon these details being sent to the IT department, necessary notices may be sent to individuals. You may also get a notice if you have purchased high-value items during this period such as a car or gold. This is because the IT department has asked all car dealers and jewellers to provide their business transactions to the department if there has been a spike in their sales after the announcement of demonetization. What you need to do under such circumstances Do not panic if you receive a notice from the IT department. As these are trying times for the country, anyone who has deposits over ₹2.5 lakh in their accounts may get a notice. This does not mean that an investigation will be launched against you to implicate you in any manner. Additionally, the IT department may only send such notices to those individuals whose deposit amounts do not match their income as per their assessments. Those who have relevant or necessary documents to explain their deposit amounts do not need to worry in any way. Furthermore, if you have done nothing illegal in obtaining the money that was deposited, you do not have to worry irrespective of your deposit amount or income. You will be investigated only if you do not provide a satisfactory answer to explain the source of the money. After the announcement of demonetization, the government has also made it compulsory for you to furnish your PAN card number in case your deposit amounts exceed ₹50,000. Therefore, if you have not filed IT returns for a while and your deposit amount has exceeded ₹2.5 lakh, the IT department may send you a notice asking you to explain the source of the income and request you to file your taxes. An investigation will also be launched in such cases. What will happen if you do not respond to the notice sent by the Income Tax Department? You must always respond to any notices the IT department issues to you. However, for whatever reason, if you have not responded to the notice, the department will send you a follow-up notice. Furthermore, the department will use your deposit data and other details available on you to assess your income and tax liability, upon which you will be asked to pay the difference if any. However, note that if you abstain from responding to the IT department notice, they may assume that you cannot explain the source of your income and hence, you did not respond to the notice. If you are unsure on how to proceed or respond to the notice, you always have the option of consulting with a tax consultant or any practicing CA for the right course of action. It will always be beneficial if you keep a record of all your finances through relevant documents. You can furnish these documents if you ever receive a notice from the IT department and resolve the issue quickly. It is not a good practice to keep such issues pending.

Advocate Rohit Jagwani LawRato

794 votes

It depends upon under what section of Income Tax Act,1961 you have got the notice. For example if you have got notice (summons) under section-131 then upon failure the penalty is Rs. 10,000/-. If notice is under section-285BA the penalty is Rs. 100/- per day during which the failure continues. The failure to furnish information asked for under a notice issued under section-142 is punishable even with 1 year rigorous imprisonment. Under which section you have got the notice? I advice you to comply with the notice even if it is late. Give some reasonable cause for responding late.

LawRato LawRato