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Introduction:

The income tax department treats tax filings with utmost seriousness, demonstrating its commitment through swift and decisive actions against any misconduct. In July 2023 alone, the department issued over 100,000 notices to taxpayers suspected of underreporting or misreporting their income. These notices, authorized under Section 133 (6) of the Income Tax Act, are dispatched to any taxpayer whose filings raise suspicions.

Section 133 (6) of the Income Tax Act 1961 stands as a pivotal provision, granting tax authorities the authority to collect pertinent information from individuals holding books of accounts or other relevant documents crucial to a tax proceeding. This provision functions as a vital instrument for tax authorities, enabling them to authenticate the veracity of taxpayer-provided information and uncover instances of tax evasion.

Section 133(6):

• Section 133 (6) confers authority upon designated individuals within the income tax department to compel taxpayers to provide information and evidence pertinent to tax-related inquiries and proceedings. This provision endows assessing officers and other departmental officials with investigative powers, allowing them to issue notices to demand the necessary information.
• These notices may be dispatched to taxpayers for various reasons, such as underreporting income or omitting income sources. They can also be issued in cases of erroneous claims for income tax deductions and exemptions. Furthermore, notices under this section may arise due to incomplete or inaccurate tax filings, ongoing investigations by the income tax department, or failure to submit Income Tax Returns (ITR).
• Under Section 133 (6) of the Income Tax Act, the Department can send notices not only to taxpayers but also to persons who have information about the transactions of the persons concerned. It is mandatory to provide the information requested in responses to recipients of such information. Cooperation with the income tax department in such investigations is anticipated from all parties involved.

Provisions Under the  Section 133 (6):

• The issuance of a notice under section 133(6) by any individual, including the assessee,
• The information can be requested not only for pending proceedings but also irrespective of whether any proceedings are underway.
• Subject to the provisions of this section, the designated authorities may request information relating to any matter, account, or matter which they consider useful or relevant for any inquiry or proceeding under the Tax Act.
• There is no specified time limit for requesting information.
• The information can be called for checking whether the proceedings are pending or not and also for the pending proceedings.

Who is Eligible for Summons under Section 133(6):

• Section 133(6) of the Income Tax Act 1961 grants the tax authorities the authority to summon individuals in possession of books of accounts or other documents pertinent to a tax proceeding. This encompasses not only the taxpayer but also any other individual holding relevant information or documents.
• A person summoned under this section has a legal duty to comply with the summons by providing the necessary information and documents. Failure to comply may result in fines and other legal consequences.

Factors for Receiving a Section 133(6) Notice:

• A discrepancy arises between reported income and actual income.
• Suspicious attempts to evade taxes should be detected.
• An initial measure to probe potential tax non-compliance or discrepancies.
• Failure to submit the  tax returns
• Discrepancies in tax-related data submitted to authorities
• Tax filings with missing or incomplete details.

Time Limit of the Section 133(6):

• There is no specified time limit for the provisions of Section 133(6). According to this section, the income tax department may request information on accounts, matters, and opinions pertaining to tax proceedings or inquiries at any juncture.
• If you’ve received a notice concerning arrears in your tax filing, prompt response is crucial. It’s imperative to comply with the department’s requests and provide any documents or evidence within the specified timeframe mentioned in the notice.

Who Files Notices under Section 133 (6):

• Section 133(6) empowers the following persons to issue notices for the purpose of obtaining information relating to tax inquiries/hearings.
• Assessing Officer (AO), Deputy Commissioner , Joint Commissioner, Joint Commissioner (Appeals), Director General, or Chief Commissioner
• For non-compliance by taxpayers in countries where the DTAA (Double Taxation Avoidance Agreement) is applicable, authority is vested in individuals holding positions above that of Assistant Director or Assistant Commissioner.

Steps to Follow After Receiving Section 133(6) Notices:

• Upon receiving a notice under Section 133(6), the timeliness and thoroughness of your response are crucial. As previously stated, it’s imperative to promptly provide a comprehensive reply with all the necessary details and evidence requested by the relevant officer.
• To process a notice under section 133(6), you have the option of submitting the documents in person at the Income Tax Department office or electronically through the official e-filing portal. If you are unsure of what response you will make to a notice under section 133(6), it is advisable to seek guidance from a qualified tax preparer or adviser.
• Here are some additional guidelines to consider when drafting a response under Section 133(6) of the Income Tax Act:
• Get a clear understanding of the specific information requested.
• Collect all the relevant financial records and documents.
• Seek guidance from a tax expert or lawyer for assistance.
• Ensure compliance within a certain time frame.
• Verify that all submitted data is accurate and up to date.
• Respond truthfully and cooperate fully with any subsequent inquiries.
• Retain copies of all communications and submissions for future reference.

Penalty:

• If you have neglected to respond to a notice issued by the Tax Office, or if your response is deemed unsatisfactory, the following may occur.
• The department may require the taxpayer to file amended tax returns, disclose excess income or withdraw the claim for deduction for insufficient evidence.
• Failure to comply with the directions of the AO will result in attraction of penalty under Section 272A (2) of the Income Tax Act. The penalties can vary from Rs 100 per day to costly penalties unless an amended return is filed.
• In summary, under Section 133(6) of the Income Tax Act, it is necessary to respond promptly on receipt of a notice. Seek the help of professionals such as a certified accountant if necessary and provide detailed answers with important information. In addition, it is advisable to keep tax returns for at least 10 years to avoid any potential disputes.

Information obtained under Section 133(6):

• Information available under section 133(6) of the Income Tax Act 1961 may include books of account, invoices, letters, documents and other relevant records relating to tax matters. This information enables tax authorities to verify the accuracy of information provided by taxpayers and identify cases of tax evasion.
• Under the Taxation Act, mandatory information includes personal details like name, address and PAN along with specific financial details like sources of income, investments, assets, liabilities and tax returns which includes disclosure of information relating to any business activity, partnership or financial transaction. Supporting documents such as bank statements, receipts, contracts, and related records verifying the information reported may also be important.
• The information acquired under this section serves as evidence in the tax proceeding. Hence, it is crucial for the summoned individual to furnish accurate and comprehensive information.

Conclusion:

Section 133(6) of the Income Tax Act 1961 stands as an important provision empowering tax authorities to collect information from persons in possession of books of account or other relevant documents relating to tax matters. This system helps tax authorities to verify the information provided by taxpayers and identify cases of tax evasion. Individuals summoned must comply and provide accurate information; non-compliance can lead to penalties, so maintaining thorough records is crucial.