Notice under Section 133(6):

Under Section 133(6) of the Income Tax Act, tax authorities have the authority to issue a notice to any person or entity to furnish information or documents relevant to a tax assessment or inquiry. This notice empowers tax officials to gather necessary information to verify the accuracy and completeness of the taxpayer’s financial records.

Section 133(6) in The Income- Tax Act, 1995–

(6) require any person, including a banking company or any officer thereof, to furnish information in relation to such points or matters, or to furnish statements of accounts and affairs verified in the manner specified by the Assessing Officer, the Deputy Commissioner (Appeals), the Deputy Commissioner or the Commissioner (Appeals), giving information in relation to such points or matters as, in the opinion of the Assessing Officer, the Deputy Commissioner (Appeals) the Deputy Commissioner of the Commissioner (Appeals) will be useful for, or relevant to, any inquiry or proceeding under this Act.

For failure to comply with notice u/s 133(6)

Section 133(6) notice is given to tax payer or related parties seeking certain details of transaction done during the year under consideration. Failure to comply with notice can ead penalty of Rs10,000 u/s 272A.

Key Points of Notice under Section 133(6):

1. Purpose: The notice is issued to gather specific information or documents that may be crucial for assessing the taxpayer’s tax liability or conducting an inquiry into their financial affairs.
2. Scope: It can cover a wide range of information, including financial statements, account books, bank statements, transaction records, agreements, contracts, and any other documents relevant to the tax assessment.
3. Timeline: Taxpayers are typically required to respond to the notice within a specified timeframe, usually within a few weeks from the date of receipt.

Response to Notice under Section 133(6):

1. Understanding the Requirements: Upon receiving the notice, the taxpayer should carefully review the requests outlined in the notice to understand the specific information or documents sought by the tax authorities.
2. Gathering Documents: The taxpayer should gather all the requested information or documents mentioned in the notice, ensuring that they are accurate, complete, and organized for submission.
3. Preparation of Response: It’s essential to prepare a clear and concise response addressing each request in the notice comprehensively. If any information or documents are not readily available, the taxpayer should provide a valid explanation for the delay or inability to furnish them.
4. Submission to Tax Authorities: The response, along with the relevant documents, should be submitted to the designated tax authority within the stipulated timeframe mentioned in the notice. It’s advisable to maintain copies of all documents submitted for future reference.

Importance of Compliance:

• Legal Obligation: Responding to the notice under Section 133(6) is a legal obligation, and failure to comply with the notice can result in penalties, fines, or further scrutiny by tax authorities.
• Facilitating Tax Assessment: By providing the requested information or documents in a timely and accurate manner, taxpayers facilitate the tax assessment process, ensuring transparency and compliance with tax laws.

Conclusion:

A notice under Section 133(6) of the Income Tax Act empowers tax authorities to gather essential information or documents relevant to tax assessment or inquiries. Taxpayers should respond promptly and diligently to such notices, providing the requested information or documents to ensure compliance with tax laws and facilitate the tax assessment process.

Under the Income Tax Act of India, various financial transactions are subject to reporting requirements to the Income Tax Department. These transactions, which exceed specified thresholds, are reported by the respective entities to the Income Tax Department, and the details of these transactions are compiled into the Annual Information Statement (AIS) for individual taxpayers. Here are some common transactions and their respective thresholds that are reported under the AIS:

1. Bank Transactions:

• Cash deposits or withdrawals aggregating to Rs. 10 lakh or more in a financial year in one or more savings account of a person maintained with the same bank.
• Payment made by any mode (other than cash) for credit card bills aggregating to Rs. 10 lakh or more in a financial year.
• Purchase of bank drafts or pay orders with cash aggregating to Rs. 10 lakh or more in a financial year.

1. Mutual Fund Transactions:

• Redemption of units of mutual fund for an amount exceeding Rs. 10 lakh.

1. Stock Transactions:

• Sale or purchase of shares of a company listed on a recognized stock exchange exceeding Rs. 10 lakh in value per transaction.

1. Property Transactions:

• Purchase or sale of immovable property valued at Rs. 30 lakh or more.
• Receipt of rent exceeding Rs. 2.40 lakh per annum.

1. Credit Card Transactions:

• Payment made by any mode (other than cash) for credit card bills aggregating to Rs. 10 lakh or more in a financial year.

1. Foreign Exchange Transactions:

• Purchase of foreign currency or traveler’s cheque exceeding Rs. 10 lakh or more in cash.

1. Fixed Deposit Transactions:

• Fixed deposit with banks or post office aggregating to Rs. 10 lakh or more.

1. Cash Transactions:

• Cash deposits aggregating to Rs. 10 lakh or more in a financial year in one or more saving account of a person maintained with the bank.
• Cash deposits aggregating to Rs. 50 lakh or more in a financial year in one or more accounts (other than current account and time deposit) maintained with the bank.

Reporting and Compliance:

• Annual Information Statement (AIS): The details of these high-value transactions are compiled into the Annual Information Statement (AIS) for individual taxpayers and are made available for download through the Income Tax Department’s e-filing portal.
• Verification and Compliance: Taxpayers are required to verify the accuracy and completeness of the high-value transactions reported in their AIS. Any discrepancies or omissions should be rectified promptly to ensure compliance with tax laws.
• Income Tax Return Filing: Taxpayers must accurately report all high-value transactions in their income tax returns and ensure compliance with tax laws. Failure to disclose these transactions may attract penalties or scrutiny by tax authorities.

The Annual Information Return (AIR) serves as a crucial tool for the Income Tax Department to track high-value financial transactions and ensure tax compliance among taxpayers. When significant discrepancies are identified between the information reported in the AIR and the income tax returns filed by taxpayers, the Income Tax Department may issue a notice to investigate and resolve the discrepancies. Taxpayers are required to respond to such notices promptly and provide the necessary clarification or information to address the discrepancies and ensure compliance with tax laws. It’s essential for taxpayers to accurately report their financial transactions and income to avoid potential penalties or scrutiny by tax authorities

Tax Savy Tips for #Equity Investors

Your Investment is a Short Term if a period of holding is up to 12 Month otherwise it will be treated as Long Term

Short Term Capital Gain is Taxable @ 15%

Long Term Capital Gain is exempt up to Rs.1 lakh after that taxable @ 10 % (No Indexation)

Long Term Capital Loss can be set off against Long Term Capital Gain only

Short Term or Long Term losses can be carried forward up to 8 years if you have filed ITR on or before the due date u/s 139(1)

💡Tips💡
1:Book Long Term Capital Gain up to Rs.1 lakh during the year as it was exempt from tax

2:If you have already booked a short term capital gain then to save taxes book short term capital losses and repurchase the shares on next day so that such short term losses can get set off against your taxable short term capital gains and no effect to your portfolio

3:If you have already booked a long term gain of more then 1 lakh then to save taxes book short term capital losses or long term capital losses and repurchase the shares on next day so that such short term/long term losses can get set off against your taxable long term capital gains and no effect to your portfolio.

Basic of HUF:-

A Hindu Undivided Family (HUF) is a specific family unit recognized under Hindu law, primarily in India. It represents a unique legal entity distinct from its members, primarily for taxation purposes under the Income Tax Act, 1961. The concept of an HUF stems from Hindu customary law, which encompasses not just Hindus by religion but also those who are followers of Jainism, Sikhism, and Buddhism in India, as these religions are considered part of the Hindu legal framework in certain contexts

Definition and Characteristics

Legal Entity: An HUF is treated as a separate legal entity for the purpose of assessment under the Income Tax Act. This means it has a separate legal identity from its members and can hold property, enter into contracts, and sue or be sued in its own name.

Formation: An HUF is automatically formed by a Hindu family. A common misconception is that it requires a special ceremony or registration to be constituted, but in reality, it comes into existence the moment a Hindu individual gets married and starts a family. It includes all members of a family, including wives and unmarried daughters.

Karta: The head of an HUF is called the ‘Karta’, who manages the affairs of the family and the joint family property. Traditionally, the Karta is the eldest male member of the family, but recent legal judgments have allowed for women to become Kartas under certain circumstances.

Members: The members of an HUF include all persons lineally descended from a common ancestor, including their wives and unmarried daughters. Membership in an HUF is by birth, and in the case of females, through marriage into the family.

Legal Rights and Obligations

• Property Ownership: An HUF can own property in its name. The property owned by an HUF is deemed to be owned jointly by all members of the family.
• Bank Accounts and Financial Transactions: An HUF can operate bank accounts, invest in securities, and engage in other financial activities in its name.
• Liability: The liability of the Karta is unlimited, whereas the liability of other members is limited to their share in the HUF.
• Taxation: An HUF has its own PAN (Permanent Account Number) and is required to file tax returns separately from its members. It enjoys certain tax benefits under the Income Tax Act, which can lead to tax efficiency and savings for the family.

Formation

• Automatic Creation: An HUF is automatically created at the time of a Hindu marriage. The family, including spouses and children, become members of the HUF. The creation of an HUF does not necessarily require a specific ceremonial process. The essential requirement is that there should be a family that can come under the umbrella of HUF.
• Legal Recognition: For legal and tax purposes, however, it’s important to formalize the existence of the HUF. This begins with creating it formally with the help of a Tax professional

Saving tax through a Hindu Undivided Family (HUF) involves strategic planning and understanding of the income tax laws applicable to HUFs in India. An HUF is treated as a separate entity for taxation purposes, which means it enjoys its own set of exemptions and deductions, similar to an individual taxpayer. Here are several ways through which you can save tax by forming an HUF:

1. Tax Saving through HUF- Claiming Separate Tax Exemption

• Basic Exemption Limit: Just like any individual taxpayer, an HUF is entitled to a basic exemption limit (which is ₹2,50,000 for FY 2022-23; this may change with new financial budgets). This is beneficial if the family members individually fall into higher tax brackets.

2. Income Splitting

• By channeling income through an HUF, the overall tax liability can be reduced. For example, rental income from property owned by the HUF or business income that is attributed to the HUF can be taxed in the hands of the HUF, potentially at a lower rate due to the basic exemption limit and the slab rate applicable.

3. Investment in Tax-saving Instruments

• An HUF can invest in tax-saving instruments under Section 80C of the Income Tax Act, such as ELSS, PPF, NSC, life insurance premiums, and more. The limit for deduction under Section 80C is ₹1,50,000, which is over and above the deductions claimed by the individual members.

4. Deductions under Other Sections

• Health Insurance Premiums: Premiums paid for the health insurance of HUF members can be claimed as a deduction under Section 80D.
• Education Loan: Interest paid on an education loan taken for any member of the HUF can be claimed under Section 80E.
• Home Loan Interest: If the HUF has taken a home loan, the interest component can be claimed as a deduction under Section 24.

5. Paying Salary to Members

• If any HUF member is actively involved in the operations or management of the HUF’s business, a reasonable salary paid to them for their services can be claimed as an expense by the HUF. This reduces the HUF’s taxable income.

6. Creation of a Trust

• An HUF can also create a trust for a specific purpose, and the amount given to the trust can be claimed as a deduction under the applicable sections of the Income Tax Act.

7. Gifts Received

• Gifts received by an HUF from its members can sometimes be a tax-efficient way to increase the capital of the HUF without attracting gift tax, subject to the provisions and limits under the Income Tax Act.

Planning and Documentation

To effectively save tax through an HUF, proper planning and documentation are crucial. All transactions must be legal and justified, with clear demarcation of income and investment in the name of the HUF. It’s important to maintain transparent records and comply with all tax laws to avoid scrutiny and penalties from tax authorities.

Conclusion

The Hindu Undivided Family system offers a viable tax-saving mechanism within the framework of Indian tax laws. By leveraging the benefits available to an HUF, families can significantly reduce their tax liabilities while ensuring the efficient management and transfer of wealth across generations. However, it’s crucial to adhere to the legal stipulations and ensure proper documentation and compliance to fully benefit from the HUF structure. As with all tax-related strategies, consulting with a tax professional or financial advisor to understand the implications and benefits specific to one’s situation is advisable

Total 17 updates in the latest Income Tax Return (ITR) Forms for FY 2023-24! Here’s a detailed breakdown of the key changes:

1. Filing Deadlines: Taxpayers now have a new column in Forms ITR 3, 5 and 6 where they specify the deadline for filing returns.
2. Online Gaming Winnings Taxation: Schedule OS has been amended to include reporting of income from online gaming in form ITR 2, 3, 5 and 6.
3. Adjustment of Unabsorbed Depreciation: The new provisions allow for the adjustment of unabsorbed depreciation in Form ITR 3 and 5.
4. LEI Details: Legal Entity Identifier (LEI) disclosure is now mandatory for refunds exceeding INR 50 crores in Form ITR 2, 3, 5 and 6.
5. Political Party Contributions: Schedule 80GGC will require detailed disclosure of political party contributions in Form ITR 2, 3, 5 and 6.
6. Cash Receipts Reporting: A new column for cash receipts reporting has been added to claim an enhanced turnover limit in Form ITR 3, 4 and 5.
7. Start-up Deduction Details: New Schedules for claiming deductions under Sections 80-IAC and 80LA have been introduced in Form ITR 5 and 6.
8. Dividend Income Reporting: dividend income received from a unit in an International Financial Service Centre shall be taxed at a reduced tax rate of 10% instead of 20%. Schedule OS has been amended in new ITR forms to incorporate such change in Form ITR 2, 3, 5 and 6
9. ESOP Tax Benefits: Enhanced reporting requirements for Employee Stock Option Plans (ESOPs) needs disclosure of PAN and DPIIT Registration Numbers in Form ITR 2and 3.
10. EVC for Tax Audits: Individuals and HUFs under tax audits (ITR 3) can now verify returns using Electronic Verification Code (EVC). This simplifies the verification process and enhances ease of compliance.
11. Reasons for Tax Audit: Additional details are required from audited companies in Form ITR 3, 5 and 6 regarding the circumstances necessitating tax audits. This change enhances transparency and accountability in tax reporting.
12. Business Trust Sums Reporting: A new column under Schedule OS allows for reporting sums received by unitholders distributed by business trust to avoid non-taxation in Form ITR 2, 3 and 5.
13. Bank Account Disclosure: Taxpayers must now disclose all bank accounts held, except dormant accounts in Form ITR 2, 3 and 5.
14. CGAS Reporting: Detailed disclosure of deposits in the Capital Gains Accounts Scheme is now required in Form ITR 2, 3, 5 and 6.
15. Deduction under Section 80CCH: A new column is introduced to claim deductions under Section 80CCH for Agniveer Corpus Fund in Form ITR 1, 2, 3 and 4.
16. New Schedule 80U: Schedule 80U is added for claiming deductions for persons with disabilities, seeking detailed information in Form ITR 3.
17. Schedule 80DD: Similar to Schedule 80U, Schedule 80DD is added to claim deductions for maintenance and medical treatment of dependents with disabilities in Form ITR 2 and 3.

The GST Council concluded its discussion and held a press briefing at 3:30 P.M on October 7, 2023, to announce the following outcomes:

1. Regarding the formation of the GSTAT (Goods and Services Tax Appellate Tribunal), the Finance Minister stated that the council had previously made decisions. In this meeting, they recommended amending the law to set a maximum age limit of 70 years for the President and 67 years for members, with a minimum age requirement of 50 years. The age limit for members has been raised from 65 to 67, and for the President, it has been increased from 67 to 70 years. Additionally, advocates with up to 10 years of experience can now be appointed as judicial members of GSTAT.
2. Millet flour blended with other atta, comprising 70% millets under HS1901, will be subject to nil GST when sold unpackaged or in loose form, and 5% GST when pre-packaged or labeled.
3. Regarding the taxation of Extra Neutral Alcohol (ENA) used in alcoholic beverages, the Allahabad High Court ruled that states do not have the authority to tax ENA after the 101st Constitutional Amendment. The GST Council retains the right to tax ENA by law, but it has granted this right to states despite the court ruling.
4. The GST rate on molasses has been reduced from 28% to 5%, benefiting sugarcane farmers and lowering the cost of cattle feed.
5. Rectified spirit for industrial use will now have a separate HSN code, and an 18% tax will be applicable to ENA for industrial use.
6. To boost tourism, foreign-flagged/owned or foreign-going vessels will receive a conditional GST exemption of 5% if they operate in India’s coastal areas during the upcoming winter season.
7. An extension has been granted for the GST Amnesty Scheme, allowing appeals to be filed until January 31, 2024, with enhanced pre-deposit. An additional 2.5% pre-deposit will be charged for the extended period, payable from the electronic cash ledger.
8. Zari will be taxed at a 5% rate instead of 18% under GST.
9. Job work services related to the processing of barley into malt will attract a 5% GST rate for food and food products but 18% for the production of alcoholic beverages.
10. Exemptions have been provided to Government Authorities for services related to water supply, public health, sanitation, conservancy, solid waste management, slum improvement, and upgradation. This also applies to composite services involving up to 25% of the mentioned services. Clarification has been given regarding the eligibility of the District Mineral Foundation Trust (DMFT) for these exemptions.
11. All services provided by Indian Railways will be subject to forward charge, with Input Tax Credit (ITC) available for discharging liabilities.
12. The GST Rules will now specify a one-year time limit for the provisional attachment of property to avoid practical difficulties during property release from banks after one year.
13. The Finance Minister clarified that there were no discussions on GST rate rationalization or Input Tax Credit (ITC) recoveries.
14. Currently, 18 states have passed amendments to impose a 28% GST on gaming companies starting from October 1, 2023, along with corresponding GST Rules. Thirteen states are yet to pass such amendments.
15. The Revenue Secretary clarified that when a director provides a corporate guarantee to a company, it does not attract GST unless there is specific consideration. However, if a company provides a corporate guarantee to its subsidiary, 1% of the total guaranteed amount is considered as value and attracts an 18% GST.

Introduction:

Filing an accurate and complete income tax return is essential for individuals and businesses alike. It helps ensure compliance with tax laws and facilitates the smooth functioning of the taxation system. However, there may be instances when the tax authorities deem a filed return as defective. In such cases, the taxpayer receives a notice under Section 139(9) of the Income Tax Act, highlighting the deficiencies in the return and providing an opportunity to rectify them. In this article, we will delve into the concept of the Notice of Defective Return and shed light on its implications for taxpayers.

Understanding the Notice of Defective Return:

Section 139(9) of the Income Tax Act empowers the Assessing Officer (AO) to issue a notice to a taxpayer if the filed return is considered defective. This provision gives the AO the authority to point out errors, discrepancies, or omissions in the return and request the taxpayer to rectify them within a specified timeframe. The notice serves as a means to ensure accurate reporting and computation of income and prevents taxpayers from submitting incomplete or erroneous returns.

Reasons for Issuing a Notice:

The Assessing Officer may issue a Notice of Defective Return for various reasons. Some common grounds for such notices include:

1. Incomplete or incorrect information: If the return lacks necessary details, such as income from various sources, deductions claimed, or tax payments made, the AO may consider it defective. Similarly, errors in basic information like name, address, PAN, etc., can also render the return defective.
2. Non-compliance with the prescribed form: The income tax return form prescribed by the tax authorities must be used while filing the return. Failure to use the correct form or non-compliance with the specified format may lead to a notice of defect.
3. Mathematical errors: If the calculations in the return are incorrect or inconsistent, it may result in a defective return notice. This includes errors in computing income, deductions, tax liability, or any other relevant figures.
4. Non-attachment of mandatory documents: Certain supporting documents, such as Form 16, Form 26AS, TDS certificates, or proofs of deductions claimed, need to be submitted along with the return. Failing to attach these documents can result in a notice of defect.

Implications and Course of Action:

Upon receiving a Notice of Defective Return under Section 139(9), the taxpayer is granted a specified period to rectify the defects mentioned in the notice. This timeframe is typically 15 days from the date of receipt of the notice, although it can vary based on the discretion of the AO. It is crucial for the taxpayer to carefully review the notice, understand the deficiencies highlighted, and take appropriate steps to rectify them within the stipulated time.

In case the taxpayer fails to comply with the notice or rectify the defects within the given timeframe, the AO can treat the return as invalid. This may lead to the imposition of penalties and initiation of further proceedings, such as scrutiny assessments or audits. Therefore, it is in the taxpayer’s best interest to address the defects promptly and accurately.

Rectifying a Defective Return:

To rectify a defective return, the taxpayer must follow the instructions provided in the notice. This may involve providing additional information, correcting errors in calculations, attaching necessary documents, or making any other amendments required to bring the return in line with the prescribed format. Once the necessary corrections are made, the taxpayer should resubmit the rectified return to the tax department.

Conclusion:

The Notice of Defective Return under Section 139(9) of the Income Tax Act serves as a mechanism to ensure accurate reporting and compliance with tax laws. It gives the taxpayer an opportunity to rectify any errors, omissions, or discrepancies in the filed return. Timely response and rectification of the defects are crucial to avoid penalties and further scrutiny from tax authorities. Therefore, taxpayers should be diligent in preparing and reviewing their income tax returns to minimize the chances of receiving a notice of defect and ensure smooth tax compliance.

Income tax plays a crucial role in a country’s revenue generation and is an important aspect of financial planning for individuals. In recent years, the Indian income tax system has undergone significant changes, with the introduction of the new tax regime. This article aims to provide an overview of the income tax structure under the old and new regimes, compare the tax slabs, and discuss factors to consider when determining which regime is better suited for an individual taxpayer.

The Old Tax Regime: Under the old tax regime, the income tax structure consists of multiple tax slabs with progressive rates. The tax rates for individual taxpayers for the financial year 2021-22 are as follows:

• Up to INR 2.5 lakh: Nil
• INR 2.5 lakh to INR 5 lakh: 5%
• INR 5 lakh to INR 10 lakh: 20%
• Above INR 10 lakh: 30%

Additionally, a cess of 4% called the Health and Education Cess is levied on the total tax liability. Taxpayers can avail various deductions and exemptions under different sections of the Income Tax Act to reduce their taxable income and lower their tax liability.

The New Tax Regime: The new tax regime, introduced in the Union Budget 2020, offers reduced tax rates with fewer deductions and exemptions. It aims to simplify the income tax structure and provide taxpayers with the option to choose between the old and new regimes based on their individual circumstances. The tax rates for individual taxpayers for the financial year 2021-22 under the new regime are as follows:

• Up to INR 2.5 lakh: Nil
• INR 2.5 lakh to INR 5 lakh: 5%
• INR 5 lakh to INR 7.5 lakh: 10%
• INR 7.5 lakh to INR 10 lakh: 15%
• INR 10 lakh to INR 12.5 lakh: 20%
• INR 12.5 lakh to INR 15 lakh: 25%
• Above INR 15 lakh: 30%

It is important to note that under the new regime, taxpayers cannot claim various deductions and exemptions, including the standard deduction, house rent allowance (HRA), deductions under Section 80C, 80D, etc.

Determining the Better Option: Deciding which tax regime is better for an individual depends on several factors, including the taxpayer’s income, age, investments, and financial goals. Here are some key considerations:

1. Income Level: For individuals with lower income levels and limited investments, the new tax regime may be beneficial, as it offers lower tax rates without the need to claim deductions. However, individuals with higher incomes who can avail substantial deductions under the old regime may find it more advantageous.
2. Deductions and Exemptions: Under the old regime, taxpayers can claim deductions and exemptions, such as those available under Section 80C for investments in instruments like provident fund, National Savings Certificate, etc. If a taxpayer has significant deductions that substantially reduce their taxable income, the old regime might be more beneficial.
3. Investment Preferences: Individuals with specific investment preferences may find the old regime more advantageous. For example, taxpayers who invest in life insurance policies, health insurance, or have home loan interest payments can claim deductions under the old regime, reducing their tax liability.
4. Simplicity: The new tax regime offers a simpler structure with lower tax rates and eliminates the need to track and claim various deductions. For individuals who prefer simplicity and do not have significant deductions, the new regime

Conclusion:

Choosing between the old and new income tax regimes depends on various factors and requires a careful assessment of one’s income, investments, and financial goals. While the new regime offers lower tax rates, it comes with reduced deductions and exemptions. The old regime provides the benefit of claiming deductions but involves a more complex structure. It is advisable for taxpayers to consult with tax professionals, such as chartered accountants or tax advisors, to analyze their specific circumstances and make an informed decision that optimizes their tax liability and aligns with their financial objectives.

Question: What is an income tax notice under Section 148A?

Answer: An income tax notice issued under Section 148A of the Income Tax Act, 1961 is a communication from the income tax department to a taxpayer, informing them about the initiation of reassessment proceedings. This notice is typically issued when the income tax department has reason to believe that the taxpayer’s income has escaped assessment, and they require further examination and verification of the taxpayer’s income and tax liability.

Question: Why would someone receive an income tax notice under Section 148A?

Answer: There are specific circumstances in which an individual or entity may receive an income tax notice under Section 148A. Some common reasons include:

1. Income Escaping Assessment: The income tax department may issue a notice under Section 148A if they have reason to believe that the taxpayer’s income, either wholly or partly, has not been assessed in the original assessment proceedings. This could be due to non-disclosure of income, understatement of income, or other factors leading to the evasion of taxes.
2. Information from External Sources: The income tax department may receive information from various sources, such as financial institutions, third-party reports, or data matching exercises, indicating potential discrepancies in the taxpayer’s income. Based on this information, they may initiate reassessment proceedings by issuing a notice under Section 148A.
3. Cross-Verification of Transactions: If the income tax department identifies specific transactions or activities that require further investigation, such as substantial cash deposits, high-value investments, or property transactions, they may issue a notice under Section 148A to re-examine and verify the tax implications of these transactions.
4. Non-filing of Returns: In cases where the taxpayer has failed to file their income tax return, despite being liable to do so, the income tax department can issue a notice under Section 148A to initiate the assessment process and determine the taxpayer’s income and tax liability.

Question: How should a taxpayer respond to an income tax notice under Section 148A?

Answer: When a taxpayer receives an income tax notice under Section 148A, it is crucial to respond appropriately and in a timely manner. Here are some steps to consider:

1. Review the Notice: Carefully read and understand the contents of the notice. Take note of the reasons provided by the income tax department for initiating reassessment proceedings and the timeline specified for responding to the notice.
2. Gather Relevant Documents: Collect all the necessary documents and records related to your income, deductions, investments, and financial transactions for the relevant assessment year. Ensure that the documents are organized and readily available for submission.
3. Seek Professional Advice: If you are unsure about how to proceed or if the notice involves complex issues, it is advisable to consult a tax professional, such as a chartered accountant or a tax lawyer. They can guide you on the appropriate course of action, help you prepare the response, and represent you before the income tax department if necessary.
4. Prepare a Response: Based on the reasons mentioned in the notice, prepare a detailed response addressing each point raised by the income tax department. Provide explanations, clarifications, and supporting documentation to substantiate your claims and refute any allegations of income escaping assessment.
5. Submit the Response: Submit the response and supporting documents within the specified timeframe mentioned in the notice. Retain a copy of the response and maintain a record of the submission, such as an acknowledgment receipt or a postal tracking number, as proof of compliance.

Question: What are the consequences of non-compliance with an income tax notice under Section 148A?

Answer: Non-compliance with an income tax notice under Section 148A can have serious consequences for the taxpayer. Some possible outcomes include:

1. Best Judgment Assessment: If the taxpayer fails to respond to the notice or provides an inadequate response, the income tax department can proceed with a best judgment assessment. In this scenario, the department will make an assessment based on the information available to them, and the taxpayer’s income and tax liability will be determined accordingly. This may result in a higher tax liability for the taxpayer.
2. Penalty and Interest: Non-compliance with the notice can lead to the imposition of penalties and interest by the income tax department. The penalties can be substantial and may add to the taxpayer’s financial burden.
3. Prosecution: In cases of deliberate evasion or willful failure to comply with the income tax notice, the income tax department may initiate prosecution proceedings against the taxpayer. If found guilty, the taxpayer can face legal consequences, including fines and imprisonment.
4. Continued Scrutiny: Non-compliance can also attract further scrutiny from the income tax department in subsequent years. The taxpayer’s compliance history may be reviewed more closely, leading to increased scrutiny and potential audits in the future.

It is essential for taxpayers to take income tax notices under Section 148A seriously and respond promptly and diligently to avoid these adverse consequences. Seeking professional advice and adhering to the timelines specified in the notice are crucial steps in ensuring compliance with the income tax regulations.

Futures and options trading is a popular way of making investments in the stock market. However, like any other business, it is not immune to losses. If you have incurred losses from futures and options trading, it is important to understand the tax implications and comply with the tax laws and regulations. In this article, we will discuss tax audit in case of loss from futures and options trading.

What is Tax Audit?

A tax audit is an examination of the financial records and tax returns of a taxpayer to verify the accuracy and compliance with the tax laws and regulations. As per the Income Tax Act, 1961, taxpayers whose total income exceeds a specified limit are required to get their accounts audited by a Chartered Accountant. This is known as tax audit.

When is Tax Audit Required in case of Loss from Futures and Options Trading?

A tax audit is mandatory in the following situations:

1. If the total income from futures and options trading exceeds the basic exemption limit: If your total income from futures and options trading exceeds the basic exemption limit, which is currently Rs. 2.5 lakhs, you are required to get your accounts audited.

• If the loss from futures and options trading exceeds the basic exemption limit: If your loss from futures and options trading exceeds the basic exemption limit, you are required to get your accounts audited even if your total income is below the basic exemption limit.

• If you are an eligible business under section 44AD: If you are an eligible business under section 44AD and you opt to declare a lower profit or loss than the presumptive profit or loss, you are required to get your accounts audited.

What is the Process of Tax Audit in case of Loss from Futures and Options Trading?

The process of tax audit in case of loss from futures and options trading involves the following steps:

1. Maintain proper records: It is important to maintain proper records of your transactions in futures and options trading. This includes purchase and sale bills, contract notes, bank statements, ledger accounts, and other relevant documents.

• Get your accounts audited by a Chartered Accountant: You need to engage a Chartered Accountant to audit your accounts and prepare a tax audit report. The report should be submitted in Form 3CA/3CB and Form 3CD.

• File the tax return: After the tax audit is completed, you need to file the tax return in Form ITR-3. You need to disclose your loss from futures and options trading in the tax return.

What are the Consequences of Non-Compliance with Tax Audit Requirements?

If you fail to comply with the tax audit requirements, you may face the following consequences:

Penalty: You may be liable to pay a penalty of 0.5% of the turnover or Rs. 1,50,000, whichever is lower.

Disallowance of Loss: If you do not get your accounts audited and file the tax return, your loss from futures and options trading will not be allowed to be carried forward to future years.

Notice of Defective Return U/s 139(9): You may receive the notice of filing of tax audit report duly certified by chartered Accountant within a prescribed time. Non-Filing of Tax Audit report may result of issue of further income tax scrutiny notice

Conclusion

In conclusion, if you have incurred losses from futures and options trading, it is important to comply with the tax laws and regulations and get your accounts audited. This will not only help you avoid legal hassles but also ensure that you can carry forward your loss to future years and set it off against future profits.

Engaging the services of a qualified Chartered Accountant can help you comply with the tax audit requirements and file your tax returns accurately and on time.