Section 133(6) of Income Tax Act: Time Limit, Case Laws, Penalty and How to Respond to Notices

The income tax department takes tax filings very seriously. It is known to take strict and prompt action against any wrongdoers; in just the month of July 2023, the department issued 1 lakh+ notices to taxpayers suspected of underreporting or misreporting their income in their tax filings. Under Section 133 (6) of the Income Tax Act, notices may be sent to any taxpayer who filed suspicious income tax returns. 

Have you received such a notice in your mail? Read along to know everything about Section 133 (6):

• Introduction to Section 133(6)
• Section 133(6) time limit
• Case Laws for Section 133(6)
• Authorities permissible to issue notices
• Response to notices under section 133(6)
• Penalties under section 133(6)

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

Section 133 (6) empowers certain persons in the income tax department to order any taxpayer to furnish information and evidence for tax-related enquiries and proceedings. The act grants investigative powers to assessing officers and other department officials to demand information through notices. 

Such notices can be sent to taxpayers for reporting lower income or withholding sources of income. They can also be issued for claiming income tax deductions and exemptions wrongfully. Other reasons for notices under this section include incomplete or incorrect tax filings, ongoing investigations by the income tax department or refusal to submit ITR. 

The department can send notices under Section 133 (6) of the Income Tax Act to not only a taxpayer but also to anyone with information on the concerned person’s transactions. Anyone receiving such notices must reply with the required information. People are expected to cooperate with the income tax department regarding such investigations. 

In case you do not comply with the directions issued by these notices, the concerned Assessing Officer can levy a penalty for your lack of response. 

Section 133(6) of Income Tax Act Time Limit

There is no framed time limit for the provisions of Section 133(6). As per the section, the income tax department may call for information on accounts, matters and opinions regarding tax proceedings or enquiries at any point in time.

If you have received a notice regarding arrears in your tax filing, you should respond immediately. You should also comply with the department and furnish any documents or other pieces of evidence within the time frame mentioned in the notice. 

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

Let’s consider a few case laws to highlight how the Section 133 (6) applies to taxpayers:

Case 1: Mr A has purchased goods worth Rs.10 lakh from Mr B but did not disclose the details of the transaction when filing taxes. 

If the income tax department selects Mr A for additional scrutiny, it may send a notice u/s 133 (6) to obtain information about this transaction. Mr A has to now provide invoice details of the transaction and file updated returns if any corrections are required.

Case 2: Mr X was an Indian citizen until FY2020 when he left for the USA for his profession. He continues to gather funds from India from several investments but he has not filed an ITR for the same. 

In this situation, the income tax department issues a notice u/s 133 (6) to submit all bank and demat statements showing his income in India and the foreign country. Mr X has to submit these documents within 20 days, or the AO will impose penalties.  

Who Can File Notice Under Section 133 (6) of Income Tax Act?

Section 133 (6) allows the following persons to send notices for information regarding tax enquires/proceedings:

• Assessing Officer (AO)
• Deputy Commissioner (Appeals)
• Joint Commissioner
• Joint Commissioner (Appeals)
• Director General or Chief Commissioner

For non-compliance by taxpayers in countries where DTAA (Double Taxation Avoidance Agreement) is applicable, the above powers are given to persons above the rank of Assistant Director or Assistant Commissioner.  

How to Respond to Notices Under Section 133 (6) of Income Tax Act?

When you receive a notice under Section 133 (6), the presentation and promptness of your reply matter a lot. As mentioned before, you need to promptly send a response with all the details and evidence required by the concerned officer. 

Let's say that you have claimed HRA on the rent paid and received a notice for arrears. In this instance, you need to provide copies of your salary slip and receipt for rent paid to clear any doubts of the income tax department. Similarly, for leave travel allowance, you need to submit copies of invoices, hotel bookings and travel tickets. 

To respond to a notice u/s 133 (6), you can choose to submit the documents in person at an office of the income tax department. Alternatively, you can submit your response online through the official e-filing portal. If you have doubts about how to form a response to a notice u/s 133 (6), you should consult a qualified tax planner/advisor. 

Here are some additional tips to follow when filing a reply under Section 133 (6) of the Income Tax Act:

• Go through the notice carefully to understand the reason behind its issuance.
• Collect information about all sources of your income by going through your bank statements.
• Be honest and never give misleading statements in your response.
• If you cannot submit the required information within the given time, be sure to contact the income tax department to request an extension.
• If you have contracted a professional such as a chartered accountant or tax advisor, to file taxes, you need to submit their name and contact details in your response. 

Penalty Section 133(6) of Income Tax Act 

If you fail to file a response to a notice sent by the income tax department or they deem your response to be unsatisfactory, the following consequences may take place:

• The Assessing Officer deems your tax returns invalid and sends you another notice under Section 148 of the Income Tax. This notice requires a taxpayer to refile income tax returns and provide an explanation for any arrears within the stipulated time. 
• The department may ask the taxpayer to file revised tax returns while disclosing additional income or withdrawing claims for exemptions and deductions for which there is no sufficient proof. 
• Failure to comply with the directions of the AO will result in penalties imposed under Section 272A (2) of the Income Tax Act. The penalty can range from Rs.100 per day till the filing of revised returns to a more substantial penalty.
• If the investigation finds misreported income or wrongful claims for deductions/exemptions, the taxpayer has to pay penal interest at 12% p.a. or a 200% penalty for taxes evaded. Besides fines, prosecution may result in imprisonment.  

In short, if you get a notice under Section 133 (6) of the Income Tax, ensure that you respond promptly. Send a response with the requisite information and take the help of a professional like a chartered accountant if needed. It is advisable to preserve documents related to tax filing for at least 10 years to respond to disputes.