Black money chase: Don’t panic if you receive a tax notice

Prepare your replies with expert help and keep relevant documents ready to support your replies

Breaking News : The government has asked banks to provide information to the Income-Tax (I-T) Department about savings accounts where deposits have exceeded Rs 2.5 lakh (Rs 12.5 lakh in the case of current accounts) after November 8. If the deposits are higher than past levels or deviate significantly from what a person’s savings are expected to be, based on the I-T returns he has filed in the past, he could receive a notice from the tax department. As the government has gone into overdrive against black money, many more notices are expected this year.

Type of notice received

First, you determine the type of notice you have received. Sometimes the tax department sends enquiry notices, where the officer asks for specific information. A tax scrutiny notice is for examining your I-T return in great detail. “For black money-related cases, the department could issue enquiry notices anytime, asking people to explain the source of large deposits in their savings accounts. Scrutiny notices will be issued only after the return is filed,” says Rahul Jain, partner-direct taxation, Nangia & Co.

The seriousness of your problem also depends on whether you have received a limited or detailed scrutiny notice. In the former, the officer can ask you to provide information only regarding limited points, say, about a mismatch between the tax return you have filed and the Annual Information Return (AIR) filed by a bank or mutual fund (MF) house for high-value transactions. A detailed scrutiny is a more holistic investigation. “A tax officer can convert a limited scrutiny into a complete scrutiny but not merely on the basis of suspicion or guesswork. He can do so, with the approval of a high-rank officer, only if he forms a reasonable view to believe income exceeding Rs 5 lakh (Rs 10 lakh in a metro) has escaped assessment,” says Kuldip Kumar, partner and leader (personal tax), PwC India.

What should you do?

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s