Got a tax notice for a sudden income spike? What it means what you must do

Business Standard

12-05-2025

If you receive a notice from the Income Tax Department under Section 133(6) of the Income-tax Act, 1961, don't jump to conclusions. This provision allows tax officers to seek specific financial information or documents from any person, regardless of whether a formal assessment or investigation is ongoing.
According to Kunal Savani, partner at Cyril Amarchand Mangaldas, 'Section 133(6) empowers tax authorities to call for information not only during ongoing assessment but even when no proceedings are pending.'
He added that such notices are commonly sent when there are high-value transactions, sudden income spikes, or large deductions that appear inconsistent with the income reported by the taxpayer.
What kind of documents are usually sought?
Ankit Jain, partner at Ved Jain and Associates, says that the notice may ask for documents such as:
Bank statements
Purchase or sale agreements
GST returns
Invoices
Loan documents
Agreements with customers or vendors
He explained that even third parties, like banks or vendors, can receive such notices if they are linked to a taxpayer under scrutiny.
Steps to follow after receiving the notice
According to Jain, the taxpayer should follow a structured response:
Verify the notice: Ensure it has been issued by a valid income tax officer and carries a DIN (Document Identification Number).
Compile documents: Gather all relevant data and check it for accuracy.
Submit the response: The information should ideally be furnished via the Income Tax e-filing portal, Jain said. 'For hard copy submissions, get an acknowledged copy,' he added.
Seek more time if needed: If documents can't be provided within the deadline, Jain advised sending a formal request for extension.
Is it a sign of trouble?
Both experts clarified that a notice under this section does not imply wrongdoing. 'It's a routine tool for verification. No proceedings can be initiated solely on the basis of this notice,' said Jain.
How to avoid receiving one in the first place
To steer clear of such notices, Naveen Wadhwa, Vice President at Taxmann, recommended maintaining financial transparency. He advised avoiding large cash transactions, especially for property or jewellery, and ensuring accurate income reporting throughout the year.
'These notices are often triggered by mismatches or anomalies. If your disclosures are consistent with your financial activities, there's little reason to worry,' Wadhwa said