Notice from income tax department.

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

13 October 2013 Dear Friends,

My Client has received Letter from Income Tax department from his local ward not from New-Delhi asking for non filing for Return for A.Y 2010-11 and stating information from CIB-0321 Share Transaction of Rs 20000/- or More.

His transaction for that year is Rs 10010802 and having loss of Rs 202850/- he has not filled his return for that year because he is having loss and other income less than maximum exemption limit.

Now want to know what are the consequences and whether he need to get audited as his turnover is Above 60lakh and whether he need to file return because of having Losses and is there any special cases transferred to Local Ward.

Please Help......

Thanks......

Nikhil Kaushik

Nikhil Kaushik (Expert)
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13 October 2013 Is share trading the business of ur client

Querist : Anonymous

Querist : Anonymous (Querist)

14 October 2013 His business is of grocery shop but he frequently do share trading I.e intraday

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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04 August 2024 ### Handling a Notice from the Income Tax Department

**1. Understanding the Notice:**

Your client received a notice from the local ward regarding non-filing of the return for AY 2010-11, with a reference to share transactions exceeding Rs. 20,000. The notice indicates that the Income Tax Department has information from the Central Information Branch (CIB) about share transactions.

### Consequences and Actions Required

**2. Filing of Return:**

- **Filing Requirement:**
- Even if your client has a loss, they are required to file a return if their turnover exceeds Rs. 60 lakhs. In this case, since your client's turnover from share trading exceeds Rs. 60 lakhs, they must file a return, even if there is a loss.
- Losses in share trading need to be reported, as they can be carried forward to future years. Filing the return ensures that the losses are properly recorded and can be carried forward.

- **Audit Requirement:**
- Since the turnover is above Rs. 60 lakhs, your client is required to get their accounts audited under section 44AB of the Income Tax Act. This audit report must be filed along with the income tax return.

**3. Consequences of Non-Filing:**

- **Penalties and Interest:**
- If a return is not filed, the Income Tax Department may levy penalties for non-filing and for late filing. Additionally, interest under section 234A, 234B, and 234C might be applicable.
- Your client may also face scrutiny or further inquiries if the return is not filed.

- **Repercussions:**
- Failure to file the return may result in the assessment of income based on available information, potentially leading to higher tax liabilities or penalties.

**4. Special Cases and Transfer of Notices:**

- **Local Ward Notices:**
- Notices for non-filing can sometimes be issued by the local ward based on data gathered from various sources, including CIB reports. It does not necessarily mean that the case has been transferred to New Delhi but indicates local scrutiny.

- **Action Plan:**
- **File the Return:** Ensure that the income tax return for AY 2010-11 is filed immediately, reflecting all transactions and losses.
- **Audit Compliance:** Ensure that the accounts are audited as per the requirements, and the audit report is submitted with the return.
- **Provide Explanation:** When filing the return, provide a detailed explanation of the transactions and the loss incurred to address any queries the department might have.

### Steps to Resolve the Issue

1. **File the Return:**
- Prepare and file the income tax return for AY 2010-11. Include all necessary details of share transactions and declare the losses.
- If the return is being filed after the due date, ensure that you mention this in the return and calculate any applicable penalties or interest.

2. **Conduct the Audit:**
- Arrange for an audit of the financial statements and ensure that the audit report is prepared as per the requirements under section 44AB.

3. **Respond to the Notice:**
- Prepare a response to the notice explaining why the return was not filed and provide the necessary documentation, including details of the share transactions and the audited accounts.

4. **Consult a Tax Professional:**
- It’s advisable to consult with a tax professional or chartered accountant who can assist in filing the return correctly, managing the audit process, and responding to the notice effectively.

By promptly addressing these requirements, your client can mitigate potential penalties and ensure compliance with tax regulations.

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