Got An Enquiry From The Tax
Authorities? Here’s How To
Handle The Situation
An enquiry from the tax authorities can create panic in most of us. Is there
any reason to worry, or can this be handled without professional help? In
this column the author analyses various circumstances in which you may
receive such an enquiry, and offers tips on how to handle the situation
countries. This automatic exchange
of information provides authorities
an opportunity to cross-check
whether the overseas income and
assets are duly accounted for in
taxpayers’ returns or not. Apart
from this, there could be a routine
selection of taxpayers based on
certain criteria decided by the
authorities, whereby they audit them
by issuing a notice.
Kuldip Kumar
Partner, PricewaterhouseCoopers
O
ur government has a
particular focus on
unearthing black money
that’s stashed away,
whether it’s in India or abroad. The
black money may be in any form –
investment, property, undisclosed
bank account, benami asset, or
even cash. The elevated use of
technology and data analytics by the
authorities leads to identification
of financial transactions that are
either high-value or suspected to be
unaccounted. Either of these factors
generally triggers an enquiry from
the tax authorities in an attempt to
verify the transaction.
India has signed tax information
exchange agreements with several
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Why an enquiry?
Given below are some of the
circumstances that could possibly
lead to an enquiry from the tax
authorities. This is an indicative list
and not an exhaustive one.
There are certain transactions
where quoting of PAN is
mandatory by virtue of Section
139A (5) of the Income tax
Act, 1961 (Act) read with rule
114B of the Income tax Rules,
1962 (Rules). For example, sale
or purchase of motor vehicles;
opening of bank account/demat
account; sale or purchase of
immovable property exceeding
`10 lakh; sale or purchase of
unlisted shares exceeding
`1 lakh; purchase of mutual
funds/ debentures/ foreign
exchange/ payment to hotels etc.
exceeding `50,000; or any sale or
purchase of any goods or services
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Outlook Money April 2018 www.outlookmoney.com
exceeding `2 lakh. If the PAN is
not provided, or if you provided
the PAN but the person filing the
Annual Information Return (AIR)
failed to furnish the details to the
authorities or misquoted, it may
result in communication from the
tax authorities for verification of
the transaction with your tax
filings, etc.
Banks/ financial institutions/ stock
exchanges/ certain other persons
are required to file AIR under
section 285BA of the Act in relation
to certain financial transactions,
viz. cash deposits/ term deposits/
purchase of bonds, debentures,
shares/mutual funds, etc. of `10
lakh or more; purchase or sale of
immovable property of `30 lakh or
more; receipt of cash payment of `2
lakh or more for goods or services
of any nature; and payment of credit
card bill of `10 lakh or more. Tax
authorities analyse these AIRs with
the level of income and tax filings
of the taxpayer. If they are not able
to correlate the same, it may trigger
an enquiry. Again, if the PAN is not
quoted or misquoted in the AIR, it
could lead to an enquiry.
You lent somebody money or made
a large payment in cash, and the
person to whom the money was
lent is being audited by the tax
authorities. As part of verifying the
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