In April 2026, KoinX published a statement on LinkedIn warning that Section 148A notices are now being issued to crypto investors in India, including for transactions dating back to FY 2021-22. The company noted that the figures referenced in such notices are “often not actual profit” but amounts the system flags based on available transaction data.
This enforcement push is already significant. In a written reply in the Indian Parliament, the government stated that over 44,000 communications had been issued to taxpayers for non-reporting or incorrect reporting of virtual digital asset (VDA) transactions, primarily covering AY 2023–24 and AY 2024–25. As scrutiny extends into earlier years, many active traders are now being asked to explain the gaps between their reported crypto income and the much larger transaction volumes captured by the tax system.
@Sravanreddyeth was one of them.
According to tax professionals at KoinX, closing the notice requires a trade-by-trade reconciliation showing that the same capital was recycled across multiple cycles.
Where the Tax Confusion Begins
@Sravanreddyeth shared the notice publicly on X without editorialising, laying out the numbers in three lines: reported transaction volume, approximately ₹51 lakh. Actual capital used, approximately ₹5 lakh. Final result: heavy loss.
“Looks like IT dept is flagging high-volume trading data from exchanges,” he wrote, and asked whether anyone else had received a similar notice, what their transaction volume versus actual investment had been, and how they were responding.
The replies that followed confirmed the pattern was not isolated. Traders across different exchanges, different trading strategies, and different capital sizes had received or heard of similar notices, all for FY 2021-22, all citing transaction volumes that bore no relationship to the actual capital deployed or the actual financial outcome of the year.
The arithmetic that the notice system does not understand is why ₹5 lakh becomes ₹51 lakh before anyone does anything wrong.
On day one, you deploy ₹5 lakh. You buy a token and sell it the same day for ₹5,05,000, a small gain. That ₹5,05,000 becomes your capital for the next trade. You buy again, sell for ₹5,10,000. The following day goes badly, and you sell for ₹4,95,000. Each of these sell transactions is recorded in exchange data at its full sale value: ₹5,05,000, then ₹5,10,000, then ₹4,95,000. After 10 such cycles, cumulative sell receipts total somewhere between ₹50 and ₹51 lakh, even though at no point did you hold more than roughly ₹5 lakh, and even though your net outcome across all those trades was a loss.
Trade cycle | Opening capital | Sell value recorded in AIS | Running AIS total |
Cycle 1 | ₹ 5,00,000 | ₹ 5,05,000 | ₹ 5,05,000 |
Cycle 2 | ₹ 5,05,000 | ₹ 5,10,000 | ₹ 10,15,000 |
Cycle 3 | ₹ 5,10,000 | ₹ 4,95,000 | ₹ 15,10,000 |
Cycle 4 | ₹ 4,95,000 | ₹ 5,08,000 | ₹ 20,18,000 |
Cycle 5 | ₹ 5,08,000 | ₹ 4,90,000 | ₹ 25,08,000 |
After 10 cycles | ~₹5 lakh throughout | Cumulative | ~₹51,00,000
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From the perspective of an automated system matching gross receipts against declared income, it looks exactly like someone who received ₹51 lakh and reported almost none of it. The flag is generated, and the burden of explanation sits entirely with the taxpayer.
What Section 148A Actually Is, and What It Is Not
Section 148A of the Income Tax Act is a reassessment provision with a built-in hearing step, and that distinction matters enormously for how traders should respond to it.
Before a tax officer can issue a formal reassessment notice under Section 148 (the one that creates a binding demand), they must first issue a Section 148A notice giving the taxpayer an opportunity to explain why reassessment should not proceed. This is, in principle, a protection measure: the system flags a discrepancy, the taxpayer is invited to explain it, and if the explanation is satisfactory, no further action follows.
“A 148A notice is not a tax demand. It’s asking you to explain the mismatch,” as KoinX’s April 2026 statement put it.
What makes it feel urgent is that it has a response deadline, typically 15 to 30 days, and an inadequate or absent response leads directly to the formal reassessment under Section 148, which does create a demand. At that stage, the officer assesses income without the trader’s input, typically using gross transaction volume as a proxy, which can produce a demand that is wildly disconnected from the actual tax owed.
The ITD’s enforcement infrastructure has become sophisticated enough to generate these notices at scale. The Insight Portal and CRIU risk-analysis systems cross-reference PAN-linked KYC data, exchange trading activity, bank transfers, and ITR filings simultaneously. A ₹51 lakh AIS entry against a declared loss is a straightforward algorithmic flag. The notice is automated, but the response requires a human with documentation.
What the Response Requires
Understanding what a Section 148A notice requires for a high-frequency trader before hiring a CA is the most useful thing they can do.
- Opening capital deployed: In this case, it is ₹5 lakh. This establishes the base from which the gross volume was generated.
- Number of trading cycles: How many times was that ₹5 lakh bought and sold across the financial year? Each cycle generated a new AIS entry. The total of those entries is the ₹51 lakh figure in the notice.
- Reconciliation between the two numbers: The ₹51 lakh is the cumulative sum of 10 or more sell transactions using the same underlying capital. It is not ₹51 lakh in income. It is ₹5 lakh traded approximately 10 times, with each trade’s sell value recorded independently. This is the core of the explanation, and it requires a trade-by-trade record, not a summary.
- Net realised gain or loss: After accounting for the acquisition cost of every position, the actual financial outcome of the year. In this case, a loss, which means the tax liability on the actual activity was zero, and the ₹51 lakh is a counting artefact of high-frequency trading, not an income figure.
How KoinX Builds the Document That Closes the Gap
Sign up on KoinX to generate audit-ready crypto tax reconciliation reports for past financial years.
KoinX is a global crypto tax platform, used by over 1.5 million users across 100+ countries, with 800+ exchange and wallet integrations. For traders responding to a Section 148A notice, the relevant output is a year-specific, audit-ready reconciliation that maps AIS gross volume to net income through a trade-by-trade cost-basis calculation.
When @Sravanreddyeth imports his FY 2021-22 transaction history from his exchanges into KoinX, filtering by financial year in the previously generated reports feature that isolates historical year data independently, the platform produces the specific structure the notice response requires.
Every transaction in KoinX shows its FIFO cost basis, source, and destination the exact granular trail a 148A reconciliation asks for.
The Schedule VDA Report lists acquisition date, cost of acquisition, and taxable gain per trade ready to attach as your reconciliation evidence.
Notice for FY 2021-22? KoinX lets you generate a Schedule VDA reconciliation for any past financial year independently
Reconciliation element | What KoinX generates |
Capital deployed | Derived from first acquisition in the FY |
Number of trading cycles | Count of buy-sell pairs across the import |
Gross transaction volume (AIS figure) | Sum of all sell values across the FY |
Net realised gain or loss | Sale proceeds minus cost basis, every trade |
Trade-by-trade cost basis records | Individual line items, attached to the report |
The Schedule VDA report for ITR-2 provides the net taxable income figure with the full underlying calculation. The Section 194S TDS reconciliation connects the gross volume the AIS recorded to the net figure declared. The financial-year filter isolates FY 2021-22 data specifically, which is critical when the notice pertains to a historical year and the current year’s trading should not contaminate the response document.
This is a documented calculation that shows the same data the tax system used to raise the question, organised to explain rather than contest it.
For traders dealing with AIS mismatches, historical transaction scrutiny, or Section 148A notices, KoinX helps consolidate exchange data, reconcile gross transaction volume with actual taxable income, and generate audit-ready crypto tax reports across financial years before responding to the ITD.
The Broader Risk for Active Crypto Traders
@Sravanreddyeth’s case illustrates a problem that is becoming increasingly common in India’s crypto tax environment: traders are being scrutinised because their transaction footprint looks disproportionately large when viewed through automated tax systems.
The ₹51 lakh figure in his notice was not the amount he earned; it was the cumulative transaction volume generated by repeatedly deploying the same ₹5 lakh across multiple trades during FY 2021-22. To a human reviewing the trade history, the explanation is straightforward. But to an automated matching system comparing AIS transaction data against reported income, the gap appears significant enough to trigger scrutiny.
This is the structural issue high-frequency traders now face. Every buy-and-sell cycle creates another gross transaction entry in exchange records, even when the underlying capital remains largely unchanged and the trader ultimately ends the year in a loss. As India’s crypto enforcement systems increasingly rely on transaction-level data analysis, large cumulative volumes are becoming a standalone trigger for reassessment notices under Section 148A.
The traders handling these notices successfully are not necessarily the ones with the lowest transaction volume. They are the ones who can clearly reconcile how the gross figures visible to the ITD were generated from a much smaller capital base through repeated trading cycles.
In practice, that means maintaining trade-level records, acquisition costs, sell values, and historical exchange data in a format that can explain the AIS numbers before scrutiny escalates into a reassessment demand.
For a complete picture of what triggers scrutiny and how the ITD’s data systems work, the crypto tax audit triggers guide and the how to avoid tax audits in India guide lay out the full framework. For traders who have already received a notice and need to understand the response process, the WazirX income tax summons guide covers the specific compliance steps for exchange-linked notices, and the crypto tax India guide provides the foundational framework for every calculation in the response document.
