Getting a notice from the Income Tax Department can feel stressful, especially when it asks for information you don’t remember or aren’t sure how to provide. These notices, often sent under Section 133(6) of the Income Tax Act, can catch anyone off guard.
Whether you’re a salaried individual, a small business owner, or someone who’s recently made profits from crypto, the anxiety is the same. You may start asking, ‘Why me? What did I miss? And how should I reply?’
Section 133(6) empowers tax officials to ask for documents, explanations, or transaction details. And if your filings include crypto trades, foreign wallets, or large transfers, the chances of receiving such a notice are even higher. This article breaks it all down: what the section means, who it applies to, how to respond, and what happens if you fail to comply.
What Is Section 133(6) of the Income Tax Act?
Section 133(6) allows certain income tax officials to ask any person, whether a taxpayer or someone connected to a taxpayer, for information related to tax matters.
This includes documents, account details, or explanations needed during inquiries or assessments. These requests are legally binding, and failure to respond can result in penalties or further scrutiny. The section applies to all types of income, including traditional earnings like salary or rent, as well as crypto-related gains.
For instance, if you’ve traded crypto or moved funds across exchanges without reporting them, the department may issue a notice under this section. The aim is to verify transactions, confirm claims, and prevent tax evasion.
Why Is a Notice Sent Under Section 133(6)?
Notices under Section 133(6) are issued to gather information when tax officials find gaps, inconsistencies, or suspicious patterns in a taxpayer’s filing. Below are the key reasons:
Suspicious Tax Filings or Non-Filing
If your income tax return shows inconsistencies, such as underreported income, a mismatch in TDS details, or failure to file despite having taxable income, you may receive a notice. The Income Tax Department uses data from banks, employers, and Form 26AS to detect such issues. Even minor mismatches can trigger information requests under Section 133(6) for further clarification or proof.
Claims of Invalid Deductions or Exemptions
Taxpayers who wrongly claim deductions under HRA, LTA, or Sections 80C and 80D can be flagged for enquiry. The department may send a notice asking for rent receipts, travel bills, or investment proofs. If you’re unable to justify the claims with documents, you might face revised assessments and possible penalties. These notices act as a verification checkpoint before reassessment.
Crypto Transactions With No Disclosures
Crypto traders often overlook declaring their digital asset gains or transfers, especially from decentralised exchanges or foreign wallets. If you’ve received or sent crypto without reflecting it in your ITR, the department can ask for wallet addresses, exchange statements, or transaction history. These notices ensure crypto activity is accurately taxed and not hidden from authorities.
When Can You Receive a Section 133(6) Notice?
A notice under Section 133(6) can arrive at any stage of your tax journey. Below are the common scenarios in which such notices are typically issued by the department.
During Ongoing Assessments or Investigations
If your tax return is already under review or selected for scrutiny, a Section 133(6) notice can be issued to collect supporting documents. The department may request details such as transaction proofs, source of funds, or ownership documents to complete its evaluation. This applies to all taxpayers, including those with high-value crypto trades flagged during assessment.
Post-Filing Review and Cross-Verification
Even after your ITR is filed, the system cross-checks your data against sources such as Form 26AS, AIS, and bank records. If mismatches are found, such as undeclared income or a sudden spike in crypto inflows, a notice may follow. These notices help ensure that your disclosures accurately reflect your financial activity.
Years After Filing a Return
There is no official time limit within the Income Tax Act for when a Section 133(6) notice can be issued. It may arrive even several years after the original return was filed. This typically happens when new information emerges or when crypto transactions from older years are revisited during broader investigations or audits.
Who Can Issue a Notice Under Section 133(6)?
Only specific income tax officials are authorised to issue notices under this section. Their powers vary depending on the nature of the case and the jurisdiction in which it is involved.
List of Authorised Officials
The following officers have the authority to issue notices under Section 133(6):
- Assessing Officer (AO)
- Deputy Commissioner (Appeals)
- Joint Commissioner
- Joint Commissioner (Appeals)
- Director
- Director General
- Chief Commissioner
Each officer exercises this power based on the taxpayer’s case complexity, location, or type of income. These officials may initiate the notice when they detect suspicious or inconsistent financial disclosures that need further clarification.
Additional Powers for International Cases (DTAA)
For taxpayers with cross-border investments or crypto transactions through foreign exchanges, different rules apply. If the person is located outside India, a Double Taxation Avoidance Agreement (DTAA) applies.
In such cases, only officers of the rank of Assistant Director or Higher can issue such notices. This ensures the right level of authority handles international financial scrutiny, especially in crypto-related disclosures involving offshore wallets.
How to Respond to a Notice Under Section 133(6)?
Responding to this notice requires clarity, accuracy, and timeliness. A well-prepared reply can resolve the issue quickly and avoid future complications. Follow these steps to respond correctly.
Read and Understand the Notice Carefully
Start by reading the entire notice word by word. Note the specific reason mentioned for the enquiry, the documents requested, and the deadline for submission. Some notices relate to deductions, while others may question unexplained income or transactions involving cryptocurrency wallets. Missing these details or assuming a generic response could lead to further notices or even penalties.
Prepare Supporting Documentation (General and Crypto)
Once the reason is understood, gather the required proof. For salaried individuals, this could include Form 16, rent receipts, or bank statements. If you trade crypto, prepare exchange trade logs, wallet screenshots, or transaction summaries. If you have used a tax platform, download the relevant tax reports. Ensure all documents are dated, accurate, and clearly labelled to avoid confusion.
Modes of Response (Offline and Online)
You can respond either online through the official income tax e-filing portal or offline by visiting your local income tax office. Most taxpayers prefer the online method for its ease and convenience in documentation. Upload scanned copies of your response and attach any required files in supported formats. Always keep a copy of the acknowledgement for your records.
Consulting a CA or Crypto Tax Expert
If your case involves large sums, foreign investments, or crypto transactions, it is wise to consult a tax expert. A professional can draft a clear response, verify your calculations, and help you avoid technical mistakes. Crypto tax advisors can help you interpret wallet statements, DEX logs, and ensure nothing is missed in your response.
What Happens If You Ignore or Delay Your Response?
Ignoring a Section 133(6) notice is never a good idea. The Income Tax Department considers non-response as a sign of non-compliance or deliberate withholding of information. This could trigger stricter actions and additional notices.
Once the deadline passes without a proper response, your case may be flagged for further review. In crypto cases, especially, silence may be interpreted as an attempt to hide foreign wallets or undeclared gains. Here’s what could happen if you do not respond on time:
- Escalation to Section 148: The department may initiate reassessment proceedings and require you to file a new return with complete disclosures.
- Invalidation of Earlier ITR: Your previously filed return might be disregarded if key income sources remain unverified.
- Heavier Penalties: You could face daily fines or a 200% penalty if misreporting is proven.
- Increased Audit Risk: Non-response increases the chance of your case being selected for audit in future years.
- Prosecution Possibility: If the department finds clear evidence of tax evasion, it may initiate criminal proceedings against the individual.
Read More: How Are Crypto Referrals Taxed in India?
Consequences of Not Responding to a Section 148 Notice
Ignoring a Section 148 notice can lead to serious consequences. The Income Tax Department has the authority to proceed with the reassessment based on whatever limited information is available, and this may not always work in your favour.
- Best Judgment Assessment: If you don’t respond, the Assessing Officer will estimate your income using available data and complete the reassessment based on their discretion. This process often results in a higher tax demand than if you had responded.
- Interest and Penalties: Non-compliance may result in interest under Section 234 for late filing and penalties under Section 271 for concealment or misreporting of income. These penalties can add a significant financial burden.
- Limited Scope for Appeal: While you still have the right to appeal, your chances of success may be limited if you haven’t participated in the reassessment process or failed to provide accurate information when requested.
- Legal and Compliance Risks: Failure to act on the notice could raise red flags for future scrutiny. It can also hurt your compliance record and trigger audits or investigations in subsequent years.
Read More: How Are Crypto Futures Taxed In India?
What Are the Penalties for Non-Compliance Under Section 133(6)?
If you fail to respond to a Section 133(6) notice or submit incorrect information, the Income Tax Department can take strict action. Below are the penalties you may face.
Daily Penalty Under Section 272A(2)
When you ignore a notice or respond after the given deadline, the Assessing Officer can impose a penalty of INR 100 for each day of delay. This continues until a proper reply is submitted. Though the daily amount may seem small, it quickly adds up and also impacts your tax record. It is always better to reply within the timeline to avoid unnecessary penalties.
Penalty for Misreporting Income or Exemptions
If your reply includes misleading data or omits important financial details, the department may treat it as misreporting. In such cases, you could be penalised up to 200% of the evaded tax amount. For example, if you claimed an invalid deduction or did not report crypto gains, the fine could be double the tax avoided, plus additional interest.
Crypto Penalty Examples
Crypto traders who fail to disclose their digital asset earnings or do not explain wallet inflows may face severe consequences. The department may reject your ITR, demand updated returns, or impose 12% interest per year on the unpaid tax. In serious cases, such as those involving undisclosed foreign wallets or peer-to-peer transfers, prosecution and imprisonment are also possible. Accurate records and full transparency are essential.
How Should Crypto Taxpayers Prepare for Section 133(6) Notices?
Crypto investors are increasingly under scrutiny for underreporting or failing to make required disclosures. Below are key steps to help you stay prepared and respond confidently if a notice is issued.
Keep Records of All Crypto Transactions
Maintain clear records of every transaction, including buys, sells, swaps, and transfers across wallets or exchanges. These records should include date, value in INR, and transaction type. Whether you are using centralised platforms or decentralised ones, every activity should be traceable. In case of a notice, these details become essential for verifying your gains and cost basis.
Download Tax Reports From Tools Like KoinX
Using a crypto tax tool helps consolidate data across multiple exchanges and wallets. Platforms like KoinX automatically sync your transactions and generate accurate capital gains and income reports. These reports reduce the chance of error and make it easier to share proof with the department in case of any information request.
Regularly Monitor Form 26AS and AIS
Check your Form 26AS and Annual Information Statement for entries related to crypto earnings, large deposits, or high-value purchases. Any data mismatch between your ITR and these forms may result in a Section 133(6) notice. Early detection helps you file an updated return before a notice is issued.
Declare Foreign Wallets in ITR if Applicable
If you use international exchanges or store cryptocurrency in non-Indian wallets, declare them clearly in your ITR under ‘Foreign Assets’. Failing to do so may violate FEMA and DTAA rules. If a notice is issued, you will be expected to submit wallet addresses, KYC details, and transaction history. Transparency is key to avoiding larger legal issues later.
How Long Should You Retain Your Tax Records?
Taxpayers are advised to retain their income tax records, including proofs of income, deductions, and asset transactions, for a minimum of 6 to 10 years. This is especially important in case the department issues a Section 133(6) notice many years after the original return was filed. The longer retention period allows you to defend your filings with proper evidence even in delayed enquiries.
For crypto users, the need for recordkeeping is even more critical. Wallet statements, exchange summaries, on-chain transaction logs, and staking reports must be stored securely. Since crypto tax treatment continues to evolve, older transactions may be reassessed under new rules. Having these records easily accessible can save time and prevent penalties during any future scrutiny.
Read More: How Are Crypto Profits Taxed In India?
How Can KoinX Help You Respond to a Section 133(6) Notice?
Responding to a Section 133(6) notice can feel overwhelming when your tax records involve crypto trades across multiple wallets and platforms. Gathering accurate data, matching transaction values, and justifying every inflow becomes a time-consuming task, especially if you’ve never used a proper tracking tool.
KoinX addresses this by providing a reliable method for consolidating, calculating, and reporting your crypto activity. With automated syncing, expert guidance, and accurate tax reports, KoinX simplifies the entire process and helps you reply confidently to any income tax notice.
Consolidated Crypto Tax Reports
KoinX automatically pulls transaction data from all your connected exchanges and wallets, then generates a consolidated tax report. This report reflects all realised gains or losses, saving you the trouble of manual entry. With accurate cost and sale values, your capital gains calculations become error-free, helping you submit a complete and truthful response.
Real-Time Portfolio Syncing
KoinX connects with over 800 platforms and keeps your cryptocurrency activity up to date in real-time. Whether you trade daily or hold long term, your entire transaction history remains synced and ready to use. This prevents missing entries that could otherwise lead to mismatches during an enquiry under Section 133(6).
Expert Assistance for Notice Responses
If you receive a notice, KoinX offers assistance through tax professionals who have a deep understanding of crypto taxation. These experts help you draft accurate replies, interpret complex wallet transactions, and avoid errors that could lead to reassessments or penalties.
Avoid confusion and errors while replying to Section 133(6) notices. Start using KoinX today to track, calculate, and file your crypto taxes with confidence. Stay ready, stay compliant.
Conclusion
A notice under Section 133(6) is not a penalty in itself but a warning sign that your tax records need clarity. Whether it’s missing deductions, unreported income, or crypto-related activity, a clear and timely response is essential. Keeping accurate records and staying informed can help you avoid penalties, reassessments, and future stress.
If your income includes crypto earnings, it’s even more important to stay organised. KoinX makes this easier by tracking all your digital asset activity and generating tax-ready reports. Join KoinX today to simplify your tax compliance and handle income tax notices with confidence.
Frequently Asked Questions
Can I Respond to a Section 133(6) Notice Online?
Yes, you can submit your response online through the Income Tax Department’s official e-filing portal. Ensure that you upload all supporting documents in the correct format and retain an acknowledgement. If you’re unsure, consult a tax advisor to help you prepare a proper response that covers all the requested details.
What Is the Penalty for Not Responding to a Section 133(6) Notice?
If you fail to respond within the specified timeframe, a penalty of INR 100 per day may be applicable under Section 272A(2). In cases of false reporting or missed income, the penalty can be much higher, including interest or even prosecution. It’s best to respond on time and with accurate information.
Can Crypto Tax Issues Lead to These Notices?
Yes, taxpayers dealing in crypto may receive Section 133(6) notices if they fail to disclose wallet addresses, exchange activity, or foreign holdings. As crypto remains under increased tax scrutiny, discrepancies in income reporting can trigger information requests from the department, especially for high-value or untraceable transactions.
Is It Mandatory to Consult a Tax Expert for Replying?
It is not mandatory, but highly recommended if your case involves complex transactions or crypto earnings. A tax expert can help interpret the notice correctly, organise your documentation, and ensure your reply is compliant. This reduces the risk of further notices or penalties due to unintentional errors.