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Querist : Anonymous

Querist : Anonymous (Querist)

14 January 2014 hi
i a an indivudal.and my salary upto 1.5lac..during the year 2008 one of my friend has opend a trading account and he was doing trading .and he has incurred loss of 12000.to clear this debit amount . my friend has transfered stock from his Dp account to my dp account .i have receid a notice from income tax and they have impose a penalty of rs 20000. and also they have asked me to submit the following:
Transaction of value more than 20000 for 2008-2009 with complete detials

And if it's there why you havent file tax return,for all these years.

if your income is not taxable from where you got money for trading.

what should i do please suggest

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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14 January 2014 You should respond to the notice positively.
.
Invite your friend to join you in the latest 3-D movie show of "Sholay".
.

Querist : Anonymous

Querist : Anonymous (Querist)

14 January 2014 But what should i reply....currently i dont have money to pay the penalty..

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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27 July 2024 Given your situation, here's how you can address the issues raised by the Income Tax Department:

### **1. Understanding the Situation**

- **Trading Account and Losses:** Your friend had a trading account and incurred a loss of ₹12,000. To clear this debit, he transferred stock to your Demat account.
- **Penalty and Notice:** You received a notice and a penalty of ₹20,000 for not filing a tax return and not reporting transactions above ₹20,000.

### **2. Addressing the Notice**

#### **a. Gather Documentation:**

1. **Proof of Stock Transfer:**
- Obtain a copy of the transfer documents from your friend's Demat account to yours. This should include details like the date of transfer, quantity, and value of the stock transferred.

2. **Proof of Transactions:**
- Gather all bank statements, Demat account statements, and trading statements related to the year 2008-09.

3. **Income Details:**
- Since your salary was ₹1.5 lakh, it is below the taxable limit for the year 2008-09 (assuming it was the relevant assessment year). However, any additional income or transactions need to be reported.

#### **b. Response to the Notice:**

1. **Draft a Detailed Response:**
- Prepare a letter addressing the Income Tax Department explaining the situation:
- **Explain the Stock Transfer:** Clarify that the stock was transferred to your account to offset your friend's trading losses.
- **Explain the Transactions:** Provide a detailed account of all transactions that took place, including those above ₹20,000.
- **Reason for Non-Filing:** Mention that you were not aware of the requirement to file a return due to the nature of the transactions and the amount of income.

2. **Attach Supporting Documents:**
- Attach all relevant documents like the stock transfer statement, bank statements, and any correspondence with your friend.

#### **c. Addressing the Penalty:**

1. **Request for Penalty Waiver:**
- If this is your first instance of non-compliance, you can request a waiver or reduction of the penalty by explaining your genuine oversight.

2. **Consult a Tax Professional:**
- Given the complexity, it’s advisable to consult with a tax professional or chartered accountant who can assist in drafting a comprehensive response and guide you through the process.

### **3. Filing the Return**

1. **File the Return for 2008-09:**
- Although it’s past the due date for filing the return, you should file a belated return. This will help in documenting your income and transactions correctly.

2. **Include All Relevant Information:**
- Ensure that you include all the relevant details such as stock transactions, salary, and any other income.

### **4. Future Precautions**

1. **Keep Records:**
- Maintain detailed records of all financial transactions and stock transfers in the future.

2. **Regular Filing:**
- Ensure to file your tax returns annually even if your income is below the taxable limit to avoid such issues.

### **Example of a Response Letter**

Here is a basic template for your response:

```
[Your Name]
[Your Address]
[City, PIN Code]
[Date]

To,
The Income Tax Officer
[Income Tax Department Address]

Subject: Response to Notice No. [Notice Number] for Assessment Year 2008-09

Dear Sir/Madam,

I am writing in response to your notice dated [Notice Date] regarding the penalty of ₹20,000 for non-filing of the tax return and transactions above ₹20,000.

1. **Explanation of Stock Transfer:**
During the year 2008-09, I received stock transferred from my friend’s Demat account to my Demat account. This transfer was made to settle my friend's trading losses.

2. **Details of Transactions:**
I have attached all relevant documents including bank statements, Demat account statements, and the stock transfer details.

3. **Reason for Non-Filing:**
At the time, I was unaware of the requirement to file a tax return given my income was below the taxable limit.

4. **Request for Penalty Waiver:**
I kindly request you to consider waiving or reducing the penalty given the circumstances and my past compliance.

I have also filed a belated return for the year 2008-09, which is enclosed for your reference.

Thank you for your understanding and assistance.

Sincerely,
[Your Name]
```

### **Summary**

- **Respond Promptly:** Send a detailed and truthful response along with supporting documents.
- **Consult a Professional:** Seek help from a tax consultant for accurate guidance.
- **File the Return:** Ensure to file the belated return to rectify the oversight.

This approach should help in addressing the issues raised and potentially reduce or eliminate the penalty.