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Got income tax notice for credit card spends

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palkunal376917
Income Tax Notice for Credit Card Payment

I have placed various orders from Flipkart with Flipkart Axis Bank credit card and after buying those orders sold them outside at lower prices.I gave the outside shopkeeper a lower price than the prize I bought.But since I got five percent cashback, I got some profit and not loss.

Besides credit card payment showed deposit for which I have already replied with bank statement.And all the deposits were made by myself and no money was sent to anyone.

Can I now tell the income tax department that I used to run a cyber cafe and have customers there and for them I bought these things with my credit card.

Income tax department has asked me for credit card statement and which I will send them.

But income tax asked me about the payment I sent and their details and PAN number but I don't have any details.

And yes I have been filing regular income tax for 3-4 years and I show that my income is less than 5 lacs in the year.

And as a business I saw that I have a shop for electronics.

And since I didn't file income tax on time I also paid 1000 late payment fee.


I got this notice from it dept-


Please refer to the notice under section 133(6) issued from this office and the subsequent reply made by you. Please note that as per
the Trading & Profit and Loss Account furnished by you, the total sales is Rs.18,xx,xxx/- whereas as per information, your total
payment by credit card amounts to Rs.25,xx,xxx/-. So you are requested explain the issue and submit the details of the person
(including PAN and Contact number) for whom the payment has been made. You are also requested to submit the credit card
statement for the F.Y. 2020-21. You are requested to comply within xx/xx/2023.
Response to the letter can be furnished through Compliance Portal only. 

I have done a lot of shopping with credit cards for the rest of the years but since I paid the income tax on time I didn't get the notice. 

Income tax notice was sent to me because I did not fill the income tax in that year but after sending the income tax notice I paid the income tax with late payment free.

To the first notice I have given the reply in due time and this is the second notice that I have been questioned again.

Now how do I give the reply to the IT department yes I will send the cc statement but how do I tell them can someone explain me so that I can give the reply properly.

Edited-

This is the original notice which I received two to three months ago.At that time I had not filled ITR for that year and I was asked to fill revised ITR and I filled ITR with late payment fee ( 1000 INR ).

And I gave answers to the questions that were put to me and I also sent my trading PL statement statement and bank statement.

But today I got another reply to that notice.

Remaining year ITR-4 is already filed and business name is ABC Trading & Online 

Nature of bussiness shown in ITR- Electronic Goods and Accessories

Income Tax Notice for Credit Card Payment
I have placed various orders from Flipkart with Flipkart Axis Bank credit card and after buying those orders sold them outside at lower prices.I gave the outside shopkeeper a lower price than the prize I bought.But since I got five percent cashback, I got some profit and not loss.“But since my card got canceled in the last month, I didn’t get the cashback that I earned in last month, so I didn’t have any money in my pocket.”

“The cash pack of the last month was so much more than the first two months”.So since I didn’t get the last match cashback, ultimately the cashback I earned for the first two months is no longer in my pocket.

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Top Comments
Commentator Commentator
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May be I'm not paying keen attention. I didn't understand whether you really have electronics store or you just want to say you have the store for the IT department.

As a side hustle I work in insurance, income tax, mutual funds etc. I closely work with a CA in my team and handle notices. When 133 (6) notice is served, returns are revised. I read that you have already done that. Based on my experience handling the notices, the AO keep sending notices despite corrective action. In your case, the notice is for your store not for you, right? So I don't think you filing returns is going to help. If you have a store, can't you just respond saying it was a trade activity? You need to talk to CA. I'm just giving my opinion.

Benevolent Benevolent
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Don't do anything on your own, if you don't want to be in trouble.

Get help from CA and reply in a very sophisticated way, otherwise, you will be in a bigger problem.

Also, do anything within the limits to avoid any issues. Some of the common limits for 1 financial year is as follows:

  • Cash deposit in savings account < 10L
  • CC payment by cash < 1L
  • CC spends per card (or combined in case of multiple cards from the same bank) < 10L
  • if CC spends > 10L then ITR > All CC spends combined
Deal Subedar Deal Subedar
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I heard somewhere that every problem have a solution itself one has to only find the way. don't waste your time and efforts here because now many PPL will come here and make fun of your situation, baaki me itna hi conclude kr paaya hu. isme tumhe Ek Experienced CA ki help cahiye family members friends relatives inki bhi jaroorat padegi although they are so called IT wale not ED baas IT ka chakkar ko jld se jld short out krlo nhi mentally haras hoge. 

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Helpful Helpful
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How do you get a notice? An email of physical letters?

Deal Newbie Deal Newbie
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On my email id

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Finance Mentor Finance Mentor
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How much were your total spends on cards and the ITR income you show?

Generous Generous
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As per the details - OP's spend - 25Lac+ , ITR < 5 Lac



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Finance Mentor Finance Mentor
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How much were your total spends on cards and the ITR income you show?

Generous Generous
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@palkunal376917 , Go to some good CA, revise your ITR and respond accordingly. 

Helpful Helpful
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+1

Consult best CA Firm Possible..

Follow flash007 advice to be in safe zone

Commentator Commentator
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May be I'm not paying keen attention. I didn't understand whether you really have electronics store or you just want to say you have the store for the IT department.

As a side hustle I work in insurance, income tax, mutual funds etc. I closely work with a CA in my team and handle notices. When 133 (6) notice is served, returns are revised. I read that you have already done that. Based on my experience handling the notices, the AO keep sending notices despite corrective action. In your case, the notice is for your store not for you, right? So I don't think you filing returns is going to help. If you have a store, can't you just respond saying it was a trade activity? You need to talk to CA. I'm just giving my opinion.

Tech Guru Tech Guru
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Cyber cafe bhai

Flame Flame
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How much did u spend on your FK Axis cc during that financial year?

Deal Cadet Deal Cadet
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CONTACT WITH CA DEFINITELY HELP YOU

Deal Subedar Deal Subedar
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Your spends is 25 lakhs but showing 5 lacks income will defiantly be doubtful in eye if income tax officers. Consult CA bro to get rid out of this problem.

Deal Cadet Deal Cadet
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Know a days its a very common issue for credit card holders but i try to to many way to knowing how to tackle this seeing many videos on youtube but not get satisfying answer. So I filled ITR 3 till Iam not get notice. i have alaso a expenses of 30lakh plus. Many people generate income from credit for commission basis.

Benevolent Benevolent
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Itr 3 means? 

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Deal Subedar Deal Subedar
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These details are shown in AIS??

if yes then under which option this is showing 

I checked you have received notice under section 133(6) for spends made on Flipkart which you later sold in local market at less price and made 5% bucks you have cafe and electronic shop 

Please confirm you received this notice for only Flipkart spends of 25L or these are your total expenditure in FY20-21???

Deal Newbie Deal Newbie
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I have edited the post and added more information, request everyone to take another look at the post and help me and tell me what to reply.

Commentator Commentator
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25 lakh spend is on single credit card or multiple credit cards?

Deal Cadet Deal Cadet
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@palkunal376917 ??

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Deal Newbie Deal Newbie
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If I show a service turnover of greater than 20Lakh, then I will have to get GST registeration too.

So please help me and tell me that I will reply? I'll send  the cc statement showing that it's done only from flip kart & some small recharges from phone pe.

Deal Newbie Deal Newbie
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Since you are buying from Flipkart or may be from other sites online then you can go for GST registration under the composition scheme (available who have annual turnover below 1.5 crore) under which you have to pay just 1% GST of your total sale but you won't get ITC (input tax credit).

Deal Newbie Deal Newbie
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Actually I can't find any good CA I have talked to many CA's they are not right about this they have no answer how will they reply to them.

That's why I posted this here so that you guys can help me and tell me what to reply

The PostMighty The PostMighty
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That does not sound right because this is any CA's bread and butter unless they are one of those corporate types who specialize in a particular area. CAs, like most professionals, hate giving (free) advice unless you discuss the "fees" upfront. This is especially true of a CA friend or relative. Also, consider market rate for "fees" and not what you think should be the "fees" -
https://www.aubsp.com/fees-charged-by-chartered...
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Deal Cadet Deal Cadet
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Spending on a card does not have a direct link with the income shown in itr which can be explained though to some extent but cash deposits is a big concern here. You can say something like you have taken loan from your multiple friends and relatives but their PAN needs to be shared along with the amount borrowed and AO may not necessarily check with those individuals if they are showing good income in their ITR. Other thing is marriage, if you got married by any chance during the year of deposits then you can say some of the amount was received as gift on the marriage from relatives. There are some other ways too but all need some kind of documentary proof plus support from you family, relatives and friends who can share their PAN.

Deal Newbie Deal Newbie
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Contact any tax consultant. Tell all the things to him. Tell the things which are correct. There is no point in lying in the notice. They can or may have asked your credit card statements. Don't lie to them in the notices. Depending on facts the reply can be formed by CA.

Benevolent Benevolent
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Don't do anything on your own, if you don't want to be in trouble.

Get help from CA and reply in a very sophisticated way, otherwise, you will be in a bigger problem.

Also, do anything within the limits to avoid any issues. Some of the common limits for 1 financial year is as follows:

  • Cash deposit in savings account < 10L
  • CC payment by cash < 1L
  • CC spends per card (or combined in case of multiple cards from the same bank) < 10L
  • if CC spends > 10L then ITR > All CC spends combined
Deal Cadet Deal Cadet
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For the 3rd point, as an individual, say net income p.a. is 20 lacs. 
Can one spend 30 lacs p.a. on CC assuming he can say the additional 10 lacs is from savings ?
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Helpful Helpful
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@palkunal376917

sorry for the heartless reply i made anyways all i would say to you is get a good ca coz each day is costing you 500 rs untill you give proof

its already 45000 dont waste time here go find the right ppl who can actually help you 

atleast request for more time so that its on the record 

Benevolent Benevolent
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CA has lots of expertise, they can turn around anything, this is just a small thing for a good CA. But that will be costly.


@palkunal376917 My suggestion to you will be to get a good CA if you know any good CA that will be helpful.

Otherwise in this type of situation, if you contact anyone new, they may try to scare you or charge very high. I would say If you can find someone new (good CA) for around 10k then it will be a fair deal. 

Generous Generous
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16 lakh cash deposit.. tahts ur main problem.. this miney can be illegal.. bcz no trace route.. normally everything online have traceable.. u have to explain that 16L with proof

Deal Newbie Deal Newbie
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here is even a matter of buying something from a credit card that I have to buy from my income for that year ?

I can buy any goods with my credit card from my capital right ?

And here the money that I have deposited in my account is because I will make the credit card payment.

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Deal Subedar Deal Subedar
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I heard somewhere that every problem have a solution itself one has to only find the way. don't waste your time and efforts here because now many PPL will come here and make fun of your situation, baaki me itna hi conclude kr paaya hu. isme tumhe Ek Experienced CA ki help cahiye family members friends relatives inki bhi jaroorat padegi although they are so called IT wale not ED baas IT ka chakkar ko jld se jld short out krlo nhi mentally haras hoge. 

Helpful Helpful
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wru located ? 

Generous Generous
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This is a complex case and there's no correct answer to it which you can get here ... you do need a CA to get out of this by replying with supporting proofs with some tweaks here and there

But, a lesson to learn here for all credit card users who may have thought of doing anything similar ... I'll personally choose peace of mind any day and for that very reason, never ever went ahead with rotating money or using credit card unnecessarily to raise eyebrows 😇

One more thing to note, this notice is from FY 2020-21, means they're scrutinizing past data which is scary 😬

I hope you get out of it but filing such low taxable income ITR and then doing such high transactions will definitely attract a notice from Income Tax Department. Act fast on it or it may get even worse.

Deal Cadet Deal Cadet
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I said the same thing a week back on a money rotating post smile 
Unfortunately I was made fun of , and hope this posts will open a few people eyes. 2-5% for such big headaches is not worth it. 

Deal Subedar Deal Subedar
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Hi this is just my advice.

First do you keep a ledger for your business? Even if you don't, make one from referencing your credit card and bank deposit statements. 

A simple template would suffice.

S.no|particulars|credit|debit|remark|

1.| Item name  | - | 1000 | purchase

2.| Item name | 900 | - | Sale

3.| Bank deposit | - | 1000 | Deposit

-------you don't need to include bank deposits but it would make it easier for IT dept------

After this you need to draft a letter explaining how you bought inventory with credit cards and sold them at profit / loss. And deposited the sales proceeds into your bank account. No lies. 

Use the compliance portal, submit this letter along with your credit card, bank statements and your ledger.(Don't know  what format the portal accepts).

This should help. If this doesn't work, you have no option but to go to a CA.

P.S. I AM NOT A CA OR AN ACCOUNTANT. THIS IS JUST WHAT I THINK SHOULD WORK.


Deal Newbie Deal Newbie
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Thanks bro for your reply and advice.

Most of the payments I made from the account but there are some payments which I did not from my own account but from other people's account so it is not possible for me to show exact same amount.

That means I will tell the IT department that the cash I deposited is actually my credit card money( like loan amount) and I will pay my credit card bill with those deposited money.

And my bank statement also shows that I paid my credit card bill with that money.

But the problem here is that the entire amount of 25 lakhs paid to my card I did not make from my own account I paid some bill from other people's account which is not possible for me to know .

And can I say that the rest of my credit card payments I have made from local service guys who take money and do online transactions.

So would it be correct to say that I have bought and sold goods from the money of the credit card ?

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Benevolent Benevolent
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@palkunal376917 1 doubt I have, since this notice is for 2020-21, does your AIS report for 2020-21 also reflect the same transaction amount from that year?

Deal Newbie Deal Newbie
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Yes bro

Tech Guru Tech Guru
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@guest_999

Benevolent Benevolent
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So your official Turnover is 18L but credit card spend alone is 25L...

No justification will help... such huge amount will be treated as business activities and you should shell out additional tax (minimum tax) or actual (which you wont be able to prove as I assume most of the folks might have paid you in cash)

Go to a CA to file proper response, but be ready to shell out additional tax and avoid such adventure in future. 

Deal Lieutenant Deal Lieutenant
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so you're doing business with credit cards by using cashback as your profit tool 😜 Nice bro. Please file your ITR accordingly. 

Helpful Helpful
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AO is not asking for cash deposits. AO wants to know the CC payments how it was paid back (who has paid).
Provide your PAN number and credit card number.
If they were paid by some one else, you must provide their PAN numbers and bank account number. This comes under money laundering.
But you can still say they are your customers and you have sold the  products to them. In return, they paid your credit card.
You must provide their names  at least.
You may have to revise your returns with 8% profit, that comes to 2L profit.

Most of the CAs are not fully equipped with the knowledge. They are good for IT returns filing. They dont want to take any risk.
Just do it your self until there is a clarity (under the table business). 

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