By Narayan Jain
A lavish function can stir the curiosity of the tax department. Narayan Jain tells what to do in such a situation
In the recent past, the income tax department has become active about collecting information about expenses on marriages as well as other functions by invoking Section 133A of the income tax act. There has been a lot of controversy between the IT department and the persons incurring the expenses on the amount actually spent. Such enquiries also lead to investigation about the source of the money.
The tax department’s suspicion is not always unfounded. Under Section 133A(5), authorities can issue notices to the concerned taxpayer or any other person, requiring them to furnish information on the expenditure incurred in any function, ceremony or event.
The basic objective of the inspection of marriage ceremonies and other ostentatious social functions is to detect the use of unaccounted money. The information may be gathered by the taxmen under Section 133A(5) only after such functions or ceremonies are over. The notices may be issued to the assessee, who has incurred the expenditure, or any other person, who is likely to possess information on the expenses.
Under Section 133A(5), the IT authority may
a) require the concerned taxpayer or any other person to furnish such information which may be useful for, or relevant to, the proceedings under the income tax act
b) record statement of the taxpayer or any other person
c) use the recorded statements of the taxpayer or any other person as evidence in assessment or any other proceeding
The information that may be sought are:
i) PAN of parents of bride/groom and other family members
ii) Name and address of the bride/groom
iii) Name and address of the bride/groom’s father
iv) Occupation of the bride/groom as well as the father’s
v) Address where the marriage/reception and other functions were held and the rent paid
vi) Number of invitees for the various functions
vii) Names and addresses of the decorators engaged for decorating the said premises along with the charges paid to them
viii) Names and addresses of the caterers engaged to serve food and refreshments to the guests invited and the cost incurred
ix) Name and address of wedding card printer and the cost incurred
x) Amount paid to car rental agency engaged for wedding function
xi) The amount incurred for pre-marriage expenses
xii) Particulars of presents made to newly weds both on engagement and wedding
xiii) Details of the expenses on furniture, jewellery, bridal make-up, other gifts/presentations, audio- videography, engagement ceremony and other customary expenditure
xiv) Copy of bank statements reflecting payments or withdrawal for marriage expenses
xv) Copy of last IT return filed along with balance sheet and profit and loss account and last wealth tax return, valuation report of jewellery etc
Similar information may be required in connection with other functions.
IT authorities are also empowered to record the statement of the concerned taxpayer or any other person regarding the expenses, but such powers can be exercised only after the marriage or other functions.
It has been held in the case of Rameshwar Lal
vs the Commissioner Of Income Tax, that a competent authority can inspect the
business premises and record the statements under the provisions of Section
However, such an authority cannot demand collection of tax on the alleged undisclosed income then and there. The authority is required to send the statement of the material collected to the assessing officer if he himself is not the tax authority carrying out the survey operation.
The following authorities are empowered to carry out the inspection under Section 133A(5): Commissioner, director, additional commissioner, additional director, joint commissioner, joint director, assistant director, deputy director, assessing officer and inspector of income tax (if authorised). From June 2003, prior approval of the joint commissioner or joint director has to be obtained for carrying out any survey by an assistant director or deputy director or an assessing officer or a tax recovery officer or an inspector of income tax.
You can follow these suggestions to avoid unnecessary hassles.
The taxpayer should make proper compliance on getting any notice or letter under Section 133A(5) regarding expenses on marriage or other functions. Non-compliance may cause suspicion in the minds of officials and they may take adverse actions.
In case the taxpayer is unable to furnish the required details within the time allowed by the officer, applications should be made in writing seeking time. But while making the reply, all the required information with supporting documents should be furnished.
If expenses on marriage or other functions have been contributed by various family members or the HUF, it should be properly mentioned.
In case any gift of cash, jewellery or silver article has been received by the bride/groom, it should be mentioned. Likewise, in case of other functions, if presents have been received, it should be mentioned and a certificate should be obtained.
If old jewellery has been remade and presented to the daughter or daughter-in-law, the bill should be taken.
It is also advisable to procure bills from caterers, florists, decorators etc and such payments should preferably be made by account payee cheques.
The author is a tax advocate. He can be reached at firstname.lastname@example.org