Income Tax Notice for property purchase and sale ! How to reply ?

CA Rahul Agarwal
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The Income Tax Department may send an inquiry to an assessee (taxpayer) for selling property in the following situations:

1. *High-value transaction*: If the property is sold for a significant amount, the department may want to verify the transaction and ensure taxes are paid.

2. *Capital gains tax*: The department may inquire about the sale to determine if capital gains tax is applicable and if so, whether it has been paid.

3. *Underreporting of income*: If the department suspects that the assessee has underreported the sale price or concealed income, they may send an inquiry.

4. *Mismatch in records*: If there is a discrepancy between the sale price reported by the buyer and seller, or between the sale deed and income tax returns, the department may investigate.

5. *Anonymous tip-off*: The department may receive a tip-off about alleged tax evasion or other irregularities in the property sale, prompting an inquiry.

6. *Verification of exemptions*: If the assessee has claimed exemptions or deductions on the sale, the department may verify the legitimacy of these claims.

7. *Tax evasion suspicion*: If the department suspects tax evasion or fraud related to the property sale, they may send an inquiry to investigate further.

Remember, these inquiries are routine and don't necessarily imply wrongdoing. Assessees should cooperate and provide required information to resolve the inquiry.