1.12 Crore Income Tax Notice for Credit Card usage !

[ramkumar_yramkumar_y is verified member.]

Recently a video posted on Taxpuram Youtube channel (Tamil) discusses about Rs.1.12 Crore Income Tax Demand Notice received by one of his clients for spend of Rs.68.97 Lakhs in AY 2020-21. * LINK TO VIDEO *

Income Tax Notice is issued under Section 156 of IT Act demanding ₹1.12 crore from one of his clients in Chennai. The person made transactions for Rs.68.97 Lakhs by Credit Card rotation and not filing returns since 2020-21. He spent Rs.68.97 lakhs using his HDFC Bank and SBI Credit cards which is treated by Income Tax Dept as unexplained expenditure u/s 69C of IT Act.








There's another video on same case posted by Tamil Tech Youtube channel A2D Channel * VIDEO LINK *

Even though we've discussed about possible IT Notice for High Credit Card spends and even cases about receiving Notice for Credit cards, this looks like the first case with IT Demand above 1 Crore for such usages?

Kindly share your views on this and also feel free to edit this Wiki post to add more information related to this 🙏

 

[rajarancho]

Wow. 1-2% chakkar mein 30-40% money gaya .. he rotated money.. now he needs to rotate bw court and it dept.

 

[kumars_001]

I guess form 26AS is where we check the credit card spends right

 

[TechnoFinoTechnoFino is verified member.]

This is a classic case of credit card spends being misinterpreted as income by the IT department. ₹68.97 lakhs spent doesn’t mean that much income was earned... it could very well be credit card rotation, loans, or money already taxed.

The notice under Section 156 and addition under Section 69C (unexplained expenditure) usually happens when a taxpayer doesn’t file returns or fails to explain the source of funds. Since this person hasn’t filed returns since AY 2020–21, the IT Dept is treating the spends as unexplained and taxing it at 60%+ penalty, which resulted in the ₹1.12 crore demand.

The right approach here is not to panic but to reply through a qualified CA or tax lawyer, submit bank statements, card statements, and proof of income/funds. Once explained properly, the demand should come down drastically or even get dropped.

Moral of the story: high credit card usage is not a problem, but always file ITR and keep proper documentation so spends are matched with income.