Why is the tax department asking me about a high-value transaction I do not remember explaining

Question

I received a query about a high-value transaction reported in my Annual Information Statement that I do not fully recall, and I want to know how to handle this. I have been reading conflicting things online and I would like to understand what Indian law actually says about this, which Act and Section applies, what the realistic timelines and costs are, and what I should be doing right now to protect my position. If the matter can be resolved without litigation I would prefer that route, but I want to know what my rights are before I agree to anything or sign any document.

MyVakeel Legal Desk · Accepted Answer

Why is the tax department asking me about a high-value transaction I do not remember explaining is governed in India primarily by Income-tax Act, 1961, Section 285BA, Income-tax Act, 1961, Section 133(6) and Income-tax Act, 2025. The short answer is set out below, followed by the practical steps most people in this situation need to take. Read it alongside the specific provisions named, because the exact relief available to you turns on the facts you can prove on paper.

Section 285BA of the Income-tax Act, 1961 requires specified entities such as banks, mutual funds, registrars of property and companies to report certain high-value financial transactions to the tax department, which are then compiled and displayed to you as an individual taxpayer through the Annual Information Statement and the Statement of Financial Transactions framework, enabling the department to cross-verify these against your filed return.

Common examples of reported high-value transactions include large cash deposits in a savings account, high-value credit card payments, purchase of mutual funds or shares above a threshold, purchase or sale of immovable property above a specified value, and large fixed deposits, and a mismatch between such reported transactions and your declared income or investments is a frequent trigger for a departmental query or notice.

Where a query is raised, you should carefully review the Annual Information Statement entry, verify it against your own bank and investment records, and provide a factual explanation, for instance identifying the transaction as a loan repayment received, sale proceeds already disclosed, or a joint transaction where another family member is the actual owner of the funds.

If the Annual Information Statement itself contains an error, such as a transaction wrongly attributed to your PAN or duplicated reporting by two different entities for the same transaction, you can submit feedback directly on the Annual Information Statement utility, which flags the correction to the reporting entity, in addition to responding separately to any specific notice received.

What to do next: 1) Download and review your Annual Information Statement carefully; 2) Match each flagged transaction with your own bank and investment records; 3) Respond factually to any query with supporting documentation; 4) Submit online feedback to correct any inaccurate entry in the statement.

If the other side has already issued a notice, filed a case or set a deadline, treat the matter as time-sensitive — most remedies under Income-tax Act, 1961, Section 285BA carry limitation periods, and a delay you cannot explain weakens an otherwise strong case. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in this practice area.