Introduction

When we receive Income Tax notices, we often get scared but all these notices have a reason of issuance. Some income tax notices just give us information like intimation under section 143(1), some warrant information for inquiry under 142(1) and some communicate that an audit is required to be done etc. This article will give you a brief information about the income tax notices.

Type of Income Tax notices

Intimation under section 143(1) is an intimation for ITR processed by the income tax department to the taxpayer. It communicates arithmetical mistakes or changes to be done.

A notice in the email from Income Tax Department may make anyone worry but if you’ve received an intimation under section 143(1), you don’t need to worry as it is just an intimation and not any scrutiny or order by the  Income Tax Department. Intimation for ITR processed may be about:

  • Any tax or interest which has to be paid, or
  • If you are eligible for refunds from Income Tax Department

This notice/intimation under section 143(1) is generated by the computer on the basis of any mathematical error or any incorrect tax claim.

Defective Return is the type of return for which a person receives a notice u/s 139(9) if the IT Department has found any discrepancies or mistakes or any missing information in ITR. Once you file your income tax return, the details provided by you in the ITR are cross-verified and processed. The department compares the details provided by you with the information that is available to them.

An assessee is expected to correct the defect within 15 days and if it to correct the defect, would be treated as an invalid return.

Section 142(1) tax notice is the notice that is usually served, in a case where the return has been filed, to call for further details and documents from the assessee and to take a particular case under assessment. This notice can also be sent to require him to file his return where he has not yet furnished it.

This notice is generally issued when information is missing from the taxpayer’s end and an inquiry is sought to be made. The taxpayer is given a reasonable opportunity of being heard for any material that may have been gathered on the basis of such inquiry.

It applies to a case where the return has either been filed by the assessee himself (Self Assessment) or in response to a notice u/s 142(1). This notice is served by the Assessing Officer in order to ensure that the assessee has not understated the income, computed excessive loss or underpaid the tax. It may require him to:

  1. Be in physical attendance or represent before the Assessing Officer (AO) to clarify facts; or
  2. Make written submissions for providing details; or
  3. Produce evidence to substantiate the income/profits/gains/losses.

This notice is issued within a period of 6 months from the end of financial year in which the return is filed.

Section 156 tax notice is the notice of demand issued by the Income Tax Department when any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed. The section 156 tax notice of demand will specify the sum which is payable.

This demand notice is generally accompanied by an intimation notice under section 143(1) or along with the assessment order that is issued on completion of the scrutiny proceedings. Notice of Demand u/s 156 is issued in respect of every assessment order for addition to income.

The amount stated in the notice to be paid within 30 days by the assessee.

  • Notice u/s 148 – Commence Proceedings

This notice is issued to re-open a case that has already been assessed earlier by an officer. The case is re-opened if the officer believes that any chargeable income is not mentioned in the return.

Before making an assessment or re-assessment, the Assessing Officer (AO) has to serve a notice under section 148.     Assessing Officer (AO) should have a valid reason to re-open the case and must record the reason for issuing the notice.

Section 245 Tax notice is the notice by the income tax department to the assessee in whose return the IT Department feels that there’s an outstanding demand from earlier years and a refund is claimed in another assessment year. In such a case as per section 245, the AO can adjust refund against the tax demand which is outstanding from the taxpayer.

In simpler words, Intimation under section 245 is received when:

  • A tax demand is pending from the IT Department; and
  • The taxpayer may have claimed a refund from IT Department in some other Assessment Year.

Under Section 245, the adjustment of refund and demand can be made only after a proper notice is given to the taxpayer and an opportunity will be given to the assessee to correct any mistake which might have occurred in the raising or adjusting of the demand.

Reasons for getting Income Tax Notices

  • Not filing of return: The income tax department sends notice to who has not filed ITR. If the return is filed after the due date but of the Assessment Year, then the income tax officer can levy a penalty of up to Rs. 5,000 for the delay from F.Y. 2017-18 and if the return is filed after 31st December, a penalty of Rs. 10,000 shall apply.
  • Mismatch in tax rate: Sometimes, there is a difference of tax rate in Form 16 and Form 26 AS. If there is any difference in the form, the department will consider Form 26 AS. The reason for mismatch of the figures can be due to the reason that the employer forgot to deposit the tax that is deducted from salary or deposited in someone else’s account. In both the cases, consult with the employer for a rectified return.
  • High-value transactions: Various high-value transactions should be updated to the income tax department. This is done to ensure that taxes are levied as per the rules and regulations.
  • Investment in the name of a spouse: There are many individuals who purchase assets on the name of their family, children or spouse to evade the taxes. These are needed to be updated to the income tax department.
  • Scrutiny Notice: A notice can be issued in case Scrutiny Assessment will be held by the IT Department.

Dealing with Income Tax Notices

When income tax department sends notice to people regarding certain issues, people fail to deal with that. If you’ve received a notice from income tax department, follow these steps to handle these income tax notices:

  • Handle it carefully: Whenever you receive any notice from income tax department don’t ignore. Ignorance will lead to a penalty of Rs 10,000 or more along with the payment of tax.
  • Proof: If notice is received through the post, preserving the envelope as it will serve as the proof for future purposes.
  • Check DIN: If notice is received through e-mail or online then; make sure to check the Document Identification Number (DIN).
  • Check the reasons: If you have received the income tax notice then must check the reasons for the notice. Reasons for receiving the notice can be the improper filing of a return,  TDS, error in  E-TDS return online or any other serious issue.
  • Validity: Different types of notices have different time period validity. For example, a notice of scrutiny assessment has to be served within 6 months. If it is served later than the application is considered invalid.
  • Collect your documents: Start collecting documents which are asked by income tax department.
  • Preparation of letter: With all the documents, a letter should be attached which need to be sent to income tax department.
  • Acknowledgment: Keep two copies of all the documents.
  • Give timely response: All the response should be given on time. You can even ask for an extension for the time limit.
  • Take professional advice: In serious cases like that of Scrutiny Assessment always take advice from professionals such as Chartered Accountant. This will help you in filing the notice on time and more accurately. One should neither get petrified and nor ignore a notice from the IT department. Generally, it fines as high as Rs 10,000 for not responding to theses notices.
  • Scrutiny NoticeIn case, you receive any scrutiny notice then follow:
  1. Keep in mind the duration and time limit of the notice. A scrutiny notice must comply with 6 months time limit from the end of the financial year.
  2. Make multiple copies of the notice.
  3. Submit all the necessary documents required with a cover letter to the income tax department.
  4. Demand an acknowledgment slip from the assessing officer for the record.

Conclusion

Income tax notices issued by the Income Tax Department is very important. As soon as, you received any of these notices read them thoroughly and respond to the notice. Any delay in making a response to the notices can be heavy to your pocket.

For any help on ITR Filing feel free to consult the tax experts at LegalRaasta. You can file ITR yourself via our ITR software or get CA’s help on filing income tax return. You can also use the option of Business Return, Bulk Return or Revised Return Filing.