Income Tax (IT) Notice: Why You Received an Income Tax Notice Online? The IT Department, through Income Tax Department of Government of India’s website, sends Income Tax Notice online to selected tax assessee for scrutiny of their income tax return (ITR) filed online. Here, tax assessee is also known as taxpayer or filer. Income Tax Department’s online Notice requires tax assessee to furnish information and to rectify or correct errors in income tax return of taxpayer, to explain the discrepancy etc. and to carry out any other proceeding as specified in Income Tax Department’s online IT Notice. So, While an intimation is sent by Income Tax Department to assessee after processing his returned income i.e. after processing his ITR, an IT Notice is send to inform whether scrutiny of returned income is required to be carried out or not.
An intimation is an automated computer generated intimation by Income Tax Department after the processing of your Income Tax Return. This intimation is for various reasons and may include – Intimation that no further action is required on your return (i.e. no demand/no refund); Intimation that there is a demand of tax; Intimation that there is refund payable to you; Intimation that after processing of return, an addition/deletion has been made to your return etc
A few of the Income Tax Notifies may require no action by taxpayer; however, majority of them would require the taxpayer to respond or even to comply with proceedings initiated by Assessing Officer within specified time frame.
5 Types of Income Tax Notices
Income tax notices are issued to taxpayers for variety of reasons like correction of defective income tax return, seeking of some information, scrutiny of income tax return, demand of tax and adjustment of refund against outstanding tax liability. A tax assessee must know the section of Income Tax Act under which a notice has been issued to take appropriate action.
1. A defective return (u/s 139(9)): A return filed by the taxpayer is considered to be defective if there is a lack of information or if there is a contradiction in the information furnished in the return. The Department issues a defective notice u/s 139(9) requiring the assessee to cure the defect within a specified time frame which can be up to 15 days. The taxpayer can also seek extension of time to rectify defect in return filed by him.
2. Intimation after processing of return (u/s 143(1)): This notice is issued by the Income Tax Department after it has processed the ITR filed by the assessee. This intimation is issued under Section 143(1) of the Income Tax Act,1961 and it may show that there is ‘no change’ in the return filed by the assessee. In some cases, the intimation issued can show a huge amount of tax, interest, etc. being demanded which is entirely incorrect. In such a case, you must verify the details in the intimation letter and respond to the intimation letter u/s 143(1) immediately and get the tax demand reduced to zero.
3. Types of Income Tax Notices Sections Under Which Notifies are Issued to Tax Assessee For not filing return / seeking information (u/s 142(1)): This is a very common type of notice issued to a tax assessee who has not yet filed his Income Tax Return. The notice issued under this section may also be issued to inquire about additional information that may be required by the Assessing Officer for assessment of income of tax assessee. The notice under this section can be replied online by logging into e-Proceedings and then filling the Response in Detailed Notice.
4. Scrutiny selection (u/s 143(2)): If the return is selected for scrutiny, the Department may issue a notice under section 143(2) seeking an explanation and supporting details for claims/discrepancies.
5. Demand Notice (U/S 156) : A notice issued by the Assessing Officer to the taxpayer under which any order made by the Assessing Officer under the Act results into tax, interest, penalty, fine or any other sum becoming payable by the taxpayer. Such amount is required to be paid by the taxpayer within the stipulated time period as specified in such notice.
How to Reply to an Income Tax Notice?
The IT department issues all notices online and can be downloaded from the Income Tax Department website – www.incometax.gov.in. The intimation and other notices can be viewed and response filed in the e-Proceedings option available on the home page of the Income Tax Department’s e-Filing portal – https://www.incometaxindiaefiling.gov.in/home after login into the portal using your login ID and password. Your user ID for login is your PAN.
Step 1: Visit the Income Tax Department’s home page on the Government of India website.
Open – https://www.incometaxindiaefiling.gov.in/home
Step 2 : Click on Login and enter your login id & password. Your User Id is your PAN.
Step 3: Check for any notices. Also, check the ‘Worklist’ tab for actions required to be taken.
Step 4: View ‘Detailed Notices’ and file ‘Response’ by clicking on ‘Submit’. In case of tax demands, while submitting a response, you would need to choose from the below options-
- Disagree with the demand
- Demand is correct
- Demand is not correct but agree to the adjustment.
- Demand is partially correct
Submit your response and keep a lookout for follow up notices from the income tax department that may require you to provide clarification on your response that was previously submitted.
Is it Mandatory to File ITR?
Filing of ITR by a taxpayer before end of the ITR filing statutory time period is mandatory in following situations:
Income exceeding the Exemption Limit.
My total income after all the deductions has resulted in a situation where I have already paid in excess of my required tax and I would like to receive a refund of this excess.
You have financial assets or entities o
Financial assets or entities o / signing authority over any account outside India.
Foreign companies that are eligible for treaty benefits on financial transactions in India
You are an NRI with an accrued income of ₹2.5 Lakh in a year in India
Consequences of Late/Non-filing:Late filing of ITR incurs a late filing penalty which would be required to be paid by the defaulter based on the delay in filing the ITR. Wilful non-filing of ITR is an offence under Section 276CC of the Indian Income Tax Act and defaulter can be imprisoned for minimum three months to seven years as per tax payable on return of income.
Including all income in returns is a sane approach. Since most transactions today create a paper trail, high value expenditures like purchase of a car will automatically get reported by the vendor such as car dealer. Then it is a matter of IT Department seeking proof of income of such taxpayer from returns that he has filed truthfully. Even if such income has not been reported by taxpayer in returns, it can always be taxed at 30% (plus surcharge and cess as applicable) under Section 115BBE of the Act.
Why Disclose Income?In the same manner, all other income even which is totally exempt and for which no return is required to be filed, should also be disclosed in ITR as entire process of filing online ITR is now very easy and online. It is matter of few minutes if all relevant details of all income, all investments and also all taxes already paid (along with details of 26AS) are already in order and only Aadhar e-verification of online filed Form V is required to be done to complete entire process of filing online returns of income.
Exempt Income & NIL Returns:Returns are not mandatory if total income of taxpayer is below the exemption limit but return can be filed in few minutes by keying in all income, all investments and all taxes paid so far and also TDS already deposited and also 26AS.
Conclusion
The IT Department has undergone massive transformation and all intimations, notices and tax demands are now managed ‘Faceless’ i.e. digitally and without any human intervention. However, it is very important to reply all such notices on time. The system maintains a record of all replies and the IT Department appreciates in writing those who reply on time.