Any notice that is received from the Income Tax Department might be alarming and frightening to the recipient. However, there is no reason to be disturbed when an income tax notice is received. On receiving an income tax notice, the taxpayer must understand the nature of notice, the request or order in the notice and take steps to comply. Some of the common reasons for receiving an income tax notice is as follows:
- Not Filing Income Tax Returns
- A discrepancy in the tax paid when compared with the amount mentioned in the return
- Entering into high-value transactions but not filing tax-returns
- Unexplained cash credits.
- Any other reason leading a tax officer to believe that there could be income tax evasion
Notice u/s 143(1) – Intimation
This notice is an indication that ITR is being processed by the Income Tax Department. It intimates the receiver of any numerical faults or modifications to be made. The notice is usually sent in the form of an e-mail from the Income Tax Department. If an intimation is received under section 143(1), it is no reason for panicking, it is not an inspection or order sent forth by the Income Tax Department.
Common reasons for receiving income tax notice under Section 143(1) are
- Incorrect tax calculation
- Levy or interest which is yet to be paid
- If you are qualified for refunds from the Income Tax Department.
Notice u/s 139(9) – Defective Income Tax Return
A return is termed defective when the IT Department identifies any contradiction or faults or any misplaced information in ITR. An assessee must rectify the flaws within 15 days and if the flaw is not rectified, it would be considered as an invalid return. Once the income-tax returns are filed, the particulars provided in the ITR are checked and processed.
Notice u/s 142(1) – Inquiry Notice before Assessment
This notice is addressed to the assessee when the return is already filed and further details and documents are required from the assessee to complete the process. This notice can also be sent to necessitate a taxpayer to provide additional documents, as required by the tax officer.
This notice is mostly received when there are discrepancies in the taxpayer tax return and an investigation of certain documents or information is required. The taxpayer is given time for submission of documents and a judicious chance of being heard before the conclusion of the process.
Notice u/s 143(2) – Scrutiny Assessment Notice
This applies when the tax is filed by the assessee himself (Self-Assessment) or in retort to a notice u/s 142(1). This notice is attended by the Assessing Officer in order to confirm that the assessee has not minima-listed the income, computed undue damage or tax had been short-paid. It is expected of him/her to execute the following:
- Be present or signify before the Assessing Officer (AO) to provide proofs
- Make written proposals for providing details
- Produce proof to validate the income/profits/gains/losses.
Notice u/s 156 – Demand Notice
This type of income tax notice is issued by the Income Tax Department when any tax, interest, fine or any other sum is owed by the taxpayer. All demand tax notice will stipulate the sum which is outstanding and due on the part of the taxpayer. The amount mentioned in the demand notice must be deposited by the taxpayer within 30 days or any other date mentioned on the tax notice.
Notice u/s 148 – Commence Proceedings
This notice is released for the purpose of reopening a case that has already been evaluated previously by an officer. The case is re-opened if the officer trusts that any actionable income is not stated in the return. Prior to undertaking this course of action, the Assessing Officer (AO) has to deliver a notice under section 148 by creating a valuation or re-assessment. The Assessing Officer (AO) should have a binding motive to re-open the case and must record the purpose of dispensing the notice.
Notice u/s 245 – Intimation to set off Demand and Refunds
This tax notice is issued by the income tax department to an assessee for whom the Income Tax Department owes a refund from a previous assessment year, while the taxpayer is supposed to pay the tax demanded currently. At this juncture, the Assessing Officer can setoff a refund against the tax demand which is unresolved from the taxpayer. As per Section 245, the modification of reimbursement and petition could be provided after an appropriate issue of notice to the taxpayer. The taxpayer will be given the opportunity to rectify the inaccuracy identified by raising or altering the claim.
Responding to Demand Notice
Responding to an income tax demand notice has now become easier, thanks to the digitization of the Income Tax portal and introduction of E-Assessment under the Centralised Communication Scheme, 2018. This takes away the time-consuming and painstaking manual processes of the past. Taxpayers can now view the outstanding tax demand by following the procedures listed below:
Step 1: Log in to the e-filing portal of the official website of the Income-tax department. If you do not have a username and password, please create a new user identification on the website.
Step 2: On the drop-down menu of My Accounts Section, choose the option ‘Respond to Outstanding Tax Demand’.
Step 3: Details pertaining to the Assessment year, Section Code, Demand Identification Number (DIN), Date of issue of demand will be displayed. Select the income tax demand from the list to which you would like to respond.
Step 4: The taxpayer, after clicking ’Submit’ is entitled to choose the response among the options available:
- Demand is correct
- Demand is partially correct
- Disagree with demand
- Demand is not correct but agree for adjustment
Now, let us examine the procedures based on the status of demand chosen by the taxpayer.
Demand is Correct
Choosing this option prohibits you from disagreeing with the demand later. To start the process under this choice, click on ‘Submit’. A success message will be displayed. If you are eligible for a refund, the outstanding amount along with interest will be adjusted against the refund due. If not, the dues should be immediately remitted. For payment of dues, click on the hyperlinked option ‘Pay Tax’, and then click on ‘Confirm’. You will be redirected to the TIN website of NSDL, where your outstanding taxes can be paid. Now click on ‘submit to bank’ option on the page to the payment.
Demand is Partially Correct
On selecting this option, two amount fields will be displayed on the screen. You must enter the correct and incorrect amount. In addition to it, you will have to choose the reason cited in the portal. You will be required to provide additional information based on the selected choice.
The following reasons are cited in the portal, among which the choice should be made:
- Demand paid.
- Demand paid and challan has CIN.
- Demand paid and challan has no CIN.
- Demand already reduced by rectification/revision.
- Demand already reduced by the Appellate order but appeal effect to be given.
- Appeal has been filed.
- Stay petition filed with.
- Stay granted by.
- Instalment granted by.
- Rectification/Revised return filed at Central Processing Centre (CPC).
- Rectification filed with Assessing Officer (AO).
- Others.
Additional Documents to be Submitted
Any taxpayer who chooses the “Demand is Partially Correct” option would have to provide additional information as provided below:
| Reason Demand is Partially Correct | Additional Information |
| Demand paid and challan has CIN | BSR CodeDate of paymentSerial NumberAmountRemarks |
| Demand paid and challan has no CIN | Date of paymentAmountRemarksUpload Copy of Challan |
| Demand already reduced by rectification / Revision | Date of OrderDemand after rectification/ revisionDetails of AOUpload Rectification / Giving appeal effect order passed by AO |
| Demand already reduced by Appellate Order but appeal effect to be given | Date of OrderOrder passed byReference Number of Order |
| Appeal has been filed: Stay petition has been filed | Date of filing of appealAppeal Pending withStay petition filed with |
| Appeal has been filed: Stay has been granted | Date of filing of appealAppeal Pending withStay granted byUpload copy of Stay |
| Appeal has been filed: Instalment has been granted | Date of filing of appealAppeal Pending withInstalment granted byUpload copy of stay/instalment order |
| Rectification / Revised Return filed at CPC | Filing Typee-Filed Acknowledgement No.RemarksUpload Challan CopyUpload TDS CertificateUpload Letter requesting rectification copyUpload Indemnity Bond |
Demand is not Correct
This option can be selected if you have apprehensions on the correctness of the demand, after which you will be required to choose among the many options specified in the option “Demand is partially correct”. Some of the option that can be selected for citing demand is not correct include:
- Demand paid
- Demand already reduced by rectification/revision
- Demand already reduced by Appellate Order but appeal effect to be given
- Appeal has been filed
- Rectification / Revised Return Filed at CPC
- Rectification filed with AO
- Others
Demand is not Correct but Agree for Adjustment
In this case, you will have to specify the reasons for your disagreement with the demand, which again could be any of the following:
- Demand paid
- Demand already reduced by rectification/revision
- Demand already reduced by Appellate Order but appeal effect to be given
- Appeal has been filed
- Rectification / Revised Return Filed at CPC
- Rectification filed with AO
- Others
Tracking Status of Response
After completing all the above procedures and successfully submitting the information to the Income Tax department, a transaction ID will be generated. The response can be checked by clicking on the ‘transaction ID’ on the income tax e-filing portal.
The demand position will be updated every day. Further, interest demand u/s 220(2) is linked to the principal demand of the same assessment year. This indicates that principal demand is already adjusted/ paid and interest demand is the only outstanding value. Hence does not require any confirmation.