Income Tax Department sends notice to an individual under section 143 (1)(a) if there is any discrepancy while filing income tax returns, like less or excess tax is deposited, etc.
But regardless of the case, you can respond to it online after reviewing the records and carefully tallying them with the filled IT return details.
This enables the taxpayer to revise their IT return details.
Mihir Tanna, associate director of S.K. Patodia and Associates, a Mumbai-based chartered accountancy (CA) firm, says the notice under section (143 (1)) shows a columnar comparison of income and tax details filed by the taxpayer and processed by the department.
Why The Department Sends the Section 143 Notice?
Every taxpayer, be it filing an original or a belated return, will get an intimation from the income tax department under section 143 (1) of the Income Tax Act, 1961. It is to inform the taxpayer that the department has processed their return.
But when it sends the notice under section 143 (1) (a), it implies there could be some discrepancies in their filled return applications.
Says Tanna: Before issuing the 143 (1) notice, the income tax department issues the 143(1)(a) notice to an individual if there is any discrepancy, like the difference in income as per the taxpayer and the information recorded with the income tax system. It allows the taxpayer to revise the original ITR copy in case of an error.
Pallav Pradyumn Narang, the partner at CNK, a New Delhi-based law firm, says, “The income tax department can send the notice within nine months from the end of the financial year” when the tax returns are furnished.
What Should You Do After Receiving The Notice?
The taxpayer must check if his income in the ITR matches the department’s records. If there is any discrepancy, Narang says, the individual should respond within 30 days of receiving such a notice.
Tanna adds the taxpayer can file a rectification application online under section 154 of the Income Tax Act if he is dissatisfied with the department’s income computation and believes there is a mistake in its records.
But suppose it is an old case, and the department has transferred the rectification rights from its centralised processing centre to the jurisdictional assessing officer. In that case, the taxpayer should file a rectification request within four years of receiving the notice with the latter, says Tanna.
Scenarios Where 143 (1)(a) Notice Is Issued
The notice could be served either for a shortfall in tax payment or a refund for excess tax paid.
Ankit Jain, a partner at Ved Jain & Associates, a New Delhi-based CA firm, says the taxpayer should examine the reason for the notice. The person can respond to it on the income tax portal. The taxpayer can rectify the error and request reprocessing of the ITR application.
● TDS Information Mismatch: According to Jain, the most common reason is the mismatch in the claim for the credit of TDS (tax deducted at source). If details such as TAN or the amount is incorrect, the system won’t be able to match the TDS credit.
● Technicality Aspects: For example, it is specified that an individual who has both salary and business income must file form 10IE to intimate the department about switching the tax regime.
Ruchika Bhagat, chartered accountant and managing director at Neeraj Bhagat & Co, a New Delhi-based CA firm, says certain deductions under section 10AA or Chapter VI-A under heading C are allowed only in certain incomes. But the department might reject the forms if filed after the due date. Certain “carry-forward losses” aren’t allowed in belated returns.
● Missing Income Details Information: There could be instances where the taxpayer may show income in Form 26AS but hasn’t filed a return. For example, if the individual draws a salary but forgets to give information related to housing rent allowance (if applicable). Likewise, possibilities are endless.
According to Jain, “We have noticed that people sometimes miss reporting incomes such as savings bank interest, dividend income, sale of mutual funds, etc., in their tax returns.”
Jain adds that income information is now routinely furnished to the income tax department by the banks and companies. If such income is not reported in the tax return, the tax department can issue a notice asking the taxpayer to report such an income and pay tax.
What Happens If A Taxpayer Does Not Respond To The Notice?
Taxpayers should take immediate action upon receiving the notice. If they do not respond in time, the income tax department can adjust extra tax from any refunds due to the taxpayer. Further, if the demand amount is correct and payable, a delay in tax payment would lead to additional interest costs to the taxpayer.
Bhagat says if there is a favourable, possible addition in the refund amount, no action is required on the part of the taxpayer. But finally, the taxpayer should check the notice thoroughly to spot the difference in the reported income with the one recorded in the CPC.