After the taxpayer files his income tax return (ITR), the return is electronically processed and matched with the data available with the income tax department. Thereafter, the income tax department processes the ITR and sends an intimation under Section 143(1) to the taxpayer. As a taxpayer, you are required to keep a close watch on all communications received by the CPC after filing your ITR and ensure that processing under Section 143(1) is proper.
Intimation under Section 143(1) is communicated on the registered email address of the taxpayer and is sent as a password protected attachment to the email.
Verify income reported
The taxpayer needs to verify that the income reported in the income tax return is the same as computed under Section 143(1). Where the amounts are the same, it means that the tax department has accepted your tax return without any adjustments and no further action will be required from the taxpayer.
However, where there is a discrepancy, between the income reported in the ITR and the amount computed under Section 143(1), the taxpayer is required to analyse and understand the cause of the difference and submit requisite documents/ clarification online through the income tax portal, with a request for reprocessing of the ITR.
Only adjustments which are apparent from record can be made under Section 143(1). No adjustment can be made on account of legal issues or issues which are debatable. Two of the most common adjustments are given below.
Deduction under Chapter VIA not provided
It has been seen on several occasions that while processing under Section 143(1), the CPC denies deduction under Chapter VI-A. There may be several reasons, but the most common being that the detail of deduction under Chapter VIA is not mentioned in Form 16.
In such cases, the taxpayer will need to submit proof of investments through the portal and request the CPC to reprocess the return. If the CPC is satisfied with the documents uploaded, it would delete the adjustment and provide the deduction.
Credit for self-assessment tax or TDS not provided
In some cases, credit for TDS or self-assessment tax paid by the taxpayer is not considered in the amount computed under Section 143(1). This could be because it is not reflected in Form 26AS or there may be a time lag between the date of payment and updating the same in Form 26AS. In such cases, the taxpayer will have to submit proof of tax payment/deduction like Form 16 and a copy of the challan.
The income tax department provides the taxpayer 30 days from the date of the email to respond to any adjustments made. In case no response is received it is assumed that the proposed adjustments are acceptable and the final Section 143(1) intimation is passed. It is up to the taxpayer to stay vigilant and provide appropriate responses, through the appropriate medium, so as to avoid payment of excess taxes or delay in the issue of refund.
Documents required to reply to an Income Tax Notice
What documents are required to reply to an Income Tax Notice?
The Documents are required to vary with the type of Income Tax notice that is served to the taxpayer. The basic documents needed to reply to an income tax notice would be:
- The Income Tax Notice copy.
- Proof of Income source such as (Part B ) of Form 16, Salary receipts, etc.
- TDS certificates, Form 16 (Part A)
- Investment Proof if they are applicable.
Checklist for Income Tax Notice
step:1 After the intimation notice under Section 143 (1) is received of the Income Tax Act,1961 the taxpayer has to make a reply within 30 days from the date when the notice is served.
step:2 If the taxpayer fails to respond within the time that is prescribed then the Income Tax Returns will be processed with the necessary adjustments without providing any opportunity to taxpayers.
step:3 Once the notice is received then the taxpayer should cross-check the name, address, and PAN number, mentioned in the notice.
step:4 Similarly, it is necessary to cross-check the assessment year that is mentioned and verify the e filing acknowledgment number.
step:5 Revised returns can be filed only when the taxpayer has made mistake in the original ITR filing. When the taxpayer has opted to revise the return it has to be filed within 15 days.
step:6 The rectification return can be filed only when the taxpayer has found any fault or error in the order that is sent by the Income Tax Department.
step:7 On-Page 2 of the notice that is issued you can understand the reason for which the notice has been issued. It also shows the difference of the mentioned income in the returns that file and Form 16/16A/ 26AS.
step:8 If the intimation notice demands the taxpayers to pay an additional tax amount i.e demand notice then it has to be treated as the notice of demand u/s 156.
step:9 On receiving this notice of the demand the taxpayer has to respond within 30 days to avoid the !% of the interest per month from the 30 days expiry period and a penalty is also imposed by the assessing officer.