Receiving a notice from the Income Tax Department can be a daunting experience for many taxpayers. However, it’s crucial to remember that not all notices are cause for alarm. This article will guide you through the steps you should take if you find yourself in this situation.
Understanding the Notice
The first step is to understand the notice. The I-T Department sends notices under various sections of the Income Tax Act, each pertaining to a specific issue. These notices can range from a simple request for additional documentation to a notification that you are being audited.
A notice from the I-T Department doesn’t necessarily mean you’ve done something wrong. It could be a routine communication. However, it’s essential to act promptly. Ignoring the notice won’t make the problem go away and could lead to penalties, such as additional taxes, interest, and even criminal prosecution.
Responding and rectifying the errors
Once you’ve understood the notice, the next step is to respond. This should be done within the stipulated time mentioned in the notice. Make sure to keep a record of all correspondence with the department.
If the notice is about a discrepancy in your tax return, you’ll have the opportunity to rectify it. You can file a revised return if the assessment year is still open. However, if the assessment year is closed, you may have to file an appeal with the Income Tax Appellate Tribunal.
Types of Income Tax Notices in India
As mentioned in the earlier section, there are quite a few different reasons why an income tax notice may be issued. The Income Tax Act, 1961 contains various provisions for the issue of different types of IT notices and below are the key ones that taxpayers should keep in mind:
Intimation Under Section 143(1)
This is perhaps the most common type of notice from the IT department usually referred to as an “Intimation u/s 143(1). This is a preliminary notice sent after your returns have been processed. This type of notice could imply any one of the following:
- Your tax calculation matches with the department: No action is required.
- You have paid excess tax for the fiscal. The excess will be refunded with interest, if applicable, using the applicable income tax refund mechanism.
- You have underpaid due tax as per tax authorities. The balance tax amount needs to be paid with penal interest, if applicable using the applicable Income Tax Challan.
Notice Under Section 143(2) and Section 143(3)
These two types of notice are closely related. An income tax notice u/s 143(2) is issued by tax authorities as part of the scrutiny assessment process u/s 143 (3). This type of scrutiny assessment may be undertaken by assessing officer in order to ensure that the tax payer has not understated income, paid lower tax or shown excessive loss to reduce tax liability. While you do not need to take action on receiving such a notice, if closer scrutiny reveals discrepancies you might receive another income tax notice u/s 156 subsequent to the scrutiny assessment.
Demand Notices Under Section 156
Notices issued u/s 156 or any of its subsections are typically a demand notice for payment of due tax. If you have unpaid taxes, the Income Tax Department will send you a notice under this section, specifying the amount of tax you owe and the date by which you need to make the payment. Usually such tax payment demands also feature a commensurate fine and penal interest charges that are clearly mentioned in the notice. If you have received such a notice, it might be advisable to seek the help of a tax expert or CA for figuring out the next step.
Notice Under Section 142 (1)
This type of income tax notice may be issued after you have filed your income tax returns when the Assessing Officer (AO) seeks clarification or additional documentation related to your filed ITR. Examples of such additional income tax documents may include a statement of assets and liabilities, produce accounts/documents to support income or tax saving investment claims, etc. Additionally, a tax notice under Section 142(1) may also be issued if one has filed belated returns i.e. ITR was filed after the due date.
Notice Under Section 139(9)
A tax notice u/s 139(9) is often referred to a ‘defective return’ notice. If the IT department finds errors or omissions in your tax return, you’ll get a notice under this section. It could relate to missed income declaration, incorrect personal information, using the wrong ITR form, mismatch between TDS and tax paid, etc. On receiving a Section 139(9) notice, you have a stipulated time period, usually 15 days, to respond and file a revised return, if required.
Tax Notice Under Section 148
An income tax notice u/s 148 is issued with respect to ITR that have been filed at an earlier date. The Income Tax Department can send this type of notice if the assessing officer believes some income has escaped assessment in a previously filed tax return. In such a situation you may be asked to furnish income details again for a specific financial year along with any other supporting documents such as proof of tax saving investments made during the specified period.
Summons Notice Under Section 131
If you receive an income tax notice under Section 131 or its sub-sections such as 131 (1A), it means that you have been summoned in-person by tax authorities. Common reasons for issuing such a summons include:
- For conducting inquiry by the IT Department for discovery, inspection and/or verification of different documents or people
- In order to ensure attendance of a person for examination under oath
- To demand the production of key documents such as book of accounts, Form 16, home loan amortisation schedule, etc. from the assessee
It is mandatory to respond to such as summons request as non-compliance might lead to legal action from the tax authorities along with potentially hefty fines.
Intimation Under Section 245
This intimation notice is issued by the IT department in order to seek confirmation from the assessee that pending tax dues for any previous FY can be offset using the income tax refund issued in the current assessment year. On receiving an income tax notice u/s 245, you can respond with agreement or disagreement with corrective action such as filing a revised return within a period of 30 days. If you do not provide a response within the stipulated time, the tax authorities will complete the adjustment automatically and issue the balance refund amount.
While there is no rule against responding to an income tax notice on your own, it might be advisable to seek expert help from a tax expert or chartered accountant. This can help ensure that your response is appropriate and you are aware of the correct course of action to resolve the issue at hand.
What Should Be Done After Receiving An Income Tax Notice?
When you get a notice under any of the aforementioned sections, you should take the following steps:
1. Carefully read the notice to determine why it was sent.
2. Examine the notice’s basic details to determine that it is intended for you. To ensure that the notice is sent to you, it should include your correct name, PAN number, address, and so on. Check the assessment year given in the notice as well.
3. Determine the mismatch in your income tax return that resulted in a notice being served, if any.
4. To avoid penalties and prosecutions, respond to the notice within the time frame specified.
5. Ensure that your response is backed by adequate information.
6. Also, make sure to check that the notice you received is reflected in your income tax account online.
Why Did You Receive Income Tax Notice?
Receiving an Income-tax notice can be for several reasons, few are given below.
1. TDS Amount Error: The most common issue with returns filed is often a mismatch in the TDS amounts. Sometimes your employer or deductor may have delayed or made a mistake filing their TDS returns. If that is the problem with your return too, request your employer to revise the TDS amount credited to you.
2. Discrepancy in Return Filed: If the discrepancy is with the amounts declared by you in the returns you filed, try to understand the difference. Differences may arise because:
- You may have forgotten to declare some incomes, like Interest from FDs
- You may have claimed a deduction under the wrong section
- You may have provided incomplete information
Remember, these notices are generated automatically by the Income Tax Department’s software. Sometimes you may have filed everything correctly to the best of your knowledge, but still may have received a notice. It’s always good to have an expert look at your notice.
3. Documentation: Sometimes the IT department would like to review certain documentation based on which your returns were filed. In case of such a request, furnish the said documents immediately.
4. Tax Returns Not Filed: In case the notice is to remind you that you have not filed your tax returns yet, do so without any delay. The IT department can remind you about unfiled returns for the previous 6 assessment years. Delays in tax filing can sometimes lead to a penalty of up to Rs.5000 per year. If there are taxes unpaid in such cases of delayed filing, the assessee is charged 1% interest per month from the due date. If you are not required by law to file a tax return, then reply to the IT department clarifying this fact.
5. Investments in the name of spouse: Many individuals resort to purchasing assets in the name of their spouse, children or other close family members in the hope of evading taxes. Assets in this case refer to any kind of investment like land, buildings, fixed deposits, mutual funds, shares, debentures etc. Let’s say you bought mutual funds in your wife’s name. As per section 64 of the Income Tax Act, any income you generate out of these mutual funds is still considered your income and YOU will be taxed for it. You need to ensure that you declare such income at the time of filing your return, or else you will attract the attention of the taxman and receive a notice for the same.
6. High-Value Transactions: High-value transactions need to be updated to the Income Tax department by the entity with which you carry out such a transaction. This is in order to ensure taxes are levied as required on each of these transactions in a timely manner. Failure to do so is an invitation for a tax notice. What qualifies as a high-value transaction?
- Cash deposits in a bank worth Rs 10 lakh or more in a year
- Credit card purchases of Rs 2 lakh or more
- Mutual fund investments for Rs 2 lakh or more
- Purchase of bonds and debentures worth Rs 5 lakh or more in a year
- Sale or purchase of property worth Rs 30 lakh or more
7. Non-disclosure of assets for wealth tax: If you own assets whose net value is over Rs.30 Lakhs, you are liable to pay wealth tax at the rate of 1% of the amount that is above the Rs.30 Lakhs limit. If you do disclose such assets that you own or do not pay taxes on them, there is a good chance that you might receive an IT notice. Assets can include anything from land, second homes, cars, yachts, gold jewellery, antiques, art etc. If you are unsure about the exact value of the assets you own, you can approach government approved valuers for this purpose.
8. Random scrutiny: To enforce tax compliance, the IT department has started randomly scrutinizing returns under section 143 (3). If you receive such a scrutiny notice, don’t panic. Just follow these simple steps:
- Check the validity of the notice as well as the duration within which you have to respond to the Assessing Officer. Usually, a scrutiny notice is served to the assessee within a period of 6 months from the end of the financial year. Very rarely, notices related to older cases are also sent under section 148, if the Assessing Officer finds genuine reason to do so.
- Make multiple copies of the notice received
- Submit documents requested along with a cover letter listing all the documents to the Assessing Officer
- Request for an acknowledged copy of the cover letter from the Assessing Officer for your own records
- If the notice is regarding your old dues, they can be adjusted against any pending refund claims made by you for a current year.
What Are The Most Common Causes Of Notice?
The most common causes for which you might receive an income tax notice include the following:
1. Inconsistency in the amount of TDS reported
2. An inaccuracy on your tax return
3. Failure to submit all required papers
4. Failure to file your tax returns
5. When you make investments in your spouse’s name but fail to report them on your income tax returns.
6. If high-value transactions occurred during the fiscal year but were not correctly disclosed on the income tax return
7. If the assessing officer randomly examines your income tax return
8. When long-term capital gains from stock investments are not properly disclosed
9. If the taxpayer fails to declare any income
10. If the incorrect income tax return form is used to file the income tax return
Authenticate the Notice issued by ITD FAQ
1. Why do I need to authenticate notice/order issued to me by Income Tax Authorities?
Every communication by Income Tax department issued on or after 1st October, 2019 shall bear an unique Document Identification Number(DIN). In order to satisfy yourself that the notice/order or any communication received by you is genuine and issued by Income Tax Authority, you can authenticate any notice/order or any communication using this service.
2. What if the ITD notice/order does not bear a DIN?
In such case, the notice/order/letter received by you would be treated as invalid and shall be non est in law or deemed to be as if it has never been issued. You do not need to take any action or respond to such communication.
3. Where can I authenticate the order issued to me by ITD?
You can authenticate the order issued by the Income Tax authorities on the e-Filing portal using Authenticate Notice / Order Issued by ITD service.
4. Do I need to log in to authenticate the notice issued to me by ITD?
No, you do not need to log in to the e-Filing portal to authenticate the notice / order. You can authenticate the notice by clicking on the Authenticate Notice/Order Issued by ITD link available on the e-Filing portal.
5. Do I need to enter the same mobile number as registered on the e-Filing portal to authenticate my notice?
No, it is not mandatory to enter the mobile number registered on the e-filing portal to authenticate the notice / letter or any communication issued by Income Tax Department. You may choose to receive OTP on any mobile number which is accessible to you by entering it in the mobile number textbox.
6. What is DIN?
DIN stands for Documentation Identification Number. It is a computer generated unique number which needs to be duly quoted on every communication (letter / notice / order / any other correspondence) issued by any Income Tax Authority to any taxpayer.
e-Proceedings FAQ
1.What is e-Proceedings?
e-Proceedings is an electronic platform for conducting proceedings in an end to end manner using the e-Filing portal. Using this service, any registered user (or his Authorized Representative) can view and submit response to any notice / intimation / letter issued by the Income Tax Department.
2.What are the benefits of e-Proceedings?
e-Proceedings is a simple way to respond electronically to all notices / intimation / letters issued by Income Tax Department. It reduces the compliance burden of the taxpayer as there is no need to visit the Income Tax Office. Further, it is easy to keep track of the submissions and record keeping for future reference.
3. Can I view my response once I have submitted my response to the notice issued to me?
Yes, you can view the response submitted by you or by your Authorized Representative.
4. Where can I see if any query has been raised against my response given on Adjustment u/s 143(1)(a) issued to me?
You can view the queries raised by the Income Tax Department under e-Proceedings.
5. Why my submit response button is inactive?
Submit response button can be inactive due to below reasons
For CPC notices – If the response due date has been lapsed.
For ITBA notices – If the proceedings status has been closed/blocked by Income Tax Authority.
6. Can I edit my response after responding to a notice on the e-Filing portal?
No, you cannot edit your response once submitted on the e-Filing portal.
7. What are the notices can I respond to under e-Proceedings?
All notices / intimations / letters issued by the Income Tax Department and CPC are made available under e-Proceedings where you can view and submit the response along with attachments by uploading the same on the e-Filing portal. You can view and submit response to the following notices through this service
- Defective Notice u/s 139(9)
- Prima Facie Adjustment u/s 143(1)(a)
- Suo-moto Rectification u/s 154
- Notices issued by Income Tax Authorities
- Seek for Clarification communication
Path
Dashboard/Pending action/E-proceeding
8.The number/size of attachments is more than the permitted limit under the submit response functionality, what should I do?
The maximum size permitted of a single attachment is 5 MB. In case you have more than 1 document to upload, you can select number of attachmeent upto 10. The maximum size of all attachments should not be more than 50 MB. If the size of the single document exceeds the permitted limit, you can optimize the document by reducing the file size.
9.What is a Defective Return?
A return may be treated as defective on account of incomplete or inconsistent information in the return or in the schedules or for any other reason.
10.How do I know if my return is defective?
If your return is found defective, the Income Tax Department will send you a defective notice u/s 139(9) of the Income Tax Act via email on your registered email ID and the same can be viewed by logging in to the e-Filing portal.
11.Can I update or withdraw my response after submitting the response on the e-Filing portal?
No, you cannot update or withdraw your response once submitted on the e-Filing portal.
12.Can I authorize another person to respond to my Defective Notice?
Yes, you can authorize another person to respond to the defective notice u/s 139(9).
13.Can I correct the defect in the ITR Form online?
Yes, you can submit the response by online correcting the defect in the ITR Form.
14. What is the time limit within which I can respond to a Defective Notice sent by Income Tax Department?
If your return is found defective, you will get 15 days of time from the date of receiving the notice or as the time duration specified in the notice to rectify the defect in the return filed by you. However, you may Seek Adjournment and request for an extension.
15. What if I don’t respond to a Defective Notice?
If you fail to respond to the defective notice within stipulated period then your return may be treated as invalid and therefore consequences such as penalty, interest, non-carry forward of losses, loss of specific exemptions may occur, as the case may be in accordance with the Income Tax Act.
16. I have been notified about defective returns u/s 139(9). Can I file the return as fresh return for that Assessment Year?
Yes, you can either file the return as a fresh / revised return incase the time provided for filing the return in a particular Assessment Year has not lapsed or alternatively you can also choose to respond to Notice u/s139. However, once the time provided for filing the return for a particular Assessment Year has lapsed, you will not be able file the return as a fresh / revised return and you will have to respond to Notice u/s 139(9). If you are unable to respond to the notice, the return will be treated as invalid or not filed for that Assessment Year.
17. What are some of the common errors that make a return defective?
Some of the common errors that make a return defective are as follows:
- Credit for TDS has been claimed but the corresponding receipts/income has been omitted to be offered for taxation
- The gross receipts shown in Form 26AS, on which credit for TDS has been claimed, are higher than the total of the receipts shown under all heads of income, in the return of income.
- Gross Total Income and all the heads of income is entered as nil or 0 but tax liability has been computed and paid.
- Name of taxpayer in ITR does not match with the name as per the PAN database.
- Taxpayer having income under the head Profits and Gains of Business or Profession but has not filled Balance Sheet and Profit and Loss Account.
18. What is Seek for Clarification communication?
Seek for Clarification communication is sent to the taxpayer, if there are instances where the information provided under a schedule or annexures of the return is insufficient or inadequate and clarification is required on certain claims made by the taxpayer.
19. Do I need to log in to e-Filing portal to view and submit response using e-Proceedings service?
Yes, you will be required to log in to the e-Filing portal to view and submit response using e-Proceedings service.
20. Do I need to e-Verify the response / submission made?
No, you are not required to e-Verify the response submitted by you.
21. Can I respond to a Seek for Clarification Notice without logging on to the e-Filing portal?
No, you will be required to log in to respond to a Seek for Clarification communication. You will not be able to either view the notice or submit the response to the notice issued to you.
22. Can somebody else respond on my behalf using the e-Proceedings service to the notices issued to me by the Income Tax Authority ?
Yes, you can add an Authorized Representative to respond to a notice on your behalf using the e-Proceedings service.
23. Can I remove an already added / existing Authorized Representative?
Yes, you can remove or withdraw the representative authorized by you.
24. Can I add two Authorized Representatives to respond to the notice issued to me?
No, you can only have one Authorized Representative active at a time for a proceeding.
25. I have filed a revised return. Do I still need to respond to the Seek for Clarification communication issued to me?
No, it will not be allowed to submit a response in case you have already filed a revised return for the same assessment year. A message stating ‘Revised Return has been filed against this notice; no further action is required’ will be displayed.
26. Is it mandatory for me to respond to the Seek for Clarification communication issued to me? If yes, then what is the time limit within which I should submit my response?
You should submit / provide your response as per the due date mentioned in the communication issued to you. In case the due date has passed and no response has been provided, CPC will process the return with the information available with them.