Tag: Checklist for Income Tax Notice

Income Tax notice of Rs 2 crore to a person earning Rs 10,000

Income Tax Notice: A strange case related to the Income Tax Department has come to light in Bihar. Yes, a person earning Rs 10,000 a month in Gaya district of Bihar has received an income tax notice of Rs 2 crore. After receiving the notice, the laborer and his family are very upset. Rajiv Kumar Verma, a resident of Gaya, supports his family by working as a laborer. But now he is troubled by the mistake of the Income Tax Department.

Forced to make rounds of Income Tax Department

According to the report published in News 18, Rajiv Kumar Verma has been forced to make rounds of Income Tax Department for the last four days. But his problem remains the same. Rajiv says that he cannot earn such a huge amount even by working as a labourer all his life. Rajiv Kumar told that he had made an FD of Rs 2 lakh in Gaya branch of Corporation Bank on 22 January, 2015. But he withdrew it on 16 August, 2016 before the time was over. Despite this, a notice of Rs 2 crore has been sent to his house.

Order to pay a fine of Rs 67 lakh in two days

He told that when he approached the Income Tax Department regarding this matter, he was advised to appeal. He was told that this could be a technical issue. He was also told that if it is a technical issue, it can be rectified through appeal. Rajiv has been asked to pay a fine of Rs 67 lakh within two days. He says that I do not have any kind of information related to income tax. He also said that how can a person earning Rs 10,000 a month file a return?

Reason for receiving notice from Income Tax Department

> Wrong information in data: It is possible that due to some technical error in the database of Income Tax Department, wrong transaction has been shown in the account of Rajiv Kumar Verma. Due to this, you may receive a notice from the Income Tax Department.
> Identification error: It is possible that Income Tax Department has wrongly linked Rajiv Kumar Verma with some other person whose income is very high.
> System error: Due to some error in the system of Income Tax Department, this notice may have been generated wrongly. Apart from this, there can be many other reasons like any fraud or any other technical problem etc.

What is the option

If any such person receives a notice from the Income Tax Department in a wrong manner, then he should appeal to the Income Tax Department. The department should be given information related to his income and bank account. Apart from this, such a person should submit his bank statement, PAN card and other necessary documents.

Various types of Important Notices and the reasons for Such

Notice under Section 142(1) – Inquiry before assessment:

Notice under Section 142(1) is usually served to call upon documents and details from the tax payers.

  1. This notice is basically sent after notice u/s 142(1) has already been sent. It means AO was not satisfied with the produced documents or may be AO has not received any documents
  2. If assessee do not comply with the provisions of this section
    • It may result in Best Judgement Assessment u/s 144, or
    • Penalised under Sec 271(1)(b) i.e. Rs10,000 for each failure
    • Prosecution under Sec 276D which may extend upto 1 year with or without fine.

Notice under Section 143(2) – Scrutiny Notice

  1. This notice is basically sent after notice u/s 142(1) has already been sent. It means AO was not satisfied with the produced documents or may be AO has not received any documents.
  2. This notice can be served upto 6 months after completion of relevant assessment year.
  3. The AO can reduce the income below the returned income and can assess the loss higher than the returned loss under Scrutiny Assessment as per Sec 143(3).
  4. The notice might ask you to produce documents in support of deductions, exemptions, allowances, reliefs other claim of loss you have made and provide proof of all sources of income.
  5. Section 143(2) enables the Assessing Officer to make a regular assessment after a detailed inquiry.
  6. If assessee do not comply with the provisions of this section:
    • It may result in Best Judgment Assessment u/s 144
    • Penalised under Sec 271(1)(b) i.e. Rs10,000 for each failure
    • Prosecution under Sec 276D which may extend upto 1 year with or without fine.

 Notice under Section 143(1) – Letter of Intimation

Three types of notices can be sent under section 143(1)

  1. Intimation where the notice is to be simply considered as final assessment of your returns since the AO has found the return filed by you to be matching with his computation under section 143(1).
  2. A refund notice, where the officer’s computation shows amount excessively paid by the assessee.
  3. Demand Notice where the officer’s computation shows shortfall in your tax payment. The notice will ask you to pay up the tax due within 30 days.
  4. Time limit for the notice to be served is up to 1 year after completion of relevant assessment year.

Notice under Section 148 – Income escaping assessment

  1. If AO has reasons to believe that any income chargeable to tax has escaped assessments, he may assess or reassess such income, which is chargeable to tax and has escaped assessment.
  2. To initiate proceedings under Sec 147, the AO is required to have a reason necessarily.
  3. The onus of stating the reasons is on AO.

Notice under Section 156 – Notice of Demand

  1. Where any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed, the AO shall serve upon the assessee a notice of demand, specifying the sum do payable.
  2. The tax so demanded is payable, generally within 30 days of the service of notice of demand, which may be reduced by the AO with prior approval of JCIT.
  3. In case of delay in payment of tax, the assessee shall be deemed to be in default and liable to pay simple interest u/s 220(2) @ 1% for every month or part thereof from the end of the period allowed u/s 156, further penalty u/s 221(1) may be imposed.

Notice under Section 139(9) – Defective Return

  1. What is a Defective Return? – A return shall be considered as a defective return unless it is accompanied by the required documents under the Act. e.g. Annexures, statements, proofs of tax, reports etc.
  2. If the AO considers that the return filed by the assessee is defective, he may intimate the defect to the assessee and gave him an opportunity to rectify the defect within 15 days from the date of such intimation or within such extended period as may be allowed by the AO.
  3. If the defect is not rectified within the aforesaid period, the return shall be considered as an invalid return and accordingly the assessee will be deemed to have furnished no return.

Notice under Section 245 – Set off of refunds against tax remaining payable

  1. Where any amount of refund is pending to the assessee and also any sum is payable under the Act, the AO may adjust the amount to be refunded with the sum payable by the assessee. Basically it can be related to the ‘inter adjustment of transactions’.
  2. Notice under Section 245 is more of intimation letter and less of demand notice.
  3. Under this notice, the AO intimates the effect of the adjustments made with the amount due to assessee. It indicates the adjusted amount which can be either merely intimation or demand notice of lesser amount still payable after the adjustment.

Income Tax notice for cash transaction

Depositing an amount exceeding ₹10 lakh in a single or combined financial year attracts attention from the Income Tax Department (ITD) in India. Any cash deposit surpassing ₹10 lakh in a financial year (April 01 to March 31) across all your savings accounts is duly reported to the ITD. The Central Board of Direct Taxes (CBDT) requires banks to report such transactions. Even if the deposit is divided among multiple accounts, any cumulative amount exceeding ₹10 lakh will still be flagged.

The misconception that cashless transactions are less traceable by the Income Tax Department has arisen due to the increasing prevalence of such transactions. Nevertheless, this belief is incorrect. This is because banks and other financial institutions must notify the Income Tax department of transactions surpassing a specified threshold. This encompasses card payments, UPI transactions, as well as cash deposits, and withdrawals beyond a designated limit.

The department employs advanced data analytics tools to detect disparities between declared income and incurred expenses. It can cross-check information from diverse sources such as bank statements, property records, investment details, and travel records to construct a comprehensive financial profile of individuals. Apart, it also can collect information from external sources such as employers, travel agencies, and stock exchanges to validate income sources and pinpoint possible discrepancies.

This degree of scrutiny proves valuable in suspected cases of tax evasion, enabling the department to initiate scrutiny assessments, issue notices, and conduct inquiries directly to accumulate evidence and recover taxes. Below is a compilation of common transactions that could trigger a tax notice, even when conducted in cash:

Depositing large amounts in cash in savings accounts

Depositing an amount exceeding ₹10 lakh in a single or combined financial year attracts attention from the Income Tax Department (ITD) in India. Any cash deposit surpassing ₹10 lakh in a financial year (April 01 to March 31) across all your savings accounts is duly reported to the ITD. The Central Board of Direct Taxes (CBDT) requires banks to report such transactions. Even if the deposit is divided among multiple accounts, any cumulative amount exceeding ₹10 lakh will still be flagged.

Surpassing the ₹10 lakh limit doesn’t inherently suggest tax evasion, but it does prompt scrutiny from the Department. Explaining the source of the deposited funds becomes necessary, particularly if it doesn’t align with your declared income. If the explanation is considered unsatisfactory or if discrepancies arise in your tax returns, you could potentially face additional inquiries or penalties.

The ITD’s evaluation is also influenced by the intended use of the deposited funds. For instance, placing business income into a personal account could lead to concerns. Your comprehensive financial profile, encompassing income sources, expenses, investments, and other significant transactions, is taken into account by the ITD. Ensuring compliance is essential; maintaining accurate records and aligning your tax returns with your income and expenses is crucial to prevent unwarranted scrutiny.

Fixed deposits made with cash

Given the recent uptick in fixed deposit (FD) rates, these have become increasingly appealing choices for investors, especially for those in search of a steady and predictable income. The existing limit for reporting cash deposits to the ITD is ₹10 lakh within a single financial year (April 01 to March 31), irrespective of the purpose, including fixed deposits. It is crucial to take note of multiple deposits across different bank accounts. Even if you divide the cash deposit into smaller amounts across various accounts, any combined sum surpassing ₹10 lakhs will be brought to the attention of authorities.

Surpassing the limit doesn’t inherently indicate tax evasion, but it does attract the ITD’s attention, necessitating an explanation for the source of the funds. This scrutiny applies to any fixed deposit exceeding ₹10 lakhs.

The ₹10 lakh limit applies to the cumulative value of your FD holdings across all accounts and financial institutions, not solely to the individual deposit amount. Similar to cash deposits, surpassing this threshold may trigger inquiries regarding the source of funds, particularly if it doesn’t align with your declared income.

Purchases of shares, mutual funds, and bonds made in cash

Investing in bonds, shares, mutual funds, and debentures with cash transactions could result in an income tax notice if the investment surpasses a threshold of ₹10 lakh. Digital transactions, on the other hand, leave behind an online trail for both investors and the ITD alike.

Surpassing a particular threshold may prompt scrutiny from the ITD, but it does not automatically indicate the issuance of a tax notice or any wrongdoing. The ITD’s emphasis lies in identifying inconsistencies between declared income and expenses rather than discouraging investment through specific thresholds.

Repaying credit card bill in cash

There is no explicit rule mandating automatic scrutiny for cash payments towards credit card bills, irrespective of the amount. However, if you make a cash payment for a monthly credit card bill exceeding ₹1 lakh, the department automatically seeks information about the source of funds.

Surpassing any high-value transaction threshold, which includes cash payments, could initiate general scrutiny by the ITD. This examination is designed to uncover possible disparities between your declared income and expenses and is not specifically focused on credit card bill payments.

Cash payments related to properties

In India, when acquiring a property valued at over ₹30 lakhs, the ITD mandates the buyer to disclose the origin of the funds utilized for the purchase. This measure is implemented to counteract tax evasion and prevent money laundering activities.

The existing threshold for compulsory declaration of the source of funds is ₹50 lakhs for property acquisitions in urban areas and ₹20 lakhs for rural areas. Nevertheless, certain states may enforce more stringent thresholds, hence it is advisable to verify the specific regulations applicable in your region.

You have the option to declare the source of funds by including it in the registration documents or by submitting Form 26QB to the ITD. Even if the property purchase value is below the threshold, the Department retains the authority to request the source of funds if there are suspicions of discrepancies in your income or other transactions. Neglecting to declare the source of funds may result in penalties, tax assessments, and potentially lead to investigations.

To address an ITD notice concerning high-value cash transactions, it is essential to possess sufficient documentation substantiating your assertion about the source of funds. This documentation may include bank statements, investment records, or inheritance papers.

If you are uncertain or have concerns regarding the declaration of the source of funds, it is advisable to seek advice from a qualified tax advisor for personalized guidance. Upholding transparency and adhering to tax regulations is essential for prudent financial management and mitigating potential legal complications.

Income Tax Department Issues Notices for Mismatched Income Disclosures

INCOME TAX DEPARTMENT ISSUES MASS NOTICES FOR ITR MISMATCH FOR FY 2022-23 AND FY 2021-22

The issue concerns bulk compliance communication from the Income Tax Department regarding income mismatches. In most cases, the taxpayer has already disclosed their income, which doesn’t match with the AIS/TIS. An example is provided, where the disclosed interest in the ITR differs from the interest as per AIS/TIS, leading to a communication of mismatch. It’s emphasized that the system’s method of checking the interest from unsecured loans/non-bank parties is incorrect. The correct disclosure method is highlighted, along with relevant images depicting the issue.

BULK COMPLIANCES COMMUNICATION FROM INCOME TAX DEPT FOR MISMATCH OF INCOME!!

In majority of such cases, assessee has duly disclosed his income and there is no mismatch if compared with AIS/TIS.

Sharing one example and requesting @IncomeTaxIndia @FinMinIndia  to look into the matter before it turns into unnecessary headache of honest taxpayers & professionals

Interest as per AIS/TIS – Pic 1
From Bank              – 448227
From Other Party – 503250
(TDS Deducted)

Total Interest        – 951477

Disclosure in ITR – Pic-2
Interest on Deposits (Bank/Post Office)- 448227
Interest-OTHERS                                             –  511793

Total Int. disclosed in Other Sources    – 960020
(higher than appearing in AIS/TIS)

Now in above case, Mismatch of Rs. 503250 has been communicated i.e. Interest of Party (other than bank) on which TDS has been deducted has been considered as Mismatch – PIC 4

System is checking Interest from Unsecured loan/Non Bank parties etc. in column Int. on Deposits (Bank/post office/Cooperative Society)-[eligible for 80TTB dedcution] , WHICH IS TOTALLY INCORRECT.
This SHALL BE disclosed in Interest-Others in Other Sources head and has been disclosed the same way!!

Income tax return filing: Did you get an intimation notice under Section 143(1)

After an income tax return (I-T return) has been filed, the tax department sends an intimation under section 143(1) to highlight any discrepancy that might arise from a lower tax paid than what was meant to be paid.

In case of a lower tax paid, the tax payer is meant to pay the balance amount and resolve the issue. And in case of excess amount, the tax refund is disbursed by the department to the assessee’s bank account that is linked for this very purpose.

What is intimation under section 143(1)?.1)?

Individuals are supposed to file their income tax returns on or before July 31 of the assessment year. After the return has been filed, the tax department carries out processing of the return.

During this process, the tax department might come across a number of discrepancies such as that of data, calculations, among others. In such cases, the department will send a notice — also referred to as intimation under section 143(1).

This notice is sent on the tax payer’s registered email ID. An SMS is also sent on the registered mobile number informing that the intimation notice has been sent to the registered email ID.

An array of scenarios

Once the intimation is received from the department, there could be a number of scenarios that follow, e.g., wrong deduction of TDS from salary and under-reporting of income.

Chirag Chauhan, Founder of CA Chauhan & Co, says there could be three likely scenarios. The first one is that the tax department does not raise any demand for income tax. In this case, assessee does not have to worry over anything. The second scenario could be that of a tax refund. And the third is that there is a tax demand.

“It is important for the tax payer to first identify the scenario, and accordingly rectify the computation. For instance, if TDS is not considered by the department, then one can apply for it to be considered — thereby reducing the tax liability. There are, therefore, multiple permutations and combinations and the response will vary from case to case,” says Mr Chauhan.

There could be a situation that these changes are not reflected in the tax return by December 31. In such a case, one can always rectify the return afterwards. “The deadline for filing a revised return gets over on Dec 31, but one can always rectify his/her return later. There is also an option of raising a grievance or approaching the CPC,” says Mr Chauhan.

Time period

Although the department usually sends a notice within a short period of filing of tax return, the maximum time limit of sending this intimation is nine months from the end of financial year in which the return has been filed.

ITR Notice: Notices are coming as soon as you fill ITR, don’t panic… this can also be a good thing!

Income Tax Department sends the notices for various reasons like not filing the income tax returns, any defect while filing the returns, or other instances where the tax department is requiring any additional documents or information.

Nothing is frightening or alarming about the notice that is received. But the taxpayer has to first understand the notice, the nature of the notice, the requestor’s order in the notice, and take steps to comply.

IndiaFilings offers a comprehensive suite of services for families and businesses to help them in maintaining the compliances. In case an income tax notice is received get in touch with the Tax Expert at IndiaFilings to understand the income tax notice and determine a course of action.

Don’t panic: The first and most important step is to remain calm and not panic. Receiving an income tax notice can be scary, but instead of panicking, it is important to exercise patience. Therefore, it is very important to understand the reason behind the Tax Notice. The Income Tax Department explains in detail the basic issue along with the time limit in its notice.

Verify the notice: It is important for you to ensure that the notice you receive is genuine and not a trap to obtain sensitive financial information. Avinash Shekhar, Founder and CEO of TaxNodes, says that the actual income tax notice usually contains the taxpayer’s Permanent Account Number (PAN), a Unique Document Identification Number (DIN) and other important information. You can check the authenticity of the notice by visiting the official Income Tax Department website.

Let us understand the various types of notices or intimations issued by the Income Tax Department.

Type of NoticeDescription
Notice u/s 143(1) – IntimationThis is one of the most commonly received income tax notices. The income tax department sends this notice seeking a response to the errors/ incorrect claims/ inconsistencies in an income tax return that was filed.If an individual wants to revise the return after receiving this notice, it must be done within 15 days.Else, the tax return will be processed after making the necessary adjustments mentioned in the 143(1) tax notice.
Notice u/s 142(1) – InquiryThis 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 and information.
Notice u/s 139(1) – Defective ReturnAn income tax notice under Section 139(1) would be issued if the income tax return filed does not contain all necessary information or incorrect information.
If tax notice under Section 139(1) is issued, you should rectify the defect in the return within 15 days.
Notice u/s 143(2) – ScrutinyAn income tax notice under Section 143(2) is issued if the tax officer was not satisfied with the documents and information that was submitted by the taxpayer.Taxpayers who receive notice under Section 142(2) have been selected for detailed scrutiny by the Income Tax department and will have to submit additional information.
Notice u/s 156 – Demand NoticeThis 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 from the taxpayer.
Notice Under Section 245If the officer has reason to believe that tax has not been paid for the previous years and he wants to set off the current year’s refund against that demand, a notice u/s 245 can be issued.However, the adjustment of demand and refund could be done only if the individual has been provided proper notice and an opportunity to be heard. The recipient has to respond to the notice is 30 days from the day of receipt of the notice.If the individual does not respond within the specified timeline, the assessing officer can consider this as consent and proceed with the assessment.Therefore, it is advisable to respond to the notice at the earliest.
Notice Under Section 148The officer may have a reason to believe that you have not disclosed your income correctly and therefore, you have paid lower taxes.Or the individual may not have filed his return at all, even if you must have filed it as per law. This is termed as income escaping assessment. Under these circumstances, the assessing officer is entitled to assess or reassess the income, according to the case.Before making such an assessment or reassessment, the assessing officer should serve a notice to the assessee asking him to furnish his return of income.The notice issued for this purpose is issued under the provisions of Section 148.

The Income Tax Act,1961 has laid down the law for the service of a notice, summons, order, or any other communication by delivering or transmitting a copy to the person in any method that is sanctioned under the Act. Here are the various ways in which the Income Tax Notice is served.

Recipient of the Notice: Income Tax Notices are directly addressed to the individual but if they are meant for a minor they are addressed to the guardian Incorrect description of the assessee is usually rectifiable but in case of scenarios where the status of the assessee is entangled with the identity of the assessee, the name mentioned on the face of the return may become material.

Service by Post: Service of the income tax notice can be processed through a registered post. Section 27 of the General Clauses Act 1897, specifies that the service is to be initiated by properly addressing, pre-paying, and posting by a registered post a letter that contains the document. This delivery can be made to the address, an employee, agent, or any other authorized person.

Service by Affixture: In case a defendant refuses to sign the acknowledgment or where the officer is not able to find the defendant, then the office has to affix a copy of the summons or notice or requisition order on the outer door or any other noticeable part of the residence where the defendant is residing or pursuing the business activities.

HUFs and the Partnership Firm: If the officer discovers the total partition of any HUF it may be recorded by the assessing officer and the notices can be served on the person who was the manager of the HUF. If the concerned person is deceased then the notice will be served to all adults who were firm or other Association of Persons, notices concerning the income of the firm or the association may be served on any personnel who were former partners or the members of the association that is assessed to taxation.

Closed Business: In case of closed business, the assessing officer has to serve as a notice on the person whose income is subject to assessment. In the case of the firm or an association of persons a notice will be served to any of the members who have been a part of the firm during discontinuation. Concerning a company, the notice will be served on the principal officer or the Director.

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.

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.

Checklist for Income Tax Notice

Income Tax Department sends the notices for various reasons like not filing the income tax returns, any defect while filing the returns, or other instances where the tax department is requiring any additional documents or information.

Nothing is frightening or alarming about the notice that is received. But the taxpayer has to first understand the notice, the nature of the notice, the requestor’s order in the notice, and take steps to comply.

IndiaFilings offers a comprehensive suite of services for families and businesses to help them in maintaining the compliances. In case an income tax notice is received get in touch with the Tax Expert at IndiaFilings to understand the income tax notice and determine a course of action.

Let us understand the various types of notices or intimations issued by the Income Tax Department.

Type of NoticeDescription
Notice u/s 143(1) – IntimationThis is one of the most commonly received income tax notices. The income tax department sends this notice seeking a response to the errors/ incorrect claims/ inconsistencies in an income tax return that was filed.If an individual wants to revise the return after receiving this notice, it must be done within 15 days.Else, the tax return will be processed after making the necessary adjustments mentioned in the 143(1) tax notice.
Notice u/s 142(1) – InquiryThis 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 and information.
Notice u/s 139(1) – Defective ReturnAn income tax notice under Section 139(1) would be issued if the income tax return filed does not contain all necessary information or incorrect information.
If tax notice under Section 139(1) is issued, you should rectify the defect in the return within 15 days.
Notice u/s 143(2) – ScrutinyAn income tax notice under Section 143(2) is issued if the tax officer was not satisfied with the documents and information that was submitted by the taxpayer.Taxpayers who receive notice under Section 142(2) have been selected for detailed scrutiny by the Income Tax department and will have to submit additional information.
Notice u/s 156 – Demand NoticeThis 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 from the taxpayer.
Notice Under Section 245If the officer has reason to believe that tax has not been paid for the previous years and he wants to set off the current year’s refund against that demand, a notice u/s 245 can be issued.However, the adjustment of demand and refund could be done only if the individual has been provided proper notice and an opportunity to be heard. The recipient has to respond to the notice is 30 days from the day of receipt of the notice.If the individual does not respond within the specified timeline, the assessing officer can consider this as consent and proceed with the assessment.Therefore, it is advisable to respond to the notice at the earliest.
Notice Under Section 148The officer may have a reason to believe that you have not disclosed your income correctly and therefore, you have paid lower taxes.Or the individual may not have filed his return at all, even if you must have filed it as per law. This is termed as income escaping assessment. Under these circumstances, the assessing officer is entitled to assess or reassess the income, according to the case.Before making such an assessment or reassessment, the assessing officer should serve a notice to the assessee asking him to furnish his return of income.The notice issued for this purpose is issued under the provisions of Section 148.

The Income Tax Act,1961 has laid down the law for the service of a notice, summons, order, or any other communication by delivering or transmitting a copy to the person in any method that is sanctioned under the Act. Here are the various ways in which the Income Tax Notice is served.

Recipient of the Notice: Income Tax Notices are directly addressed to the individual but if they are meant for a minor they are addressed to the guardian Incorrect description of the assessee is usually rectifiable but in case of scenarios where the status of the assessee is entangled with the identity of the assessee, the name mentioned on the face of the return may become material.

Service by Post: Service of the income tax notice can be processed through a registered post. Section 27 of the General Clauses Act 1897, specifies that the service is to be initiated by properly addressing, pre-paying, and posting by a registered post a letter that contains the document. This delivery can be made to the address, an employee, agent, or any other authorized person.

Service by Affixture: In case a defendant refuses to sign the acknowledgment or where the officer is not able to find the defendant, then the office has to affix a copy of the summons or notice or requisition order on the outer door or any other noticeable part of the residence where the defendant is residing or pursuing the business activities.

HUFs and the Partnership Firm: If the officer discovers the total partition of any HUF it may be recorded by the assessing officer and the notices can be served on the person who was the manager of the HUF. If the concerned person is deceased then the notice will be served to all adults who were firm or other Association of Persons, notices concerning the income of the firm or the association may be served on any personnel who were former partners or the members of the association that is assessed to taxation.

Closed Business: In case of closed business, the assessing officer has to serve as a notice on the person whose income is subject to assessment. In the case of the firm or an association of persons a notice will be served to any of the members who have been a part of the firm during discontinuation. Concerning a company, the notice will be served on the principal officer or the Director.

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.

But it is always better to review the notice from the Tax experts only. Therefore, once the Income-tax notice copy is uploaded, the tax experts will review the same and come up with the best probable solution.

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.