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Can I deposit 2 lakh cash in my account? Received Income Tax Notice

Cash Deposit Limit in Saving Account as per Income Tax

Savings accounts in most banks have a minimum balance requirement. But is there a cash deposit limit in savings account? Read ahead to know more about it.

How Much Money Can You Keep in Savings Account?

There is no limit on how much money you can keep in a savings bank account.

However, banks have a minimum balance requirement that needs to be maintained in your savings bank account. If you fail to do so, you need to pay a penalty.

Some banks do allow you to open zero-balance savings accounts, which means you can withdraw all your money from the account without attracting a penalty.

What is the Cash Deposit Limit in Savings Account as per Income Tax?

Cash deposit refers to either depositing money manually into your account or through modes like money transfer or ATM. People often deposit money in banks to carry out transactions or to keep it safe. You can withdraw the money after the deposit has been made, and it will still be referred to as a cash deposit transaction.

The cash deposit limit in savings account as per income tax is Rs.10 Lakh during a financial year. All banks or financial institutions must declare large cash deposits according to Section 114B of the Income Tax Act, 1962.

Cash deposits are monitored by the Income Tax department, and the cash deposit limit in savings account refers to the amount deposited by each person. It is calculated taking into account all the bank accounts of an individual.

Cash Deposit Limit in Savings Account per Day

The cash deposit limit in savings account per day is Rs.1 Lakh. You can, however, deposit up to Rs.2,50,000 in a day as long as you don’t do it too often.

You must just remember that the cash deposit limit in savings account in a financial year is Rs.10 Lakh and you must not cross that amount. If you deposit more than that amount, the IT department may be notified.

What Will Happen if You Cross the Cash Deposit Limit in Savings Account per Month?

If you cross the cash deposit limit in savings account, the banks are required to report the excess transactions to the Income Tax Department. But, they will not be taxed outright. Here are certain things that you must keep in mind regarding the cash deposit limit in savings account –

Crossing the cash deposit limit in savings account per day of Rs.2.5 Lakh for general and Rs.5 Lakh by senior citizens is considered a large deposit
The IT department will contact you through Email or SMS to furnish details about the source of income
To deposit more than Rs.50,000, you will have to show your PAN card details if it is not already provided to the bank
On being unable to explain the origin of the income, it is well within the rights of the IT department to serve notices under Section 68 of the IT Act
If you still cannot verify the income sources, a 60% tax, 25% surcharge, and 4% cess is imposed
The IT department also prescribes penalties if you end up receiving Rs.2 Lakh or more as a cash deposit in a financial year

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.

Can I Deposit 3 Lakh Cash In My Savings Account?

You can deposit Rs.3 Lakh in your savings bank account as the cash deposit limit in savings account as per income tax is Rs.10 Lakh in a year. But you can’t deposit the total amount in a single day as the cash deposit limit in savings account per day is just Rs.1 Lakh.

What Is The Maximum Cash Deposit Limit In Savings Account?

You can deposit Rs.10 Lakh in your savings bank account without attracting the attention of the Income Tax department.

Is Cash Deposit In Savings Account Taxable?

Yes, cash deposit in savings account is taxable according to the Income Tax Act, 1962.

Can I Deposit 50,000 Cash In Bank Without PAN?

You will need your PAN card details to deposit Rs.50,000 or more. But in case you don’t have a PAN card, you can declare about the particulars of the deposit in Form 60.

How Much Money Can I Keep In My Savings Account In India?

There is no limit in India as to how much money you can keep in your savings bank account.

The I-T Department sends notices under various sections of the Income Tax Act, each pertaining to a specific issue

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.

Restriction on Cash Transactions Under Income Tax Act Rules for 2024

Restriction on Cash Transactions: Provisions and Penalties lowly and gradually, the Indian economy is getting digitized and ultimately moving towards a cashless economy. Electronic transactions ensure a clear money trail and make it very difficult for tax evaders. Many of provisions that existed and introduced from time to time in Income tax act, putting restrictions on cash transactions. The new provisions introduced are the result of the proposal submitted by Supreme Court’s constituted Special Investigation Team in July, 2011. The objective of imposing restrictions on cash transactions is to curb the flow of domestic black money which is not only adversely affecting the revenues of the Government but is also affecting the investment for productive purposes, because most of the black money is transacted in cash, it remains unaccounted and quite a sizable amount remains unproductive and is stored in the form of cash or remains invested in low priority investments such as gold, jewellery etc. The restrictions are intended to move

towards a less cash economy and to reduce generation and circulation of black money.

In a bid to curb black money as well as to limit the number and amount of cash transactions, the government has come out with some new provisions and related rules and prohibited some types of cash payments in the Finance Acts. The effects of restrictions under provisions of income tax act are as follows.

Restrict cash transactions which results disallowances of expenses or deduction under chapter VIA of income tax act in computation of taxable income and allowing deduction to incentivise better compliance.
Penalising cash transactions above threshold limits to create effective deterrence.

Few of the provisions under income tax act and relevant income tax rules are given below:

Sl. No.	Transactions/ relevant sections under income tax act	Provisions at a glance	Consequences in violation of Provisions related to for cash transaction/ Penalty
1	Exemption of Income in the hands of political Parties – Section 13A	Political parties which is registered with the Election Commissioner of India, are exempt from paying income tax. To avail exemption political parties are required to submit a report with Election Commissioner of India and furnish details of contribution received in excess of ₹ 20,000 from any person. As amended in Finance Act 2017, to discourage cash transaction and to bring transparency in the source of funding to political parties, the amendments have been made.	The income to the extent will not be exempted. If return of income as required u/s 139(4B) is not submitted or if return is submitted belatedly that is after the due date, exemption u/s 13A will not be available.

		No donation of ₹ 2,000 or more is received otherwise than by an account payee cheque/draft/use of electronic clearing system through a bank account or through electoral bonds .Political parties keeps and maintains such books of accounts to satisfy the Assessing Officer and such accounts to be audited by an Accountant as prescribed under income tax act.Income tax return to be filed under section 139(4B) & within time limit prescribed under section 139(1).
02	Disallowances of Capital Expenditures, depreciation and investment allowances on cash payments – Section 35AD / Section 43(1).	Section 35AD was introduced with effect from the assessment year 2010-11 to provide for investment linked tax incentives. Under the provisions if certain conditions are satisfied, the business assesse engaged in the specified business are eligible for deduction @ 100% (few cases weighted deduction @ 150%) of the capital expenditure incurred wholly and exclusively for the purpose of such specified business carried on in the previous year.	*Deduction u/s 35AD shall not be available.Will not form part of “ actual cost” u/s 43(1) and consequently depreciation u/s 32 and investment allowance u/s 32AD pertaining to such payment cannot be claimed.***
		Prior to Finance Act 2017, there was no restriction on deduction of capital expenditure as stated above in case acquisition of any capital asset in any mode of payment. To discourage cash payment for purchase of capital assets, section 35AD and section 43(1) have been amended with effect from the assessment year 2018-19 as follows:
		No deduction under section 35AD shall be allowed in respect of payment or aggregate payment per day made to a person against such expenditure otherwise, than an account payee cheque/draft/use of electronic clearing system through a bank account exceeds ₹ 10,000.
		(ii) Section 43(1) is amended to provide that where an assessee incurs any expenditure for acquisition of any asset in respect of which a payment or aggregate payment made to a person in a day, otherwise than by cheque or bank draft or electronic clearing system exceeds ₹ 10,000/-, such payment shall be ignored to determine the actual cost of such asset
3	Payments exceeding	Prior to amendment of Finance Act 2017,	*No deduction is*
	certain sum made	expenditure incurred(which is otherwise	*allowable in*
	otherwise than by	deductible under the other provisions of the act	*computation of income*
	account payee	for computation of income from business and	*from business or*
	cheques or bank	profession) and payment made to a person in a	*profession in respect of*
	drafts etc – Section	day exceeds ₹ 20,000 (₹ 35,000 in the case of	*which a payment or*
	40A(3) and 40A(3A).	payment for plying, hiring or leasing of goods	*aggregate of payments*
		carriage) otherwise than by an account payee	*made to a person in a*
		cheque or account payee demand draft, such	*day, otherwise than by a*
		expenses are not allowable as deduction under	*crossed account payee*
		Section 40A(3) in computation of income from	*cheque or an account*
		business and profession. However few exceptions	*payee bank draft /use of*
		are provided by Rule 6DD of income tax rules.	*electronic clearing*
		This resulted increase in taxable income from	*system through a bank*

		business or profession.	*account exceeding* ₹ *10,000/-*.
		In order to disincentives cash transactions, section 40A (3) has been amended and limit of cash payment per day to a person has been reduced from ₹ 20,000 to ₹ 10,000 from assessment year 2018-19. However no changes to the monetary limit of ₹ 35,000has been made in the case of payment for plying, hiring or leasing of goods carriage which was effective from October 2009.The disallowances to be applicable if the payment made in a day to a person otherwise than an account payee cheque/draft/use of electronic clearing system through a bank account.	This results increase in taxable income, in computation of profits and gains from business or profession.
		As per section 40A(3A), the restriction is also applicable
		If the tax payer had claimed a deduction in respect of any expenditure relation to any previous year.Payment to such expenditure is made during the current year.
		If during the current year payment made in a day otherwise than by an account payee cheque or account payee demand draft/use of electronic clearing system through a bank account exceeds ₹ 10,000. This monetary limit has also been reduced from ₹ 20,000 to ₹ 10,000 from the assessment year 2018-19.
4	Deduction in respect of Health Insurance Premium – Section 80D	Deduction is allowable from Gross Total Income of a tax payer who is an Individual (may be resident/non-resident)/Indian citizen or foreign citizen) or a HUF (may be resident/non-resident) if	*No deduction shall be allowed* from gross total income, if health insurance premium made by the tax payer in mode of cash.
		Payment made out of income chargeable to taxPayment should be made any mode other than cash (exception is payment for preventive health check-up)
		Regarding maximum limit of deduction please refer to the provision.
5	Donation – Section 80G	Under the existing provisions of section 80G, deduction under Chapter VIA of income tax act is not allowed in respect of donation made of any sum exceeding ₹ 10,000/-, if the same is not paid by any mode other than cash. Section 80G contains details of Donee, maximum limit and deduction as a % of net qualifying amount for deduction from Gross Total Income (GTI) to arrive at Taxable Income. In order to provide cash less economy and transparency, section 80G has been amended by Finance Act 2017, so as to provide that no deduction shall be allowed under the section 80G in respect of donation of any sum exceeding ₹2,000/- unless such sum is paid by any mode other than cash.	*No deduction is allowed under Chapter VIA of income tax act from Gross Total Income if Donation paid in cash exceeding* ₹*2,000.*

6	Donations for scientific research or rural development – Section 80GGA	An Assessee (other than an asessee whose Gross Total Income includes income chargeable under the head “profits and gains of business or profession”) is entitles to deduction in respect of certain donations for scientific, social or statistical research or rural development programme or for carrying out an eligible project or National Urban Poverty Eradication Fund shall be allowed (Subject to certain conditions). Such donation can be given in cash, or by cheque or draft. However no deduction is allowed in respect of cash transaction/contribution exceeding ₹10,000 from the assessment year 2013-14	100% of donations or contributions made other than cash only is allowable as deduction.No deduction shall be allowed if contribution is paid in cash in excess of Rs.10,000.
7	Donations by	Any sum contributed by an Indian company to	*No cash payment*
	companies / any	any political party or an electoral trust is	*allowed as deduction in*
	person to political	deductible while computing taxable income.	*computation of taxable*
	parties. – Section	From the assessment year 2014-15, no deduction	*income.* Non deduction
	80GGB / Section	shall be allowed in respect of any sum	results increase in tax
	80GGC	contributed by way of cash.	payable.
8	Prohibition on acceptance of cash loans, deposits, etc. – Section269 SS	As per provisions section 269SS, a person shall not accept any loan or deposit or “specified sum” from any other person otherwise than by an account payee cheque or account payee bank draft (or use of electronic clearing system through a bank account) if,	Section 271D of Income Tax Act 1961 provides that if a loan or deposit is accepted in contravention of the provisions of section 269SS, then a *penalty equivalent to the amount of such loan or deposit, so taken or accepted,* may be levied by the Joint commissioner. However by virtue of section 273, the above penalty is not leviable if the assessee proves that there was a reasonable cause for the failure in compliance of the provisions
		(a) the amount of such loan or deposit or the aggregate amount of such loan and deposit ; or
		(b) on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid and the amount or the aggregate amount remaining unpaid ; or
		(c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b),
		is ₹ .20,000 or more:
		The limit of ₹ 20,000 will also apply to a case even if on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from such depositor is remaining unpaid and such unpaid amount along with the loan or deposit to be accepted, exceeds the aforesaid limit.
		“Specified Sum” means any sum of money receivable whether as advance or otherwise, in relation to transfer of an immovable property, whether or not transfer takes place.
9	Prohibition on	It provides that any branch of a banking company	Section 271E of Income
	repayment of loans	or a cooperative society, firm or other person	Tax Act 1961 provides
	or deposits in cash –	shall not repay any loan or deposit made with it	that if a loan or deposit is
	Section 269T	or any specified advance (any sum in nature of	repaid in contravention of
		advance , by whatever name called in relation to	the provisions of section
		transfer of an immovable property, whether or	269T then a *penalty*
		not such transfer takes place) received by it	*equivalent to the amount*
		otherwise than by an account payee cheque or	*of such loan or deposit*
		account payee bank draft drawn in the name of	*repaid may be levied* by

		the person (or use of electronic clearing system through a bank account), who has made the loan or deposit, if The amount of the loan or deposit together with interest is ₹ 20,000 or more, or The aggregate amount of loans or deposits held by such person, either in his own name or jointly with other person on the date of such repayment together with interest, is ₹20,000 or more.	the Joint commissioner. However by virtue of section 273, the above penalty is not leviable if the assessee proves that there was a reasonable cause for the failure in compliance of the provisions
The Finance Act, 2015 amended Section 269SS and Section 269T to include transactions in immovable property in order to curb black money circulation. As per proviso of section 269SS and section 269T, section is not applicable on any loan or deposit taken or accepted from:- (a) Government (b) any banking company, post office savings bank or co-operative bank (c) any corporation established by a Central, State or Provincial Act. (d) any Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956) (e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette.
10	Restriction on Cash Transactions – Section 269ST	With a view to promote digital economy and create a disincentive against cash economy, a new section 269ST has been inserted in the Income- tax Act, 1961(the Act) vide Finance Act, 2017. The said section inter-alia prohibits receipt of an amount of two lakh rupees or more by a person, in the circumstances specified therein, through modes other than by way of an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account. It is applicable whether the recipient person is a seller of goods or provider of service transferor of capital assets or any other person. It prohibits receipt of an amount of ₹ 2 lakh or more by a person,	If any person receives any amount contravention of the provision of section 269ST, shall be *liable to pay penalty of a sum equal to the amount of such receipt.* However, penalty is not leviable by the Joint Commissioner if it is proved by such person that there is a good and sufficient reason for such contravention.
		(i) In aggregate from a person in a day (Example: if a person receives ₹ 2. 25 lakhs in cash against two different invoices raised for the service provided/goods supplied amounting to ₹ 1 lakhs and ₹ 1.25 lakhs). or
		(ii) In respect of a single transaction. (Example: If there is a single invoice for service provided/goods supplied amounting to ₹ 2.90 lakhs against which cash has been received on different days for ₹ 1.6 lakhs and ₹ 1.30 lakhs) or
		(iii) In respect of transactions relating to one event or occasion from a person. (Example: If birth day celebration is one occasion and a person receives amount of ₹ 2.50lakhs)
		(iv) Otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account.

Provisions of this section shall not apply to any receipt by Government/any banking company, post office savings bank or co-operative bank; Transactions of the nature referred to in section 269SS – i.e. acceptance of Loan, deposits etc,Such other persons or class of persons or receipts etc.that may be notified by the Central Government. Persons from whom the loan or deposit is taken or accepted and if the person by whom the loan or deposit is taken or accepted are both having Agricultural Income and neither of them has any Income chargeable to Tax. Any corporation established by a Central, State or Provincial Act It is further clarified that the receipt of one installment of loan repayment in respect of a loan shall constitute a ‘SINGLE TRANSACTION’ as specified in clause (b) of section 269ST of the Act and all the installments paid for a loan shall not be aggregated for the purposes of determining applicability of the provisions section 269ST.

It may be noted that the specified mode of payment namely, crossed account payee cheque or draft as stated in the relevant sections above has been expanded by Finance Act 2017 to include any payment through the use of electronic clearing system through a bank account. Such a clearing system may include Real Time Gross Settlement (RTGS), credit card or debit card payments and even payments through the Aadhaar Card System.

Promotion of digital payment to an eligible assesse covered in section 44AD:

The existing provisions of section 44AD of income tax act, inter-alia, provides for a presumptive income scheme in case of eligible assesses (individuals, HUFs and firms excepting LLPs) carrying out eligible businesses. As per provisions under above scheme, in case of an eligible assessee engaged in eligible business having total turnover or gross receipts not exceeding two crore rupees in a previous year, a sum equal to eight per cent of the total turnover or gross receipts deemed to be his business income chargeable to tax under the head “profits and gains of business or profession. Amendment provisions in Finance Act provides for lower presumptive profit rate of 6% on turnover realized in account payee cheque or DD or electronic clearing system through a bank account on or before due date for filing Income Tax Return.

The amendment is made in Finance 2017 (effective from assessment year 2017-18) in order to promote

digital transactions and to encourage small unorganized business to accept digital payments by reducing the existing rate of deemed total income of 8% to 6% in respect of the amount of such total turnover or gross receipts received by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account during the previous year or before the due date specified in sub-section (1) of section 139 in respect of that previous year. However, the existing rate of deemed profit of 8% referred to in section 44AD of the Act, shall continue to apply in respect of total turnover or gross receipts received in any other mode. Assesses availing presumptive scheme under section 44AD must keep in view the provisions of section 269ST (as stated above) as also provisions of section 206C(TCS) while accepting cash payments/advances from customers.

While concluding, it may be noted that, by making few provisions under income tax act are not only measures to eliminate black money. No doubt a tax payer is required to adhere to all the provisions of income tax for tax compliances and to get tax benefits. But at the same time, more innovations will be required to route transactions through the banking system. As more transactions go through banking channels, reporting of income and tax compliance will improve leading to higher tax revenues. Higher tax revenues would, ideally, lead to lower tax rates, which will benefit all tax payers.

CMA NIRANJAN SWAIN

Senior General Manager (Finance), Odisha Power Generation Corporation Ltd

Income Tax Notice: Income Tax Department can send notice on these 5 high value cash transactions, Details here

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

Fixed deposits made with cash

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

Repaying credit card bill in cash

Cash payments related to properties

Received Rs 2.61 Crore Income Tax Notice from Income Tax Department

Edelweiss Financial Services Limited’s subsidiary, Edelweiss Rural & Corporate Services Ltd., received a tax demand notice of Rs. 2.61 crores from the Income Tax Department, the company informed the exchange in its filing.

The company stated that the notice, received on May 31, 2024, pertains to the assessment year 2016-17 and includes certain disallowances.

“We wish to inform that Edelweiss Rural & Corporate Services Limited, a subsidiary of the Company, has, pursuant to search, received the assessment order and demand notice on May 31, 2024, under Section 143(3) of the Income Tax Act, 1961, for the assessment year 2016-17 and a tax demand of Rs. 2.61 crores (including interest) on account of certain disallowances,” said the company.

The company added that the demand is not sustainable by the department and will not have a significant impact on its financials, operations, or other activities. It mentioned that they are examining the order and appropriate steps, including the filing of appeals, would be taken in this regard.

Earlier, the Reserve Bank of India (RBI) imposed stringent business restrictions on two entities of the Edelweiss Group–ECL Finance Limited (ECL) and Edelweiss Asset Reconstruction Company Limited (EARCL).

The decisive action came in response to supervisory concerns identified during recent examinations, as per RBI release.

According to RBI, invoking its authority under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) and the Reserve Bank of India Act, 1934, ECL Finance Ltd (ECL) to cease and desist immediately from engaging in any structured transactions involving wholesale exposures, except for the repayment or closure of accounts in the normal course of business.

Edelweiss Asset Reconstruction Company Limited (EARCL) to stop the acquisition of financial assets, including security receipts (SRs), and refrain from reorganizing existing SRs into senior and subordinate tranches, it said.

The supervisory examinations revealed that the Edelweiss Group entities had engaged in a series of structured transactions aimed at ever-greening stressed exposures of ECL. (ANI)

Notice under Section 142(1) of the Income-tax Act

After you complete the e-filing process of the income return, the income tax department conducts an assessment. In case the assessing officer (AO) realises that there is more clarification needed regarding a particular detail during the assessment, they are likely to dispatch a notice under Section 142(1) of the ITA.

Purpose of Notice under Section 142(1)

With the issue of notice under Section 142(1), the AO may call upon the assessee to:

File the income tax return where the return is not filed within the time limit. It may include a return in respect of his/her income or income of another person for which he/she is liable to be assessable. For example, in the case of a legal guardian or a deceased person
Produce accounts or documents to make an assessment
Provide such other information or statements as required by the officer. For example, a statement of assets and liabilities of the assessee on a particular date

Compliance under Section 142(1) is Mandatory

Even if a taxpayer thinks that the accounts/documents requested are irrelevant, compliance remains mandatory. In case an assessee does not comply with the provisions of Section 142:

It may result in the best judgement assessment under Section 144, where the income tax officer determines the income and taxes thereon.
A penalty under Section 271(1)(b), which is Rs 10,000 for each failure, or
Prosecution under Section 276D, which may extend up to a year and may attract a fine

If AO is satisfied with the documents or return or supporting evidence, he/she may not start with the assessment process. The return filed by you will be accepted and proceedings will be closed.

E-Assessment Scheme, 2019

The Central Board of Direct Taxes (CBDT) has notified that ‘e-Assessment Scheme, 2019’ will be termed as ‘Faceless Assessment Scheme, 2019’, and all income tax assessments (subject to certain exceptions) shall be conducted in a faceless manner. Further, the CBDT has directed that the National e-Assessment Centre (NeAC) shall pass all the assessment orders through the ‘Faceless Assessment Scheme, 2019’.

Procedure of Conducting Faceless Assessment

The following steps are adopted concerning the Faceless Assessment.

NeAC serves notice to an assessee. He/she (assessee) needs to reply within 15 days of receipt of the notice. The NeAC will assign the case to specific assessment units (AU) in any one regional e-assessment centre (ReAC) through an automated allocation system.
The AU requests the NeAC to obtain information, documents, or evidence from an assessee, conducting inquiry or verification by the verification unit (VU), or seeking technical assistance from the technical unit (TU).
The NeAC issues notice to an assessee and assigns the request to the VU and the TU. After receiving documents from an assessee and relevant reports from the VU and TU, the NeAC transfers the same to AU.
In case an assessee fails to comply with the notice, then the NeAC serves notice under Section 144 as to why an assessment should not be completed to the best of judgement.
An assessee needs to file a reply to the NeAC within a given time frame. If the assessee fails to file a response, then the NeAC examines the draft assessment order as per risk management strategy (RMS) and automation examination tools. Based on this, it may decide to finalise the assessment order, provide an opportunity to an assessee if modification is proposed, or assign draft assessment order to Review Unit (RU) in any one ReAC. This is done through automated allocation system for conducting a review of such an order
The RU conducts the review of the draft assessment order and may decide to concur with it and intimate or suggest modifications and send them to the NeAC.
The NeAC on receiving the concurrence of the review unit finalises the draft assessment order. The NeAC, after receiving suggestions for modifications from the RU, will assign the case to AU, other than the AU who made the draft assessment order through an automated allocation system. The AU, on its part, will consider RU’s suggestions on modifications and send a final draft assessment order to the NeAC.
The NeAC is likely to finalise the assessment order or if modifications are proposed, follow such a procedure accordingly.
In case a show-cause notice (SCN) has been served to an assessee, he/she furnishes a reply within a particular time frame. The NeAC shall in case of no response to the SCN, finalise an assessment as per the draft assessment order. In case a response to an SCN is received, the NeAC will send a response to the AU. The AU then makes a draft assessment order and sends it to the NeAC.
The NeAC receives the revised draft assessment order. If modification is not prejudicial to the interest of an assessee regarding the draft assessment order, it will finalise an assessment order. In case a modification is prejudicial to the interest of an assessee regarding a draft assessment order, NeAC will provide an opportunity of being heard.

The NeAC deals with a response as per a similar procedure, that is the AU will make draft assessment order and so on.

Sample of a Notice under Section 142(1) of the ITA

Process to File a Response

A response to a notice under Section 142(1) has to be furnished electronically only via the ‘e-Proceedings’ utility in the registered ‘e-Filing’ accounts of the assessee. There is no need to visit the income tax office or schedule an in-person meeting with any assessing authority in this regard.

Log in to the income tax portal: www.incometax.gov.in
Go to the ‘Pending Actions’ tab and select ‘E-Proceedings’
Click on ‘View Notices’ and hit ‘Submit Response’
You will be directed to a page that will prompt you to ‘Select Response type for Notice’
You are required to choose between ‘Partial Response’ and ‘Full Response’

Note: The attachments to be submitted can be in PDF/ Excel/Comma-Separated Values (CSV) formats.

Click on ‘Continue’, mark a tick on the ‘Declaration and Submit’
You will receive a response ‘Submitted Successfully’
You can download the response acknowledgement

Fiscal Year 2023-24 Tax Filing: 10 Must-Do Tips to Avoid Income Tax Notice

By Alok Agrawal

The fiscal year 2023-24 ended on 31 March 2024 and individual taxpayers are gearing up to file tax returns by the deadline of 31 July 2024. Over the past few years, the government has sought to improve the taxpayer’s experience by simplifying tax return filings through pre-filed ITR, etc.

With some useful tips listed below, taxpayers can ensure that their returns are filed accurately and they can also avoid potential queries from the income tax department, and other issues.

1) Selection of correct ITR Form: – Using the correct ITR Form is crucial for accurately reporting of income and for claiming deductions and credits. The tax department may issue a notice of “defective return” to the taxpayer in case of such an incorrect selection. So, the appropriate ITR Form must be selected based on income sources, residential status and other criteria.

2) Selection of tax regime: – The Budget 2023 mandated the simplified tax regime as the default tax regime from FY 2023-24 onwards. If a taxpayer wishes to opt for the old regime, then there is an option in the ITR Form – “Do you wish to opt out of new regime?”, wherein “Yes” is to be selected. Tax calculators are available on the income tax portal for comparison and can assist in deciding which regime is beneficial.

3) Reconciliation of income: – It is imperative to reconcile income details appearing in Form 16/16A, Form 26AS (tax credit statement), AIS (Annual Information Statement) etc., available on the income tax portal to ensure all sources of income are disclosed, else this may lead to interest and penalty.

4) Tax Collected at Source (‘TCS’):– TCS is the tax collected from the buyer on various expenses (car purchase, foreign trip, foreign remittances etc,). Details of TCS are available in Forms 26AS and AIS. Taxpayers must ensure that this credit is fully reflected as they are eligible to claim credit of TCS while filling the ITR Form.

5) Tax credit: – While filing ITR, taxpayers should ensure that taxes already deducted/paid are reported in Form ITR and only the balance tax liability is paid. As in the case of TCS, details of TDS, Advance tax and Self-assessment tax paid are also available in Forms 26AS and AIS. In order to get full credit for the relevant amounts, the taxpayer should mention details (i.e. TAN, date of deposit, Challan Sr. No etc) accurately in the relevant sections of the form.

6) Claiming Losses: – Taxpayer should claim all eligible losses incurred during the current and previous years, which can save taxes. Also, the unclaimed past losses which can be carried forward to next year, should be reported in the appropriate schedule of Form ITR.

7) Declaration of Foreign Assets: – Recently, there has been increase in notices issued to taxpayers to verify details of offshore investments. Hence, if you qualify as Resident & Ordinarily Resident (ROR) and have foreign assets, then it is essential to report such assets appropriately in the income tax return.

8) Bank Account details: – In case of tax refund arising in ITR, taxpayer should ensure that active and validated bank account details (i.e. account number, IFSC code, name of the bank etc) are accurately mentioned.

9) Adherence to deadline: – There are many consequences of not filing the return within the specified deadline such as late fees charges, penalty. Also, the simplified tax regime can’t be opted for and also capital losses can’t be carried forward, etc. So, one should always file the income tax return within timelines to avoid such implications.

10) Verification: – The final step after submitting income tax return on the portal is verification of the return within 30 days from filing the return. Verification can be done either through OTP on mobile number registered with Aadhaar or net banking or sending a signed copy of ITR-V to the CPC Bangalore office, etc. Without verification within the stipulated time, an ITR is treated as invalid.

(The author is Partner, Deloitte India)

Source FT

Receive Income Tax Notice; Things To Do After Receiving Income Tax Notice

Receiving an Income-tax notice can be for several reasons, few are given below.

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

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.

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.

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

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.

Things To Do After Receiving Income Tax Notice

A. Understand Notice: First and foremost – keep calm and read the communication you received end to end. Work around the legalese and understand what exactly are they trying to tell you. The first important thing you have to do when you receive a notice is to understand the communication sent by the Income Tax Department and work around the legalese.

B. Check the basics

Is it really your name on the notice?
Is your PAN number mentioned correctly?
Which assessment year is it meant for?
Who is the issuing officer? What is their designation?
Is there a document identification number? What is it?

C. Figure out the discrepancy: The new intimation format has 2 columns. Here’s what it looks like:

If a particular row shows different amounts in these two columns, that is the source of your discrepancy.

Never ignore a notice Ignoring a notice from the IT department can prove to be expensive. Fines are usually imposed on assessees who do not respond to IT notices – these can be as high as Rs.10,000!

Main Reasons for Receiving an Income Tax Notice

Top reasons for which you could receive an income tax notice: The Income Tax Department issues an income tax notice for a number of reasons under a number of provisions. Normally, a taxpayer receives an income tax notice as a result of missing or filing their income tax return late, filing it incorrectly, claiming an incorrect tax refund, and many other reasons. The income tax notice is issued by the tax department under sections 143(1), 142(1), 139(1), 143(2), u/s 156, Section 245 and Section 148. Here are the top reasons a taxpayer may receive an income tax notice, based on an exclusive interview with several industry experts.

CA Arpit Jain, Joint MD, Arihant Capital

Getting an income tax notice can be stressful. These notices can be issued for various reasons – from as obvious as failing to file an income tax return or a delay, to calculation errors to a request for specific information pertaining to your filings or reporting excessive losses.

Here are some of the common reasons why taxpayers receive an income tax notice:

a) Mismatch in TDS amount: When the TDS claimed in the Tax return doesn’t match with Form 26AS and 16 or 16A.

b) Mismatch in income: Whenever there is a discrepancy between the income tax return and form 26A.

c) Discrepancy in tax returns: There are times when taxpayers make common mistakes like claiming deductions under the wrong sections, or unintentionally failing to add their interest, rent, dividend, or other incomes in their calculations. Such instances will create discrepancies in their tax returns and what they are actually liable to pay and will invite income tax notice.

d) Discrepancies in disclosure of declared income versus your actual income: This is an obvious one. The income tax department is constantly on the lookout for people trying to evade taxes. If the IT authorities suspect that you haven’t disclosed all your income from various sources, then you could be served with an income tax notice.

e) Failing to report high-value transactions: The Income Tax Department requires taxpayers to report all their high-value transactions, so they can curb black money and detect all under-reported income. In case, you fail to report such transactions then this will invite an IT notice. Examples of high-value transactions include cash deposits or withdrawals over ₹10 lacs, international transactions in foreign currency over ₹10 lacs, and purchase of mutual funds, bonds, or debentures of over ₹10 lacs.

f) Random scrutiny: If you’re unlucky, you could receive the notice because every year, the IT department randomly selects the files for which IT returns need to be scrutinized. If you have paid your taxes diligently and have all the paperwork in order, you have nothing to worry about.

g) Incomplete documentation: Many times, your income tax returns need to be accompanied by some required documentation. If you fail to provide these, then you will receive a notice. These include but are not limited to: your balance sheet and profit and loss statement in case the net profit from your business income or profession exceeds ₹1.2 lacs, Form 67 if you have received any foreign income and Form 10E in case of arrears.

Suresh Surana, Founder, RSM India

Some of the reasons due to which taxpayers may receive income tax notice are as follows:

1) Taxpayers not filing their income tax returns irrespective of their total income exceeding the basic exemption threshold or otherwise being eligible for filing such return

2) Mismatch in the income details as per the returned income and Annual Information Summary (AIS)/ Tax Information Summary (TIS)/ Form 26AS

3) Taxpayers have claimed excess TDS than what is reflected in Form 26AS

4) Discrepancy in the calculation of interest u/s 234A/B/C as per the returned income and as per the revenue authorities records

5) Missing out disclosing certain income or failing to apply clubbing provisions

6) Selection of wrong ITR form leading to a defective return

7) Any high value or unusual transaction which is not commensurate with other details of the returned income

Prateek Toshniwal, Co-Founder of IVY Growth Associates | MI Capital (UAE)

There are several reasons why you may receive an income tax notice from the government. One common reason is if you have not filed your tax returns on time or have filed them incorrectly. Another reason could be if there are discrepancies in the information you have provided, such as mismatches in your income or expenses.

Additionally, if you have claimed excessive deductions or exemptions or have not disclosed all your income sources, you may be flagged for further scrutiny. In some cases, if you have received a high-value transaction or made significant investments, the government may also ask for clarification on the source of funds.

It is essential to maintain accurate and complete records of your financial transactions to avoid receiving an income tax notice. In case you do receive a notice, it is important to respond promptly and provide the necessary documents and information to the authorities.

Parry Singh, Founder & CEO, Red Fort Capital

There are several reasons why you may receive an income tax notice, including:

a) Mismatch in reported income: If there’s a discrepancy between the income reported in your tax return and the information available to the tax authorities (e.g., TDS, Form 26AS, etc.), you may receive a notice.

b) Non-disclosure of assets: Failing to disclose assets or foreign income in your tax return can trigger an income tax notice.

c) High-value transactions: Engaging in high-value transactions without disclosing them in your tax return may attract a tax notice. These transactions could include large cash deposits, purchase of property or investments, etc.

d) Late filing or non-filing of returns: If you fail to file your tax returns on time or don’t file them at all, you may receive a notice from the tax department.

e) Claiming excessive deductions: If you claim deductions or exemptions that seem excessive or unrealistic compared to your income, the tax authorities may send a notice for further scrutiny.

f) Errors in tax returns: Mistakes like incorrect personal information, wrong calculations, or incorrect tax credits can lead to a tax notice.

It’s crucial to maintain accurate records, report all income and deductions correctly, and file tax returns on time to avoid receiving an income tax notice.

Khazana Associates founder Santosh Badhei

Below are the few top reasons that can get you income tax notice:

1. Discrepancies in Disclosure of Actual Income & Declared Income

2. Inaccurate Information on Assets or Income in The Income Tax Return

3. Unexpected Alters in Investment Amounts, Elevated Transactions or Income

4. Unexpected TDS Inconsistencies When Your TDS Claim Is Incorrect

5. For Review & Evaluation

6. Delayed Income Tax Return Filing

7. Payment of Refunds Against Any Outstanding Debts & Taxes Owed by You

8. For Prior Years of Tax Evasion

Himani Chaudhary, financial advisor

There can be many reasons why individuals may receive an income tax notice in India. Here are some of the top reasons:

1. If Income Tax Return is not filed on time.

2. If there is a mismatch in income reported by the individual and the information IT department has from Form 26AS

3. If income from all sources are not disclosed

4. If large cash deposits or investments are made which are not aligned with income, they may be flagged by the Income Tax Department.

5. Failure to declare any foreign account or investments made abroad

6. ITR filing mistakes can be highlighted asking the individuals to file revised returns.

Authenticate Income Tax Notices and Respond Effectively

Before you respond to any communication received in the name of the income tax department, it is important to verify whether the notice/order issued is genuine and issued by the income tax authority.

You can authenticate the notice/order/letter issued by the income tax authority on the e-filing portal. Let us understand to verify the same.

Step 1: Go to income tax e-filing portal. On the home page, go to ‘Authenticate notice/order issued by ITD’ under ‘Quick Links’.

Step 2: You can authenticate using:

PAN, document type, assessment year, issue date and mobile number (for notice/order/letter issued for AY 2011-12 and subsequent years only)
Document Identification Number and mobile number (for all assessment years)

Step 3: If you want to authenticate by PAN, document type, assessment year, issue date and mobile number, select the option and enter all the details.

Step 4: After filling in all the details, you will receive an OTP. Enter the OTP received.
Once the OTP is validated, the DIN of the notice issued, along with the date of issue of the notice, will be displayed.

If the notice is not issued by the ITD, it will display a message – No record found for the given criteria.

Step 5: Another alternative is to authenticate using DIN and mobile number.

Step 6: Enter DIN and mobile number and continue. You will receive an OTP. Validate using OTP.

If the notice/order is issued by the income tax authority, it will display a success message, as shown below.

Otherwise, it will show- No record found for the given Document Number

Types Of Notices/Intimations

Notice Under Section 133(6)

The Income Tax Department has enacted the E-Verification Scheme 2021 which involves calling for information from those taxpayers where material difference is observed between the ITR field and data available in form AIS. The reason for such notice can be as follows

ITR was not filed in spite of having income exceeding the basic exemption limit as per AIS.
Taxable Income in the form of Salary, Interest Income, and Capital gain exists in the Annual Information Statement (AIS). However, values are not entered correctly in the ITR Form.
Significant higher expenditure in the form of Purchase of immovable property, Foreign travel, and Purchase of Mutual funds/stocks in comparison to the Income declared in the ITR

Copy of Notice u/s 133(6)

Steps To Respond To Notice u/s 133(6)

Analyse the reason for receiving such notice and identify if there was any actual misstatement from taxpayer side or error from department
Login to the income tax portal >> Pending Action >> Compliance Portal >> E Verification

Provide detailed response along with necessary attachment in the questionnaire provided

If the misstatement is from the taxpayer and additional liability is required to be paid, then such taxpayer can file the Updated return u/s 139(8A) along with the necessary penalty voluntarily and provide a response accordingly
However, if the error is from the department side you can provide the response in the insights portal along with supporting documents.

Notice Under Section 142(1)

A notice under section 142(1) can be issued under two circumstances:

If you have filed your return, but the assessing officer requires additional information and documents; or
If you have not filed your return but the assessing officer wants you to file it.

The information is called for to enable the officer to make a fair assessment. Being non-responsive to this notice has consequences,

A penalty of Rs 10,000 can be levied for each such failure
Prosecution, which may extend up to 1 year
Both of the above.’

Copy of Section 142(1) Notice

Intimation Under Section 143(1)

After having filed your returns, it is electronically processed by the Central Processing Centre (CPC). The income is computed after making the following adjustments to the total income in return :

Any arithmetical error in the return
An incorrect claim (provided the incorrect claim is apparent from the information filed)
Disallowance of incorrectly claimed loss or expenditure
Any income which has not been included in the return

Upon successful processing of the return, an intimation under section 143(1) is issued by the CPC under any of the three instances:

There is a tax liability to be paid
A refund has been determined
There is no refund or demand, but there is an increase or reduction in the amount of loss.

In case there is a tax demand, then the intimation must be issued within nine months from the end of the year in which the return has been filed. For example, if you have filed your returns for Assessment Year (AY) 2024-25 on 27 July 2024, then an intimation can be issued anytime on or before 31st Dec 2025. Processing of returns under this section has been made mandatory from AY 2017-18.

How To Analyse The Above Notice?

The notice provides a comparative analysis of the date provided in the ITR and Computed u/s 143(1).
Identify which line item is causing such additional liability
It can be a mismatch in Income, Deduction or Prepaid taxes
If such demand is due to an error, then Rectification return u/s 154 can be filed within a period 4 years from the end of such assessment year
If demand is accurate, then it can be paid off using the link provided

Notice Under Section 143(2)

The purpose of this notice is to notify the assessee that the return filed has been picked for scrutiny. It is pertinent to note that the section under which it will be scrutinized is different from the one in which the notice has been issued. Via detailed scrutiny, the assessing officer intends to be assured that you have not done any of the following:

Understated your income
Claimed excessive loss
Paid lesser taxes

Through this notice, the taxpayer is required to respond to the questionnaire issued along with the documents required by the income tax department. The assessing officer is supposed to service this notice within 3 months after the completion of the assessment year to which it pertains.

For instance, Rohit filed his return on 20th May 2024 for the AY 2024-25. Here notice under section 143(2) can be issued to Rohit within 3 months after completion of the AY to which it pertains, i.e. 31th July 2025.

How To Respond To Notice u/s 143(2)

Carefully go through the notice and identify the reason why such notice has been issued, which will be provided in the Annexure.
Prepare a response under a cover letter, providing a detailed explanation in a legitimate manner and answering truthfully to all the questions provided in detail.
Log in to your Income tax portal under e-proceeding, provide the response to such notice with the cover letter and also attach the necessary documents as requested.

Are you not sure about what to do with such an income tax notice? Use our Notice Upload Facility to allow us to help you out. Alternatively, you can even seek the help of a Tax Expert.

Notice Under Section 148

An assessing officer may have a reason to believe that you have not disclosed your income correctly and, therefore, you have paid lower taxes. Alternatively, you may not have filed your return at all, even if you must have filed it as per law. This is termed an income-escaping assessment. Under these circumstances, the assessing officer is entitled to assess or reassess your income according to the case. Prior to 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.

Previously the timelines to be adhered to for the issuance of notice under Section 148 were as below:

As per the amendment in the Finance Act 2021, with effect from 1st April 2021, the time limit up to which the assessing officer can re-open the assessment of the taxpayer is as follows;

Up to three years from the end of the relevant assessment year in normal cases and
Beyond three years but not more than ten years from the end of the relevant assessment year, if the assessing officer has material evidence that income of Rs.50 lakh or more for a financial year has escaped assessment.

Notice Under Section 245

If the assessing 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 under Section 245 can be issued. However, the adjustment of demand and refund could be done only if you have been provided proper notice and an opportunity to be heard. The timeline to respond to the notice is 30 days from the day of receipt of the notice. If you do not respond within the aforesaid 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.

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.

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.

What Are The Most Common Causes Of Notice?

The most common causes for which you might receive an income tax notice include the following:

Income Tax notice for cash transaction

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.

Depositing large amounts in cash in savings accounts

Fixed deposits made with cash

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

Repaying credit card bill in cash

Cash payments related to properties

Scrutiny Assessment under Income Tax Section 143(3)

Income tax assessment is the process of verification of the information a taxpayer has provided in the returns submitted by a taxpayer to the income tax department. The Income Tax department assesses after an assessee FFilinginges an income tax return. The assessment’s purpose is for the Income Tax department to verify the return filed for correctness concerning the amount of taxable income declared and tax paid. There are various types of income tax assessment. In this article, we briefly discuss the concept of a scrutiny assessment under Section 143(3).

Income Tax Assessment

The term “assessment” in the context of income tax refers to the process where the Income-tax Department evaluates a taxpayer’s return of income. This evaluation is done to verify the accuracy and correctness of the information provided by the taxpayer in their Income tax return. The assessment process involves various methods, including:

Regular assessments examine the details submitted in the taxpayer’s return for accuracy.
Re-assessment might occur in specific situations as specified by the tax laws.
Best judgment assessment under Section 144, where the evaluation is based on the best judgment of the Assessing Officer, is typically used when the taxpayer fails to comply with specific requirements of the tax laws.

Notably, the Finance Act of 2018 introduced Section 143(3A), which implemented an e-assessment scheme for regular assessments carried out under Section 143(3). Further expanding this, the Finance Act 2020 included the best judgment assessments under Section 144 within the scope of e-assessment. By leveraging digital platforms, E-assessment aims to make the entire process more efficient and less cumbersome.

Notice under Section 143(2)

When the Income Tax Department selects your Income Tax Return for a detailed check, they issue a Notice under Section 143(2). This is a step towards what is known as a scrutiny assessment or thorough assessment under Section 143(3).

Under Section 143(3), the scrutiny assessment thoroughly reviews your Income Tax Return. The main goal is to verify the accuracy and truthfulness of various claims and deductions you’ve made in your return. Essentially, this process ensures that the income you’ve reported and the tax you’ve paid are correct.

The Key Objectives of Scrutiny Assessment:

The scrutiny primarily aims to check three things:
That you haven’t reported less income than you have.
That you haven’t claimed excessive losses.
That you haven’t paid less tax than you should have.

So, in summary, to conduct a scrutiny assessment under Section 143(3) of the Income Tax Act, the Income Tax Department issues a notice under Section 143(2). This notice is typically given within three months from the end of the financial year.

What Exactly is a Scrutiny Assessment?

A scrutiny assessment, as defined under section 143(3), involves a detailed examination of the income tax return. During this assessment, the tax authorities meticulously check the authenticity and accuracy of various claims, deductions, and other details you have provided in your return.

Scope of Assessment under Section 143(1):

The assessment under Section 143(1) is essentially a preliminary check of the income tax return filed by the taxpayer. At this stage, the focus is not on detailed return scrutiny. Instead, it involves a basic verification process where certain adjustments may be made to the income or loss reported by the taxpayer. These adjustments include:

Correction of Arithmetical Errors: Any mathematical mistakes present in the return are rectified.
Identification of Incorrect Claims: If any claims in the return are incorrect, they are adjusted based on the information available in the return. This includes claims inconsistent with other entries in the return, claims lacking required substantiation, or deductions exceeding statutory limits.
Disallowance of Loss Claimed: If the return for the previous year, for which a loss set-off is claimed, was submitted after the due date under Section 139(1), the loss claim can be disallowed.
Disallowance of Expenditure Not Accounted in the Total Income: If certain expenditures are mentioned in the audit report but not considered in the total income calculation in the return, these can be disallowed.
Disallowance of Certain Deductions: Deductions claimed under sections 10AA, 80-IA, 80-IB, 80-IC, 80-ID, or 80-IE can be disallowed if the return is filed beyond the due date specified under Section 139(1).
Addition of Income Not Included in the Return: Any income that appears in Form 26AS, Form 16A, or Form 16, which has not been included in the total income stated in the return, may be added.

When Can a Scrutiny Assessment under Section 143(3) be Initiated?

Scrutiny Assessment assessment can be started in the following situations:

When you file an income tax return as per Section 139 or respond to a notice under Section 142.
When the Assessing Officer or Income Tax Authority feels it’s necessary to audit your return to ensure the reported income and paid taxes are accurate.

Types of Scrutiny Assessments

Scrutiny assessments under the Income Tax Act can be categorized into manual and compulsory assessments.

Manual Scrutiny Assessments: These are selected on a case-by-case basis due to specific reasons. Assesses can often avoid manual scrutiny by exercising due diligence and careful compliance with tax laws and filing procedures.
Compulsory Scrutiny Assessments: These are not within the control of the assessee and cannot be avoided. They are usually mandated by specific criteria set by the tax authorities.

Criteria for Selecting Cases for Scrutiny Assessment

A case is typically selected for scrutiny assessment by the Income Tax Department under certain circumstances:

Non-filing of Tax Return: If the assessee does not file the tax return, it can trigger a scrutiny assessment. This is particularly relevant when the assessee has a taxable income but fails to file the required returns.
Incomplete or Erroneous Tax Return: Cases where the tax return is filed but lacks necessary information or contains errors may also be scrutinised. This includes inaccuracies in income reporting or tax calculations.

Common Reasons for Scrutiny Selection

Reason 1: Non-filing of Income Tax Return (ITR)

Individuals with gross income above the exempted limit (e.g., Rs 2,50,000 for individuals below 60 years) must file an ITR.
Residents who own foreign assets or have authority over foreign bank accounts must file an ITR regardless of income level.
Filing is necessary even if the employer has deducted TDS.

Reason 2: Errors Related to TDS

Discrepancies between TDS amounts reported in the ITR and those recorded on the Traces website can trigger scrutiny.

Reason 3: Non-disclosure of Other Incomes

All incomes, including interest from savings accounts and fixed and recurring deposits, must be reported.
Issues arise when TDS is deducted at a lower rate than the assessee’s tax slab.

Reason 4: Unnatural or High-Value Transactions

Transactions significantly higher than the income declared can lead to scrutiny. For example, extensive deposits in bank accounts that don’t correspond with the reported income.
Such transactions are often reported to the tax department by banks and other financial institutions.

Reason 5: Defects in Income Tax Return

Errors in filing, such as using the wrong ITR form or omitting mandatory information, can result in a notice.
The tax department may direct the filing of a revised return under Section 139(9) to correct any inaccuracies.

Procedure for Scrutiny Assessment in Income Tax

Income Tax Notice under Section 143(2) and Scrutiny Assessment Process is explained here:

Starting a Scrutiny Assessment – Income Tax Notice u/s 143(2)

When an Income Tax officer needs to conduct a scrutiny assessment, they first issue a notice under Section 143(2). This notice asks the taxpayer to show up in person or through an e-assessment. The taxpayer must also provide any documents or information the officer thinks are essential for determining the taxable income and tax owed. This notice must be sent within six months after the end of the financial year the tax return was filed.

For example, if a return is filed on November 2, 2018, the notice can be sent until September 30, 2019. However, if the notice is sent on September 29, 2019, but reaches the taxpayer after September 30, it’s invalid.

Participating in the Scrutiny Assessment

The taxpayer or their authorized person can meet with the Assessing Officer to discuss and present evidence or arguments about different issues as requested by the officer.

Conducting the Scrutiny Assessment Hearing

During this hearing, the tax officer gives the taxpayer plenty of chances to be heard and to show documents or evidence supporting their tax return. If the taxpayer doesn’t provide the needed information or doesn’t cooperate, the officer can do a best judgment assessment under Section 144.

If the taxpayer cooperates and provides all the information, the Assessing Officer will review this evidence and decide. Once the officer makes a decision, the taxpayer has a few choices:

Accept the decision and either pay any extra tax, get a refund, or accept the loss determined.
Apply for a correction under Section 154 if there’s a clerical mistake.
File a revision application to the Commissioner of Income Tax under Section 263/264.
Appeal the decision if they disagree with it.

During the scrutiny process, the Assessing Officer (AO) focuses on ensuring:

No Underreporting of Income or Overstating of Losses: The AO verifies that the assessee has not underreported income or overstated losses in their tax return.
Sufficient Tax Payment: The AO checks if the assessee has paid the correct tax due. Any shortfall in tax payment can be a point of examination.

In conducting these assessments, the Assessing Officer must adhere to the guidelines and norms set by the Central Board of Direct Taxes (CBDT) and follow the precedents and rules established by the Supreme Court. This adherence ensures the scrutiny process is consistent, fair, and in line with legal standards.

Time Limits for Conducting Scrutiny Assessments as Per Section 153

The duration allowed for completing a scrutiny assessment under Section 143(3) is outlined in Section 153 and varies based on the assessment year:

For the assessment year 2017-18 or earlier: The scrutiny assessment must be concluded within 21 months from the end of the assessment year when the income was first subject to tax.
For the assessment year 2018-19: The scrutiny assessment should be completed within 18 months following the end of the assessment year in which the income was first assessable.
For the assessment years starting from 2019-20 onwards: For the assessment years beginning in 2019-20 onwards, including the current assessment year, the rule is that the scrutiny assessment must be completed within 12 months after the end of the assessment year in which the income was first considered taxable.

Common Income Tax Notice FAQs: Different Types of Assessments and Notices Under Income Tax Law

Income Tax Notice FAQs: Tax payer may get the notices in different ways, for every notice there are different section and different possibility’s, assessing officer Or ITD will issue the notice according the errors and return furnishing perspectives.

1. What is meant by assessment?

Every taxpayer has to furnish the income and investment details to the Income-tax Department. These details are to be furnished by filing return. Once the return is filed by the taxpayer, the next step is the processing of the return by the Income-tax Department. The Income-tax Department examines the return. The process of examining the return of by the Income-tax Department is called “Assessment”. Assessment also includes re-assessment or best judgment assessment.2.

2. What are the different types of notices or assessments under the Income-tax Law?

There are different types of notices or assessments as given below:

Defective Income Tax Return: Section 139(9).
Calling for information u/s 133(6) of the Income Tax Act, 1961,
Income is concealed or likely to be concealed: Section 131(1A).
Preliminary Enquiry before an assessment: Section 142(1).
Notice of demand: Section 156.
Refund adjusted against the tax demand: Section 245.
Follow up to the notice u/s 142(1): Section 143(2).
Summary assessment without calling the taxpayer: Section 143(1).
Scrutiny assessment: Section 143(3).
Best judgment assessment: Section 144.
Income escaped assessment: Section 148 & 147.

3. What is meant by defective return under the section 139(9)?

This notice is sent by Assessing Officer of the opinion that ITR filed by the taxpayer is defective or incorrect.

And the Assessing Officer will provide the

Proper description of the errors
The solution that possible use to rectify those errors

Examples: Incomplete returns, parts of information missing, file a wrong ITR The tax payer has submit the response within 15 days from the notice received date, if the tax payer don’t respond then the return will be rejected by AO. The tax payer can submit the response in 2 ways

Tax payer agreed to observation of assessing officer, then tax payer will submit the revised return with rectifying the errors raised.
Tax payer does not agree with the error description then tax payer can reply to the income tax notice and share the reasons and proofs for the same.

For a details on how to address defective returns, refer Defective Notice: How to Prepare, Upload JSON

4. What is section 131(1A), and what are reasons to get notice u/s 131(1A)?

Assessing Officer is of the opinion that tax payer are concealing the income or likely to conceal income then tax payer will receive notice u/s 131(1A). This notice is basically intimation that AO is initiating an enquiry or investigate into the matter. The AO should expect the attendance of tax payer and books of accounts, statement of all bank accounts, details of all properties acquired during the financial year. Tax payer can seek the permission for attend someone behalf of tax payer, extension of time for valid reasons.5.

5. What is meant by Preliminary Enquiry notice u/s 142(1)?

Tax payer will get a notice of preliminary enquiry in case the return is not filed on time, then tax payer will furnish a return of income in respect of which is assessable.

AO would like to go through the documentary proof to verify tax payer claim in Income Tax Return then AO may ask you to furnish the documents for assessment purpose.

The time limit to answer is before the end of the relevant assessment year.

If tax payer not responded to this notice:

It may result in Best Judgement Assessment u/s 144, or

Penalised u/s 271(1)(b) i.e. Rs.10,000 for each failure.6.

6. What is meaning of section 156 outstanding demands?

This notice will serve the ITD, when the tax payer has any dues like tax, interest, penalty, fine or any other sum is payable. Normally this notice is served after the assessment of ITR. The taxpayer can deposit the amount payable within 30 days from the date of the income tax notice. Or if any mistakes in original return then tax payer can do the revised return and submit the revised acknowledgement. There is no time limit to serve this notice. And also refer Income tax notice under section 143(1).7.

7. What is section 245 under income tax act?

This is called intimation

This intimation means offset tax payer refund (full/partial) against the old tax payable or due8.

8. What is section 143(2) notice?

This notice will issue by Assessing Officer, if not satisfied with the response of the taxpayer or tax payer failed to provide the proofs or documents against the notice 142(1). So this notice is a detailed scrutiny.

The AO should expect the attendance of tax payer and books of accounts, statement of all bank accounts, details of all properties acquired during the financial year.

The timeline to serve notice u/s 143(2) is before the expiry of six months from the end of FY in which the return is furnished.

Where the taxpayer has not furnished return, then notice under Section 143(2) cannot be issued to him and also scrutiny assessment cannot be done. In such case, direct Best Judgement Assessment under Section 144 is done by the AO.

If tax payer not responded to this notice: It may result in Best Judgement Assessment u/s 144, or

Penalised u/s 271(1)(b) i.e. Rs.10,000 for each failure9.

9. What is notice under section 143(1)?

The notice/intimation under section 143(1) issued by ITD in 2 different ways

1. Intimation:

Return furnished by the taxpayer and as verified by the Income Tax department match.

Then the Intimation will serve as final assessment of the return with nothing to be done on part of the taxpayer and the department. Take a printout of the same and file it with your income tax papers.

If the tax payer has refund, wait for the cheque or transfer into your account.

2. Notice:

Return furnished by the taxpayer and as verified by the Income Tax department does not match, which means in tax payer return there is some arithmetical errors or tax due.

The tax payer can submit the response in 2 ways

Tax payer agreed to observation of assessing officer, then tax payer will submit the revised return with rectifying the errors raised.
Tax payer does not agree with the error description then tax payer can reply to the income tax notice and share the reasons and proofs for the same.

Time limit is depending up on the ITR process10.

10. What is scrutiny assessment u/s 143(3)?

This is a detailed assessment and is referred to as scrutiny assessment. The scrutiny is carried out to confirm the correctness and genuineness of various claims, deductions, etc., made by the taxpayer in the return.

In the cases selected for scrutiny, the assessing officer conducts necessary enquiries during assessment proceedings to ensure that the tax payer not understanding the below:

Understated the income
Computed excessive loss
Underpaid tax in any manner

Time limit:

21 months from the end of the AY in which the income was first assessable. [To AY 2017-18 or before]
18 months from the end of the AY in which the income was first assessable. [To AY 2018-19]
12 months from the end of the AY in which the income was first assessable [To AY 2019-20 and onwards]

11. What is mean by Best judgment 144 and when it issues?

The Assessing Officer issues the Best Judgment 144 for the bellow reasons

The taxpayer fails to file the return of income as required within the due date u/s 139(1) or after due date u/s 139(4) (belated) or a revised return u/s 139(5).
The taxpayer fails to fulfil with notice issued under section 142(1). (For 142(1) please refer question number 5)
The taxpayer fails to fulfil directions or notice issued u/s 142(2A).

Note: Section 142(2A) deals with special audit. As per section 142(2A), if the conditions justifying special audit as given in section 142(2A) are satisfied, then the Assessing Officer will direct the taxpayer to get accounts audited from a chartered accountant

The Assessing Officer is not satisfied by the arguments of the taxpayer and AO has reason to believe that the case demands a best judgment, and then AO will proceed to carry out the assessment as per best of knowledge.

Criteria of best judgment assessment are satisfied, then after taking into account all relevant material which the Assessing Officer has gathered, and after giving the taxpayer an opportunity of being heard, the Assessing Officer shall make the assessment of the total income or loss to the best of judgment and determine the sum payable by the taxpayer on the basis of such assessment.12.

12. What is scrutiny assessment u/s 143(3)?

If the Assessing officer has reasons to believe that any income chargeable to tax has escaped assessment for any assessment year, he may subject to the provisions of Sec 148 to 153, assess or reassess such income and also any other income chargeable to tax which comes to his notice subsequently in the course of proceedings.

Circumstances when income is deemed to have escaped assessment

The following shall be deemed to be the cases where income chargeable to tax has escaped Assessment.

Where the total income of the tax payer during the previous year has exceeded the maximum amount which is chargeable to income tax and no return of income has been furnished by the tax payer.
Where the return of income has been furnished by the tax payer and it is noticed by the AO that the tax payer has understated the income, claimed the excessive loss, deduction, allowance or relief in the return and no assessment has been made.
The assessee has failed to furnish a report in respect of any international transaction u/s 92E.
It is noticed by the AO that the income of the tax payer exceeds the basic exemption limit based on the information or document received u/s 133C(2) and the return of income has not filed.
It is noticed by the AO that the tax payer has understated the income or claimed an excessive loss, deductions; allowance in case of return of income has been filed.
Where the return of income has been furnished by the tax payer and assessment has been made and it is noticed by the AO that the tax payer has understated the income, claimed the excessive loss, deduction, allowance or relief in the return.

Advance tax notices: Income Tax department flags error, asks taxpayers to wait

After some taxpayers received inflated advance tax payment notices, the Income Tax Department said it identified “certain inconsistencies” in the financial transaction data reported in the annual information statement (AIS).

Taking to X (formerly known as Twitter), the IT department said, “Based on feedback from taxpayers on the e-campaign for Advance Tax, the Department has identified certain inconsistencies in the data of the securities market (SFT-17) provided by one of the reporting entities. The reporting entity has been asked to submit a revised statement based on updated information.”

The tax authority has assured taxpayers that data will be updated on AIS. “Taxpayers are advised to wait for further updates on AIS based on the revised statement,” it added.

On March 10, the department launched an e-campaign to inform taxpayers whose tax payments in the financial year 2023-24 did not match financial transactions as reported in AIS.

The Income Tax Department receives information of specified financial transactions of taxpayers from various sources. To increase transparency and to promote voluntary tax compliance, this information is reflected in the Annual Information Statement (AIS) module and is available to persons/entities for viewing. The value of ‘significant transactions’ in the AIS has been used for carrying out this analysis,” the IT department said in a statement.

What is the Annual Information Statement (AIS)?

AIS or Annual Information Statement is a detailed report of a taxpayer, as displayed in Form 26AS. Taxpayers have the option to provide their feedback on the information displayed in AIS. The statement shows reported value and modified value after considering taxpayer feedback under each section, such as TDS, SFT and other information.

TDS deducted, but not filed ITRs? You may soon get income tax notice

Income Tax Department will soon send notices to individuals who have not filed income tax returns (ITRs). The notices will be sent to even those whose income tax has been deducted at source, The Economic Times reported on Sunday.

Central Board of Direct Taxes (CBDT) chairman Nitin Gupta said that the department will be sending notices to only those taxpayers for which it had definitive information. He said the department’s focus was on improving taxpayer services, from bringing down the period of refund to updated returns or solving a large tax dispute.

The CBDT has set up a demand management centre at Mysuru that’s focussing on tax disputes above Rs 1 crore, the chairman said. At the particular point of time agreed upon by the taxpayers, they put together a chartered accountant, the assessing officials, and the taxpayers who try to resolve and reach agreement on assessment from both sides,” he was quoted as saying.

Gupta said that the centre was earlier confining itself to Karnataka disputes but now it was picking up cases from across India.

In the Interim Budget 2024, Finance Minister Nirmala Sitharaman announced the withdrawal of outstanding tax demands upto Rs 25,000. She said there were a large number of petty, non-verified, non-reconciled or disputed direct tax demands, many of them dating as far back as the year 1962, which continued to remain on the books, causing anxiety to honest taxpayers and hindering refunds of subsequent years. “I propose to withdraw such outstanding direct tax demands up to Rs 25,000 pertaining to the period up to financial year 2009-10 and up to Rs 10,000 for financial years 2010-11 to 2014-15. This is expected to benefit about a crore tax-payers,” she said.

Section 139(9) defective return notices issued by the Income Tax Department (ITD)

Section 139(9): Defective Income Tax Return Notice: Section 139(9) of the Indian Tax law pertains to defective return notices issued by the Income Tax Department (ITD). Taxpayers, often unaware of all the rules, may encounter errors while filing their Income Tax Returns (ITR). Upon verification, the ITD identifies these errors and issues a defective return notice. It is crucial for taxpayers to respond to this notice within the stipulated time frame to avoid unfavorable outcomes. To encourage voluntary compliance, the ITD provides various documents such as 26AS, AIS, TIS, etc., which should be reviewed before filing the ITR.

What is 139(9) – Defective Income Tax Return Notice?

A defective return notice is issued when an income tax return contains errors, omissions, or inconsistencies, preventing accurate processing. Common reasons include missing or incomplete information, undisclosed income, or not following filing guidelines. It allows the taxpayer to correct and resubmit the return for compliance. The taxpayer has to respond within 15 days of receiving the notice.

Reasons for Defective Return Notice u/s 139(9) of Income Tax Act

The common reasons for defective return notice u/s 139 (9) of the Income Tax Act are as follows:

Mismatch in TDS and Income Details

The department issues a defective return notice under section 139(9) when they identify a mismatch between the income details filed in the return and the TDS deducted as per Form 26AS.

For Example:

Ajay earned income from freelancing during FY 2022-23. Freelancing income is considered professional income, and TDS is deducted u/s 194J of TDS. However, he reported the income under the Income Head Salary. Here, he would receive a defective return notice with a mismatch in TDS and Income Details.

Mismatch in Tax Dues

The department issues a defective return notice under section 139(9) when there is a disparity between the total taxes paid and the total taxes payable in the filed return.

Return filed without P&L and Balance Sheet

Individuals are required to maintain their P&L and Balance Sheet under the following two conditions:

Books of accounts are required to be maintained u/s 44AA.
An individual is not eligible to opt for the presumptive taxation scheme u/s 44AD, 44ADA, and 44AE.

The IT Department issues a notice u/s 139(9) if the return is filed without P&L and Balance Sheet details. You can check the Schedule P&L and Schedule Balance Sheet in the filed ITR to know the defect.

For Example:

Aman is a general commission agent and he earns commission income from different companies during FY 2022–23. In this case, his income falls under the head of Business and Profession. He did maintain the P&L and Balance Sheet. But while filing his return for FY 2022–23, he forgot to fill in details in the Balance Sheet. In this case, he would receive a defective return notice for a return filed without a P&L and Balance Sheet.

Return is filed without Tax Audit Report

Section 44AB of the Income Tax Act has prescribed the criteria for a tax audit. If taxpayers fulfill such criteria then they have to submit a tax audit report along with an income tax return. In case they had not filed the tax audit report then the department can issue a notice under section 139(9).

For Example:

Bharat is a salaried individual who also does F&O Trading. His turnover from trading is INR 10 crore. Here, he is required to get his books of accounts audited as per section 44AB. But while filing ITR-3 for FY 2022–23, he did not get his books of accounts audited. In this case, he would receive a defective return notice for the return filed without a tax audit report.

Not eligible for Presumptive Taxation Scheme

If the taxpayer had opted into the presumptive scheme of taxation while filing the return, but he had not provided all the relevant information or had provided any inaccurate data then they may receive a defective return notice.

Furthermore, as per 44AB, if you opt out of the presumptive taxation scheme before the completion of five assessment years, and do not get a tax audit done then a defective return notice may be received.

Mismatch in Name and PAN

If there is a mismatch between the name as per the PAN database and the name as per the ITR filed, the taxpayer might receive a defective return notice.

Sample Notice u/s 139(9)

How will I Receive Notice u/s 139(9)?

The system auto-generates the notice u/s 139(9) of the Income Tax Act and communicates it to the assessee via the registered email address. The sender of these emails is CPC i.e., the Central Processing Center.

The notice is attached to the email, and it is password-protected. The password to open is PAN in lower case and the date of birth in DDMMYYYY format. e.g., aagpr1212a02101980 for PAN: AAGPR1212A and DOB: 02/10/1980.

How to respond to notice u/s 139(9)?

Here’s how you can submit a response to the notice u/s 139(9) of the income tax act.

1. Login to the e-filing portal and Navigate to Pending Actions > E-Proceedings from the dashboard.

2. Click on View Notices

You will be able to view the proceeding name [Defective notice u/s 139(9)] and your return acknowledgment number here.

3. Submit Response

After understanding the notice, click on the submit response option. Make sure to submit a response before the response due date mentioned here.

4. Agree or Disagree

Choose from the options provided as to whether you agree or disagree with the notice.

5. Agree with the Notice

If you agree with the notice, you can file a corrected return by attaching a JSON file here.

6. Disagree with Notice

If you disagree with the discrepancy mentioned by the ITD, you will have to provide a reason for disagreement here.

7. After entering the reason click on Submit and it is done you will see a confirmation message with an acknowledgment number on the screen upon successful uploading.

Consequences of Non-response

If the taxpayer fails to file a response to the notice issued within a 15-day time frame, then the department will consider their original return as an Invalid return. Hence, it will be considered as the taxpayer hasn’t filed the return for such a financial year. Further, the interest and penalties may be levied for non-filing of return.

Income Tax Department Issues Notice for Mismatched ITR Filing

Income Tax Department has initiated a process of issuing formal notice to taxpayers regarding potential discrepancies identified between the information reported in their Income Tax Returns (ITRs) and the Department’s records of specific financial transactions for the assessment year 2021-22 (financial year 2020-21).

The Income Tax Department encourages those who received notices regarding discrepancies in their Income Tax Returns for the assessment year 2021-22 (financial year 2020-21) to file updated returns by March 31, 2024. This applies specifically to individuals identified through the e-verification scheme due to either mismatched or missing information.

The tax department additionally stated that individuals who haven’t filed Income Tax Returns for the assessment year 2021-22, but the department possesses information on specific high-value financial transactions related to them, are also required to file updated returns after careful examination.

In cases where ITRs for A.Y. 2021-22 have not been filed and, the Department has information of specified high-value financial transactions, the same also needs to be examined,” the tax department statement read.

To ensure transparency and facilitate compliance, the Income Tax Department, under the e-verification scheme-2021, is contacting taxpayers via their registered email addresses. Additionally, they encourage taxpayers to access their Annual Information Statement (AIS) through the department’s e-filing portal. This AIS provides a comprehensive overview of their financial information, allowing them to identify any inconsistencies with their ITRs and file updated returns (ITR-U) if needed.

In the spirit of transparency and fostering voluntary compliance, the tax department has incorporated this information into the AIS module of the e-filing portal. This allows taxpayers to easily access and review their financial records, promoting accurate ITR filing.

Communication of income tax notice proposed adjustment u/s 143(1)(a)

Income Tax Department verifies the details provided in the return filed by the taxpayer. If any discrepancies exist, the department issues a notice or intimation to the taxpayer, instructing them to make corrections. However, before commencing any assessment procedure, the department provides a notice u/s 143(1)(a) mentioning the proposed adjustments to be made in the return. Once the taxpayer responds to the notice, the department initiates the assessment procedures and issues a final order.

What is Notice u/s 143(1)(a)

Section 143(1)(a) notice of proposed adjustments involves the electronic processing of tax returns by the Centralized Processing Center in Bengaluru. This is not a final assessment but a preliminary communication of the tax calculation based on the provided information. This notice may indicate any discrepancies or adjustments in the filed income tax return, allowing the taxpayer to respond before a final assessment is made.

Such notice is issued for the following reasons:

Section	Reason
143(1)(a)(i)	Arithmetical Error in ITR
143(1)(a)(ii)	Incorrect Claim in ITR
143(1)(a)(iii)	Disallowance of loss claimed in ITR
143(1)(a)(iv)	Disallowance of expense claimed in ITR
143(1)(a)(v)	Disallowance of deduction claimed in ITR
143(1)(a)(vi)	Addition of income appearing in Form 26AS, Form 16 or Form 16A

Notice u/s 143(1)(a)(i)

Notice under this sub-section is issued when there is an arithmetical error in the return. The notice specifies the income categories where discrepancies exist between the calculations based on the taxpayer’s filed return and the department’s calculations.

Notice u/s 143(1)(a)(ii)

Under this sub-section, the notice is issued when there is an incorrect claim in the filed Income Tax Return.

Incorrect claim means:

The information provided in one part of the Income Tax Return doesn’t match with any other part of the return.
The required information that should be disclosed in the return has not been provided.
Deduction claimed while filing the return exceeds the specified statutory limit as per the Act.

Notice u/s 143(1)(a)(iii)

As per the Income Tax Act, the taxpayer cannot carry forward the loss if they file the income tax return after the prescribed due date. If the taxpayer filed the return after the due date u/s 139(1) and still claims losses, then the department will issue a notice under section 143(1)(a)(iii) to disallow such loss.

Notice u/s 143(1)(a)(iv)

This notice is issued when an expense has been incorrectly claimed in the ITR filed. If the audit report disallows the expenses, and the taxpayer claims the same expenses while filing the return, then it will be disallowed.

Notice u/s 143(1)(a)(v)

Under this sub-section, the notice is issued when a deduction has been incorrectly claimed in the ITR filed. There are certain deductions such as Sec10AA and Sec 80H to Sec 80RRB under chapter VI-A that the taxpayer can not claim if they filed the ITR after the due date u/s 139(4). However, if they have claimed the same, then the department will issue a notice u/s 143(1)(a)(v).

Notice u/s 143(1)(a)(vi)

The notice under this sub-section is received when there is a mismatch in details of TDS on salary as per Form 26AS or Form 16 or a mismatch in TDS as per Form 16A and income details reported in the filed Income Tax Return. There can be the following 3 possibilities:

Business or Profession Income reported under Schedule BP in return does not match the gross receipts/ turnover in the Tax Credit Statement i.e Form 26AS.
The salary reported under Schedule S in the return does not match the gross salary in the Tax Credit Statement i.e. Form 26AS.
Taxable Salary in ITR does not match with the Taxable Salary as per Form 16. This indicates that the taxpayer has included an additional deduction in the ITR that doesn’t appear in Form 16.

Communication of proposed adjustment u/s 143(1)(a)

The Central Processing Centre (CPC) at the income tax portal will send the letter of intimation under section 143(1)(a) to the registered email or mobile number.
The notice is password-protected. The password to open is PAN in lower case and the date of birth in DDMMYYYY format. Eg: aagpr1212a02101980 for PAN: AAGPR1212A and DOB: 02/10/1980

Time Limit for issue of Communication for Proposed adjustment u/s 143(1)(a)

The income tax department can send notice within nine months from the end of the financial year in which the return is filed.

For instance, if Ms. Priya filed her income tax return on 25th July 2023, she may receive a notice under section 143(1)(a) until 31st December 2024. This period spans 9 months from the end of the financial year in which the return was filed.

If a taxpayer does not receive any intimation within such period, it means that the calculations of ITD matched with the ITR filed.

Due Date to submit response to notice u/s 143(1)(a)

If you have received a notice under section 143(1)(a), you must file a response within 30 days from the date of issue of notice.

If you Agree to the discrepancies mentioned in the notice – You can accept the proposed adjustments.
If you Disagree with the discrepancies mentioned in the notice – Submit a response by explaining the reasons for disagreement.
When you Partially Agree to the discrepancies mentioned in the notice – submit a response by explaining the disagreement.

Note: In all the cases mentioned above, taxpayers have the opportunity to submit a revised return under section 139(5).

How to File Response to Notice u/s 143(1)(a)

Login to the e-filing portal and navigate to Pending Actions > e-Proceedings from the dashboard.

View Notices

Click on the option to View Notice for adjustment u/s 143(1)

Notice pdf

Click on the Notice/Letter pdf.

Download the notice

You will be able to view the notice issued to you. If you wish to download the notice, click Download.

Respond to Notice

Click on the option to submit a response.

Details of the Prima Facie Adjustments

You will be able to view the details of the Prima Facie Adjustments found by CPC in your filed ITR. Click on each variance to respond.

Details of the Prima Facie Adjustments

You will be able to view the details of the Prima Facie Adjustments found by CPC in your filed ITR. Click on each variance to respond.

Provide Response

On clicking the variance, details of the variance will be there. To respond to the particular variance, click Provide Response.

Response from dropdown

Select the relevant response from the dropdown and click Save after responding to each Prima Facie Adjustment.

Proceed to e-verify your response

After providing all the responses, click “Back.” This action will take you to the details of the Prima Facie Adjustment that CPC found in your filed ITR. Once you respond to each variance, the system will save your responses. Click Continue, Select the Declaration checkbox, and click Proceed to e-Verify.

Successful Verification

On successful e-Verification, a success message will be there along with a Transaction ID. You will also receive a confirmation message on your email ID registered on the e-filing.

TDS mismatch in my intimation under Section 143(1)

Section 143(1) of income tax act Intimation refers to the communication sent by the Income Tax Department to a taxpayer after processing their income tax return. This intimation is not an assessment order but rather a preliminary review of the information provided by the taxpayer in their return. The purpose of this intimation is to inform the taxpayer about the computation of their total income, the tax liability, and any discrepancies or adjustments made by the Income Tax Department.

Key Causes of Intimation

The issuance of an intimation under Section 143(1) of the Income Tax Act typically occurs after the processing of a taxpayer’s income tax return. Several factors can lead to the issuance of an intimation order, highlighting various reasons for adjustments made by the Income Tax Department. Here are the key causes:

Discrepancies in Income Details: Mismatch or discrepancies in the reported income, such as differences in salary, business income, interest income, or other sources of income.

Mismatch in TDS Details: Variations between the TDS (Tax Deducted at Source) details reported by the taxpayer and the data available with the Income Tax Department.

Errors in Deductions and Exemptions: Inaccuracies or omissions in claiming deductions or exemptions under various sections of the Income Tax Act.

Incorrect Tax Payments: Differences in the amount of tax paid by the taxpayer and the tax liability as computed by the Income Tax Department.

Mismatch in PAN or Aadhaar Details: Incorrect or mismatched Permanent Account Number (PAN) or Aadhaar details provided in the return.

Failure to Verify or E Verify the Return: Non verification or non e verification of the filed income tax return by the taxpayer.

Non Filing of Tax Return: Failure to file an income tax return when the taxpayer’s income exceeds the exempt limit, or when the taxpayer is liable to file a return under the law.

Calculation Errors: Mathematical errors or calculation mistakes in the return that lead to discrepancies in the computed tax liability.

Non disclosure of Income: Deliberate or unintentional non disclosure of certain income sources or assets.

Non Compliance with Income Tax Rules: Violation of specific rules or provisions of the Income Tax Act, leading to adjustments during the processing of the return.

It’s important for taxpayers to carefully review the intimation received under Section 143(1) and address any discrepancies or errors promptly. The intimation serves as a communication tool to inform the taxpayer of the adjustments made during the processing of the return, and resolving any issues in a timely manner contributes to a smoother and more accurate income tax assessment process. If there are disagreements with the adjustments, the taxpayer may need to take corrective action and, if necessary, follow up with the Income Tax Department.

Time Limit for issuing intimation u/s 143(1)

No Intimation under sub-section Shall be sent after the expiry of one year from the end of the financial year in which the return is made

Actions to be taken upon receiving an intimation under Section 143(1)

It is advisable to carefully review the details provided in the intimation. Check the computation of total income, tax payable or refundable, and any adjustments made by the Income Tax Department. If the details are accurate and there are no discrepancies are found, no further action may be required.

However, if there is agreements or disagreements :

If you agree with the tax payable or refund amount indicated in the Section 143(1) intimation, you can proceed by either making the payment for any outstanding taxes or simply expect to receive the refund amount specified.

However, if you find discrepancies in the calculations made by the Income Tax Department, you have the option to either submit an online request for rectification under Section 154 or initiate an appeal under Section 246A.

In the event that the net refundable or payable amount is zero, you may consider the intimation received under Section 143(1) as the conclusion of the return filing process for the relevant financial year, as per the information provided by the Income Tax Department.

What should I do if I don’t receive any intimation from the Income Tax Department within the given time frame?

If you haven’t received an intimation within one year from the end of the financial year in which you filed your return, your ITR–V acknowledgement will be deemed as the intimation. Nevertheless, it’s recommended to verify online whether the Income Tax Department has processed your ITR for your confirmation.

Where can you find your ITR Intimation

You can find your Income Tax Return (ITR) Intimation by logging into the Income Tax e-filing portal. Here are the steps to locate your ITR Intimation:

Visit the Income Tax e-filing Portal: Go to the official Income Tax e-filing portal at https://www.incometax.gov.in/iec/foportal/

Log in to Your Account: Log in using your credentials, which include your User ID (which is your PAN) and password. If you haven’t registered, you will need to create an account.

Go to “My Account”: After logging in, go to the “My Account” tab on the dashboard.

Select “View e Filed Returns/Forms”: Under the “My Account” section, select the option “View e Filed Returns/Forms.

Choose the Relevant Assessment Year: Select the assessment year for which you want to view the ITR Intimation.

View Intimation: Click on the acknowledgment number of the filed return. This will lead you to the details of your filed return, and you can find the link to view the Intimation under Section 143(1).

Download the Intimation: You can view and download the ITR Intimation in PDF format for your reference.

Check Your Email: Additionally, the Income Tax Department often sends an email notification to the registered email address when the Intimation is available. Check your email inbox for any communication from the Income Tax Department.

Always ensure that you keep a copy of the ITR Intimation for your records, as it provides details about the computation of your total income, tax payable or refundable, and any adjustments made by the Income Tax Department.

Intimation: Password Protected

The ITR intimation password for opening the attachment/file received is your PAN number in lowercase followed by your date of birth in DDMMYYYY format.

Say, your PAN is XYZPB1234C and your birth date is 15th March 1999, then the password to access your online intimation under Section 143(1) would be “xyzpb1234c15031999.”

What precautions should be taken when reviewing an intimation under Section 143(1)?

When reviewing an intimation under Section 143(1), it’s crucial to pay close attention to the following aspects:

Carefully verify personal details such as your name, PAN, and assessment year to ensure accuracy.
Thoroughly review the income details to confirm that all sources of income have been accurately considered.
Check the computation of total income and tax payable, ensuring alignment with your filed return and adherence to tax slabs.
Verify the consideration of all eligible deductions and exemptions claimed in your return.
Cross-check TDS details against your Form 26AS to ensure accurate reflection in the intimation.
Understand whether the intimation indicates a tax refund or demand, and if there’s a demand, review the reasons behind it.
Understand adjustments made by the Income Tax Department and carefully review any discrepancies mentioned.
Note any specified deadlines for responding to discrepancies or taking necessary actions.
Log in to the income tax e-filing portal to verify details online, as it often provides a comprehensive view of your filed return and processing status.

Income Tax Department SMS alerts

The Income Tax Department uses SMS alerts for various purposes. Here’s a breakdown of what they are and the types of SMS alerts you could receive:

Purpose of Income Tax SMS Alerts:

Reminders: To nudge you about important tax deadlines, like filing your Income Tax Return (ITR), paying advance tax, etc.
Verifications: To confirm that you have successfully e-verified your ITR or completed other actions on the e-filing portal.
Information updates: To notify you about the processing of your ITR, refund status, or discrepancies discovered during processing.
Alerts on high-value transactions: To draw your attention to significant financial transactions that may have tax implications. This is part of a larger initiative to promote voluntary tax compliance.

Types of SMS alerts you might receive:

ITR Filing Reminder: “Dear Taxpayer, the due date for filing your ITR for AY [Assessment Year] is [date]. File now on the e-filing portal to avoid penalties.”
E-Verification Success: “Dear Taxpayer, your ITR for AY [Assessment Year] has been successfully e-verified.”
ITR Processing Update: “Dear Taxpayer, your ITR for AY [Assessment Year] has been processed. Refund [amount] has been issued/Tax demand [amount] is to be paid.”
Discrepancy Alerts: “Dear Taxpayer, the Income Tax Department has information regarding certain financial transactions. Please review and ensure your income and taxes are accurately reported.”

Important Notes:

The Income Tax Department sends SMS alerts from the official sender IDs like “ITD-eFiling” or similar variations.
Never click on links in such SMS alerts unless you are sure they are from the genuine Income Tax Department. The official e-filing portal address is https://www.incometax.gov.in/iec/foportal/
Do not share your personal or financial details in response to SMS alerts from unknown sources.

Why The Income Tax Department Sends SMS Alerts

Timely reminders:
- Deadlines for ITR filing
- Due dates for advance tax payments
- Other time-sensitive actions to avoid penalties
Status updates:
- Confirmation of successful e-verification of your ITR
- Processing status of your ITR (whether a refund is due or more tax needs to be paid)
- Completion of other online actions on the e-filing portal
Transparency and pre-emptive action:
- Informing you about discrepancies between your reported income and information available with the Income Tax Department (from SFT, TDS, etc.)
- Encouraging you to review your filings and make any necessary corrections to ensure accurate tax reporting

How to Identify Genuine Income Tax SMS Alerts

Official Sender ID: The messages will come from sender IDs like “ITD-eFiling” or something similar. Be cautious of variations that attempt to mimic the official name.
No Links: Legitimate Income Tax Department SMS alerts usually will NOT contain clickable links. They are meant to inform, not redirect you to external websites.
Action Oriented: The SMS often guides you towards logging into your account on the e-filing portal (https://www.incometax.gov.in/iec/foportal/) for further details or action.

Security Precautions

Avoid responding directly: Never reply to the SMS with personal details (PAN, bank account, passwords, etc.).
Don’t click suspicious links: If an SMS has links, DO NOT click them. Always access the e-filing portal by directly typing the address into your browser.
Verify on the e-filing portal: Any information or action specified in an SMS should also be reflected on your official Income Tax account on the portal. Log in and verify before taking action.
Report fraud: If you suspect a fraudulent SMS, report it to the Income Tax Department through their official channels.

Remember: The primary goal of genuine Income Tax Department SMS alerts is to keep you informed and promote timely tax compliance. They act as a nudge, urging you to log in to your official account for further details and actions.

Income Tax Notice Penalties under the Income Tax Act

An Income Tax Notice is a communication from the Income Tax (IT) Department, typically indicating the initiation of an inquiry into the taxpayer’s filed returns. The reasons for such notices may vary, ranging from requests for additional information or documents to intimations about additional tax liabilities. Failure to respond promptly and accurately to an Income Tax Notice can result in penalties or additional taxes for the taxpayer.

Penalties Under the Income Tax Act

Non-responsiveness to an Income Tax Notice can lead to various consequences as outlined below:

Section 139 (9)

If a taxpayer fails to respond within the stipulated 15-day timeframe from the Assessing Officer’s (AO) notification date, their return may be deemed invalid. This could result in penalties, interest, non-carry forward of losses, and loss of specific exemptions.

Section 245

A notice may be issued if a taxpayer requests a refund for a specific assessment year while still having outstanding taxes. The unresolved demand as of the notification date will be adjusted against the return if left unaddressed for 30 days.

Section 143 (1)

Failure to respond to a notice u/s 143 (1) can lead to the processing of Income Tax Returns (ITR) after making necessary adjustments mentioned in the notice.

Section 143 (1a)

Non-responsive behavior to a notice under section 143(1a) can result in penalties being levied against the taxpayer.

Section 143 (2)

If a taxpayer does not respond to a scrutiny notice (notice under section 143 (2)) within the required time frame, it may lead to penalties.

Section 148

Failure to respond to a notice under section 148 can result in non-compliance penalties.

Section 234 (F)

Under section 234 (F), failure to file an ITR within the specified time frame may result in late fees being imposed based on the overall revenue and time taken to file the return.

When filing an Income Tax Return, it is imperative for taxpayers to thoroughly verify all details and documents or have a Chartered Accountant review them. By doing so, taxpayers can potentially avoid the issuance of such notices.

Student Gets ₹ 46 Crore Tax Notice

A youth, who is a college student, has filed a complaint with the police in Madhya Pradesh’s Gwalior district after transactions of ₹ 46 crores occurred from his bank account, a police official said on Friday.

The youth, identified as Pramod Kumar Dandotiya (around 25 years old), a resident of Gwalior, came to know about the matter when he received a notice from the Income tax and GST that a company has been registered through his PAN card which is being operated in Mumbai and Delhi 2021.

Mr Dandotiya said, “I am a college student in Gwalior. After the notice from Income Tax and GST, I came to know that a company has registered through my PAN card which is being operated in Mumbai and Delhi 2021. I do not know how my PAN card has been misused and how the transactions have been done.

He further said that as soon as he got the information from the Income Tax, he talked to the department concerned. After that he tried to file a complaint to the police several times but no action was taken. On Friday again, he reached the office of Additional Superintendent of Police and lodged his complaint again.

Additional Superintendent of Police (ASP) Shiyaz K M told ANI, “Today, an application has been received from a youth that transactions amount of more than ₹ 46 crore has been made from his bank account. The documents in this regard are being checked. The PAN card has been misused, a company has been registered through it and transactions of such a huge amount have been done.

The whole matter is being investigated, the officer added.

Income Tax Notice: Be careful! Even if you file ITR much before time, you may get a Income-tax notice

The Income Tax Department has become so strict that even a small mistake can result in an Income Tax Notice. Many taxpayers think that they should follow the Income Tax rules as soon as possible and file the Income Tax Return. Therefore, many people file ITR as soon as the business year begins. But such people often get notices of mismatch and they get worried. So can filing ITR much before time become a cause of trouble? Watch this special show of CNBC Awaaz.

समय से काफी पहले फाइल किया ITR, क्या परेशानी का सबब बन सकता है?, देखिये टैक्स गुरु में@RoyLakshman #Taxguru #incometax pic.twitter.com/EhAfOiUvz5
— CNBC-AWAAZ (@CNBC_Awaaz) March 30, 2024

Read the whole matter in detail

Actually, the person who deducts tax also files a return. This is called TAN Return. The last date for this return is 31st May. After filing the TAN return, it starts appearing in your 26AS. That means its picture becomes somewhat clear by June. Now suppose you had filed the return in the beginning of April, then it will not appear in your 26AS. Same thing happens with AIS as well.

Income tax notice will not come this way

So, where taxpayers file their tax returns as soon as the business year begins to fulfil their responsibilities, this can be a problem for them. Tax expert Sharad Kohli said that it is a very good thing that you file income tax returns early but according to me, if you file income tax returns in mid-June, then the chances of getting a notice of mismatch are reduced.

Get Notice under Section 143(2) it means your return has been selected for detailed scrutiny by your Assessing Officer

Notice under Section 143(2) – Scrutiny NoticeIt means AO was not satisfied with the produced documents or may be AO has not received any documents. If you get Notice under Section 143(2) it means your return has been selected for detailed scrutiny by your Assessing Officer.

Once the assessee files his return of income the income tax department scrutinizes his return and issues assessment

intimations, scrutiny notices etc. This applies even if the assesses does not file his return of income. The various notices which the assessee may receive for any financial year are as follows:

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, and to take a particular case under assessment.

By serving a notice u/s 142(1) the assessing officer, may call upon the assessee:-

To furnish a return of income in respect of which he is assessable, where he has not filed his return of income within the normal time allowed.

– It may include return in respect of his own income or income of other person for which he is liable to be assessable. Example-In case of legal guardian/deceased person.

To produce accounts or documents which the AO may require for the purpose of making an assessment.
To furnish in writing any information on matters including statement of the assessee. For Example- statement of assets and liabilities of the assessee on a particular date.

The AO may or may not start assessment after compliance with this notice dependent upon the facts of assessee. If AO is satisfied with the produced documents or return, he may not start with the assessment process.

Compliance with this notice u/s 142(1) is mandatory even if the tax payer is of the opinion that the accounts/ documents requested are irrelevant.

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. Rs. 10,000 for each failure, or

Prosecution under Sec 276D which may extend upto 1 year with or without fine.

Notice under Section 143(2) – Scrutiny Notice

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.

If you get Notice under Section 143(2) it means your return has been selected for detailed scrutiny by your Assessing Officer.

This notice can be served upto 6 months after completion of relevant assessment year.

Where the assessee has not furnished his return of income, then notice under Section 143(2) cannot be issued to him and also scrutiny assessment cannot be done. In such case, direct Best Judgement Assessment under Section 144 is done by the AO. 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).

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.

Section 143(2) enables the Assessing Officer to make a regular assessment after a detailed inquiry.

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, or

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):

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).
A refund notice, where the officer’s computation shows amount excessively paid by the assessee.
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 30days.

Time limit for the notice to be served is up to 1 year after completion of relevant assessment year. How to reply to notice received under section 143(1):

If details provided by the taxpayer and as verified by the Income Tax department match. Then the notice will serve as final assessment of the return with nothing to be done on part of the taxpayer and the department. Just a printout of the same shall be taken and kept along with the income tax file. Take a printout of the same and file it with your income tax papers.
If you are getting Refund, wait for the cheque or transfer into your account.
If there is a tax demand then this intimation becomes Notice of Demand under section 156. The notice says “In case of Demand, this intimation may be treated as Notice of demand u/s 156 of the Income Tax Act, 1956. Accordingly, you are requested to pay the entire Demand within 30 days of receipt of this intimation”.

For example, if Income as disclosed by taxpayer is Rs 6,00,000 and tax duly deposited on same but the department computes his income as Rs 6,50,000, then tax on Rs 50,000 needs to be paid. The taxpayer will have to pay such tax or of he thinks that the demand is wrong then he must prove his case and file rectification.

Notice under Section 148 – Income escaping assessment

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.

To initiate proceedings under Sec 147, the AO is required to have a reason necessarily.

The onus of stating the reasons is on AO. Also,

Notice under Sec 147 cannot be sent in regard to the income involving matters which are the subject matter of any appeal, reference or revision.

This tangible reason should give him a belief that there is income which has expected assessment. The Supreme Court has clarified that the act nowhere states that the beliefs or reasons of AO should ultimately proved to be escaped income in order to be valid reason.

Even though if the contention of the AO shall stand invalid in any case but the beliefs were reasonable on his part, the Notice and such assessment shall stand valid.

Notice under Section 156- Notice of Demand

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.

The notice of demand is received in the cases where assessment has been made in respect to assessee. Generally, notice of demand is not received to every assessee for regular payment of taxes. Assesseeon his own pays the taxes with self assessment.

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.

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.

143(2) income tax notice reply format

Letter in response to formal first notice under section 143 (2) what does a income tax notice sent under section 143(2) mean?

When the income tax department finds discrepancies, minor or major, in your income tax returns, a notice will be issued under Section 143(2). The discrepancies can be under-reporting income or over-reporting losses. The notice is issued to make sure that you have not underpaid tax in any way.

What you should know about the notice?

You may receive a notice in the form of a PDF via email to your registered email address. It will also be sent to the postal address.
If you have not filed returns for the financial year, the assessing officer cannot issue a notice u/s 143(2). He must first issue a notice u/s 142(1), asking you to first file returns.
When you receive the notice u/s 143(2), you must produce all documents supporting the deductions, exemptions, allowances, reliefs, and other claims made while filing the returns.
You must provide proof related to all your income sources.
The assessing officer does a detailed enquiry.

How does this work?

Step 1: Your income tax return has been filed.

Step 2: A notice is issued under Section 143(2) by the assessing officer.

Step 3: You and/or your tax representative will place your arguments in front of the assessing officer and submit documents, declarations as required.

Step 4: After considering all submissions, a final order will be passed u/s 143(3) about the tax payable or refund receivable.

Types of notices u/s 143(2)

You will receive one of the following notices under Section 143(2):

Limited Scrutiny

This is a Computer-Assisted Scrutiny Selection (CASS) where cases are selected based on set parameters. These are cases with inaccurate returns information or mismatches. The scrutiny will be limited to the particular area of return mentioned in the notice such as the claim of foreign tax credit or sale of a property.

Complete Scrutiny

Complete scrutiny will be carried out on the return filed and all supporting documents. The cases will be flagged based on CASS. Though the scope of scrutiny is not limited to this type, the assessing officer cannot verify documents beyond the particular assessment year.

Manual Scrutiny

Cases are selected for complete scrutiny based on the criteria defined by the Central Board of Direct Taxes; the criteria may vary every year.

Time limit to issue the notice

The notice under Section 143(2) can be issued after an income tax return has been filed but within a period of six months from the end of the financial year in which the return was filed. For example, say, Mr Ram filed his returns on 31 July 2019 for the financial year 2018-19. The assessing officer can issue a notice under Section 143(2) only within 30 September 2020. This is because he can only issue the notice within a period of six months from the end of the financial year 2019-20, the financial year in which Mr Ram filed the returns.

What happens if you fail to respond?

You cannot take the notice lightly and ignore it. If you do not respond to the department within the stipulated time period,

You may be subject to a penalty of Rs.10,000 under Section 272A for each failure to respond.
The assessment officer may close the assessment with the information he has with the best judgement under Section 144.
A higher taxable income can be considered, resulting in a higher tax and penalty payable by you.
If you choose to dispute the higher tax demand, a minimum of 20% of the tax due must be paid before you file an appeal with higher authorities.
It may lead to prosecution; if found guilty, it may result in imprisonment.

Time limit to issue the final assessment order

Assessment Year (AY)	Time limit from the end of the (AY)
2017-18 or before	21 months
2018-19	18 months
2019-20 onwards	12 months

Sample Notice u/s 143(2)

LETTER IN RESPONSE TO FORMAL FIRST NOTICE U S 143(2)

Section 143(1)(a): Notice for Proposed Adjustments

What is Notice u/s 143(1)(a)

Such notice is issued for the following reasons:

Section	Reason
143(1)(a)(i)	Arithmetical Error in ITR
143(1)(a)(ii)	Incorrect Claim in ITR
143(1)(a)(iii)	Disallowance of loss claimed in ITR
143(1)(a)(iv)	Disallowance of expense claimed in ITR
143(1)(a)(v)	Disallowance of deduction claimed in ITR
143(1)(a)(vi)	Addition of income appearing in Form 26AS, Form 16 or Form 16A

Notice u/s 143(1)(a)(i)

Notice u/s 143(1)(a)(ii)

Under this sub-section, the notice is issued when there is an incorrect claim in the filed Income Tax Return.

Incorrect claim means:

The information provided in one part of the Income Tax Return doesn’t match with any other part of the return.
The required information that should be disclosed in the return has not been provided.
Deduction claimed while filing the return exceeds the specified statutory limit as per the Act.

Notice u/s 143(1)(a)(iii)

Notice u/s 143(1)(a)(iv)

Notice u/s 143(1)(a)(v)

Notice u/s 143(1)(a)(vi)

Business or Profession Income reported under Schedule BP in return does not match the gross receipts/ turnover in the Tax Credit Statement i.e Form 26AS.
The salary reported under Schedule S in the return does not match the gross salary in the Tax Credit Statement i.e. Form 26AS.
Taxable Salary in ITR does not match with the Taxable Salary as per Form 16. This indicates that the taxpayer has included an additional deduction in the ITR that doesn’t appear in Form 16.

Time Limit for issue of Communication for Proposed adjustment u/s 143(1)(a)

The income tax department can send notice within nine months from the end of the financial year in which the return is filed.

If a taxpayer does not receive any intimation within such period, it means that the calculations of ITD matched with the ITR filed.

Due Date to submit response to notice u/s 143(1)(a)

If you have received a notice under section 143(1)(a), you must file a response within 30 days from the date of issue of notice.

If you Agree to the discrepancies mentioned in the notice – You can accept the proposed adjustments.
If you Disagree with the discrepancies mentioned in the notice – Submit a response by explaining the reasons for disagreement.
When you Partially Agree to the discrepancies mentioned in the notice – submit a response by explaining the disagreement.

Note: In all the cases mentioned above, taxpayers have the opportunity to submit a revised return under section 139(5).

How to File Response to Notice u/s 143(1)(a)

Login to the e-filing portal and navigate to Pending Actions > e-Proceedings from the dashboard.

View Notices

Click on the option to View Notice for adjustment u/s 143(1)

Notice pdf

Click on the Notice/Letter pdf.

Download the notice

You will be able to view the notice issued to you. If you wish to download the notice, click Download.

Respond to Notice

Click on the option to submit a response.

Details of the Prima Facie Adjustments

You will be able to view the details of the Prima Facie Adjustments found by CPC in your filed ITR. Click on each variance to respond.

Provide Response

On clicking the variance, details of the variance will be there. To respond to the particular variance, click Provide Response.

Response from dropdown

Select the relevant response from the dropdown and click Save after responding to each Prima Facie Adjustment.

Proceed to e-verify your response

Credit Access Grameen Faces Rs 46 Crore Income Tax Demand, Plans to Oppose Ruling

CreditAccess Grameen has received a demand order of Rs 46 crore from the income tax department for the assessment year 2022-2023. The company plans to oppose the ruling, stating that it is based on incorrect facts and assumptions.

They intend to present the full facts of the case to the IT department and take necessary steps to safeguard their interests. Additionally, Jana Small Finance Bank’s appeal against an old income tax demand of Rs 73 crore has been disposed off, with no additional tax outgo for the bank as the disputed amount has already been remitted.

Steps Taken By The Income Tax Department To Trace High-Value Transactions

High-value transactions are transactions which involve large amount of money and are reported to the Income Tax Department by banks and other institutions if the transactions cross a certain threshold.

High-value transactions are closely monitored by the Income Tax department through the concept of a statement of financial transaction (SFT) in Form 61A or a reportable account in Form 61B, submitted by specific entities. These entities are mandated to provide information about particular high-value transactions which they have registered, recorded, or maintained during the fiscal year. This enables the Income Tax Department to track an individual’s financial activities and ensure tax compliance.

Here is a list of transactions that may trigger a notice from the Income Tax Department, as this data is collected from the respective reporting authorities:

Sr. No.	Transaction	Threshold (Rs)	Which authority should report?
1	Cash payment for purchasing bank draft, pay order, banker’s cheque or prepaid RBI instruments	10,00,000	Banks or co-operative society need to disclose a transaction if the amount deposited exceeds the threshold to the Director of Income Tax by filing Form 61A
2	Cash deposits in a savings bank account	10,00,000	– Banks – Co-operative society – Post master general
3	Cash deposit or withdrawal from a current account	50,00,000	Banks or co-operative society
4	Sale or purchase of an immovable property	30,00,000	The Property Registrar/Sub-registrar must report a transaction exceeding the threshold via Form 61A.
5	Investments in shares, mutual funds, debentures and bonds in cash (If amount is transferred from one scheme to another, then reporting is not required)	10,00,000	– Company issuing Shares, Debentures, Bonds – Mutual Fund Trustee
6	Payment of credit card bill in cash	1,00,000	Banks or co-operative society
7	Payment of credit card bill other than through cash	10,00,000	Banks or co-operative society
8	– Sale of foreign currency – Crediting FOREX card – Spending in foreign currency through a debit or a credit card or through traveler’s cheque or any other instrument	10,00,000	Authorised Person under Foreign Exchange Management Act, 1999
9	Cash deposits in the fixed deposit or recurring deposit account	10,00,000	– Bank – Co-operative society – Nidhi Company – NBFC

Steps Taken By The IT Department To Trace High-Value Transactions

Below are some of the measures taken by the department to trace high-value transactions:

Upgraded Form 26AS:
The Department has upgraded Form 26AS to reflect Specified Financial Transactions (SFT). Moreover, it has introduced ‘Annual Information Statement (AIS)’ where you can view all the financial information. The specified institutions, such as registrars, banks, post offices, stock exchanges, etc., must report transactions exceeding the specified threshold to the income tax department. These transactions are then reflected in the AIS portal so that the taxpayer can voluntarily disclose all the information based on the AIS information.
Applicability of TDS on cash withdrawal:
To trace high-value transactions, the government has proposed that the banks must deduct TDS at 2% on cash withdrawals more than Rs 1 crore during the financial year. If the person does not file ITR for the last three financial years, then TDS at 2% shall be deducted for cash withdrawals exceeding Rs 20 lakh, and for cash withdrawals exceeding Rs 1 crore, TDS will be deducted at 5%.
Mandatory filing of returns:
An individual is required to file ITR if income exceeds Rs 2,50,000. But, from 1st April 2019, ITR filing is mandatory if the individual has entered into certain specified high-value transactions, even if the income is less than Rs 2,50,000. For example, deposits in one or more current a/c maintained with a bank/co-operative bank are more than Rs 1 crore, foreign travel expenditure is in excess of Rs 2 lakh, or electricity bill expenditure is in excess of Rs.1 lakh during the year.

Action To Be Taken If Form 26AS Reflects SFT Transactions

Firstly a taxpayer must verify that the SFT transactions reported in the Form 26AS are correct. Subsequently, a taxpayer must ensure to report the said high-value transaction while filing the ITR, and that the tax liability on the same has been accurately calculated. Any error or mismatch in reporting such transactions may trigger an income tax notice.

Launch Of e-Campaign

The income tax department has launched an e-campaign for the voluntary compliance of income tax for the convenience of taxpayers.

The campaign focuses on the assessees/taxpayers who are either:-

Non-filers of the income tax return
Have discrepancies/deficiencies in their returns

Who Receives Email/SMS Of e-Campaign From Income Tax Department?

Under e-campaign, the income tax department sends emails/SMS to identified taxpayers to verify their financial transactions related to information received by the IT department from various sources such as SFT, TDS, TCS, etc. The department can collect information related to GST, imports/exports, and transactions in securities, derivatives, commodities and mutual funds through various third parties.
You may receive an email/SMS from the e-campaign when:

You have not filed Income Tax Return: Even if the income tax return was filed correctly, you must provide feedback upon receiving such notice.
There are discrepancies/deficiencies in your Income Tax Returns: Discrepancies do not always indicate that information has been hidden. Instead, it could be due to the errors in AIS. You must report such errors to the IT department by ‘Providing feedback on AIS’.

How To Comply With e-Campaign Notice Online and How to submit Response?

If you have received an email or SMS for high-value transactions or non-filing of returns, you can respond to the income tax department by following the below steps:

Step 1: Log in to your income tax e-filing account.

Step 2: In the home page, go to ‘Pending Actions’> Compliance Portal > ‘e-Campaign (AY 2021-22 Onwards)’.

Step 3: Select the relevant e-campaign.

After redirecting from the e-filing portal, the landing page of the e-campaign view will be displayed. Select the relevant e-campaign and click on ‘provide feedback in AIS’.

If you don’t have active e-campaigns or e-verifications, you will get the message – “No Compliance Record has been generated for you”.

For example, in the case of high-value transactions or non-filing of income tax returns, it will show the below information under the ‘e-Campaign’ list.

Step 4: Select the information category
‘e’ would be marked against the information category for which you have received the communication.

Step 5: Select the Transaction
The information on which feedback is required would be marked as ‘Expected’.

Step 6: Submit Response
From the options, select the most appropriate response:
– Information is correct
– Information is not fully correct
– Income is not taxable
– Information relates to other PAN/year
– Information is duplicate/included in other displayed information
– Information is denied

Following are the categories where the response is expected from the taxpayer under e-campaign:

Preliminary Response
Feedback on Information on AIS

Preliminary Response

Under the ‘Preliminary Response’ section, the taxpayer is expected to respond to relevant questions. The queries under the Preliminary Response section are based on campaign type (non-filing of return/certain high-value transactions done by the taxpayer).

For example, for campaign type – ‘Non-Filing of Income Tax Return’, the taxpayer is expected to submit a response whether an income tax return has been filed or not.

Step 1: Click on the ‘Provide Response’ button provided against the ‘Preliminary Response’ section.
Step 2: On the next page, respond by selecting the relevant drop-down.
Step 3: Provide additional details as required by the income tax department. For example, For the question ‘Whether Income Tax Return (ITR) has been filed?’ the following additional details are required:

If ITR has been filed:
- Acknowledgement Number – Enter the Acknowledgement Number generated for the Income Tax Return filed for the relevant A.Y.
- Date – Select Date of Income Tax Return filing
- Mode – Select Mode of Income Tax Return filing (i.e., e-Filed return | Paper filed return)
- Circle/ Ward and City – Enter Circle/Ward and City of the taxpayer
- Remarks – Enter Remarks for Income Tax Return filing (Optional)
If ITR has not been filed
- Reason – Select the Reason for not filing the ITR
- Remarks – Enter Remarks for not filing the ITR

Step 4: After filling in all the relevant information, submit the response. You can download the preliminary response submitted from the ‘Activity History’ screen.

If you don’t have active e-campaigns or e-verifications, you will get the message – No Compliance Record has been generated for you.

Submit Feedback On Information In AIS

You have to provide feedback on the information under the e-campaign, where no feedback has been provided. You must provide feedback on the L1 information, which is marked as ‘Expected’ as shown in the below screenshot.

To know more about how to give feedback, you can click on the link: Submit feedback on information in AIS.

In this way, you can submit the response to the income tax department for the notice on the high-value transactions or non-filing of the income tax return.

Check your inbox: Income Tax Department alerting taxpayers on major transactions

Income Tax Department’s Advance Tax e-Campaign and Significant Transactions for A.Y. 2024-25 The Income Tax Department is gearing up to launch an e-campaign aimed at urging individuals and entities to pay their advance tax for the financial year 2023-24. This initiative, conducted via email and SMS, aims to notify those involved in significant financial transactions to calculate and settle their advance tax obligations by March 15, 2024.

Having acquired information about specific financial transactions carried out by individuals and entities during the F.Y. 2023-24, the department has identified discrepancies between the taxes paid so far in the current fiscal year and the financial activities undertaken during that period. In an effort to assist taxpayers, the Income Tax Department will roll out an e-campaign, named “Advance Tax e-Campaign-Significant Transactions for A.Y. 2024-25,” to prompt them to accurately assess their advance tax liability and submit the due amount by the specified deadline.

The department collates information on designated financial transactions from various sources, which is incorporated into the Annual Information Statement (AIS) module for review by individuals and entities. This analysis is based on the value of “Significant Transactions” listed in the AIS.

An official statement from the tax department highlighted, “The Income Tax Department receives information of specified financial transactions of taxpayers from various sources. To increase transparency and promote voluntary tax compliance, this information is reflected in the Annual Information Statement (AIS) module and is available to the persons/entities for viewing. The value of ‘Significant Transactions’ in the AIS has been used for carrying out this analysis.”

Individuals and entities can access details of significant transactions by logging in to their e-filing accounts and navigating to the Compliance Portal. For those who are not yet registered on the e-filing website, the registration process is simple and can be completed by clicking on the “Register” button and providing the necessary details. Once registered successfully, they can log in to their e-filing accounts and access the Compliance Portal to view significant transactions via the e-Campaign tab.

Intimation Under Section 143(1) of Income Tax Act

Section 143(1) of the Income Tax Act, 1961, is essentially a computer generated automated message which lets the taxpayer know of any error that exists in his/her tax filing. It also tells the taxpayer if he/she has any interest that is payable.

Anytime someone receives a notice from the Income Tax Department, there seems to be an overwhelming sense of trepidation that goes with it. Just looking at such envelopes can bring thoughts of impending fines and appearances and adds to the stress of daily life. But not all notices come bearing bad news. While some bear great news such as tax refunds, there are a few that are more of an announcement or statement of facts and have no positive or negative impact.

One such notice is the Intimation under section 143(1). This notification is a computer generated message stating any errors made or any interest found payable or refundable. This message is generated automatically and has no human intervention. These intimations are often sent via email within a time frame of 1 year from the financial year in which the return was filed.

What is Intimation u/s 143(1)?

The details submitted to the tax department and the details considered by the department to process the tax return are summarised in the Intimation u/s 143(1). The following are the details present in the Intimation u/s 143(1):

Sequence number of refund
Details of assesses, such as name, address, etc.

As per Tax Department, the tax computed under section 143 (1)
Other details related to Income Tax filing, such as filing date, acknowledgement number, etc.
The tax calculation as provided in the Income Tax return

When does One Receive an Intimation under Section 143(1)?

The below three instances are the primary reasons for having an intimation notice generated.

If the taxpayer has paid extra tax then the notification will mention the amount of tax refund. If the refund value is above Rs. 100, then the refund will be paid out to the taxpayer. Refund values below Rs. 100 will not be paid out.
If the taxpayer has paid taxes, which after computation are found to be short, then the notice will state the amount of tax due by the taxpayer and will also enclose a challan for the same payment.
A simple notice which states that the tax returns filed by the taxpayer fall in line with the computation made by the assessing officer. In such cases no specific intimation is sent to the assessee and the assessee should treat the ITR V acknowledgement of filing of return of income as the intimation notice.

Till when can I receive intimation u/s 143(1)?

Intimation can be received up to one year from the end of the financial year in which the return is filed.

For example, if the return for the year 2021-22 was filed on 18 June 2022, then the financial year ends on 31 March 2023, and you can receive intimation till 31 March 2024 and not after that. The response should be submitted within the specified timeframe in case any action required to avoid legal complication.

What if no intimation is received till the expiry of one year?

Your ITR–V acknowledgment will be considered your intimation; in case you do not receive intimation till expiry of one year from the end of the financial year in which you have filed your return.

How is the intimation u/s 143(1) received?

Here are the required details regarding how the intimation is received:

Intimation is received in your registered email ID

This email ID is the same one that you provided during registration on the income tax website or at the time of filing income tax returns online
The Central Processing Centre (CPC) is the sender of these emails
Sender ID is intimations@cpc.incometax.gov.in
Text message is also sent to the recipient to their registered mobile number.

What is the password to open intimation u/s 143(1)?

To open the intimation u/s 143(1) you need to enter the correct password to access the file. The password for these files is your PAN number in lower case and your date of birth in DDMMYYYY format. For example, if your PAN number is MARGK5108Q and your date of birth is 11 October 1984, then the password will be ‘margk5108q11101984’.

How to get the Intimation u/s 143(1) again?

The following are the steps to get intimation u/s 143(1) again, on case you are not being able to receive your intimation on your registered mail ID:

Visit the e-filing portal
Log into the portal by entering your login credentials

Click on the ‘Income Tax Return’ option under ‘e-file’ option
Click on ‘View Field’
New page will appear showing the filed returns
Click on the ‘Download Intimation Order’

Check the following points when you receive an intimation u/s 143(1)

The following are the points that you must check when you receive an intimation u/s 143(1):

The document identification number in the intimation
Name on the intimation
Check whether the deduction claimed under 80C, and sections are considered or not
Income is mentioned under appropriate head

Check whether the income is repeated or not
Check whether any rebate claimed or allowable, or relief u/s 89, 90/90A/91 are considered in the intimation or not
Self-Assessment Tax paid and TDS/TCS claimed Advance Tax paid in the computation by CPC (Central Processing Centre)

How to deal with Intimation under section 143(1)?

Firstly, a taxpayer should not fret if they receive such an intimation. They should check for particulars and see if the details mentioned do belong to them such as name, PAN number, and assessment year.
The second step would be to check if the notice was sent either due to tax refundable or tax payable. In cases of tax refundable, only those values exceeding Rs. 100 will be refunded and this refund will be paid out in due course of time without the taxpayer having to provide any additional details.
If the notice was sent due to tax payable, then the taxpayer needs to see the cause of discrepancy. These causes may be due to simple arithmetic errors, inadequate documents submitted, undeclared sources of income, or deductions filed under the wrong sections.
If the computation seems satisfactory, then the taxpayer must proceed to pay the tax difference immediately but if the taxpayer is unhappy with the computation made and would like to refute the notice then they can consult with a competent CA and contact their income tax officer.

What is the password for intimation under Section 143(1)?

The intimation received under Section 143(1) is password protected. The ITR intimation password will be your PAN (in lowercase) followed by date of birth in DDMMYYYY format without giving any space.

For example: Assuming your PAN is ABCDE1234E and the date of birth is 01/01/2000, the password to open the intimation will be “abcde1234e01012000”.

Nature of adjustments under 143(1)

Total income or loss is computed under Section 143(1) after making the following adjustments:

Arithmetical error in the return
Any incorrect claim which is apparent from any information in the return where incorrect claim which may include the following:
- The claim of an item in the return which is inconsistent with another entry of the same or some other item in such return – for example, income from other sources are deducted from business income but not declared under income from other sources.
- Disallowance of set off of loss in the financial year which is carried forward from previous years in which return was filed beyond specified due date
- Disallowance of expenditure indicated in the audit report but not indicated in the return of income.

Time Limit for issue of 143(1)

Section 143(1) intimation has to be sent within one year from the end of the financial year in which return is being filed. For eg: if the taxpayer has filed return pertaining to the financial year 2021-22 in July 2022, intimation can be sent any time till 31 March 2024. If a taxpayer does not receive any intimation within such period, it simply means there are no adjustments carried out to the return filed by the taxpayer and no change in tax liability/refund, and the acknowledgement filed itself is deemed to be Section 143(1) intimation.

Action to be taken by the taxpayer after receiving a 143(1)

As a first step, review certain things in Section 143(1) intimation to ensure document pertains to your return itself and data provided pertain to the same financial year as mentioned in Section 143(1) intimation.
Check the name, PAN, address, assessment year for which notice has been sent, e-filing acknowledgement number.
In case you are able to identify the mistakes you have made while filing your return from the 143(1) intimation, and they can be rectified by filing a revised return, please do so by logging into income tax e-filing website. Please refer our article on how you can go about revising your return online.
However, if no mistakes have been made and you do not agree with the adjustments made by CPC/computerised system, you can file an online rectification application under Section 154(1) intimating the correction of mistake appearing in the Section 143(1) intimation. Refer our article on filing rectification application.
Also, submit your response in the e-filing portal where there is a tax demand- whether you agree or disagree with the same.
In case you are not satisfied with the processing of your rectification return by CPC, you can also file online grievances or contact your assessing officer. In case of no satisfactory action from CPC/assessing officer, you can file a complaint to income tax ombudsman.

However, if taxpayer agrees to the tax demand raised by income tax department after carrying out adjustments as above, taxpayer is required to pay such taxes. Refer our article on OLTAS challan payment on how to pay taxes. However, while paying tax on demand raised under this Section, please choose ‘Tax on regular assessment (400)’ under ‘Type of payment’ field in the challan.