Tag: income tax notice reasons

Income Tax Notice: Top Reasons You May Receive One

Reasons You May Receive an Income Tax Notice: Even if you have paid your taxes and filed your returns, you may still receive a notice. This section explains why and how to respond.

Let’s see for which reasons you might receive an IT notice-

1) Inaccurate Information on Assets or Income in The Income Tax Return

The Income Tax Department actively works to prevent tax evasion. You may receive a notice requesting disclosure of all income and assets, both in India and abroad.

Additionally, you should carefully complete your income tax return document by ensuring your tax return includes accurate details such as your name, address, and PAN. Incorrect information may result in a notification.e a notice for non-reportage if the income tax authorities suspect that not all your income from various sources has been reported.

You should gather all your financial documents and proof of all your income sources,To avoid non-disclosure issues, gather all financial documents and proof of income, such as pay stubs, bank statements, and invoices, before filing your return.ax department will be on a constant lookout in the event of a sudden substantial decrease in income or a steep increase in income levels.

You may receive a notice if you acquire high-value assets or conduct large transactions. Investments made in the names of your spouse or child may still be considered your income and should be reported accordingly.

Failure to report such income on your tax return may result in a notice.

4) TDS Inconsistencies or Incorrect TDS Claims

Your TDS at the time of filing should match the amounts on Forms 26AS and 16 or 16A. Discrepancies may result in a notice under Section 143 (1).

Employers, banks, and bond issuers may deduct TDS. Errors in TDS deductions or reporting of income and interest can lead to a notice from the tax department.

5) For Review & Evaluation

You may receive a notice under Section 143 (2) if your ITR is selected for scrutiny, often due to discrepancies or incorrect reporting.

You should also be conscious that the Income Tax Department Be aware that the Income Tax Department may impose penalties. Respond to notices promptly. to reply to an Income Tax Notice

6) Delayed Income Tax Return Filing

You must file your tax return by the deadline each assessment year. If the deadline is approaching and you have not filed, you may receive a reminder notice.

Under Section 142(1)(i) of the Income Tax Act, you may receive a notice requiring you to file your return. Filing and payment are separate processes, so paying tax without filing a return can still result in a notice.

You must submit tax returns, even if your business experienced a loss for the fYou must file tax returns even if your business incurred a loss. After uploading your return online, you have 120 days to submit the ITR. Filing after the deadline may result in penalties and a notice from the tax department.Tentionally, you may have failed to include some interest income that you have accrued; however, since the interest is credited to your bank account or reinvested in your assets, the department can quickly identify you as the source of the overstatement. You may receive a notice for failure to pay taxes.

The assessing officer may notify you that any outstanding dues will be deducted from your income tax refund, if applicable.

8) For Prior Years of Tax Evasion

The Income Tax Act empowers the Internal Revenue Service to re-evaluate prior filed tax returns. The department may issue a notice to the taxpayer under section 147 of the Income Tax Act. Based on predefined criteria, an Assessing Officer can select tax returns for reassessment.

Only when the tax officer seems to have reason to suspect that A notice for reassessment is issued only if the tax officer has reason to believe taxable income has not been assessed.

Also read: Section 143(3) Scrutiny Assessment

Intimation Under Section 143(1) of Income Tax Act, 1961

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.

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

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.

FAQs on Intimation Under Section 143(1) of Income Tax Act

  1. How to open intimation u/s 143(1)?To open intimation u/s 143(1) use your PAN and date of birth as password. For example, if your PAN is DARGK6914q, and your birth date is 3rd October 1993, then the password will be dargk6914q03101993.
  2. How will I receive Section 143(1) notice from the IT Department?You will receive the Section 143(1) notice from the Income Tax Department through email with the subject line ‘Your ITR intimation’ and you will also receive an SMS alert informing that intimation notice has been sent to your registered email ID.
  3. How to file rectification for intimation u/s 143(1)?Log in to your income tax portal account to rectify the intimation u/s 143(1) and click on the Service tab. Select the rectification option and choose relevant A.Y. and file.
  4. What to do if there is no mismatch in an intimation u/s 143(1) notice, demand, or refund?If there is no mismatch in an intimation u/s 143(1) notice, demand, or refund, then you need not do anything, as it means that the ITR has been processed successfully.
  5. Is intimation u/s 143(1) an assessment order?No, intimation u/s 143(1) intimates about the processing of the return, and hence, it is not an assessment order.
  6. If I have zero refunds and tax demand, and proper sync on the taxpayer and 143(1) section columns, then do I need to reply to 143(1) intimations?If you have zero refunds and tax demand, and proper sync on the taxpayer and 143(1) section columns, then you need not reply.
  7. Can I revise the income tax return after receiving the intimation u/s 143(1)?Even after receiving intimation u/s 143 (1), you can revise your income tax return by 31 December of the relevant assessment year.
  8. Is the tax assessment order and intimation u/s 143(1) the same?No, the intimation u/s 143(1) and the tax assessment order are not the same.
  9. Can I use intimation u/s 143(1) as address proof?Yes, you can use the intimation u/s 143(1) as an address proof.

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.

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

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.

FAQs on Intimation Under Section 143(1) of Income Tax Act

  1. How to open intimation u/s 143(1)?To open intimation u/s 143(1) use your PAN and date of birth as password. For example, if your PAN is DARGK6914q, and your birth date is 3rd October 1993, then the password will be dargk6914q03101993.
  2. How will I receive Section 143(1) notice from the IT Department?You will receive the Section 143(1) notice from the Income Tax Department through email with the subject line ‘Your ITR intimation’ and you will also receive an SMS alert informing that intimation notice has been sent to your registered email ID.
  3. How to file rectification for intimation u/s 143(1)?Log in to your income tax portal account to rectify the intimation u/s 143(1) and click on the Service tab. Select the rectification option and choose relevant A.Y. and file.
  4. What to do if there is no mismatch in an intimation u/s 143(1) notice, demand, or refund?If there is no mismatch in an intimation u/s 143(1) notice, demand, or refund, then you need not do anything, as it means that the ITR has been processed successfully.
  5. Is intimation u/s 143(1) an assessment order?No, intimation u/s 143(1) intimates about the processing of the return, and hence, it is not an assessment order.
  6. If I have zero refunds and tax demand, and proper sync on the taxpayer and 143(1) section columns, then do I need to reply to 143(1) intimations?If you have zero refunds and tax demand, and proper sync on the taxpayer and 143(1) section columns, then you need not reply.
  7. Can I revise the income tax return after receiving the intimation u/s 143(1)?Even after receiving intimation u/s 143 (1), you can revise your income tax return by 31 December of the relevant assessment year.
  8. Is the tax assessment order and intimation u/s 143(1) the same?No, the intimation u/s 143(1) and the tax assessment order are not the same.
  9. Can I use intimation u/s 143(1) as address proof?Yes, you can use the intimation u/s 143(1) as an address proof.

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.

Contents  hide 

1 What is Intimation u/s 143(1)?

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

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

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

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

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

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

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

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

10 FAQs on Intimation Under Section 143(1) of Income Tax Act

10.1 Related

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.

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

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.

FAQs on Intimation Under Section 143(1) of Income Tax Act

  1. How to open intimation u/s 143(1)?To open intimation u/s 143(1) use your PAN and date of birth as password. For example, if your PAN is DARGK6914q, and your birth date is 3rd October 1993, then the password will be dargk6914q03101993.
  2. How will I receive Section 143(1) notice from the IT Department?You will receive the Section 143(1) notice from the Income Tax Department through email with the subject line ‘Your ITR intimation’ and you will also receive an SMS alert informing that intimation notice has been sent to your registered email ID.
  3. How to file rectification for intimation u/s 143(1)?Log in to your income tax portal account to rectify the intimation u/s 143(1) and click on the Service tab. Select the rectification option and choose relevant A.Y. and file.
  4. What to do if there is no mismatch in an intimation u/s 143(1) notice, demand, or refund?If there is no mismatch in an intimation u/s 143(1) notice, demand, or refund, then you need not do anything, as it means that the ITR has been processed successfully.
  5. Is intimation u/s 143(1) an assessment order?No, intimation u/s 143(1) intimates about the processing of the return, and hence, it is not an assessment order.
  6. If I have zero refunds and tax demand, and proper sync on the taxpayer and 143(1) section columns, then do I need to reply to 143(1) intimations?If you have zero refunds and tax demand, and proper sync on the taxpayer and 143(1) section columns, then you need not reply.
  7. Can I revise the income tax return after receiving the intimation u/s 143(1)?Even after receiving intimation u/s 143 (1), you can revise your income tax return by 31 December of the relevant assessment year.
  8. Is the tax assessment order and intimation u/s 143(1) the same?No, the intimation u/s 143(1) and the tax assessment order are not the same.
  9. Can I use intimation u/s 143(1) as address proof?Yes, you can use the intimation u/s 143(1) as an address proof.

Income tax’s official domain IDs will be used for sending the Income Tax Notice

Identifying Genuine Income Tax Notices

Receiving an income tax notice can be a source of anxiety for many individuals. It’s essential to exercise caution, as not all notices may be legitimate. In some cases, fraudsters attempt to deceive people by sending counterfeit income tax notices. The Income Tax Department issues tax notices to individuals for various reasons, such as scrutiny of the taxpayer’s income tax return, outstanding tax demands, or surveys.

It is crucial to comprehend the notice process, which can aid in recognizing a fake notice purportedly from the income tax department. When you receive a tax notice, attentively read through the entire document. Scammers often rely on individuals’ lack of attention, and a thorough examination can help avoid falling victim to their tactics and prevent panic reactions.

Recently, one of our clients encountered emails and messages claiming to be from the Income Tax Department. These communications pressured the client to click a link and make an immediate tax payment to evade penalties and legal consequences. The notices used official language and alarming threats to create a sense of urgency.

Key Guidelines Followed by the Tax Department in Sending Income Tax Notices

1. Document Identification Number (DIN) in Communication: All notices are now mandated to be computer-generated with a Document Identification Number (DIN) effective from October 1, 2019. This measure was introduced to enhance transparency and accountability within the system.

2. Visibility of Notices in the e-filing ITR Portal: Most income tax notices are dispatched electronically, and the contents can be verified by viewing the actual notice in the e-filing ITR portal. This platform enables individuals to cross-check notices at different tabs to ensure authenticity.

Where to Find Income Tax Notices:

  • Under the ‘e-File’ tab, individuals can check ‘view filed return’ for intimations sent for the respective year.
  • The ‘Pending Actions’ tab contains the option ‘e-Proceeding’, where notices can be found under sub-parts such as self PAN and other PAN/TAN.
  • The ‘Compliance Portal‘ can also be accessed under the ‘Pending Actions’ tab for locating notices and intimations.

3. Income tax’s official domain IDs will be used for sending the notice:

Domain names are another aspect that the tax department will meticulously follow while sending the notices over email. “Most income tax officers send notices directly from the official id which is usually created at domain ‘@incometax.gov.in’. You will observe that said official email ids are also created in a unique way. e-Mail will start from the city (Mumbai, Delhi etc) followed by designation (ITO, DCIT, Systems, etc) followed by ward number [1(1), 2(1)] @incometax.gov.in

For example: the email ID of Joint Director (Systems) Sh. Hanuman is- bangalore.jd.systems3.cpc@incometax.gov.in

4. Direct Communication by Tax Officers: Certain notices, such as dispute resolution panel (DRP) hearing notices, are directly sent by the tax department to the taxpayer’s registered email address. It is important to note that these communications will be sent from the official Income Tax domain ID and will not contain any payment links.

Furthermore, individuals may receive SMS and email notifications when the tax department sends a notice. Additionally, in specific cases, such as DRP cases, calls may be made by the DRP secretariat office, with all communications originating from the Income Tax Department. This multilayered approach offers added assurance for taxpayers regarding the authenticity of the notices.

By familiarizing oneself with these guidelines and processes, individuals can better discern genuine income tax notices from fraudulent attempts, thereby safeguarding themselves from potential scams and unnecessary distress.

How to verify the authenticity of a tax notice?

There is a functionality on the e-filing ITR portal that can be utilised to verify any communication from the income tax department, including notices, orders, summons, and letters.

  • Visit the Income Tax e-filing portal: https://www.incometax.gov.in/iec/foportal/
  • Under “Quick Links,” click “Authenticate Notice/Order Issued by ITD.”
  • Choose one of two verification methods:
  • Using PAN: Enter your PAN, document type (notice, order, etc.), assessment year, date of issue, and your mobile number (for receiving a one-time password).
  • Using DIN: Enter the Document Identification Number (DIN) mentioned on the notice and your mobile number for OTP verification.
  • Enter the received OTP and click “Continue.”
  • The tool will instantly confirm if the notice is genuine. If not, you’ll know it’s safe to disregard it.

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. 

Income Tax: 5 high-value cash transactions may attract I-T notice

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

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

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

Depositing large amounts in cash in savings accounts

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

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

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

Fixed deposits made with cash

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

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

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

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

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

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

Repaying credit card bill in cash

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

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

Cash payments related to properties

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

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

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

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

Income Tax Department has sent information mismatch alerts through emails to taxpayers

The Income Tax Department recently sent out a communication about an Information Mismatch Campaign for the financial years 2022-23 and 2021-22. Many assesses received this communication regarding a mismatch in Interest Income. The discrepancy arose from disclosing interest on fixed deposits and interest income from loans under different line items in the ITR under Income from other sources. The response tab does not provide an option to explain that the difference in interest shown as a mismatch is already disclosed under a different line item. If the AI system of the Income Tax Department is not improved and directed properly, it may lead to a lot of litigation in the future despite the proper discharge of tax liability.

Income Tax as usual Mass communication will be an headache for many :
Latest Communication from Income Tax Department: The email has been sent by Income tax department to many assessee on 24/02/2024 as communication regarding Information mismatch campaign for FY 2022-23 and FY 2021-22.

On opening the same through compliance portal, it is observed that the department has issued notice for mismatch of  Interest Income. on further scrutiny it is found that mismatch has been occurred in the department system due to disclosure of Interest on Fixed deposit and Interest Income from loan under different line item in ITR under Income from other sources (which is general practice of disclosing by many one). 
Moreover In response tab there are no option to mention that the difference of interest shown as mismatch/under reported is already disclosed under different line item as any other interest income.

If AI system of Income tax department is not further improved/directed properly, a lot of litigation will arise and pile up in near future resulting to harassment to the asseee even after proper discharge of their tax liability.

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.

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

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.

FAQs on Intimation Under Section 143(1) of Income Tax Act

  1. How to open intimation u/s 143(1)?To open intimation u/s 143(1) use your PAN and date of birth as password. For example, if your PAN is DARGK6914q, and your birth date is 3rd October 1993, then the password will be dargk6914q03101993.
  2. How will I receive Section 143(1) notice from the IT Department?You will receive the Section 143(1) notice from the Income Tax Department through email with the subject line ‘Your ITR intimation’ and you will also receive an SMS alert informing that intimation notice has been sent to your registered email ID.
  3. How to file rectification for intimation u/s 143(1)?Log in to your income tax portal account to rectify the intimation u/s 143(1) and click on the Service tab. Select the rectification option and choose relevant A.Y. and file.
  4. What to do if there is no mismatch in an intimation u/s 143(1) notice, demand, or refund?If there is no mismatch in an intimation u/s 143(1) notice, demand, or refund, then you need not do anything, as it means that the ITR has been processed successfully.
  5. Is intimation u/s 143(1) an assessment order?No, intimation u/s 143(1) intimates about the processing of the return, and hence, it is not an assessment order.
  6. If I have zero refunds and tax demand, and proper sync on the taxpayer and 143(1) section columns, then do I need to reply to 143(1) intimations?If you have zero refunds and tax demand, and proper sync on the taxpayer and 143(1) section columns, then you need not reply.
  7. Can I revise the income tax return after receiving the intimation u/s 143(1)?Even after receiving intimation u/s 143 (1), you can revise your income tax return by 31 December of the relevant assessment year.
  8. Is the tax assessment order and intimation u/s 143(1) the same?No, the intimation u/s 143(1) and the tax assessment order are not the same.
  9. Can I use intimation u/s 143(1) as address proof?Yes, you can use the intimation u/s 143(1) as an address proof.

Income Tax Department sends notice to salaried Individuals asking proof of deductions claimed in ITR

Beware of Misusing Tax Exemptions: Income Tax Department Initiates Notice Process: The Income Tax Department has initiated sending notices to salaried individuals requesting evidence of deductions and exemptions claimed in the Income Tax Return (ITR) Form for the Assessment Year 2023-24.

Salaried individuals can claim various exemptions and deductions related to HRA, LTA, housing loan, insurance, ELSS, and medi-claim to save on taxes under the old tax regime.

However, misuse of these provisions by individuals for fake tax exemptions could result in an Income Tax Notice. Tax professionals and chartered accountants should ensure no fake tax claims are made while filing ITR. It is suggested to opt for the new tax regime, which has become lucrative after the Budget 2023, instead of claiming incorrect exemptions or deductions.

Transactions seen as red flags by Income Tax Department; can send tax notice

Many taxpayers are dreading after some people complained on their social media handles of getting Income Tax notices. Several transactions could potentially result in the issuance of an Income Tax notice. Presented below are a few of the most prevalent instances:

Huge cash deposits in savings accounts

The Income Tax Department (ITD) diligently monitors all monetary deposits and withdrawals carried out by individuals. Should an individual who holds a savings account deposit an amount exceeding ₹10 lakh in cash within a fiscal year, the department could potentially issue them a notice, necessitating an explanation for the origin of these funds.

The department has instituted a benchmark of ₹10 lakh for cash deposits within savings accounts. This implies that any cash deposit surpassing ₹10 lakh in a savings account throughout a fiscal year will trigger an automatic notification to the department.

Subsequently, the department will launch an inquiry into the provenance of the funds channelled for the deposit. Should the department find the explanation satisfactory, no notice will be dispatched. However, if the explanation fails to meet their standards, an official notice might be sent to the account holder, mandating them to elucidate the source of the funds.

Several factors could lead to the department issuing a notice to an account holder depositing more than ₹10 lakh in cash within a fiscal year. One of these reasons could be the department’s suspicion that the funds are derived from illicit origins, such as money laundering or tax evasion. Another concern could be the potential involvement of the funds in the financing of terrorism or other illicit activities.

Credit card bills paid in cash in excess of ₹1 lakh

The department diligently monitors all transactions made through credit cards. If a payment exceeding ₹1 lakh is made in cash towards your credit card bill within a fiscal year, the department may initiate a notice requesting an explanation for the origin of these funds.

The department has established a benchmark of ₹1 lakh for cash payments towards credit card bills. In practical terms, this implies that should you make a cash payment exceeding ₹1 lakh towards your credit card bill in a fiscal year, this transaction will trigger an automatic notification to the department.

Subsequently, the department will initiate an inquiry into the provenance of the funds utilized for the payment. If the department deems the explanation satisfactory, no notice will be dispatched. However, if the provided explanation falls short of their standards, a formal notice might be sent to the cardholder, prompting them to elucidate the source of the funds.

Several factors might lead to the department issuing a notice to a cardholder who makes a cash payment surpassing ₹1 lakh towards their credit card bill in a fiscal year.

Cash deposit exceeding ₹10 lakh in bank FDs

The Reserve Bank of India (RBI) has established a cap of ₹10 lakh for cash deposits into fixed deposits (FDs). This signifies that you are restricted from depositing an amount exceeding ₹10 lakh in cash within a single FD account during a financial year.

Should you initiate a cash deposit surpassing ₹10 lakh into a solitary FD account, the bank is mandated to report the transaction to the RBI. Subsequently, the RBI holds the prerogative to scrutinize the origin of these funds and implement suitable measures.

Several rationales underpin the RBI’s imposition of this threshold. One rationale is the prevention of money laundering and other unlawful activities. Additionally, this measure aids in monitoring the flow of capital within the economy.

In circumstances requiring a deposit beyond ₹10 lakh into an FD account, this can be accomplished through multiple deposits each not exceeding ₹10 lakh. Alternatively, you can choose to deposit the funds using non-cash methods such as checks or bank transfers.

Importantly, transgressing the ₹10 lakh ceiling for cash deposits into FDs carries significant ramifications. It could entail a demand for clarifying the origin of the funds and potentially lead to penalties being imposed.

Steep cash infusion in the stock market

The department meticulously monitors all cash investments initiated by individuals. Should your cash investments in mutual funds, stocks, bonds, or debentures exceed ₹10 lakh within a financial year, the department may issue a notice requiring an account of the origin of these funds.

The department has established a benchmark of ₹10 lakh for cash investments within these asset categories. In essence, this signifies that any cash investment surpassing ₹10 lakh within these asset categories in a fiscal year will activate an automatic alert for the ITD.

Subsequently, the department will initiate an inquiry into the provenance of the funds utilized for the investment. Should the department deem the explanation satisfactory, no notice will be dispatched. However, if the provided explanation falls short of their standards, the department might formally notify the investor, demanding a clarification regarding the source of the funds.

Cash transaction above ₹30 lakh in real estate

The department advises against engaging in cash transactions exceeding ₹30 lakh within real estate transactions. This precaution is due to the challenges posed by tracking cash transactions, which can potentially facilitate money laundering or tax evasion.

For individuals engaged in property buying or selling, familiarity with the department’s directives concerning cash transactions is crucial. Should you participate in a cash transaction surpassing ₹30 lakh, you could be called upon to elucidate the origin of the funds. Furthermore, the possibility of facing penalties also exists.

Taxpayers have come under Radar of the income tax authorities to prevent leakage of taxes

Income tax notices sent out for overseas investments: Foreign investments of Indian residents have come under the radar of the income tax authorities to prevent leakage of taxes. However, recently even those who have declared overseas assets in their Income Tax Returns (ITRs) have received notices due to a mismatch between the information available with the tax department and ITRs. 

Many taxpayers, who have adhered to the norms by diligently declaring their overseas investments in their income tax returns, are bewildered on receiving the tax notices. It not only creates undue mental pressure but also leads to wastage of time and resources, with individuals having to engage in correspondence and coordination with the Income Tax department to rectify the issue for no non-disclosure on their part,” said Bijal Ajinkya, Partner, Khaitan & Co.

Investments abroad by resident Indians are made through Liberalised Remittance  (LRS) introduced by the Reserve Bank of India. It permits Indian residents to freely remit up to $250,000 per financial year for any investments or payments done abroad. Any income earned from these investments becomes taxable under the Income Tax Act and needs to be declared in the tax return.

The current system of tax department may not cover whole landscape of possibilities of mismatch between the information available with the tax department and ITRs. Like, there could be a possibility that the individuals may have made investment in 2000 or 2010 and the tax department data does not have any data about such investment. However, under the Information Exchange Agreement, they may have received information about such investments,” said Amit Singhania, Founder of Areete Law Offices.

It may also be noted that earlier in 2000 or 2010, there was no requirement to disclose offshore assets. Another example could be a person has made the investment in offshore entity and thereafter gifted the same to his relatives. Thats the reason he has not disclosed the information in ITR. Separately, there is still a possibility that the even though the information regarding investment and ITR are matched but the tax department may have suspicion regarding bonafide source of funds considering the quantum of income disclosed in ITR, explained Singhania.

However, discrepancies in the information mapping system of the Income Tax department have led to the present scenario where even some compliant taxpayers are receiving tax notices.  The current issue emphasizes the urgent requirement for streamlining the information management system of the Income Tax Department. The tax authorities must ensure accurate mapping and integration of data declared by taxpayers and that received from international agencies. This would not only help in avoiding unnecessary harassment of tax-compliant individuals but also aid in the accurate identification of those flouting tax norms, added Ajinkya.

Income Tax Department to Send Notices to Non-Filers Despite Source Deductions

The income tax department plans to send notices to taxpayers who have not filed tax returns despite tax deductions at source. The Central Board of Direct Taxes (CBDT) chairman, Nitin Gupta, stated that the department will send notices to individuals for whom they have definitive information, and the number of notices is expected to be in the few thousand.

The department is utilizing vast amounts of data to identify discrepancies and is urging taxpayers to update their returns. So far, the CBDT has collected ₹4,600 crore from 5.1 million updated returns. Efforts are being made to enhance taxpayer services, such as reducing refund time and resolving significant tax disputes. Additionally, a demand management center has been established in Mysuru, Karnataka, focusing on tax disputes over ₹1 crore. The CBDT is also planning to issue a detailed circular to implement the budget announcement on withdrawing outstanding small tax demands up to ₹25,000 until FY15. Currently, 60% of taxpayers have transitioned to the new tax regime introduced in the February 2022 budget.

Read more at: Income Tax Department sends 100,000 notices

The department intends to evaluate the response and filing patterns before considering any rate adjustments. Moreover, additional disclosures are being requested in income tax returns, largely stemming from recommendations by the Public Accounts Committee or the Election Commission of India. This includes details like the Legal Entity Identifier (LEI), contributions to political parties, and deductions for the maintenance of dependents with disabilities, among other information.

Read more at: Income Tax Notices: Taxpayers Alert! Income Tax Department is sending notices in cases up to 15 years old; Know the reason

Income Tax Department takes cognizance of certain high-value transactions that could land you in the legal net if ignored

Income Tax notice: 6 high-value cash transactions that can get you flagged by Income Tax Department: The Income Tax Department takes cognizance of certain high-value transactions that could land you in the legal net if ignored. To prevent tax evasion and money laundering, tax authorities closely monitor a variety of cash-related transactions. Financial institutions, including banks, mutual fund companies, brokerages, and property registrars, have an obligation to report cash transactions exceeding a specific threshold to the tax department. Below are several cash transactions subject to vigilant monitoring by tax authorities:

Acquisition of real estate assets

In accordance with Section 12 of the Prevention of Money Laundering Act, 2002 (PMLA), property registrars are mandated to notify tax authorities about any acquisitions or sales of immovable properties valued at ₹30 lakh or higher. This notification must be submitted within 30 days from the date of property registration. The property registrar must furnish the following details to the tax authorities:

This data is utilized by tax authorities to monitor substantial cash transactions and identify potential instances of tax evasion and money laundering. The property registrar must report all transactions involving the purchase and sale of immovable property valued at ₹30 lakh or higher, irrespective of whether the payment is made in cash or by cheque.

Acquisition of stocks, mutual funds, debentures, and bonds

Companies or institutions that issue bonds or debentures must compulsorily report any receipt of ₹10 lakh or more from an individual during a financial year for the acquisition of bonds or debentures. This reporting measure is implemented to prevent tax evasion and money laundering.

Likewise, companies that issue shares must report any receipt of ₹10 lakh or more from an individual within a financial year for the acquisition of shares. This reporting obligation also extends to the purchase of mutual funds.

The company or institution must provide the following information to the Income Tax Department:

  • Investor’s name and address
  • Investor’s PAN number, if provided
  • Purchase date
  • Purchase amount
  • Type of security acquired (e.g., bond, debenture, share, mutual fund unit).

This data enables the Income Tax Department to identify taxpayers who may not be disclosing their complete income or who are engaging in suspicious investment activities.

The reporting mandate is applicable to investments made by individuals, Hindu Undivided Families (HUFs), and partnership firms, and it does not extend to investments made by companies.

Acquisition of foreign currency

Any purchase of foreign exchange amounting to ₹10 lakh or more during a financial year must be reported to the Income Tax Department. This reporting obligation is applicable to individuals, HUFs, and partnership firms, but it does not pertain to companies.

The subsequent foreign exchange transactions must be reported to the Income Tax Department:

The establishment that supplies you with foreign exchange is obligated to notify the Income Tax Department of the transaction. For instance, if you buy foreign currency notes and coins from a bank, the bank must report the transaction to the Income Tax Department.

This reporting mandate is implemented to deter tax evasion and money laundering. The Income Tax Department can utilize the provided information to identify taxpayers who are either underreporting their complete income or engaging in questionable foreign exchange transactions.

Cash deposits in bank accounts

The Central Board of Direct Taxes (CBDT) has instituted a compulsory rule for banks and cooperative banks to notify the tax authorities regarding cumulative cash deposits of ₹10 lakh or more in one or more accounts (excluding current accounts and time deposits) held by an individual within a financial year. This regulation is implemented to combat tax evasion and money laundering. The bank or cooperative bank must submit the following details to the CBDT:

  • The depositor’s name and address
  • The depositor’s PAN number, if provided
  • The date of the cash deposit
  • The cash deposit amount
  • The account number(s) in which the cash deposit was placed

This data empowers the CBDT to pinpoint taxpayers who may not be disclosing their entire income or engaging in questionable cash deposits. This reporting obligation is applicable to cash deposits in one or more accounts, excluding current accounts and time deposits, held by an individual. In essence, if you make several cash deposits, each of which is less than ₹10 lakh, but the cumulative cash deposit amount in a financial year reaches ₹10 lakh or more, the bank or cooperative bank is mandated to notify the CBDT.

Money deposited in fixed deposits

The CBDT has stipulated that banks are obligated to report instances where an individual accumulates ₹10 lakh or more in a fixed deposit (FD) within a financial year, spanning one or more time deposits (excluding renewals). This reporting measure is implemented to deter tax evasion and money laundering.

The bank must furnish the following details to the CBDT:

  • The depositor’s name and address
  • The depositor’s PAN number, if provided
  • The date of the cash deposit
  • The cash deposit amount
  • The account number(s) where the cash deposit was made

This data enables the CBDT to pinpoint taxpayers who may be underreporting their total income or engaging in dubious cash deposits. These are instances of cash deposits into time deposits that necessitate reporting to the CBDT:

  • An individual deposits ₹5 lakh in cash into a new FD in January 2023.
  • An individual deposits ₹3 lakh in cash into an existing FD in February 2023.
  • An individual deposits ₹2 lakh in cash into a new FD in March 2023.

The cumulative cash deposit in time deposits for the financial year 2022-2023 amounts to ₹10 lakh, therefore, the bank is obligated to report this to the CBDT. The obligation to report pertains to cash deposits in time deposits by individuals, HUFs, and partnership firms, excluding companies.

Payments made using credit cards

The CBDT has imposed a compulsory requirement on credit card issuers to notify the Income Tax Department regarding cash payments totalling ₹1 lakh or more for credit card balances. Additionally, if an individual settles credit card dues amounting to ₹10 lakh or more through any means in a fiscal year, these transactions must also be reported to the tax department.

The purpose of this reporting requirement is to combat tax evasion and money laundering. The Income Tax Department can employ this information to detect taxpayers who may not be accurately disclosing their complete income or those engaged in questionable credit card payments. The credit card issuer must provide the following details to the Income Tax Department:

  • The credit cardholder’s name and address
  • The credit card holder’s PAN number, if provided
  • The payment date
  • The payment amount
  • The payment method (e.g., cash, cheque, NEFT, etc.)

Should you intend to make a cash payment of ₹1 lakh or more towards your credit card dues, it’s important to be mindful of this reporting obligation. Additionally, you should be ready to furnish the required payment details to the credit card issuer.

TDS Shortfall Income Tax Notices for Homebuyers in Property Purchases

The TDS tangle for which homebuyers are getting tax notices: Many taxpayers, especially homebuyers, have been ranting on social media about TDS (tax deducted at source) shortfall notices from the income tax (IT) department. Homebuyers are being asked to remit the shortfall, equivalent to approximately 20 percent of the value of the property purchased, along with penal interest.

According to IT rules, the homebuyer is required to deduct TDS at the rate of 1 percent of the sale consideration if the property’s value is Rs 50 lakh or more. However, in the absence of a PAN or if the PAN is deemed inoperative, the TDS rate increases to 20 percent. Also, effective July 1, 2023, if the PAN is not linked with the Aadhaar card, the PAN becomes inoperative.

Homebuyers who were unaware, or neglected to verify the validity of the PAN and its linkage with Aadhaar, are now receiving notices. Here’s what the TDS rules concerning property purchase entail, and the options available for buyers who have already remitted the 1 percent TDS, paid the remaining 99 percent to the seller, and have got the notice.

TDS on property purchase

TDS makes tax collection quick and effective, as it ensures that tax is deducted right when the income is generated. The payer deducts the tax and remits it to the government on behalf of the payee. TDS is applicable on several payments such as salary, interest, commissions, brokerage, professional fees, property sale consideration, etc.

“Section 194 IA of the Income Tax Act, 1961, requires home-buyers to withhold tax at the rate of 1 percent on the payment made to the seller, where the consideration or the stamp duty value of the property exceeds Rs 50 lakh,” said Suresh Surana, Founder, RSM India, a tax consultancy (added).

If the property is worth Rs 75 lakh, the homebuyer needs to deduct Rs 75,000 (1 percent of Rs 75 lakh), and pay the remaining Rs 74.25 lakh to the seller. The buyer needs to deposit the amount  deducted with the IT department within 30 days. The seller can later adjust this amount against his overall income tax liability when filing his returns. If there is a higher income tax liability due to capital gains, the seller will need to pay the difference.

TDS in the absence of PAN, or if PAN and Aadhaar are not linked

Per TDS rules, in the absence of a PAN, the TDS should be deducted at a higher rate. “Where no PAN is furnished by the seller, or such PAN has become inoperative, homebuyers would be required to withhold tax at a higher rate of 20 percent,” said Surana.

Further, “in case any person has not linked his/her PAN with Aadhaar by June 30, 2023, then such PAN would have become inoperative w.e.f. 1st July, 2023, in accordance with CBDT circular no. 3 of 2023, dated 28th March, 2023. In case of such inoperative PAN, the higher rate of withholding tax u/s 206AA would be applicable,” added Surana. Further, this higher TDS rate is also applicable where the seller is a Non-Resident Indian.

Timing of the notice could also be a worry

What if the buyer has deducted 1 percent TDS, and already paid the remaining 99 percent to the seller, before a notice is issued? Homebuyers are anxious because they say they were unaware of the rules, and whether the PAN was inoperative or not. They feel they shouldn’t be held responsible and made to pay the penal interest.

Per TDS rules, non-compliance with TDS regulations can result in penalty and interest charges being slapped on the buyer, not the seller. “The homebuyer is responsible for verifying whether or not the seller’s PAN is linked to the Aadhar. In case he fails to do the same and deducts TDS at a lower rate, he would be liable,” said Surana.

“Homebuyers who fail to deduct tax at the higher rate of 20 percent and receive a notice for short deduction would be required to pay the differential amount and file a correction in the TDS return already filed by them in this regard. Additionally, the homebuyer may also be subject to interest @1 percent per month, or part thereof, on the amount of short deduction from the date on which such tax was deductible, to the date on which it is actually paid,’’ added Surana.

He further mentions that, “as it is the homebuyer’s responsibility to confirm the status of seller’s PAN and withhold tax accordingly, the interest liability arising on account of the short deduction will need to be borne by him. However, the homebuyer may collect the additional 19 percent TDS from the deductee, wherever possible, based on their agreement and understanding.”

According to a former Vice President of the Income Tax Appellate Tribunal (ITAT), who doesn’t want to be named, “The critical question is whether the buyer of the property (the tax deductor) was in a position to verify the PAN details of the seller at the time of making the payment, or not.”

He says that if the homebuyer is in a position to ascertain the correctness of the PAN details, but fails to do so, “he has to suffer the consequences.”

But, he adds, on occasion, it is possible that the homebuyer genuinely cannot verify such details. For example, when the PAN of the seller gets deactivated after the buyer deducts 1 percent TDS.

Explaining the interpretation of India’s income tax laws, he said that nobody is expected to perform the “burden of doing the impossible.” If, for instance, the buyer  can prove that the seller didn’t share the correct PAN, he can be pardoned. Also, when  he feeds the PAN details of the seller online in the challan and the invalid PAN doesn’t get flagged at the time, no additional financial burden can be imposed on the buyer later, especially because the lapse is that of the seller.

What should homebuyers do?

Firstly, you can verify the seller’s PAN online. Click here, input details such as the seller’s PAN, his name, date of birth, and mobile number. An OTP will be sent to the seller for verification. On entering the OTP, the website will indicate whether the PAN is active, and if the details match the PAN. Just ensure that the seller co-operates with you and shares the OTP for the purpose of PAN verification.

If you, as a homebuyer, have been served an income tax notice for not deducting the correct TDS, and you can prove that you had no way knowing you were required to deduct TDS at a higher rate, then you can appeal to the income tax tribunal.

Read more at: Link PAN with Aadhaar? Pay 20% TDS for your fixed deposit

Income Tax Scrutiny Assessment under Income Tax Act – Section 143(3)

Summary of Income Tax Assessment

The income tax assessment entails the verification of information provided by a taxpayer in the returns submitted to the income tax department. It aims to ensure the correctness of the taxable income declared and tax paid. This process includes regular assessments, re-assessments, and best judgment assessments under Section 144.

Scrutiny assessment under Section 143(3) involves a meticulous review of the income tax return to verify the accuracy of claims and deductions. It can be initiated when filing an income tax return under Section 139 or responding to a notice under Section 142.

Scrutiny assessments are categorized into manual and compulsory assessments, which can be triggered by non-filing of tax return, errors in the return, high-value transactions, defects in income tax return, or non-disclosure of other incomes.

The scrutinized case is selected by the Income Tax Department under specific circumstances, such as non-disclosure of certain incomes, errors related to TDS, or non-filing of the income tax return.

The scrutiny assessment process includes starting the assessment with a notice under Section 143(2), participating in the assessment, conducting the scrutiny assessment hearing, and complying with the time limits for conducting scrutiny assessments as per Section 153. The duration for completing a scrutiny assessment varies based on the assessment year.

The procedure for scrutiny assessment ensures that the taxpayer has ample opportunity to present evidence or arguments and that the Assessing Officer follows legal standards.

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:

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:

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 3: Non-disclosure of Other Incomes

Reason 4: Unnatural or High-Value Transactions

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:

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

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.

Revised ITR, CBDT Asks Reason from 30 Lakh Taxpayers via text messages and emails

The Income Tax (IT) department has reached out to approximately 3 million salaried taxpayers nationwide via text messages and emails, pinpointing disparities between their claimed refunds in revised tax returns and the TDS (Tax Deducted at Source).

An official mentioned, “Given that December 31, 2023, marked the deadline for revised returns, we’ve issued alerts probing into discrepancies within their filings for assessment years 2023-24.”

This surge in alerts marks a significant increase, partly credited to a specialized unit established in Mysuru in October 2022. This unit centralized the process of matching and cross-verifying documents, contributing to heightened monitoring efforts.

The department provided taxpayers with a chance to rectify any errors in their reported income, deductions, bank information, personal details, missing income, or discrepancies between their original return and Form 26AS/Annual Information Statement by filing revised returns.

In a post on X dated December 26, the department clarified that the alerts sent were aimed at assisting taxpayers and informing them about the information held by the department regarding transactions reported by entities throughout the year.

“It’s not a blanket notice to all taxpayers; rather, it’s guidance sent only in cases where there’s an apparent mismatch between the ITR disclosures and the information received from reporting entities,” stated the post.

The official further highlighted that if taxpayers overlook the alert, the department will issue notices to them on an individual basis.

Experts suggest that the typical discrepancy often arises from the variance between the investments declared to the employer and those disclosed by the employee in their tax return.

Frequently, employees face challenges in making timely investments due to financial constraints and may claim tax deductions during the filing process, resulting in potential tax refunds.

These discrepancies commonly stem from factors like house rent allowance, medical insurance, home loan repayments, and tax-saving investments under Section 80C, among others. Additionally, notable disparities might arise due to property sales during the year or significant transactions like fixed deposit renewals.

IT Authorities Seek Support from Artificial Intelligence to Find Out the ITR Issues.

Moreover, utilizing its authority as per Section 133C of the Income Tax Act, tax authorities also issue notices requesting information from companies to corroborate the data they possess regarding any employee.

Supreme Court Grants Stay on Delhi High Court Judgement Regarding Income Tax Assessments and Document Identification Numbers (DIN)

In what could be a significant developmentpertaining to income tax assessments, theSupreme Court has granted a stay on a Delhi HighCourt judgement, which said that any assessmentwithout a Document Identification Number will benon-existent in law.

If an assessment is issued without a DIN and if itis held non-existent because of this fact, the topcourt said that a vacuum will build up, whichmight have serious consequences.

The court said that such an assessment could bean ‘irregularity’ but not an ‘illegality’.

This observation by the court may spark debate.However, considering that this is an interim orderand not a final order, one should not read toomuch in between the lines, Amit Singhania,partner at Shardul Amarchand Mangaldas, toldNDTV Profit.

According to S. Vasudevan, partnerLakshmikumaran & Sridharan, the Delhi high courtjudgement stood on sound footing, as the circularissued by the CBDT was binding on the incometax authorities, and non-compliance thereofrenders the proceedings invalid.

The stay does not affect the precedence value ofthe high court judgement and can still be reliedupon by the taxpayers, Vasudevan said.

DIN Less Assessments

The entire controversy behind a DIN-lesscommunication by the revenue department dates back to a 2019 circular.

The circular, in clear terms, mandated that nocommunication shall be issued by any income taxauthority relating to assessment, appeals, orders,statutory or otherwise, exemptions, enquiry,investigations, etc. to any person on or after Oct.1, 2019, unless a computer-generatedallotted.

The purpose of allocating a DIN to suchcommunications was to maintain a proper audittrail.

The circular also issued certain circumstancesunder which exceptions could be made. Theseinclude technical difficulties in generating a DIN,issues pertaining to PAN migration, and the like.

Even then, it was clearly stated that anyirregularity in issuing a DIN must be dealt with bythe authorities within a stipulated time.

In essence, the circular said that anycommunication without a DIN will be held non-estin law.

In 2023, the Delhi High Court was faced with acase pertaining to an assessment order passedwithout a DIN. It was contested by the revenuedepartment that the failure to allocate DIN was amere mistake.

Since it was a mistake, the departmentcontended that the assessment proceedingsshould not be invalidated and that this omissioncan be cured under the Income Tax Act.

However, the high court was not inclined toaccept this line of reasoning. The circular’sphraseology makes it clear that anycommunication without DIN can have no standingin law, it said.

Responding to Outstanding Tax Demands: Causes, Deadlines and Managing Income Tax Notices

Outstanding demand can be raised by the income tax department for various reasons such as incorrect selection of ITR form, incorrect IT filing due not including TDS, Self-Assessment tax challans, not filing certain forms or other processing errors by CPC.

Learn more about who generates, how to check, and how to submit, as well as the timing and payments involved.

1. What is an outstanding demand notice?

The income tax department may issue an outstanding demand for a variety of reasons, including improper selection of ITR form, incorrect IT filing due to not including TDS, Self-Assessment tax challans, failure to file specific forms, or other processing issues by CPC.

2. Who can raise outstanding demand?

Outstanding demand can be raised by following persons.

  1. Centralized Processing Center (CPC) : CPC may issue the notice of demand once the income tax return filed by the taxpayer is processed. Intimation given by CPC should be treated as notice of demand u/s 156.
  2. Assessing Officer : In some cases, assessing officer may issue the demand notice. Such cases might be scrutiny notices, rectifications pending with AO etc.IMPORTANT: In such a case, ensure that the DIN (Document Identification Number) associated with the notice is accessible online through your ITD account. Do not encourage recipients to respond to emails from officers that do not originate from the domain of the income tax department. Additionally, do not reply to calls from arbitrary mobile numbers.

3. How to check Outstanding demand through the Income Tax Portal?

The taxpayers can check the outstanding demand through the following process

  1. Login to https://eportal.incometax.gov.in/
  2. Go to Pending Actions and click on Response to Outstanding demand
  3. The next screen will show the current status of demands available on the PAN . The taxpayer needs to take corrective actions on the demand

Read more at: Taxpayers might not get an income tax refund if the tax department has sent this notice

4. How to Submit Response to an Outstanding demand?

The manner in which a response to an outstanding demand is issued can vary based on the specifics of the case.

  1. Demand is Correct:
    If the taxpayer feels that the demand is correct, he needs to submit the response that demand is correct
    1. If the Demand is correct and you have not paid already, click on e pay taxes and make the challan payment
    2. If Demand is correct and you have paid already, add the challan details and submit the response
  1. Disagree with the Demand:
    If the demand is incorrect, click on “disagree with demand” and select the following reasons which are applicable
    1. Demand paid and challan has CIN (without open challan details)
    2. Demand paid and challan has CIN (with open challan details)
    3. Demand paid and challan has no CIN.
    4. Demand already reduced by Rectification/Revision/Appellate Order
    5. Demand already reduced by appellate order but appeal effect to be given.
    6. Appeal has been filed, Stay petition filed.
    7. Appeal has been filed; Stay granted.
    8. Appeal has been filed; Instalment granted.
    9. Rectification/Revised Return filed at CPC
    10. Rectification filed with AO
    11. Others

5. What happens if no response is submitted.

If the taxpayer has not submitted any response to an outstanding demand, the following may happen

  1. Interest on outstanding demand will get accumulated over the time
  2. Outstanding demand will be adjusted against any future refunds

6. Deadline for responding to Outstanding demands

Typically, taxpayers are given 30 days to reply to a demand from the date of notification or notification. The deadline is unique to the circumstance in which the request was made.

7. Type of Payment

When the taxpayers are making the payment in response to outstanding demand, they need to select 400-Tax on Regular Assessment while paying

Read more at: Income Tax: How to respond to an intimation under Section 245 of Income Tax Act

Avoiding Income Tax Notices is easier than dealing with them, Notices such as Scrutiny, Discrepancy, Mistakes, Non-disclosure

The most crucial thing to remember when receiving an IT notice is to not disregard it. These days, almost everything is connected to Aadhaar, PAN, bank accounts, digital wallets, and mobile numbers. The income tax division is developing daily intelligence in the direction of a complex, interconnected tax system.

1. Possible Common Reasons for getting an IT Notice

  1. Reminder to file tax returns
  2. Scrutiny at random
  3. Discrepancy in your income tax returns
  4. Errors in TDS Amount Deducted
  5. Ignoring income received from the previous employer
  6. Demanding a proof of documentation
  7. High Value Transactions not matching with Income declared
  8. Transferring the asset in the name of spouse or children
  9. High number of Gift Transactions
  10. Not depositing the full amount of tax assessed before the due date
  11. Income Tax Return not filed or filed after the due date
  12. Non-disclosure of assets
  13. Non-disclosure of Foreign Income
  14. Investments in the name of family members

2. Various types of Important Notices and the reasons for Such

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

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

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

2.2. Notice under Section 143(2) – Scrutiny Notice

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

2.3. Notice under Section 143(1) – Letter of Intimation

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

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

2.4. Notice under Section 148 – Income escaping assessment

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

Read more at: Common Mistakes Leading to Defective Income Tax Returns: How to Avoid and Rectify Them

2.5. Notice under Section 156 – Notice of Demand

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

2.6. Notice under Section 139(9) – Defective Return

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

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

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

3. Documents needed in case of a defective Notice?

Most corrective actions against a defective notice require to revisit the IT return completely. Hence, the tax preparer needs all the documents that are used in the original IT Return preparation to prepare a corrective IT Return. To make sure that the response to the defective notice is accepted, one must pay attention to the revision / correction carefully.

4. How to respond to a Defective Notice u/s 139(9)?

Follow the below steps to submit a response to the defective notice issued u/s 139(9)

  1. Login to ITD e-Filing Portal
  2. Goto e-File menu, and Click on ‘Response to Notice u/s 139(9)’
  3. Enter the details like ITR, AY, e-Filing Acknowledgement Number, CPC Reference Number, Notice Date, Status, and the Response. Click the ‘Submit’ button
  4. All the identified defects from the filed ITR is displayed to the taxpayers. Choose YES/NO from the ‘Do you agree with defect?’ column.
  5. If you Choose ‘YES’, Upload the new corrected XML, and Click ‘Submit’ button to submit.
  6. If you Choose ‘NO’, Enter the response under the Assessee Remarks column and Submit.

Read more at: Defective Return notice under section 139(9)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

What documents are required to reply to an Income Tax Notice?

The Documents are required to vary with the type of Income Tax notice that is served to the taxpayer. The basic documents needed to reply to an income tax notice would be:

  • The Income Tax Notice copy.
  • Proof of Income source such as (Part B ) of Form 16, Salary receipts, etc.
  • TDS certificates, Form 16 (Part A)
  • Investment Proof if they are applicable.

step:1 After the intimation notice under Section 143 (1) is received of the Income Tax Act,1961 the taxpayer has to make a reply within 30 days from the date when the notice is served.

step:2 If the taxpayer fails to respond within the time that is prescribed then the Income Tax Returns will be processed with the necessary adjustments without providing any opportunity to taxpayers.

step:3 Once the notice is received then the taxpayer should cross-check the name, address, and PAN number, mentioned in the notice.

step:4 Similarly, it is necessary to cross-check the assessment year that is mentioned and verify the e filing acknowledgment number.

step:5 Revised returns can be filed only when the taxpayer has made mistake in the original ITR filing. When the taxpayer has opted to revise the return it has to be filed within 15 days.

step:6 The rectification return can be filed only when the taxpayer has found any fault or error in the order that is sent by the Income Tax Department.

step:7 On-Page 2 of the notice that is issued you can understand the reason for which the notice has been issued. It also shows the difference of the mentioned income in the returns that file and Form 16/16A/ 26AS.

step:8 If the intimation notice demands the taxpayers to pay an additional tax amount i.e demand notice then it has to be treated as the notice of demand u/s 156.

step:9 On receiving this notice of the demand the taxpayer has to respond within 30 days to avoid the !% of the interest per month from the 30 days expiry period and a penalty is also imposed by the assessing officer.

Checklist for Income Tax Notice

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

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

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

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

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

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

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

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

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

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

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

What documents are required to reply to an Income Tax Notice?

The Documents are required to vary with the type of Income Tax notice that is served to the taxpayer. The basic documents needed to reply to an income tax notice would be:

  • The Income Tax Notice copy.
  • Proof of Income source such as (Part B ) of Form 16, Salary receipts, etc.
  • TDS certificates, Form 16 (Part A)
  • Investment Proof if they are applicable.

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

step:1 After the intimation notice under Section 143 (1) is received of the Income Tax Act,1961 the taxpayer has to make a reply within 30 days from the date when the notice is served.

step:2 If the taxpayer fails to respond within the time that is prescribed then the Income Tax Returns will be processed with the necessary adjustments without providing any opportunity to taxpayers.

step:3 Once the notice is received then the taxpayer should cross-check the name, address, and PAN number, mentioned in the notice.

step:4 Similarly, it is necessary to cross-check the assessment year that is mentioned and verify the e filing acknowledgment number.

step:5 Revised returns can be filed only when the taxpayer has made mistake in the original ITR filing. When the taxpayer has opted to revise the return it has to be filed within 15 days.

step:6 The rectification return can be filed only when the taxpayer has found any fault or error in the order that is sent by the Income Tax Department.

step:7 On-Page 2 of the notice that is issued you can understand the reason for which the notice has been issued. It also shows the difference of the mentioned income in the returns that file and Form 16/16A/ 26AS.

step:8 If the intimation notice demands the taxpayers to pay an additional tax amount i.e demand notice then it has to be treated as the notice of demand u/s 156.

step:9 On receiving this notice of the demand the taxpayer has to respond within 30 days to avoid the !% of the interest per month from the 30 days expiry period and a penalty is also imposed by the assessing officer.

Received income tax notices after filing ITR? This platform identifies reasons behind Income Tax notices using AI

Receiving discrepancy notices from the income tax (I-T) department can often be a challenging and daunting experience due to errors, incorrect claims, and more in your tax return filings. Descrypt, a crypto taxation platform, has announced the launch of an exclusive service, Notice Mitra. This unique offering leverages a robust algorithm to scrutinise taxpayers’ data, providing insights into the potential causes behind a tax notice. By combining manual expertise with artificial intelligence (AI) autoCBDT smation, the platform aids in identifying areas of discrepancies that may have led to a notice from the I-T department.

“The platform is designed to lighten the load for taxpayers by identifying potential triggers of ITD notices using an advanced AI toolkit. It also provides taxpayers the options to consult with expert chartered accountants through 1:1 sessions,” says Raghuram Trikutam, the CEO of Descrypt. This interaction equips taxpayers with valuable insights to address discrepancies in tax returns effectively.

In order to avail of a 1:1 consultation with these expert chartered accountants, taxpayers are required to pay a fee of Rs 2500 + GST. taxpayers are expected to share relevant documents before the session, ensuring efficient communication with experts and personalized guidance on resolving tax concerns effectively.

Given the rising complexity of the financial sector, including international investments, real estate, and surging crypto transactions, ITD notices are becoming increasingly frequent and complex. In view of this, Notice Mitra helps taxpayers navigate through these complexities, identifying potential origins of notices and offering invaluable insights to them.

Key features of Notice Mitra include a detailed analysis of the ITD notice and an exhaustive inspection of the submitted Income Tax Return (ITR). The platform goes a notch further by providing reconciliation assistance and a comprehensive overview of the process to address the notice effectively.

  • Analysis of the notice: Notice Mitra’s expert team, along with partnered CAs, conduct a meticulous analysis of the received notice. This process ensures a clear understanding of the underlying issues and facilitates strategic responses.
  • Comprehensive ITR Analysis: This step allows taxpayers to identify potential discrepancies and address them proactively.
  • Reconciliation and process overview: This guidance ensures taxpayers are well-equipped to navigate the complexities of the I-T department’s requirements. 

In parallel, Descrypt plans to announce its collaborations with leading tax filing platforms, aiming to strengthen the crypto taxpayers’ compliance. Through these initiatives, Descrypt propels its mission of addressing intricate tax-related challenges, promoting a more transparent, accurate, and compliant tax environment.