Income Tax Notice in India

An income tax notice is a written communication sent by the Income Tax Department to a taxpayer alerting an issue with his tax account. The notice can be sent for different reasons like filing/ non-filing their income tax return, making the assessment, asking for certain details, etc. When the Income Tax Department sends a notice, the taxpayer has to act on the notice within the given timeline and resolve the matter with the tax authorities. The 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.

Types of Income Tax Notice

Type of Notice	Description
Notice u/s 143(1) – Intimation	This 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) – Inquiry	This 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 Return	An 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) – Scrutiny	An 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 Notice	This 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 245	If 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 148	The 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.

What is the Purpose of an Income Tax Notice?

An income tax notice may be issued for the following reasons –

When no ITR has been filed.
Errors or discrepancies in the returns filed.
A mismatch between the TDS values and income tax returns is accessible through the Income Tax Department’s Form 26AS records.
The assessing officer can ask for specific documents or information from the taxpayer through an income tax notice.
It might be issued to conduct an audit as per section 143(1) of the income tax act.
For other reasons as the assessing officer might deem fit

Service of Income Tax Notice

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 should be done after receiving an income tax notice?

When you receive an ITR notice under any of the aforementioned sections, the following steps should be taken –

Read the notice thoroughly to find out why it has been sent
Check the basic details on the notice to ensure that the notice is meant for you. The notice should contain your correct name, PAN number, address, etc., to authenticate that it is sent to you. Also, check the assessment year mentioned in the ITR notice.
Find out the discrepancy in your income tax return that caused a notice to be served, if any.
Respond to the ITR notice within the stipulated time period to avoid penalties and prosecutions.
Ensure that your response is backed by adequate information.
Also, make sure to check the notice that you have received is reflected in your income tax account online.
Take expert help.

What are the most common causes of notice?

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

Mismatch in the amount of TDS reported
An error in your income tax return
Lack of submission of all the documents
Nonfiling of your tax returns
When you invest in the name of your spouse and do not mention the same in your income tax returns
If high-value transactions have been done during the financial year and they have not been properly reported in the income tax return
If the assessing officer does random scrutiny of your income tax return
When long-term capital gains earned from equity investments are not reported correctly
If the taxpayer does not disclose any income
If a wrong income tax return form is used for filing the income tax return
If your refunds can be set off against the previous year’s tax liability
If you have evaded tax in previous financial years
If the Self-assessment tax still needs to be paid.

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

The type of documents required for replying to an income tax notice depends on the type of notice received. Here are some basic documents that are common to every notice –

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

Checklist for Income Tax Notice

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

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

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

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

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

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

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

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

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

FAQs

Q: What is Section 245?

Section 245 is an intimation and this intimation means the offset taxpayer refund either full or partial against the old tax payable.

Q: What is Income Tax Notice?

An Income Tax Notice is a communication sent by the Tax Department these communications may be to notify the taxpayer about any errors in their Income Tax Return.

Q: What is meant by defective return under 139 (9)?

Notice 139 (9) is sent by the assessing officer if the ITR filed by the taxpayer is defective or incorrect the office will also provide the proper description of the errors and also a solution for rectifying the errors.

Q: What happens if there is a response to the Tax Notice?

The reply for the Income Tax notice should be responded to within 15 days of the intimation send by the assessing officer. For an extension, a written application can be made to the local assessing officer.

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