Letter of Intimation u/s 143(1)

An income tax return can be either filed voluntarily under Section 139 or on demand by the income tax department under Section 142(1). It is necessary to understand what happens after the taxpayer has filed the return of income. 
 

The process of examining the return filed by the taxpayer by the Income tax department is termed as assessment. The IT department carries out a preliminary assessment of all the returns filed and informs taxpayers of the result of such preliminary assessment. This assessment primarily includes arithmetical errors, internal inconsistencies, tax calculation and verification of tax payment. The preliminary evaluation process is fully computerised (automated), and is delegated to the Central Processing Centre (CPC).

Thereafter, system generates the intimation under Section 143(1) that generally indicates obvious errors that the mainframe system has identified.

When does one receive an Intimation under Section 143(1):

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

2.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.

3.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.

4.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.

Centralized Processing Center

With the rapid increase in the number of income tax returns and a jurisdiction-based processing model for all the returns filed, tax department faced problems leading to delayed processing of income tax returns.

Therefore, the Finance Act, 2008 empowered the Central Board of Direct Taxes (CBDT) to make a scheme for centralised processing of returns with a view to expeditiously determining the tax payable by, or the refund due to the taxpayers. Based on the recommendations of the Technical Advisory Group, the department adopted the strategy that CPC at Bangalore would process paper and e-returns without any interface with taxpayers and in a jurisdiction free manner.

CPC project envisaged benefits for the citizens as well as the tax department. For citizens, it led to faster and hassle-free preliminary processing of their returns and also relieved the department from the burden of preliminary assessment that can be computerised and enabled them to concentrate on hardcore activities.

Any communication from the income tax department creates panic for taxpayers. However, Section 143(1) intimation is not something one needs to worry about. In this article, we would be discussing intimation sent under Section 143(1) in detail to make it help taxpayers deal with such intimation with ease.

Preliminary Assessment under 143(1)

Initial processing of returns by CPC is completely automated and Section 143(1) Intimation is also computer generated record. CPC validates data provided in each tax return with details available with income tax department’s own record (such as Form 26AS generated through details provided by collecting banks, TDS returns, etc.) and this notice usually only points out apparent mistakes found out by the mainframe system.

1.Once the return is filed, total income or loss is recomputed by the computerised system as per the department’s record and provides a comparison with data filed by the taxpayer

2.The intimation has two columns: ‘As provided by the taxpayer in the Return of Income’ and ‘As computed under Section 143 (1)

3.Comparison is made for major categories such as 

4.Income under various heads, 

5.Gross total income,

6.Deductions under Chapter VIA (80C, 80D, etc.), and 

7.Tax deducted at source, and tax paid by taxpayers in the form of advance tax and self assessment tax

8.Appropriate adjustments are made to income as computed under Section 143(1) and final tax liability or refund is arrived at

9.The adjustments are carried out only after giving an intimation to the taxpayer of the proposed adjustments either in writing or electronic mode i.e., to the email id provided in the income tax return filed

10Response received from the taxpayer within 30 days from the issuance date of intimation will be considered before making the final adjustment and in case no response received within such period, adjustments arrived at initially will be incorporated.

12.After arriving at final tax liability, the same is adjusted against TDS and tax payments and other relief under Section 90/91, if any.

An intimation shall be prepared and sent to the taxpayer.  
Kind of intimations possible are discussed below:

a. Intimation with no demand or no refund – This generally happens if the department has accepted the return as filed without carrying out any adjustments to it.

b. Intimation determining demand – Issued in case of adjustments made under Section 143(1) due to a discrepancy found and tax liability is arrived at.

c. Intimation determining refund – Issued where any tax is found to be refundable either where no discrepancy in the return filed or after making adjustments as referred to in Section 143(1) and after giving credit to the taxes and interest paid by the taxpayer.

While demand notice is sent in case of final tax liability, refunds if any shall be granted to the taxpayer.

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

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

Nature of adjustments under 143(1)

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

1.Arithmetical error in the return

2.Any incorrect claim which is apparent from any information in the return where incorrect claim which may include the following:

3.The claim of an item in the return which is inconsistent with another entry of the same or some other item in such return – for example, income from other sources are deducted from business income but not declared under income from other sources.

4.Disallowance of set off of loss in the financial year which is carried forward from previous years in which return was filed beyond specified due date

5.Disallowance of expenditure indicated in the audit report but not indicated in the return of income.

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

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.

2.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.

3.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.