Income Tax Notice

Received an income tax notice? Respond to it properly & stay away from all the headaches!

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What is the purpose of an income tax notice?

An Income tax notice is issued by the income tax department against taxpayers, who fail to file income tax returns (ITR), or if there are imperfections in the filing of tax returns, or for non-disclosure of income, as well as for high-value transactions.

Similarly, an income tax notification can be served to obtain additional information or to produce certain records and documents of the taxpayer for verification.

Under Section 143(1) of the income tax act, 1961, an intimation notice will be served to the taxpayer after the income tax department has verified income tax returns (ITR).

Under Section 143(2) of the income tax act, 1961, a scrutiny notice will be issued, only after the ITR has filed, if the taxpayer has understated any income or computed excessive loss or paid a lower tax.

Under section 143(3) of the income tax act, 1961, the final order will be passed after the detailed scrutiny of supporting documents put forth by the taxpayer for challenging the scrutiny notice.

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What are the steps involved in the assessment of income tax notice?

  • The objective of an income tax notification is to investigate or enquire the assessor before processing the assessment.
  • Once income tax returns have been filed by the assessor, the Assessing Officer (AO) will examine the accuracy of the information, with respect to the computation of total income, deductions, refunds, claims, exemptions, etc.
  • If the Assessing Officer (AO) has encountered flaws in the computation process, the income tax notice will be directed to the assessor for clarification, before processing the assessment.
  • The taxpayer should respond to the notice within a specified time alongside supporting documents.

Basically, the notice can be issued in three instances

  • When the income tax return is filed.
  • When the return is not filed.
  • When the return has not been filed within a respective time.

What are the checklist formalities involved in receiving an income tax notice?

  • Understand the subject matter of the notice issued.
  • Respond to the notice within the prescribed time limit.
  • After receiving the notice, there is an option to revise the ITR within 15 days.
  • If you fail to reply within 30 days, the ITR will be processed with mandatory adjustments under section 143(1) of the income tax act.
  • A scrutiny notice will be served within a span of six months from the end of the financial year, in which the return was filed.
  • A penalty of Rs 10,000 will be charged under section 271(1)(b) of the income tax act, for ignoring the notice.
  • Failure to respond to a scrutiny notice under section 143(2) of the income tax act, within a stipulated time, it may lead to prosecution.

How to respond to an income tax notice?

  • An Income tax notice is sent to the taxpayers’ registered email id and postal address.
  • On receiving the intimation notice under section 143(1) of the income tax act, the taxpayer will have two options namely agreeing or disagreeing with the notice.
  • On agreeing with the notice, pay the additional tax with interest specified by the income-tax department.
  • On disagreeing with the notice, do an online rectification under section 154 or an appeal under section 246(A) of the income tax act, 1961, only in case of errors in the records. Eg. mathematical mistakes, factual errors, false implications of any provisions of the income tax act, 1961.
  • Online rectification can be done by visiting the Govt official website
    • Select e-File
    • Rectification
    • Select the corresponding correction request
    • Click submit

After submitting, the Reference Number will be generated on the successful submission of the request.

  • Similarly, if you have received a scrutiny notice under section 143(2) of the income tax act, then segregate all documents supporting the deduction, exemption, and other claims as per requirement.
  • The concerned person can appear and put forth the arguments along with supporting documents in front of the Assessing Officer (AO), on the specified date of appearance.
  • After scrutinizing the documents submitted by the assessee, under section 143(3) of the income tax act, 1961, the Assessing Officer (AO) will pass a final order with reference to the tax/refund, which should be paid.
  • Clarify the liabilities with the expert by submitting a copy of the notice served.
  • Have a detailed discussion with the experts regarding the official steps to be taken.
  • Nexus with service provider after replying to the notice for further support.

What are the documents required for income tax notice?

Primarily, the documents required for income tax notice depends on the nature of the demands put forth by the income tax department. Apart from that, the basic documents required are

  • Copy of notice.
  • Form -16A/ 16B/ 16C.
  • Form 26AS.
  • Tax saving investment proofs.
  • Salary receipts.
  • TDS certificates.
  • Documents supporting deductions, exemptions.

Frequently Asked Questions

If the notice has not been responded to within the stipulated time, the assessee will incur a penalty of Rs 10,000 and further prosecution.

Yes, the notice under section 143(1) intimates miscalculations related to

  • Refund (increased/ decreased).
  • Demand of tax (increased/ decreased).

But the notice served under section 143(1)(a) intimates about the mismatch between the income and deduction in comparison with Form 16, 16A and Form 26A.

Yes. PAN and Date of birth are required to open the mail.

Eg: If the pan number is EDLSK5803P and date of birth is 27/06/1994, then the password will be “edlsk5803p27061994”

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