With the change in the know-your-customer norms, online filing of returns and strict watch on the source of income of the assesses by the Income Tax Department, the notices from the Income Tax Department to the tax payers have increased tremendously.

However, a notice from the Department does not necessarily mean that a crime has been committed. Even a minor error in tax return can invite a notice from the tax department. So, it is very necessary to first understand the cause of notice and to reply on the same within the stipulated time, so it does not create unnecessary problems.

 

Notices from Income Tax Department and How To Deal With It:

 

1. Notice under section 142(1) – Enquiry before assessment

This notice is sent when income tax return has not been filed. You may be asked to produce documents in support of returns being filed for the inquiry. This notice is usually served to call upon documents and details from the tax payers, and this is basically done to take a particular case under assessment.  

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

• To furnish a return of his income or the income of any other person in respect of which he is assessable, where he has not filed his return of income within the normal time allowed or before the end of the relevant assessment year.
• To produce or cause to be produced accounts or documents which the AO may require for the purpose of making an assessment under the Act.
• To furnish in writing  any information on any point of matter including statement of the assessee

 

How to deal with it: If the assessee has filed the return, then the required documents are to be produced.   In case of non filing, the return needs to be filed within the time given in the notice and produce the proof of the same along with the required documents.

2. Income tax noticeunder Section 143(1) – Letter of Intimation

Generally, 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 the return filed with the Department. This means that CPC or assessing officer has found the return to be matching with his computation under section 143 (1).
2. A refund notice, where Income tax refunds for extra tax paid, where the tax paid is more.
3.  Demand Notice where the officer’s computation shows shortfall in the tax payment. In such a case, notice will ask the assessee to pay up the tax due, within 30 days.

Time limit for the notice to be served: within 1 year from completion of the relevant assessment year. For example for FY 2014-15, the notice U/S 143(1) can be served by the Department by FY 2016-17(i.e. by 31-3-17).

 

How to deal with it: The intimation shows the Income Tax Return as filed by the assessee and the computation as done by the Income Tax Department.

If net amount demand mentioned in Intimation under section 143(1) is more than 100 rupees, then tax payer needs to pay tax. In case of Demand, this intimation may be treated as Notice of demand u/s 156 of the Income Tax Act, 1961. Accordingly, the entire Demand is to be paid within 30 days of receipt of this intimation“.

If tax payer/assessee thinks that Tax Demand is wrong and does not agree with the demand, then he/she may make an application for rectification under section 154. However, sometimes return processing by CPC becomes difficult and the taxpayer may contact local income tax officer (ITO) and submit a written application for rectifying the assessment. The same needs to be supported with relevant TDS statements, Form 26AS, intimation under section 143 (1) and notice of demand.

 

3. Income tax notice under Section143 (2) – Scrutiny Notice

In few cases, the Income Tax Department wants to cross-check and verify the details submitted or even not submitted completely. In such case a notice under Section 143(2) is issued & served by the jurisdictional AO to the assessee for the purpose of making assessment under section 143(3). 

If notice under section 143(2) is received, it means the respective return has been selected for detailed scrutiny by the concerned Assessing Officer.

Time limit for the notice to be served: It has to be served within the time limit of 6 months from the end of the Financial Year in which return of income is filed.

 

How to deal with it: The notice might ask the assessee to produce documents in support of deductions, exemptions, allowances and provide proof of all sources of income. So all the documents and information asked for, needs to be collated, like bank statements, major expenses, income and loan details. Section 143(2) enables the Assessing Officer (AO) to make a regular assessment after a detailed inquiry.

 

4. Notice under section 139(9) – Defective return

Intimation from the Income Tax Department is sent to a taxpayer when the Department has found an error with the income tax return filed by the assessee. If the Income Tax Officer considers the return as a defective one, then the same is intimated to the taxpayer.

 

How to deal with it: Revise return must be filed by the assessee addressing the defects the Income Tax Department has pointed out, within 15 days from the receipt of intimation. If the assessee does not rectify the defective return within the period of 15 days, or the extended time, as granted, then the return shall be treated as void-ab-initio and shall be deemed that the assessee has not filed the income tax return.

 

5. Notice under section 156 – Notice of Demand

If the assessing officer suspects and is of an opinion that the assessee is yet to remit any tax money, penalty, fine or interest incurred due to payment default as per the Income Tax Act, a demand notice is sent under Section 156 to levy the outstanding tax amount.

 

How to deal with it: The amount demanded needs to be deposited within 30 days from the date of receipt of notice. Otherwise the assessee is deemed to be an assessee in default.

The consequences of such default are:  

INTEREST U/S 220: Interest at the rate of 1% p.m. or part of month is to be paid after the expiry of said 30 days.

PENALTY U/S 221: The Assessing Officer can levy a penalty of an amount not exceeding the amount demanded.

 

6. Notice under section 148 – Notice where Income has escaped assessment

If the AO has reason to believe that any income chargeable to tax has escaped assessments, he may assess or reassess such income, other than the income involving matters which are the subject matter of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.

In case income that has escaped assessment is Rs 1 lakh or less notice under section can be sent within 4 years of the end of the relevant assessment year. In case income escaped is more than Rs 1 lakh then such notice can be sent within 6 years. The Assessing Officer shall before issuing a notice under this section, record his reasons for doing so.

 

How to deal with it: The assessee needs to file the returns for the relevant assessment year/years within time mentioned in the notice and submit documents as may be required. In case it is a reassessment, the tax expert help would be required.

 

7. Notice under section 245 – Set off of refunds against tax remaining payable

This intimation is received when assessee have a tax demand pending from the IT Department and when the same have claimed a refund from them in some other Assessment Year. Section 245 of the Income Tax Act empowers the Assessing Officer to adjust refund (or a part of refund) against any tax demand which is outstanding from the tax payer.

 

How to deal with it: The details of your outstanding demand can be viewed on www.incometaxindiaefiling.gov.in by logging in with the login and password for this site.

The details of the demand can be viewed and also a response can be submitted, if assessee believes ‘demand is correct’, ‘demand is partially incorrect’ or if you ‘disagree with the demand’.

 

8. Notice under section 274 – Notice for Penalty for concealment

Penalty is imposed U/S 271(1)(c) if the Assessing officer or the Commissioner of Income Tax during the course of assessment proceedings, is satisfied that any person has concealed or furnished inaccurate particulars of Income.

 

9. Prosecution notice  u/s 276B & 276BB for non-payment of TDS

Income Tax Department issues show cause notices for prosecution u/s 276B of the Income Tax Act. Such notices are issued for defaults in payment of TDS.  All cases where TDS is deducted but not deposited within the due date, are punishable U/S 276B/276BB.

The AO after collecting the information, issues show cause notice to the person responsible for deduction within 45 days of receipt of list of prosecutable cases from CPC-TDS.

 

10. Notice for penalty U/S 234E For Non Filing of TDS Return

U/S 234E, penalty is levied in case of failure to submit TDS return on time. In case of delay in filing TDS return, fees of Rs. 200 per day is levied on the deductor, as long as TDS return is not filed.

 

The provision for Levy of Late filing fee was introduced to improve Filing Compliance and to avoid subsequent inconvenience to the taxpayers due to inordinate delays in availability of tax credits in their 26AS Statements.

For filing of return and to deal all types of notices visit taxmantra.

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