Income tax notice refers to a written communication sent to the taxpayer by the Income Tax Department if there is any mismatch or issue with the taxpayer’s account. Non compliance of the IT notice within the stipulated time, a taxpayer might have to face various implications.
Identifying the type of Notice Taxpayer has Received
Before responding to any Income Tax notice, you need to make sure that it is a genuine notice and it is addressed to you. You can do that by checking the basic details as shown in a sample notice below:
You need to check:
- Your name and address
- Your PAN number
- Assessment year, type return, ITR type
- Name and designation of issuing officer
- Communication reference number
Once you have verified the above details. Understand the intent of Income Tax Notice and requirements stated by the Department. Let’s take a look at the scenarios in which the income tax department may issue Notice.
1) Defective Return
In case of any defects in the Income Tax Return, Assessing Office can issue notice u/s 139(9). You need to file a return within 15 days of issue of notice in this case.
Here are some of the instances when a return can be considered a defective return:
- Any required details are not provided in the annexures, statements and columns of the income tax return.
- Any tax dues are not paid before filing the income tax return.
- Assessee is required to maintain books of accounts but he/she has filed the return without providing details of the balance sheet and profit and loss account.
- Details of auditor and audit report are not provided in case of audit applicability.
Probable resolution
In case of a notice of defective return u/s 139(9), the notice will contain ‘Annexure-A’. which will contain error description & probable resolution. Here’s an example:
| Annexure – A | |||
| Sl. No | Error Code | Error Description | Probably Resolution |
| 1 | 31 | Taxpayer having income under the income head “Profits and gains of business and profession” but has not filled balance sheet and loss account as required in explanation(d) under section 139(9) read with section 44AA | The part A of the profit and loss account and part A of the balance sheet should be entered in the corrected return without which the return filed earlier is liable to be treated as invalid |
Time limit
The assessee has to rectify the defect prescribed in the notice within 15 days from the date of the notice. The Assessing officer may condone the delay and treat the return as a valid return. Provided a return is filed before completion of an assessment.
2) Scrutiny Assessment
Assessing officer (AO) may issue a notice for scrutiny assessment u/s 143(2) to confirm any of the following:
- A taxpayer has not understated the income; or
- Has not claimed excessive loss; or
- Has not underpaid the tax in any manner
The AO will issue a notice requiring the taxpayer to attend his office or to produce any evidence, supporting documents or information in support of his return.
Probable resolution
The taxpayer or his representative has to appear before the assessing officer. Present his arguments, supporting documents and information on the matters/issues required by the officer.
Time limit
Notice issued by AO u/s 143(2) will contain date and time on which the taxpayer needs to appear in his office. The taxpayer may ask for an extension in case of unavoidable circumstances. Notice u/s 143(2) can be issued within 6 months from the end of the financial year in which return is is filed.
3) Tax credit mismatch
When TDS amount or self-assessment tax/advance tax details entered in return do not match with your Form-26AS then you will receive an intimation u/s 143(1) with a tax credit mismatch.
The notice will contain amounts entered by you and the amount calculated by the income tax department as shown below:
In case of any mismatch resulting in “TAX PAYABLE”. You will have to verify the details and take a proper course of action to correct any errors.
Probable resolution
It is possible that your employer/deductor has made any mistakes while filing TDS return. As a result, the amount which you have claimed and the amount in your Form-26AS will vary. You have to ask your employer/deductor to revise the TDS return. So that you can claim credit for TDS which was deducted from your income.
Once the return is revised and correct figures are reflected in Form-26AS. You have to rectify your return u/s 154 due to tax credit mismatch.
If the details entered are correct but the tax computation is not proper, then it will vary with the tax calculation provided by Income Tax Department. Here you may have to pay the remaining tax dues and submit the response for outstanding tax demand.
4) ITR not filed
This is one of the most common income tax notices. In this case, the IT Department will send you a notice to file a return without further delay. Department can send a notice for past 6 assessment years.
Department also has a system called ‘Non Filers Monitoring System’. Where based on your transactions, a department may send you a notice to file a tax return.
Probable resolution
The taxpayer needs to respond to a notice within the time limit provided in the notice. If his total income is not taxable then he can respond to notice and provide the same reason.
If his total income is taxable then he must file a return at the earliest otherwise he may be penalized. In case of delayed filing, the department can levy a penalty of Rs 5,000 per year. However, the penalty is not mandatory and depends upon the discretion of the assessing officer. However, if any tax is due, the department charges 1% interest per month from the due date of filing.
Discovery, Production of Evidence
In the case of concealment of income, IT Authority may issue notice u/s 131(1A). Present before him and produce books of accounts and other relevant documents. Failure to comply with this notice is punishable with a penalty of Rs. 10,000 for each default. The books of accounts and other evidence produced by the taxpayer may be impounded by IT Authorities for the proceedings.
Probable resolution
The taxpayer or his representative has to appear before the assessing officer. Present his arguments, supporting documents and information on the matters/issues required by the officer.
FAQs
Login to your account on the Income Tax e-filing website by entering your credentials: User ID (PAN), password, and captcha code.
Click on the ‘e-file’ tab and select ‘Response to outstanding Tax Demand’ option.
The notice u/s 143(2) is issued with the aim of ensuring that the taxpayers has not understated any income or shown excessive loss or has paid lower tax. This notice is also known as scrutiny notice. Moreover, notice u/s 143(2) can only be issued if income tax return has been filed by the taxpayer.
1. Non payment of tax demand attracts penalty and prosecution as per the provisions of the Income tax Act,1961.
2. You are also liable to pay simple interest at the rate of one per cent for every month or part of a month for the period of default in accordance with section 220(2) of Income Tax Act, 1961
Hey @TeamQuicko
What is the time limit in which I need to respond to the notice under section 139(9)?
How can I respond to the notice received online?
How much time it will take to process the refund once response to notice u/s 139(9) is filed?
Hey @HarshitShah
It is very common to receive a notice from the Income Tax Department. The notice sent to you might be a routine inquiry or a request for clarification. There is no need to worry when you get a notice from the Income Tax Department. You will have 15 days time in which you will need to respond to the notice/file revised ITR.
Hope this helps!
Hey @SonalYadav
You can login to your account on the Income Tax e-filing website by entering your credentials i.e. User ID (PAN), password, and captcha code.
Next, you need to click on the ‘e-file’ tab and select ‘Response to outstanding Tax Demand’ option.
Hope this helps!
Hey @ViraajAhuja47
In case of any defects in the Income Tax Return, Assessing Office can issue notice u/s 139(9). If you have filed a return within 15 days of issue of notice, then it will generally take 60 days to process the return once it is sent for processing.
Hope this helps!
Hey @HarishMehta
It is mentioned in the notice that in case one does not respond in the stipulated time, the return will be processed by restricting the credit for the TDS proportionately.
To give an example: There are 2 incomes mentioned in Form 26AS as below:
Salary from A - 100000 & TDS deducted - 10000
Salary from B - 200000 & TDS deducted - 20000
In case you have not reported either of the above income in ITR then you may receive a notice for the mismatch.
Thus, in the above example if you don’t respond in the time, then ITD will add the income of both of the above but will not give the credit of TDS not mentioned in ITR and process the return.
Hence, it is always advisable to respond to the Income Tax Notice in the given time period.
Hope this helps!
Hi @Shweta_Saini ,
Notice u/s 144(1) is issued in the following cases:
-When ITR is not filed within due date by a taxpayer
-When a taxpayer fails to provide a response to an inquiry of AO (Assessing Officer) for filed ITR,
-When a taxpayer fails to provide a response to assessment notice for filing ITR.
Here, AO can assess the total income or loss of a taxpayer based on the information gathered by them. AO usually gives the taxpayer an opportunity to present their case and provide necessary documents. Hence response to 144(1) can be given after looking at the cause of the notice and with supporting documents.
Attention XXXXX4061X, Your PAN has been flagged for not filing of ITR for A.Y-2020-21. Please file your ITR or submit online response under e-Campaign tab on Compliance Portal (CP). Access CP by logging into e-filing portal (My Account) - ITD
Please help i want to avoid any problems
Hey @SreeSSXP
Since you had high value transactions and ITR has not been filed for AY 2020-21, ITD has flagged your PAN. Thus, you have to file ITR before March 31, 2021 and respond to the transactions on IT Portal.
You can reach out to us on help@quicko.com or alternatively get in touch with us at +91-7575831310 so someone from our team can get in touch with you for process, pricing and discounts?