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Understand Income Tax Notices

author portrait

Hiral Vakil

Defective Return
IT Notice
ITR-2
Section 139(9)
Tax Credit Mismatch
Last updated on September 20th, 2021

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:

income-tax-notice

You need to check:

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.

Income Tax Notice Plan for Individuals
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Income Tax Notice Plan for Individuals
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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:

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.

Scrutiny Assessment

Assessing officer (AO) may issue a notice for scrutiny assessment u/s 143(2) to confirm any of the following:

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.

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:

Income Tax Computation

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.

Tax Return 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

How do I respond to an income tax notice?

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.

What is intimation u/s 143(2)?

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.

Consequences for non-payment of tax demand?

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

Got Questions? Ask Away!

  1. Hey @TeamQuicko

    What is the time limit in which I need to respond to the notice under section 139(9)?

  2. How can I respond to the notice received online?

  3. How much time it will take to process the refund once response to notice u/s 139(9) is filed?

  4. 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!

  5. 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! :slight_smile:

  6. 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!

  7. 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.

  8. 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?

  9. Hi,

    I filed IT return for last financial error in the month of 10-Jan-2021 via Quicko. I made a loss in trading and I have shown the same in IT return for carrying forward.

    Today I got a mail from IT stating it cannot be carry forwarded as I filed late. The IT filing last date was extended due to covid and I remember filing before the last date. This is my first IT filing and I’m not sure what to do. Kindly advice.

    Snapshot of email attached below

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