Handling Income Tax Notices form IT- Department

Handling Income Tax Notices form IT- Department

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A notice from the Income Tax department brings about lots of stress. But it does not always has to mean bad tidings. Sometimes, it could be informing you about some tax refunds too! 

The important thing to remember is to understand the reason for receiving the notice and replying to it timely and correctly! 

Also, the IT department is currently busy tightening its noose around the black money hoarders. Therefore, a lot of taxpayers are going to be receiving these notices in the near future. 

How will you Receive the Notice from the Income Tax Department

The intimation from the I-T department would be sent on the email id provided during the e-filing of Income Tax Returns. 

If CPC is processing the returns, the sender’s email id would be: This email address is being protected from spambots. You need JavaScript enabled to view it.[dot]in. 

The Notice would arrive by Post to the address as per PAN details. 

Verify the address associated with the PAN number by:

  • Visiting the e-filing ITR site.
  • Logging in with your PAN number as the User ID and a secure password.
  • Filling in your date of birth details and verifying the captcha.
  • Under ‘Profile Settings’ you can then opt for the ‘PAN details’ from the dropdown menu and confirm. 

Income Tax Notices are Sent Under which sections

Five different types of Notices are send under different sections of the I-T Act of 1961. 

Notice Under Section

Reason

142

The Notice is sent under this Section to the taxpayer to scrutinize the documents and accounts that were submitted by him in support of the filed ITR.

143(1)

The taxpayer receives an intimation under this Section if there is a requirement to adjust or demand additional tax in situations where a calculation error or an incorrect information has been detected in the filed ITR.

143(2)

The Notice under this Section is for scrutiny assessment after the assessing officer has done a detailed inquiry.

148

The intimation under this Section is sent for reassessment purposes if the income tax officer thinks that a particular income escaped assessment.

156

The Notice under this Section intimates the taxpayer regarding some payable dues. It includes fine, penalty, interest, tax, or any such sum.

  

What to do when you Receive the Notice

First and foremost, never ignore the tax notice from the Income Tax department! 

Panicking and stressing would not help you out either. Therefore, remain calm and work out the details for complying with the Notice. 

Because non-compliance to the requirements of the notice could cost you Rs.10,000 as penalty. 

This is over and above the balance amount that you have to pay as overdue taxes and the penalty interest on paying late taxes! 

What you should do is: 

  1. Check your Personal Details

Verify your details on the Tax Notice, your name, address, PAN number, etc. It could be that the Notice was meant for a similarly named person! 

Especially cross-check the PAN number because the I-T notices are issued based on PAN details. 

For e-notifications, check the ‘document identification number’. It is used by the tax department for all its external communications! 

  1. Check the Sender’s Details

The Notice from the Income Tax department would always have the details of the sending tax officer. 

His name, designation, stamp, signature, official address, and most importantly the income tax ward and circle, would be mentioned in the Notice. 

  1. Understanding the Notice

You have to understand why you have received the Notice for the I-T department. 

  1. Save the Envelope

The envelope would have the Speed Post number which can tell you when the Notice was sent to you 

This can become a crucial piece of evidence in case of any dispute 

  1. Keep Copies of the Notice

This is an important communication from the tax department. Therefore, avoid losing it by making copies of it or saving its scanned image on your PC. 

  1. Verify its Validity

An I-T Notice served for scrutiny assessment purposes under Section 143(3), had to be issued within 6 months of the assessment year of the financial year for which the tax returns was filed. 

Check for the validity of the Notice issued, because if served outside of those first 6 months of the assessment year, the Notice is considered invalid! 

In case the tax assessor has suspicions regarding incorrect income reporting and tax evasions, a Notice can be issued u/S 148. 

The case can be reinvestigated up to 6 years after the relevant assessment year has ended! 

If the amount under scrutiny is below Rs.100,000, than a maximum  of 4 years returns need be examined. 

What Response should you Give When you Receive an Intimation from the I-T Department

Let us present your reply to the Notices from the Income Tax department in a tabular form: 

I-T Act Sections

Reason

Your Response

143(1)A

No Claim or Refund Return

You don’t need to take any action. Just take a print out for your records.

143(1)B

Informing you about a Refund

Again, this requires no action. Just take a print out for your records. Periodically check your bank statement for the refund credit.

143(1)C

Intimating you of your due tax liability

Verify it against your Form 26AS. Once you have paid the requisite tax, e-file the revised returns.

143(2)

Your tax file got selected for random scrutiny

First check the validity of the Notice. If valid, appear before the I-T officer at the prescribed time and date with all the relevant documents and answer all questions honestly.

The requested details could be regarding all your sources of income, relief received from a claim of loss, allowances, exemptions, and deductions.

143(3)

Income Tax department has information regarding income concealment

You would be requiring professional services of a Chartered Accountant.

142(1)

Not filed tax returns or a tax enquiry intimation for scrutiny

In case you are yet to file your income tax returns, do so as soon as possible. If you have already filed then, take your documents to the assessing officer for further scrutiny.

148

Income has escaped assessment

E-file revised returns with necessary documents.

156

Additional tax on income

If you think that this demand is viable, you can pay the amount, e-file revised returns with the challan of tax paid.

If you think that this demand is unjust, you can file for rectification.

154

Rectifications for mistakes in filing Income Tax Returns

You can seek professional help for the same or file for rectification at the I-T department’s official site.

  

When should you Ask for an Expert’s Advice

Not every Notice received from the I-T department needs an intervention from a certified Chartered Accountant. 

If the intimation is about simple matters like deduction amount or TDS mismatch, mathematical error, and likes, the taxpayer can respond to the I-T Notice on your own. 

But when the Notice is regarding serious matters like scrutiny or reassessment u/S 148, it is advisable that you seek a professional’s help. 

Hiring a CA to respond to your tax Notice on your behalf would be costly but the issue will be resolved in a timely and correct manner. 

But it is essential that you understand the reason for receiving the Notice, action taken on your behalf, and its implications, thoroughly. 

You cannot leave the entire matter on the CA only! 

Things to Remember

Just make sure that the response is sent within the stipulated time. Send over the information or documentation that is ready and if needed, request for some more time. 

For example, the scrutiny Notice can ask for documents like brokerage statements, rent receipts, payslips, bank statements, etc. Collecting and submitting all the documents together within the given time frame may be difficult. 

You can submit the documents you have gathered already and convey them to the I-T officer and request for a time extension. 

This would also convey your intent to comply with the demands of the department! 

Once you have collected all the relevant information, write a cover letter cataloguing all the documents that you are submitting. 

Make a few copies of the entire set. Get the copy of the cover letter acknowledged and file it for future reference and proof that the documents were duly submitted. 

For random scrutiny under Section 143(2), no specific documents are specified. In such cases, gather all the necessary documents like loan details, income information, major expense, bank statements, etc. 

In the End

Receiving an I-T Notice does not signify an end of the world scenario! You just need to stay calm and think about the steps you need to take next to respond to the Notice. 

Do not consider not replying to the Income Tax Notice because then you will be penalized further! 

You just need to consider all the factors and decide whether you will be responding to the Income Tax department Intimation on your own or will you be hiring a chartered accountant or a tax professional to handle the issue for you!

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