Introduction:
The word “notice” alone causes a lot of panic among taxpayers. Income Tax Notices not only get you in trouble, but they also keep you out of it. When an assessee files an income tax return, the income tax department evaluates it and gives assessment intimations, scrutiny notices, and so on. Even if the assessee fails to file his income tax return, the assessee will get a notice from the income tax department. However, some income tax notices are harmful, while others are not.
Income Tax Notice Resolution
The Income Tax Department sends notices for a variety of reasons, such as failure to file an income tax return, errors in filing tax returns, or other instances where the income tax department requires additional information or documents.
The notice received is not frightening or alarming in any way. However, the taxpayer must first understand the notice, its nature, and the request or order contained in the notice before taking action to comply.
Income Tax Notice
| Type of Notice | Description | Response |
| Notice under Section 143(1) – Intimation | One of the most regular income tax notices is this one. This letter is sent by the Income Tax Department to request a response to arithmetical errors, incorrect claims, any deductions or discrepancies in a filed tax return. Intimation sent to the assessee under Section 143(1) is not an assessment order.[1] Intimation under Section 143(1) does not amount to assessment on merits.[2] | The taxpayer should be aware that simply receiving a notice from the Income-tax department does not imply that he or she must appear before the authorities in person. In many circumstances, the physical or electronic response from the individual who receives the notice might be sufficient. If a taxpayer receives a notice under Section 143(1), he or she should be aware that the deadline for revising the return is 15 days from the date of the notice. If the taxpayer does not respond to the income tax notice within the time specified in Section 143(1), the income tax return will be processed after the necessary adjustments specified in the income tax notice are made. The taxpayer will be requested to pay the amount due within 30 days in this case. |
| Notice under Section 142(1) – Inquiry | This notice is sent to the assessee who has failed to furnish a return of his income within the time limit set out in subsection (1) of Section 139, or before the end of the relevant assessment year. And when the return has already been filed and more information and documents are needed to complete the process. This notice can also be used to require a taxpayer to provide further papers or information. In CIT v.Mintu Kalitha,[3] Employee of the assessee appeared before the Income Tax Officer in response to notice under Section 142(1) Assessment completed, Assessee questioning validity of re-assessment on the ground of non-service of notice under Section 148, No evidence of service of notice under Section 148, Reassessment not valid. | When a notice is received, an assessee must file his return within the time given in the notice, and if documents and information are requested, the assessee must produce them and provide them to the Assessment Officer within the time period specified. When receiving such a notice, the assessee should immediately consult his CA/tax adviser in order to draft a proper response. |
| Notice under Section 139(9) – Defective Return | If the income tax return filed does not contain all necessary information or contains incorrect information an income tax notice under Section 139(9) will be issued. If you receive a tax notice under Section 139(9), you have 15 days to rectify the error in the return. If the defect is not rectified within the aforementioned term of fifteen days or, as the case may be, the additional period so permitted, the return shall be deemed as an invalid return. | Once you’ve been served with a notice of defective return under section 139(9), you must revise your return within 15 days of receiving the notice from the Income Tax Department. You can also request an extension by writing to the Assessing Officer and requesting a deadline extension for filing a revised return. In fact, if a taxpayer rectifies a defect after the fifteen-day period has elapsed but before the assessment is made, the Assessing Officer may ignore the delay and treat the return as valid. The following information should be provided when filing a response: 1. Acknowledge the number of the original return. 2. Notice u/s 139(9) communication reference number 3. The notice specifies the date of the communication. 4. Date of receipt of notice by the taxpayer. 5. PIN/Password for verification as mentioned in the notice |
| Notice under Section 143(2) – Scrutiny | The purpose of this notice is to inform the assessee that his or her return has been chosen for scrutiny. In CIT v. Dharam Narain[4], Court held that in the absence of the assessee serving the notice to the authorized representative is sufficient and it deemed service of notice. In Income Tax Officer and Another v. P.N. Krishnamurthy and Another,[5] Before framing any assessment, there should be a valid notice. It’s worth noting that the section under which it’ll be scrutinized isn’t the same as the one under which the notice was issued. The assessing officer wants to make sure that you haven’t done any of the following things through detailed scrutiny: -understatement of income. -claimed an excessive loss -paid lesser taxes | Assessee or his representative will appear before the Assessing Officer to present arguments and evidence in accordance with his requirements. A final order under section 143(3) is granted to tax payable or tax refundable after all explanations and evidence have been considered. |
| Notice under Section 156 – Demand Notice | When any tax, interest, penalty, fine, or other sum is due as a result of an order made under this Act, the Assessing Officer shall serve a notice of demand in the required form to the assessee, the amount payable from the taxpayer will be specified in the demand tax notice. In Mohan Wahi v. CIT,[6] the Court held that service of notice of demand on the assessee under Section 156 is mandatory before steps for recovery under the Second Schedule of the Income Tax Act, 1960. | A taxpayer has four options when it comes to responding to outstanding demand notice. The options are as follows: Demand is correct. Demand is partially correct. Disagree with demand. Demand is not correct but agrees to adjustment. |
| Notice under Section 148 | When the Assessing Officer has a valid reason to suspect that the taxpayer’s income has escaped assessment and paid lesser taxes, the assessment officer will issue this income tax notice. However, the individual may not have filed his return at all, even though the individual were required by the law to do so. This is termed an income escape assessment. The assessing officer has the authority to evaluate or reassess the income in various cases, depending on the circumstances. The time limit for the assessing officer to reopen the taxpayer’s assessment is as follows, as amended by the Finance Act 2021, with effect from April 1, 2021: In normal cases, the assessing officer has up to three years from the end of the relevant assessment year; in exceptional cases, if the assessing officer has material evidence that income of Rs. 50 lakhs or more for a financial year has escaped assessment, the assessing officer has up to ten years from the end of the relevant assessment year. Before making such an assessment or reassessment, the assessing officer shall send the assessee a notice requesting his income return. | In accordance with the notice, the assessee may file a new return declaring the true income. Income may be equal to or greater than that declared by the assessee in the original return.[7] The assessee may write to the Assessing Officer requesting that returns already filed under section 139(1) be treated as returns filed in response to the notice under section 148.[8] After submitting a return, the assessee should request a supply of reasons for the issuance of a notice under Section 148.[9] If the assessee does not receive a copy of the reasons, the entire assessment proceedings and assessment order might be quashed.[10] |
| Notice under Section 245 | If the officer has reason to think that tax has not been paid for the past years and he wants to set off the current year refund against that demand, a notice u/s 245 would be issued. However, the adjustment of demand and reimbursement could be done only if the individual has been granted adequate notice and an opportunity to be heard. The assessee has 30 days from the date of receipt of the notice to respond to the notice. If the person does not answer within the required time, the assessing officer can take this as permission and continue with the assessment. | When taxpayers receive the Intimation u/s 245, read it thoroughly and check all of the contents, as well as the time limit for taking action (generally 30 days), The demand will be automatically adjusted with the refund if you do not take any action within the specified time. Assessees have two options: Agree with the outstanding debt. 2. disagree /partially agree with the outstanding debt. |
Conclusion
The assessee should not fear any notice sent by the income tax department if the assessee follows the law and acted in a good faith, then the assessee has options to rectify it if he has not done anything in a malafide way. And income tax department also sends a notice in a proper manner according to the procedure established by the law. Assessment Officer should have a proper reason while sending the notice to the assessee.
References:
- Pratik Anand, How to reply to different income tax notices, (24 July, 2021, 04:45PM) https://taxguru.in/income-tax/how-to-reply-to-different-income-tax-notices.html
- Notices issued under the Income Tax Act, (23 July, 2021, 2:25 PM) https://cleartax.in/s/income-tax-notice
- How to reply to different Income Tax Notices, (24 July, 2021, 10:45 AM) https://www.bankbazaar.com/tax/how-to-reply-to-different-income-tax-notices.html
Other Sources:
[1]Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers Private Limited, (2008) 14 SCC 208.
[2]CIT v. Zuari Estate Development and Investment Co. Ltd, (2015) 15 SCC 248.
[3](2002) SCC Online Gau 159.
[4](2018) 13 SCC 499.
[5]ITA No.1590/bang/2018.
[6](2001) 4 SCC 362.
[7]GKN Driveshafts (India) Ltd v. Income Tax Officer, (2003) 259 ITR 19.
[8]ibid
[9]ibid
[10]Commissioner of Income Tax v. Jagat Talkies Distributors, (2017) 398 ITR 13.
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