Income tax notices and how to handle them?

Do not panic in case the income tax department sends you a notice even when the income tax returns have been filed from your side within the timeframe. Instead, you need to find the exact reasons behind that notice and the implications as per the sections mentioned in it. You even can be relieved if you have no idea as how to handle it as the professionals are there to help you out. This article will provide detailed understanding about the notices and how you can handle them.

Notice under section 143 (1):

When you file the returns, the CPC (Central Processing Centre) process them electronically. Calculation of the income is carried out when following adjustments are made to total income in return.

  • A wrong claim
  • Return having arithmetical error
  • Any income excluded from return
  • Disallowance of expenditure or loss claimed incorrectly

The CPC sends intimation under section 143 (1) in any of the following 3 cases after processing the return successfully:

  • A return has been found
  • A tax liability has to be paid
  • No demand or refund is there but the loss amount has been reduced or increased

What you can do to handle this notice?

There is no need to do anything from your side if no discrepancy is there in returns. In case of a due return, transfer of the same amount will take place to bank account that is stated in the return. If this is not the case, you can request for refund’s reissue. In case of due tax, it has to be paid within the span of 30 days.

Notice under section 143 (2)

This notice is for notifying assessee that the filed return has been selected for scrutiny. Here it is significant to note that section under which notice is issued and that one for its scrutiny are different. The motive of assessing officer behind detailed scrutiny is to make sure that any of the following have not been done by the assessee:

  • Excessive loss claim
  • Understating of the income
  • Lesser taxes payment

This notice marks that the taxpayer must give his response for the questionnaire that is subjected with documents that the income tax department asks for. This notice is supposed to be served to the assessing officer within 6 months after the assessment year to which it is concerned.

What you need to do for handling this notice?

Collect all the relevant documents that are related to expenses or income along with other relevant papers. Also, take care to attend the hearing as it should not be missed.

Notice under section 148:

There might be a reason behind belief of assessing officer that your income has not been disclosed correctly and therefore you have given less tax. On the other hand, it is also possible that no return has been filed from your side even when it is mandatory according to law. This is known as income escaping assessment. In this case, the assessing officer has liberty of evaluating or re-evaluating your income depending on the case.

Before the assessing officer makes any such evaluation or reevaluation, he needs to serve the assessee with a notice asking him to deliver his income return. The issue of notice for such purpose is made under Section 148 provisions. For this notice issuance under Section 148, it important to adhere with several timelines as mentioned below:

  • Up to 4 years from the applicable AY’s end:

Any officer who is below the rank of Deputy Commissioner or Assistant Commissioner cannot send the notice. It can only be issued by the assessing officer on the direction of Joint Commissioner under Section 148 after the reasons for the same are recorded.

  • After 4 years but up to 6 years from applicable AY’s end:

Only the commissioner or chief commissioner can issue the notice if he is contended with the fact that assessment has been escaped by income. The income amount that has escaped from assessment must be above Rs. 1, 00,000.

  • After 4 years but up to 16 years from applicable AY’s end:
  • Notice is issued under section 148 in case the income is taxable in India related to any asset that is situated outside India but has escaped from assessment.

What you can do to handle this notice?

In this case, returns have to be filed for applicable assessment year as per assessing officer directions.

Notice under Section 245:

If a reason is there with the assessing officer to consider that payment of tax has not been done for previous years and adjacent to that demand, he wants to begin refund of current year, then notice is issued under Section 245. However, it is possible to adjust the refund and demand only in case proper notice has been given from your side and you get a chance to be heard. You get 30 days timeline for responding to notice from the day you have received it. In case response is not given within the mentioned timeline then it is considered as consent by the assessing officer and he can then carry on the assessment. It is therefore advised to give earliest possible response to the notice.

What to do for handling this notice?

Verify the correctness of demand and determine the actual paid and payable tax. Open the website of income tax, select the option of Response to Outstanding Tax Demand and provide response from your side in case you consider that demand is correct or partially incorrect or in case you do not agree with demand.

Notice under Section 143 (1A)

In this section, the taxpayer receives a notice that is computer assisted in case any discrepancy is found in Form 16 and income stated in return, or deductions presented under Section Form 26AS and Chapter VIA or Section 80C. The time limit that you get for responding to the notice is 30 days from communication issue date.

What you can do for handling the notice?

Login to tax filing portal, go to section named e-Proceeding and give details regarding the discrepancy together with the relevant documentary proof that must be uploaded.