Decoding Income Tax notices

After you have filed your Income Tax Return (ITR), the Income Tax Department (ITD) processes it and makes adjustments for any arithmetical errors, incorrect claims or discrepancy in the documents furnished.People often make a minute error or miss a detail while filing their ITR resulting in a notice from the ITD. But not all such notices are a cause of worry. We have decoded some important sectionsfor your understanding.

1. Intimation u/s 143 (1)

When? Such an Intimation is received from the Centralized Processing Centre (CPC)after initial processing of your return.

Why? You may receive such intimation in the following cases:

1. Demand : Where any tax or interest is found payable by you

2. Refund : Where any tax is found refundable to you

3. No demand or refund: Where yourreturn calculation matches the IT department’s computation

What should you do ?

1. Response in case of Demand : If the tax demanded is justifiably payable, you should make the payment within 30 days. However, If you think that the demand has been incorrectly raised, you need to get the demand corrected by filing necessary rectification request.

2. Response in case of Refund : Refund will be transferred to the bank account mentioned in the return. If it is not credited, you may request reissue of refund

3. No demand or refund : No action is needed as this implies that the ITR has been processed without any discrepancies.

Time Limit to respond : 30 daysto make payment (in case of demand)

2. Discrepancy notice under section143 (1A)

When? Such a notice is received from the CPC when there is a mismatch between income and/ or deduction and further clarification is sought.

Why? You may receive such notice if there is any discrepancy in the income mentioned in the return when compared to the income presented in Form 16, Form 16A, or Form 26AS.

What should you do ?On receipt of such a notice, you have to submit a response to notice under section 143(1A) by logging into the Income tax efiling website. Under the “E-Proceeding” section, you can explain the reason for such mismatch and submit the supporting document. You may either agree or disagree to such adjustments. If you agree with the demand, you must file a revised return within 15 days.

Time Limit to respond : within30 daysof receipt, failure of which will lead to necessary adjustments without providing further opportunities.

3. Defective return notice under section 139(9)

When? Such a notice is received if you furnish incomplete, inconsistent or incorrect information in the income tax return or the schedules.

Why? You may receive such notice if your return is considered to be defective by the Assessing Officer (AO). A return is deemed defective if it satisfies any of the following conditions:

• The annexures, statements and columns in the return have not been duly filled in

• In case where audit under any section of Income Taxis applicable, a copy of the report of the audit is not furnished online

• Details of taxes paid is not submitted, for example if you fail to submit detailsof advance tax or self-assessment tax paid or any claimsof tax deducted or collected at source& the return is filed with a tax payable.

What should you do?

On receipt of such a notice, you have to e-file a revised return in response to notice under section 139(9) by logging into the Income tax e-filing website.

Time Limit to respond : within 15 daysof receipt, failure of which will lead to the return being considered invalid.

4. Inquiry notice under section 142(1)

When? Such a notice is received ifrelevant details for assessing the income are not available with the AO.

Why?You may receive such notice in the following cases:

1. You have not filed your ITR within the time allowed or before the end of the relevant Assessment Year (AY)

2. You have failed to furnish satisfactory accounts, information or documents in support of your return

What should you do?

1. Response in case you have not filed your return : you must file your ITR within the time stated in the notice

2. Response in case you have filed your return : you must furnish all required documents, accounts or information as stated in the inquiry notice

Time Limit to respond : As prescribed by the notice.

3. Defective return notice under section 139(9)

5. Scrutiny Assessment notice under section 143 (2)

When? Such a notice is issued for a Scrutiny Assessment of your return. It is sent in response to the inquiry notice above or ifthe return has been filed under section 139

Why? You may receive such notice if the AO wants to ensure that you have not understated your income, computed excessive loss or under-paid the tax

What should you do?

On receipt of such notice, you may be required to provide clarification by ensuring either of the following:

1. physically attend the office or get representation

2. produce evidence/ documents in support of the return

Time Limit to respond: As prescribed by the notice

6. Assessment / Reassessment notice under section 148

When? Such a notice is issued where your income has escaped assessment and the AO wants to assess or reassess such income.

Why? You may receive such notice if the AO has reason to believe that any income chargeable to tax has escaped assessment for any AY and he wants to reassess the income or re-compute the loss, depreciation allowance or any other allowance as the case maybe.

What should you do?On receipt of such notice, you will be required to file your return for the relevant AY (even though it has already been furnished earlier under section 139 or 142(1))

Time Limit to respond : 30 days to furnish the return oras prescribed by AO in the notice

7. Set off notice under section 245

When? Such a notice is an intimation for set off of refund against tax /demand outstanding.

Why? You may receive such an intimation if the AO wants to set off the amount to be refunded to you against the sum remaining payable by you. Note that this is received when a tax demand is pending from the ITD and you have claimed a refund from them in an earlier AY.

What should you do?

On receipt of such notice, you have to respond to the Outstanding Tax Demand by logging into the Income tax efiling website.

You can respond by checking any of the following :

1. Demand is correct : once you click submit, demand will adjusted against refund

2. Demand is partially correct : Enter the demand which is correct and submit. For the incorrect part, provide documents or reasons supporting the same.

3. Disagree with demand / demand is incorrect : provide documents or reasons supporting the same

Time Limit to respond: As prescribed by the notice

By Lovish Goyal 6/22/2018 9:44:17 AM