How To Deal With The Income Tax Notice

If you have received The Notice From The Income Tax Department then there is no need to get panic because when you file your income tax return then to verify the correctness of the value in your return, the department may send you the notice. In this article, we will discuss the sections of the income tax act under which the department may send you the notice and how to deal with such notices.

How To Deal With Income Tax Notice

Section 139 (9) : Filing of Defective Return

The return shall be considered as a defective return unless it contains the following documents:

  • The return should be filed in its prescribed form
  • There should be the proof of tax claimed to be TDS/TCS, advance tax or self-assessment tax.
  • Tax Audit Report under section 44AB
  • Copies of Audited financial statements and auditors report.
  • In case, books of accounts are not maintained by the taxpayer, then he should attach a statement showing the gross receipts, expenses, turnover, bank balance, cash balance, debtors balance, creditors balance, net profit, etc.
  • The name mentioned in the return should be matched with the name as specified in the PAN card.

If you have made an error or omission in any of the above-specified documents while filing the computation of income, then your assessing officer shall send you the notice under this section and ask you to rectify the same within 15 days from the date of receipt of the notice.

How To Deal: In case you have received such notice, then you have to reply to the notice within 15 days from the date of receipt. Although, you can also reply to the extension. However, it is compulsory that you have to reply because in case, you didn’t reply such notice, then it shall be deemed that the return filed by you was invalid and it will treat it as if you have not filed the return.

Steps for reply:

  • Go to the website Income Tax India E-Filing ;
  • Download the correct ITR and log in to your account;
  • Select e-file option and then click on “In response to notice under section 139(9)
  • Uploaded it within the time frame.

Section 245: Adjustment of demand with any refund due

In cases, where any outstanding tax is payable and assessee was also eligible for the refund which became due to him from any previous year, then in such cases, the department may sent an intimation to the taxpayer and ask him to pay the outstanding demand within the time as specified in the notice unless his refund due would be adjusted with the outstanding demand.

How to deal: on receipt of such intimation, first you have to verify the outstanding demand amount and the amount of refund that could be adjusted with the demand as per the amount specified in the intimation. Although, there is no time limit has been defined for issuing of such intimation but you have to make a reply within the time as mentioned in such intimation.

Steps For Reply:

  • Login to your account at website;
  • Select the response to outstanding tax demand and then submit your reply. You can reply by clicking on any of the following options
    • Demand is correct
    • Demand is partially correct
    • Disagree with the demand

You can read about this point in detail in my previous articles.

Section 143(1) : intimation for the proposed adjustment as per the software scrutiny

Where a return has been made under section 139 or in response to notice under section 142(1), the return is first verified through software which computes the total income or loss after making the any or all of the following list of adjustments:

  • Any arithmetical error in the return;
  • An incorrect claim, if such incorrect claim is apparent from any information in the return;
  • Disallowance of loss claimed, if a return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under section 139(1);
  • Disallowance of expenditure indicated in the audit report but not taken in computing the total income in the return;

Disallowance of deduction claimed under section 10AA, 80IA, 80IAB, 80IB, 80IC, 80ID or section 80IE, if the return is furnished beyond the due date specified under section 139(1)
Before making the above adjustments, the assessing officer shall send you the intimation of the proposed adjustment and ask you to reply to the notice within 30 days from the date of receipt of the notice.income tax notice

How To Deal: If you have received the intimation then first check whether the intimation has been received within the time limit. The last date for issue of Intimation Under Section 143(1) is 1 year from the end of the financial year in which the return has been filed.

Practically, intimation under section 143(1) has issued in every case where the assessee has filed the return or in response to the notice under section 142(1).

So, if in the intimation, there is no difference between the calculation of total income as per your ITR and the total income as per software, then you don’t need to take any action for this.

However, if there is a difference and you do not agree with the excess demand shown in the return, then you can apply for the rectification under section 154 or you may file an appeal to the commissioner of income tax appeals within 30 days. However, you cannot file for the revision under section 234, because revision can be possible only against the order and not on intimation.

The intimation is deemed as notice of demand so if you have not replied with the intimation then you have to pay the tax amount as specified in the intimation otherwise you shall be treated as assessee in default and liable for the interest and penalty under section 220 and 221 of the income tax act, 1961.

Steps For Reply :

Section 143 (2) : Notice for Assessment Scrutiny

The Said notice may be issued by the assessing officer to ensure that the taxable person has not been

  • Understated The Income
  • Claimed Excessive Loss or
  • Underpaid The Taxes

How To Deal :

In this case also, the first thing you have to check the time limit. The last date to issue the notice under section 143(2) is 6 months from the end of the financial year in which the return has been filed.

Steps For Reply :

  • Generally, the first notice shall inform you to appear before the Assessing officer along with some details as mentioned in the notice.
  • Furnish the information as mentioned in the notice.
  • You can appear before AO by yourself or you can send the representative. Although, it is advisable to appoint your auditor as representative for handling these issues.
  • Although, now it is possible to reply to such notice through the income tax website by logging it into your account.

Section 148 : Notice for income escaping Assessment

The notice under section 148 of the income tax act, 1961, may be sent to the person for the purpose of assessment or reassessment under section 147 when the assessing officer has a reason to believe that assessee has an escaped income of the earlier year.

How To Deal : Check whether the notice has been issued within the time as specified in section 153A.

Note : In case, if the assessment has begun under this section, then the assessing officer has the power to assess or reassess any other income which has comes to his notice after issuing the notice under section 148, during the course of the proceeding.

Steps For Reply : The notice under section 148 sent to the assessee and ask to file the return containing all the details of the income including which was not mentioned in the return filed under section 139 or in response to section 142(1), within the 30 days or time as specified in the notice.

You have to file the return for such an assessment year as mentioned in the notice within the time mentioned in the notice.