What if you get Tax Notice?

Once the ITR is submitted and verified by the taxpayer, the department goes through every return in an automated/manual fashion to see if everything was correct and coincides with the data available with them. If they find an incorrect/doubtful entry or have more questions about any declared or undisclosed income or deduction or exemption, they send a communication to the taxpayer for further verification. This tax notice is the most dangerous thing for taxpayers.

However please note that most notices are harmless (and are sometimes happy about the tax return), as they ask for some more details or inform your mismatch of your tax return from Form 16 / 16A / 26AS Huh. This is why we always suggest matching your ITR with Form 26AS. One thing to note is under which section the notice is received, what does it mean and what do you need to do?

We list below the general tax notices sent below and how to treat the same.

Tax Notice Section 143(1A)

This year many taxpayers are receiving tax notice section 143 (1A). The reason for the notice is due to the discrepancy in income or deduction described in the tax return and Form 16 / 16A or 26AS. The most common reasons are not to include interest income in returns, not submitting investment proofs to employers for tax savings or HRAs and making similar claims when filing ITR among others.

Deadline for serving notice: NA

Deadline to reply: 30 days

What to do? The notice can be answered online. The taxpayer will have to log in to the income tax website and reply through e-processing. You may have to attach relevant evidence to the answer.

Tax Information Section 143 (1)

This is more information than a notice about the tax return you filed. It can be of three types:

1. Your final assessment matches the Assessing Officer’s

2. Tax refund – when the taxpayer is eligible for a tax refund as an additional tax was paid/deducted.

3. Tax payable – Taxpayer will have to pay more tax

Deadline for serving notice: from the end of the next financial year when the return was filed. Hence notice can be issued for 2017-18 by 31 March 2019.

Deadline to reply: In case of tax payable, payment has to be made within the next 30 days

What to do?

If there is a complete match, you don’t need to do anything. In case of a tax refund, the amount will be transferred to your bank account in the next few days. Pay tax within 30 days of receiving notice for tax payable cases.

Tax Information Section 143 (2)

It is the inquiry notice that follows the initial assessment of the return. It can be of 3 types depending on the severity.

1. Limited purpose check: The tax department wants to clarify some points/numbers and hence the taxpayer needs to verify the same.

2. Full investigation: The tax department has found serious discrepancies in this matter and hence a detailed investigation is required.

3. Manual check: This has been hand-picked by the Assessing Officer and can be sent only after approval from the Commissioner of Income Tax.

The time limit for service of the notice: 6 months from the end of the financial year from when the return was filed. Hence notice can be issued for 2017-18 till 30 September 2018

Deadline to reply: as per the information

What to do?

Collect all the documents related to your income, expenditure and investment details for the year and meet with the Assessing Officer. You can also send your representative if necessary. In case you do not respond to the notice or do not meet the Assessing Officer, action can be taken:

  • The officer can calculate the tax liability as it sees fit, which may lead to additional tax liability.
  • 10,000 / – fine for each failure under section 271 (1) (b) and / or
  • C. Prosecution under Section 276D, which may extend to one year or without penalty

Tax Information Section 139 (9)

A notice under section 139 (9) is sent when the ITR is defective. This can be mainly due to the following reasons:

• Used the wrong ITR form

• If ITR was filed without paying full tax

• If a refund was claimed for TDS for which the respective income was not mentioned in the ITR

• Name mismatch on ITR & PAN

This is just a symbolic list.

Deadline for serving notice: NA

Deadline to reply: 15 days. Extension possible by writing a letter to your Assessing Officer

What to do?

If you do not reply, the return filed is considered invalid.The taxpayer will have to download the correct ITR form and select the option `where the original return was filed was a defective return in response to the notice under section 139 (9). Cite the reference number and acknowledgment numberand fill the ITR form. The improvement as per requirement.

Then login to the income tax taxing website and in response to notice 139 (9) to us, select e-file >> e-file and upload it using the password in the notice.

Tax Information Section 148

Taxpayers receive this information if any income has not been disclosed and has escaped assessment.

The time limit for service of the notice: If the income is less than Rs 1 lakh, the notice should be sent within 4 years from the end of the assessment year and within 6 years if the income is more than Rs 1 lakh. Therefore, for income related to FY 2016-17 (AY 2017-18), notice can be sent by March 2024.

Deadline to reply: 30 days or specified in the notice

What to do?

The taxpayer is required to file the return of the assessment year as asked by the Assessing Officer.

Tax Information Section 234 (F)

This budget is the new section introduced in 2017 and is in force from the assessment year 2018-19. Accordingly, the taxpayer will have to pay a fine of Rs 5,000 if the tax return is not filed by the due date. If the tax return is not filed by 31 December as well, the penalty will increase to Rs 10,000. However, the fine shall not exceed Rs 1,000 for income up to Rs 5 lakh.

Deadline for serving notice: NA

Deadline to reply: NA

What to do?

File your returns on time from next year!

We hope that a brief review of all tax notices will help you to be better prepared in terms of receiving it. Do not panic and consult an expert in case of any issue!

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