Income Tax Return Discrepancy Notice
- Rashmita Choudhary
- Dec 2, 2025
- 7 min read
Introduction
Filing your Income Tax Return (ITR) can sometimes lead to errors that result in scrutiny notices under Section 142(1) of the Income Tax Act. These letters request more information or documents to clarify any discrepancies or missing information in your return. When such disparities are discovered, the Income Tax Department issues a Section 142(1) notice indicating that your return is under examination. This examination may cause delays in your tax filing process, impact your refund, and, in certain situations, result in penalties if differences are discovered. It is crucial to understand the most prevalent reasons for these differences, their potential consequences, and how you might effectively reply to a Section 142(1) notice.
Table of Contents
When Does an ITR Filing Discrepancy Happen
Discrepancies in ITR filing can arise for a variety of causes, the majority of which are accidental errors or omissions. Here are the primary factors that can cause a scrutiny notice.
Incorrect Income Reporting: This includes failing to disclose sources of income such as bank accounts, interest income, dividends, or capital gains. Failure to appropriately record income can result in disparities between what is declared on your return and what is reflected in the Annual Information Statement (AIS) or Form 26AS, prompting the department to issue a scrutiny notice.
Filing using the Incorrect ITR Form: Each taxpayer must choose the appropriate ITR form based on their income sources. Filing the incorrect form might result in the return being designated defective, which can entail processing delays, deductions, or return rejections.
Errors in Bank Account facts: Discrepancies in bank account facts, such as unvalidated or wrong information, can have serious consequences, especially when reimbursements are involved. This is a common blunder that can lead to refund delays or denials, as well as a Section 142(1) scrutiny notice if it does not match the information held by the Income Tax Department.
Failure to Verify the Return: After submitting an ITR, taxpayers must verify it. Failure to do so invalidates the return. This error can result in the non-processing of claimed deductions, leaving your ITR incomplete and potentially generating an income tax notification for clarification.
Income Tax Return Discrepancy Notice under Section 142(1)
A notice under Section 142(1) of the Income Tax Act may be issued for a variety of reasons, including:
Incomplete or non-filing of ITR: If you have failed to file your ITR for a specific fiscal year, the tax officer may issue a notice under this provision to remind you to file your return.
Verification of income details: The notice may be issued if the assessing officer requires additional information or clarification on the income reported in your ITR.
Cross-validation: If there is a disparity between the information supplied in your ITR and the data available with the Income Tax Department, you may be issued a Section 142(1) notice for cross-verification.
Objective of Income Tax Return Discrepancy Notice
The principal purpose of issuing a Section 142(1) notice is to obtain specific information from the taxpayer to guarantee the accuracy and completeness of the income declared in the ITR. The notice allows the assessing officer to:
Ensure the taxpayer's claimed income is accurate.
Verify the submitted information against other available data, such as TDS records, bank statements, and financial transactions.
Encourage compliance by pushing taxpayers to file their returns.
Components of Income Tax Return Discrepancy Notice under Section 142(1)
Understanding the substance of a Section 142(1) notice is critical to reacting effectively. The notice usually includes:
Taxpayer details: Your name, permanent account number (PAN), and address.
Assessment year: The financial year during which the notice was issued.
Information required: A list of documents, accounts, or other information that you must submit.
Deadlines: The deadline by which you must comply with the notice.
Consequences of non-compliance: The warning will also describe the fines or legal measures that may be taken if you do not answer within the time frame specified.
How to Respond to Income Tax Return Discrepancy Notice under Section 142(1)
Responding to a Section 142(1) notice promptly and accurately is essential to avoid any penalties or further problems. Here's how you can approach it:
Understand the requirements: The first step is to thoroughly read the notification and comprehend what is being requested of you. The notice will specify the documents or information that you must give. If you are unsure about any part of the notification, get expert assistance from a tax counsellor or chartered accountant.
Gather the required documents: Once you understand the requirements, begin gathering the appropriate documentation. These could include bank statements, investment proofs, business accounts, or any other financial documents indicated in the notice.
Prepare a response: Prepare a complete response to the notice that includes all of the necessary documents and information. Make sure your response is precise, succinct, and correct. Please explain why any documents are missing or unavailable.
E-filing your response: The Income Tax Department offers an online link for submitting your answer to a Section 142(1) notice. Log in to the Income Tax E-filing Portal, then go to the 'E-Proceedings' area and send your response together with the necessary documents.
Keep records: Always retain a copy of the notice, your response, and any correspondence with the Income Tax Department for future reference. This can be critical if any disagreements develop later.
Penalty for Non-Compliance with Income Tax Return Discrepancy Notice
Failure to respond to a Section 142(1) notice may result in serious repercussions, including:
Penalty per Section 271(1)(b): Each refusal to comply with the notification will result in a penalty of Rs. 10,000.
Best judgment assessment: If you do not answer, the assessing officer has the authority to issue a 'best judgment assessment' under Section 144 of the Income Tax Act, which could result in a greater tax burden.
Prosecution: In extreme situations, noncompliance might result in prosecution under the Income Tax Act.
Conclusion
Discrepancies in your ITR file, such as improper income reporting or inaccuracies in bank account information, might result in Section 142(1) scrutiny notices, causing delays and penalties. You can avoid such complications by assuring accurate reporting, using the correct ITR form, and confirming your bank account information. TaxBuddy streamlines the process by providing expert support with responding to scrutiny notices and ensuring timely compliance.
Frequently Asked Questions
What is a tax discrepancy?
Once your ITR has been filed, you can check to see if it has been accepted and processed by the Income Tax Department. If there are any differences, you may be required to react to the ITD's communication. So, it is best that you check your ITR status on a regular basis.
What are the most common reasons for tax notices?
Here are the most typical reasons why people receive income tax notices after filing their ITR.
Discrepancies in income declarations
TDS/TCS mismatch.
High-value transactions.
Non-filing of returns.
Errors in return filing.
Can I face penalties for discrepancies in ITR filing?
Yes, penalties can be applied for ITR filing errors, particularly if they are discovered to be intentional or due to negligence.
Penalty Rates: Penalties might be as high as 200% of the tax payable, depending on the severity and nature of the irregularities.
Avoid fines: To prevent such penalties, file on time and accurately, and respond to any notices as soon as possible.
When can a notice under section 142(1) be issued?
A notice under section 142(1) is given when the assessee still needs to file or when the return has been filed, but the A.O. requires more information.
What do I do when I receive a 142(1) notice?
When an assessee receives a notice to file a return, he should file it within the time period given in the notice, and if documents and details are requested, he should produce them and provide them to A.O. within the specified time frame.
How to respond to Income Tax discrepancy notice u/s 142(1)?
Section 142(1) notices can only be responded to electronically using the 'e-Proceedings' feature in the assessee's registered 'e-Filing' accounts.
Can you file a revised return after receiving a scrutiny notice?
Yes, if you discover genuine errors or omissions in your return after getting a Section 142(1) notice, you may file an amended return under Section 139(5) of the Income Tax Act. This provision permits taxpayers to amend errors in their original returns before the assessment is completed or by the specified deadline. It allows you to correct any errors before the inspection process is completed, which helps you avoid penalties or reassessments.
How to respond to an income tax notice u/s 143 (1)?
To respond to an income tax notification under Section 143(1), follow the instructions below:
Step 1: Understand the nature of the adjustments made and the reasons stated in the notice.
Step 2: Prepare a response that includes relevant explanations, supporting papers, or adjustments.
Step 3: Submit your response within the prescribed time frame, either online using the income tax e-filing system or in person at a designated office.
Step 4: Save a copy of your response and evidence of submission for the future.
What documents are needed to respond to a Section 142(1) notice?
The documents needed will vary based on the nature of the inconsistencies, but frequent ones include:
Clarify any differences in stated bank account information using bank statements.
Provide proof of income, such as salary stubs, investment statements, or capital gains reports.
Use Form 26AS to verify income and tax information.
Correct or update any ITR forms or schedules depending on the notice.
To avoid any issues, provide all necessary papers precisely and on time.
Can I change my bank account details after filing my ITR?
Once your ITR is filed, you cannot update your bank account information. As a result, before completing your return, you must verify and confirm that the account information you supplied is correct.
Correct at the time of filing: Before filing, make sure that the account you use for refunds is legitimate, operational, and properly linked to your Income Tax profile.
Rejected or delayed refund: If the bank information provided after filing is inaccurate, the refund may be delayed or denied, and you may be asked to change the information.
How long does it take to resolve a Section 142(1) notice?
The time it takes to settle a Section 142(1) notice is determined by the nature of the inconsistencies and how quickly you supply the relevant documentation.
Ensure timely submissions: If you react swiftly with the necessary documents, the process will be completed faster.
Complicated cases: If the problems are complex, such as mismatched revenue sources or several disparities, the settlement process may take longer.
In general, the Income Tax Department will attempt to resolve the situation after the appropriate information is submitted.
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