Notice from the Income Tax Department: Why You Might Receive One and How to Respond?

Receiving an income tax notice can be a nightmare, even if you have filed your income tax return on time. Understanding these notices, knowing how to respond, and taking the right actions are crucial to avoid penalties and ensure compliance. This article will help you overcome the complexities of income tax notices, covering everything from authentication to responding effectively.

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Table of Content

How to Authenticate Notice/Order Issued by Income Tax Department

Types of Notices/Intimations

What Should Be Done After Receiving an Income Tax Notice?

Common Causes for Receiving an Income Tax Notice

How to Respond to a Notice?

Frequently Asked Questions

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How to Authenticate Notice/Order Issued by Income Tax Department

Before taking any action on a notice or order from the Income Tax Department (Income Tax Department), it is crucial to verify its authenticity. Here’s a step-by-step process to authenticate a notice on the e-filing portal:

1. Go to the e-filing portal: On the home page, select ‘Authenticate notice/order issued by Income Tax Department’ under ‘Quick Links’.

   
   

2. Select authentication method: You can authenticate using PAN, document type, assessment year, issue date, and mobile number or by using the Document Identification Number (DIN) and mobile number.

   
   

3. Enter details and validate OTP: Fill in the required details and enter the OTP received on your mobile.

   
   

4. Check authentication result: The DIN and date of issue will be displayed if the notice is genuine. If not, a “No record found” message will appear.

   
   

Types of Notices/Intimations

Understanding the different types of notices and their purposes can help you respond appropriately:

Notice under Section 133(6)

• Reason: Discrepancies between ITR filed and information available in the Annual Information Statement (AIS).

• Response Steps:

  • Analyze the reason for the notice.

  • Login to the income tax portal and provide a detailed response with necessary attachments.

  • File an updated return if required.

Notice under Section 142(1)

• Circumstances: Issued for additional information or if the return is not filed.

• Consequences: Penalty of INR 10,000 per failure and potential prosecution.

• Response Steps:

  • Provide requested information.

  • File the return if not already done.

Intimation under Section 143(1)

• Processing: Return processed by the Central Processing Centre (CPC) with adjustments for errors or discrepancies.

• Outcomes: Tax liability, refund, or adjustments.

• Response Steps:

  • Analyze the notice for discrepancies.

  • File a rectification return if necessary.

Notice under Section 143(2)

• Purpose: Scrutiny of the return filed.

• Response Steps:

  • Identify the reason for scrutiny.

  • Provide a detailed explanation and necessary documents.

Notice under Section 148

• Purpose: Assessment or reassessment for income escaping assessment.

• Time Limits:

  • Up to 3 years from the end of the relevant assessment year (AY).

  • Up to 10 years if income of INR 50 lakh or more has escaped assessment.

• Response Steps:

  • Furnish the return as requested.

  • Provide necessary information and documents.

Notice under Section 245

• Purpose: Adjustment of current year’s refund against previous tax dues.

• Response Steps:

  • Respond within 30 days.

  • Provide supporting documents and explanations.

What Should Be Done After Receiving an Income Tax Notice?

When you receive an income tax notice, follow these steps to ensure proper response:

1. Read the notice carefully to understand the reason.

2. Verify recipient details to ensure it is intended for you.

3. Identify discrepancies in your tax return that triggered the notice.

4. Respond within the specified timeframe to avoid penalties.

5. Back your response with adequate information.

6. Ensure the notice is reflected in your income tax account online.

Common Causes for Receiving an Income Tax Notice

Income tax notices can be issued for various reasons, including:

• Inconsistencies in TDS reporting

• Errors on tax returns

• Failure to submit required documents

• Non-filing of tax returns

• High-value transactions not disclosed

• Random scrutiny by the assessing officer

How to Respond to a Notice?

Responding to a tax notice involves several steps:

1. Log into the income tax portal

2. Go to pending actions and select ‘respond to outstanding demand’

3. Prepare a cover letter with detailed explanations

4. Upload the response and necessary documents

FAQ

Q1. Why must I authenticate the notice/order by Income Tax Authorities?

Authenticating ensures the notice's genuineness as each communication sent by the Income Tax department will be assigned a unique Document Identification Number (DIN).

Q2. What if the Income Tax Department notice/order does not bear a DIN?

A notice without a valid DIN is considered invalid. You are not required to act or respond to such communication.

Q3. Where can I authenticate the order issued to me by the Income Tax Department?

Use the "Authenticate Notice / Order Issued by Income Tax Department" service available on the e-Filing portal.

Q4. Do I need to log in to authenticate the notice issued to me by the Income Tax Department?

No, you can authenticate notices without logging in by using the "Authenticate Notice/Order Issued by Income Tax Department" link on the e-Filing portal.

Q5. What is DIN?

DIN stands for Document Identification Number, a unique 20-digit number mandatory for every communication from the Income Tax Authority.

Q7. What would happen if you do not respond to an Income tax notice?

If you do not respond to a tax notice within the stipulated time, your return will be considered invalid, and hefty penalties and interest may be charged.

Q8. Within how many years should the income tax department send a notice?

The Income Tax department can send you a notice within eight years from the date of filing the ITR.

Q9. How to respond to a notice?

Log into the e-filing portal using your credentials, click on pending actions, and select ‘respond to outstanding demand’.

Q10. Can an assessing officer issue a notice without proper authorization?

No, the issuance of notices like those under Section 148 must be authorized by higher authorities like the Joint Commissioner.

Q11. Is it mandatory to use the same mobile number registered on the e-Filing portal for authentication?

No, you can use any accessible mobile number to receive the OTP for authentication.