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Income Tax Notice

Got an Income Tax Notice?

No need to worry! TaxBuddy is at your service.

Handling an Income Tax Notice has never been simpler!

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Reasons for Receipt of Income Tax Notice

An income tax notice is simply an official communication from the Income Tax Department to the taxpayer for a variety of reasons. The reasons could be differences found in the ITR submitted, the need for additional documentation, or a notice to the taxpayer for a personal appearance. The common causes for an income tax notice are:

Mismatch in TDS (Tax Deducted at Source) details.

Discrepancy between income declared and income as per Form 26AS.

Non-disclosure of all sources of income.

High-value transactions do not match the reported income.

Late or non-filing of Income Tax Return (ITR).

Random scrutiny selection by the IT department.

Claiming higher than usual deductions or exemptions.

Investments or savings not reported or mismatched.

Foreign assets or income not disclosed.

Cash deposits exceeding specified limits.

Discrepancy in GST and Income Tax filings.

Errors in ITR form or incorrect PAN details.

Failure to report property sale or purchase.

Significant changes in income from previous years.

Notice for routine verification or assessment.

Types of Income Tax Notice

Understanding different types of Income Tax Notices can help to clear up any confusion and eliminate future concerns. Let’s have a look on the different types of notices or intimations issued by the Income Tax Department:

Notice under Section 131

Notice under Section 131 is issued if the assessing officer suspects you have concealed your income either in part or whole.

Notice sent under Section 139(9)

Notice under Section 139(9) is issued when an income tax return is submitted with defects, like missing details or using the wrong form.

Notice under Section 142(1)

Notice under Section 142(1) is issued if there is a discrepancy between your reported income and the information possessed by the assessing officer.

Intimation under Section 143(1)

Section 143(1) is an initial assessment sent to all taxpayers, usually indicating either a demand for payment or a potential refund.

Notice under Section 143(2) for scrutiny assessment u/s 143(3)

If the Tax Department wants to scrutinize your ITR, it will send you a notice u/s 143(2). You may get it within six months from the end of the financial year.

Notice under Section 148

Notice under Section 148 is sent, if the assessing officer suspects you might have understated your income on your return, or didn't file the ITR at all..

Notice under Section 156

Received a Section 156 notice? It means the tax authorities are demanding payment for any outstanding taxes, fines, or penalties.

Notice under section 245

Notice under Section 245 is sent if you failed to make a tax payment from the previous financial year, expect to receive a notice from the Income Tax Department under Section 245.

High-Value Transaction (HVT) Notice

Have you recently made a significant financial transaction, such as a large deposit or a property purchase? Such activities may result in a notice from the Income Tax Authorities.

Form 67 Defects

If there is an error on your Form 67 claiming deductions for foreign income, you will receive a notice to correct it.

26AS-AIS/TIS Mismatch

A discrepancy between your Form 26AS and AIS/TIS can result in a notice requesting clarification, ensuring accurate credit of taxes paid.

RELIEF 90/90A/91

Are you claiming relief under sections 90/90A/91 to avoid double taxation of foreign income? If you receive a related inquiry notice, you may need to provide evidence to support your claims.

Notices include:

Appellate Notices

When someone disagrees with a decision of the department and wishes to file an appeal, they can expect an appellate notice.

Ex-Parte Orders

These notices indicate that a decision has been made without a person’s individual participation or compliance.

Seeking Rectification

Rectification notices seek the correction of errors or omissions in previous proceedings by submitting supporting documents.

Steps After Receiving an Income Tax Notice

After receiving a notice from the Income Tax Department, it is critical to approach the situation with care and order. Follow these steps to effectively manage the notice:

Read the Notice Thoroughly:

Understand the reason behind the notice, including what the Income Tax Department is asking for or pointing out.

Verify Your Details:

Make sure the notice is meant for you by checking your personal details like name, PAN, address, and the relevant assessment year.

Figure Out the Problem:

Identify the issue with your tax return that led to the notice, such as income discrepancies, large transactions, or missing information.

Reply Promptly:

Respond to the notice by the deadline mentioned to avoid any penalties or further legal issues.

Provide Necessary Documentation:

Include all relevant documents and explanations to clearly address the query or issue raised.

Check Your E-Filing Account:

Verify that the notice is listed in your online account on the Income Tax e-filing portal for authenticity and tracking purposes.

Get Expert Advice:

If you are unsure about the notice or how to deal with it, seek advice from a tax professional.

Documents Required to Reply to an Income Tax Notice

The documents differ depending on the type of income tax notice served to the taxpayer. To respond to an income tax notice, the following basic documents are required, which are common to every notice:

  1. A copy of the notice

  2. TDS certificates (Form 16- Part A)

  3. Proof of Income source (Salary receipts, Form 16- Part B, etc)

  4. Investment Proof

What are the Methods of Serving Income Tax Notices?

The Income Tax Act of 1961 specifies various authorized methods for the delivery of Income Tax notices, ensuring clear and legal communication with taxpayers. Notices are personally addressed to individuals, guardians of minors, or key representatives in groups and entities, including:

Direct Mail:

Utilizing registered post for a secure and verifiable delivery to the taxpayer's registered address.

Property Posting:

For unresponsive or unreachable recipients, notices are prominently posted at their known residence or business location.

Group Notices:

Directed to the heads of Hindu Undivided Families (HUFs), partners in firms, or members in associations, ensuring collective responsibility.

Closed Businesses:

Targeting individuals, partners, or directors associated with a business at the time of its closure, to ensure compliance even after operations have ended.

Calling for Information and Scrutiny Notices

Information Requests and Scrutiny Notices, both based on previous tax filings, aim to verify the claims made in your returns.

Section 133(6): Calling for Information

The Income Tax Department uses the power of the Income Tax Act of 1961, including Section 133(6), to collect financial data from third parties such as banks and financial institutions. This aids in gathering critical financial information about taxpayers for a comprehensive tax liability assessment.

Scrutiny Notices:

Sections 142(1) and 143(2) allow the department to directly request specific information from taxpayers, easing the scrutiny process. This process evaluates the accuracy of income and tax payments declared, ranging from limited to complete scrutiny depending on the case's complexity. Adherence to these requests is critical for taxpayers to avoid penalties and validate their tax returns.

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