The Income Tax Department sends warning notices for a variety of reasons, including failure to file income tax returns, errors in filing returns, and other cases where the tax department requires further papers or information.

Nothing about the notification is terrifying or alarming. However, the taxpayer must first understand the notification, its purpose, and the requestor’s order in the notice before taking action to comply.

Let us look at the different forms of notices or notifications issued by the Income Tax Department.

Types Of Income Tax Notice

Type of NoticeDescription
Notice u/s 143(1) – IntimationThis is one of the most typical types of tax notices. The income tax department sends this notification to request a response to errors/incorrect claims/inconsistencies in a previously filed income tax return. If a person wishes to revise their return after receiving this notice, they must do so within 15 days. Otherwise, the tax return will be completed after the necessary adjustments are made as specified in the 143(1) tax notice.
Notice u/s 142(1) – InquiryThis notice is sent to the assessee when the return has already been filed and additional information and documents are needed to complete the process. This notice may also be delivered to compel a taxpayer to furnish further documents and information.
Notice u/s 139(1) – Defective ReturnIf the income tax return filed does not contain all necessary information or contains incorrect information, an income tax notice will be issued under Section 139(1).
If you receive a tax notice under Section 139(1), you must correct the error in your return within 15 days.
Notice u/s 143(2) – ScrutinyIf the tax officer is dissatisfied with the documents and information given by the taxpayer, an income tax notice is issued under Section 143(2). Taxpayers who get a notice under Section 142(2) have been chosen for detailed examination by the Income Tax department and will be required to submit additional information.
Notice u/s 156 – Demand NoticeThis sort of income tax notification is given by the Income Tax Department when the taxpayer owes any tax, interest, fine, or other sum. All demand tax notices will state the amount that is outstanding and owed by the taxpayer.
Notice Under Section 245If the officer has cause to think that tax was not paid in past years and wishes to offset the current year’s refund against that demand, he may issue a notice under Section 245. However, the demand and reimbursement may only be adjusted if the individual was given sufficient notice and an opportunity to be heard. The recipient has 30 days from the date of receipt to respond to the notice. If the individual does not answer within the required time frame, the assessing officer may interpret this as consent and continue with the assessment. As a result, it is best to respond to the notice as soon as possible.
Notice Under Section 148The officer may have reason to assume that you did not properly disclose your income and, as a result, paid fewer taxes. Or the individual may not have filed his return at all, even if you are required by law to do so. This is known as income evasion assessment. In these cases, the assessing officer has the authority to assess or evaluate the income based on the facts of the case. Before making such an assessment or reassessment, the assessing officer should deliver a notice to the assessee requesting that he provide his income tax return. The notification issued for this purpose is by Section 148.

Service Of Income Tax Notice

The Income Tax Act of 1961 established the law for serving a notice, summons, order, or any other communication on a person by delivering or transmitting a copy to the person in any mode authorized by the Act. The following are the numerous methods by which the Income Tax Notice is served:-

Recipient Of The Notice:

Income tax notices are sent to the individual, but if they are for a minor, they are sent to the guardian. An incorrect description of the assessee is normally correctable, but in cases where the assessee’s position is intertwined with his or her identity, the name mentioned on the front of the return may become important.

Service By Registered Mail: 

The income tax notice can be served by registered mail. Section 27 of the General Clauses Act of 1897 states that the service must be commenced by correctly addressing, pre-paying, and posting a letter containing the document via registered post. This delivery can be made to the address, an employee, an agent, or any other authorized individual.

Service By Affixture: 

If a defendant refuses to sign the acknowledgment or the officer is unable to locate the defendant, the office must affix a copy of the summons, notice, or requisition order to the outer door or any other visible part of the residence where the defendant resides or conducts business.

HUFs And Partnership Firms: 

If the officer discovers the total partition of any HUF, the assessing officer may record it and serve notifications on the person who was the HUF’s management. If the concerned individual is deceased, the notice will be served on all adults who were firm or other Association of Persons, and notices concerning the firm’s or the association’s revenue may be served on any personnel who were former partners or members of the association that is subject to taxation.

Closed Business: 

When a business is closed, the assessing officer must serve a notification on the person whose income is subject to assessment. In the case of a firm or an organization of people, a notification will be issued to any members who were a part of the firm throughout discontinuance. In the case of a corporation, the notice will be served on the chief executive officer or the Director.

What Documents Must Be Submitted In Response To An Income Tax Notice?

The Documents must differ depending on the type of Income Tax notice delivered to the taxpayer. The following are the basic documents required to respond to an income tax notice:

  • Copy of the Income Tax Notice
  • Proof of income, such as (Part B) of Form 16, salary receipts, and so on.
  • Form 16 TDS certifications (Part A)
  • If they are applicable, provide investment proof.

Checklist For Income Tax Notice

  1. After receiving an intimation notice under Section 143 (1) of the Income Tax Act of 1961, the taxpayer has 30 days from the day the notification is delivered to respond.
  2. If the taxpayer fails to react within the time frame specified, the Income Tax Returns will be completed with the appropriate revisions without giving taxpayers any chance.
  3. After receiving the warning, the taxpayer should double-check the name, address, and PAN number given in the notice.
  4. Similarly, the assessment year must be double-checked, as well as the e-filing acknowledgment number.
  5. Revised returns can only be filed if the taxpayer committed an error in the original ITR filing.
  6. The rectification return can only be filed if the taxpayer discovers a flaw or inaccuracy in the order sent by the Income Tax Department.
  7. The cause for the notification can be found on Page 2 of the notice that was given. It also indicates the discrepancy between the income stated in the filed returns and Form 16/16A/ 26AS.
  8. If the intimation notice requires the taxpayers to pay an additional tax amount, i.e. a demand notice, it must be handled as a demand notice under Section 156.
  9. When the taxpayer receives this notice of demand, he or she has 30 days to answer to prevent the!% of the interest per month from the 30 days expiry period, as well as a penalty imposed by the assessing officer.

The Reasons For Receiving Income Tax Notices

Failure To File A return: 

Those who have not filed their ITR are notified by the income tax authorities. If the return is filed after the due date but before the end of the Assessment Year, the income tax officer can charge a penalty of up to Rs. 5,000 for the delay from F.Y. 2017-18, and a penalty of Rs. 10,000 if the return is filed after the end of the Assessment Year.

Tax Rate Mismatch: 

The tax rate on Form 16 and Form 26 AS may differ from time to time. If the forms differ in any way, the department will evaluate Form 26 AS. The cause for the discrepancy in the figures could be that the employer failed to deposit the tax deducted from the salary or deposited in someone else’s account. Consult with the employer in both circumstances for a corrected return.

High-Value Transactions: 

The income tax department should be kept up to date on a variety of high-value transactions. This is done to verify that taxes are collected by the rules and regulations.

Investment In The Name Of A Spouse: 

Many people buy assets in the name of their family, children, or spouse to avoid paying taxes. The income tax agency will need to amend these.

Scrutiny Notice:

If the IT Department conducts a Scrutiny Assessment, a notice can be issued.

Dealing With Income Tax Notices

When the income tax department sends out notices about particular difficulties, individuals ignore them. If you’ve got a notice from the income tax department, follow these steps to deal with it:

Handle It With Care: 

If you receive a notice from the income tax department, do not disregard it. Ignorance will result in a penalty of Rs 10,000 or more, in addition to the payment of tax.

Proof: 

If you receive a notice through the mail, keep the envelope as proof for future use.

Check The DIN: 

If you receive a notice by e-mail or online, double-check the Document Identification Number (DIN).

Check The Reasons: 

If you have received an income tax notice, you should investigate the reasons for the notification. The reason for obtaining the warning could be an incorrectly filed return, TDS, an error in an E-TDS return online, or any other major issue.

Validity: 

The validity time of various sorts of notices varies. A notice of scrutiny evaluation, for example, must be served within 6 months. If it is served later, the application is deemed null and void.

Gather Documents: 

Begin gathering the documentation required by the income tax agency.

Letter Preparation: 

A letter should be attached to all of the documents and forwarded to the income tax department. And keep two copies of all documents as an acknowledgment.

Provide Timely Responses: 

All responses should be provided on time. You can even request that the time limit be extended.

Seek Expert Assistance: 

In critical circumstances, such as Scrutiny Assessment, always seek the counsel of an expert, such as a Chartered Accountant. This will allow you to file the notice on time and with greater accuracy. One should not be alarmed or ignore a notice from the IT department. In general, it imposes fines of up to Rs 10,000 for failing to respond to these notices.

Conclusion

The Income Tax Department’s income tax notices are quite essential. As soon as you receive one of these notices, read it carefully and respond to it. Any delay in responding to the notices can cost you a lot of money.

For any help on ITR Filing feel free to consult the tax experts at Finaxis. You can file ITR yourself via our ITR software or get CA’s help on filing an income tax return.