Article

Income Tax Notices- How to Deal with Them
July 29 , 2013

With Income Tax payment and assessment increasingly going online, the number of notices sent to taxpayers is set to rise. Getting a notice from the Tax department gives nightmares to people but knowing reasons why you could get one will go some way in containing the shock.

But getting an I-T notice does not have to be worrisome because notices are sent for various reasons ranging from normal assessment of documents to suspicion of concealing income. This article will throw light different types of tax notices and what you are expected to do in each case.

I-T Section

Time frame

Possible reasons

143 (1)

Up to 1 year after completion of relevant assessment year

Calculation error or processing of assessment

143 (2)

Up to 6 months after completion of relevant assessment year

Return picked up for scrutiny assessment

142 (1)

No time bar

Not filed tax returns or to call for documents in support of filed returns

148

4 years if income escaped is Rs 1 lakh or less else 6 years

Income has escaped assessment

156

-

Demanding tax, interest, penalty or fine

Income tax notice u/s 142 (1)

This notice is sent when income tax return has not been filed. You may be asked to produce documents in support of returns being filed, simply for the sake of inquiry. Read the notice to know what is being asked.

Responding to 142 (1) notice

File your returns within time specified in the notice. If any tax money is due you are expected to clear it.

Income tax notice u/s 143 (1)

Getting a notice under section 143 (1) could mean there is some calculation error. 2 types of notices can be sent under section 143 (1) - i) intimation where the notice is to be simply considered as final assessment of your returns since the assessing officer has found the return filed by you to be matching with his computation under section 143 (1) or ii) notice of demand where the officer's computation shows shortfall in your tax payment. The notice will ask you to pay up the tax due within time specified. Processing under section 143 (1) could also make you eligible for a refund in which case you will be sent a cheque.

Responding to 143 (1) notice

If 143 (1) is just an intimation, all you are expected to do is to take printout and keep it. If it is a refund notice u/s 143 (1) then rejoice! you can look forward to the cheque.

If it is a demand notice under section 143 (1) then some action is required. If you believe your tax dues are clear the situation could be one of the following:

i) Employer has not deposited TDS amount in govt account or has not filed TDS return or TDS return not correctly filed

ii) Employer's TAN has been incorrectly quoted in Form 16

These issues can be verified through Form 26AS. It is the tax department's statement showing income tax deposited on your behalf and can viewed on TRACES website. Make the practice of verifying it before filing returns. If there are mismatches in Form 26AS with respect to Form 16 then it has to be taken up with the accounts department of your company and errors got rectified.

If there are no mismatches and no tax dues then you need to submit application for rectification under section 154 to your Income Tax Officer (ITO). Details of ITO will be on the notice. All you need to do is personally see the ITO and submit a written application for rectifying your assessment. Support it with your TDS statements, Form 26AS, intimation u/s 143 (1) and notice of demand. In a plain paper you can also submit an application for Stay of Recovery Proceedings for requesting them to hold further proceedings till rectification is made.

Income tax notice u/s 143 (2)

If you get notice under section 143(2) it means your return has been selected for detailed scrutiny by your Assessing Officer. The notice might ask you to produce documents in support of deductions, exemptions, allowances, reliefs other claim of loss you have made and provide proof of all sources of income. This is different from notice for inquiry before assessment u/s 142 (1). This usually happens if the AO believes that income has been understated or certain claims of deduction, exemption are not applicable to you.

Responding to 143 (2) notice

Check if the notice is valid; if it is sent after 6 months from the end of the year in which you filed returns, the notice is invalid. You do not have to respond to it. In this case, a notice can be sent u/s 148 for income return that has not been assessed.

If valid, present yourself in person before the AO and furnish all relevant documents such as big expenses, bank statements, other income details. Submit these in a file along with the notice. Make copies of these for your own reference. Get acknowledgement on a letter in which you have made list of documents enclosed. This serves as proof that you submitted documents on time in response to the notice. Get a CA's help if things are too complicated.

Income tax notice u/s 148

If the Assessing Officer believes some income might have escaped assessment he can issue a notice under section 148 asking you to file returns for the relevant assessment year. Alternately he might ask to file returns for the purpose of reassessment. In case income that has escaped assessment is Rs 1 lakh or less notice u/s can be sent within 4 years of the end of the relevant assessment year. In case income escaped is more than Rs 1 lakh then such notice can be sent within 6 years.

Responding to 148 notice

File returns for the relevant assessment year within time mentioned in the notice and submit documents as may be required. In case it is a reassessment, you might want to take help of a tax expert.

Income tax notice u/s 156

This is also called a demand notice. Here the AO finds you owe tax money, interest, penalty or fine based on an I-T Law requirement. Notice under 143 (1) is also a type of demand notice.

Responding to 156 notice

If you think the demand is valid pay it up within 30 days and reply to the Assessing Officer. If not you need to file for rectification under section 154.

To sum up

As long as you have not been messing up on information purposely, an income tax notice does not have to frighten. Before anything else, check whether the PAN quoted is yours indeed. To clarify an incorrect perception, the I-T guys are not out there to harass anyone, especially innocent taxpayers who might have failed to comply with some of the Law's demands. So be sure to make copies of the notice, and respond it within the time frame mentioned to avoid inconveniences and penalties.

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