Usually tax notices are sent in relation to issues in the income tax returns filed by the assesse. Notices can also be sent for initiating scrutiny or for opening of assessment of past years.
Taxpayers with limited tax knowledge will panic, but instead of panicking the right course of action should be taken to understand the reason for the notice accordingly.
In this article we will discuss about different Income Tax notices that may be issued by the Income Tax Department.
Notice u/s 143(1) – Intimation (Scheme of Processing of Returns)
100% Returns shall be processed under section 143(1). This intimation is usually received via email from centralized processing centre (CPC), Bangalore.
Intimation under section 143(1) is intimation cum notice for ITR processed by the income tax department to the taxpayer. It intimates arithmetical mistakes or changes to be done in Income Tax Return.
A notice from Income Tax Department may make anyone worry but if you have received an intimation under section 143(1), you don't need to worry as it is just an intimation and not any scrutiny or order by the Income Tax Department. Intimation shall be sent in the following three cases:
- Any tax or interest payable, or
- If you’ve refunds from Income Tax Department
Where any Adjustments referred to in Section 143(1) have been made resulting in increase or decrease in loss declared by the assessee and no tax or interest is payable or refundable to the assessee.
Intimation under section 143(1) is a system-generated intimation by the computer (CPC) based on any mathematical error or any incorrect tax claim.
No revision of return can be made against the intimation u/s 143(1). It can be rectified under section 154.
An appeal can be filed to Commissioner of Income Tax (Appeals) against the intimation under section 143(1).
Notice u/s 139(9) – Defective Income Tax Return
Defective Return of Income is the type of return for which a person receives a notice u/s 139(9) if the Income Tax Department has found any information not filed properly in ITR. Once return has been filed, Income Tax Department verifies and compares the details provided by you with the information available to them.
If Income Tax Return is found to be defective then department may give opportunity to rectify the defect and the person has to rectify the defect within 15 Days, otherwise ITR will be treated as void-ab-initio.
Unsigned ITR is not defective but it is void and therefore cannot be submitted.
Notice u/s 142(1) – Inquiry Before Assessment
Section 142(1)(i) notice will be issued where assessee has not furnished the return of income within the time prescribed u/s 139(1). In that case the Assessing officer may issue a notice requiring him to furnish the return of income within the time specified in the notice.
The Notice under section 142(1)(i) can be issued even after the end of the relevant assessment year.
Section 142(1)(ii) For the purpose of making assessment, this notice can be issued by the Assessing officer to furnish accounts, documents, various other information and also a statement of assets and liabilities, whether added in the accounts or not.
The above notice is generally issued when information is missing from the taxpayer’s end and an inquiry is sought to be made. A Reasonable chance of being heard should be given to the taxpayer.
Notice u/s 143(2) – Scrutiny Assessment Notice
For making assessment under Section 143(3) the assessing officer is required to serve a notice under Section 143(2). Notice should to be served within 6 months from the end of the financial year in which return is furnished.
This applies to a case where the return has either been filed by the assessee himself or in response to the notice under section 142(1). This notice is served by the Assessing Officer in order to ensure that the assessee has not understated the income, computed excessive loss or underpaid the tax in any manner. It may require him to:
a) Represent before the Assessing Officer (AO) to clarify facts; or
b) Make written submissions to Assessing officer for providing details; or
c) Produce relevant evidence to substantiate the income/profits/gains/losses.
- Notice u/s 156 – Demand Notice
When any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under the Income Tax Act, then Assessing officer (AO) issue a notice of demand specifying the amount so payable.
This notice of demand is generally accompanied by an intimation notice under section 143(1) or along with the assessment order that is issued by the Assessing officer on completion of the scrutiny proceedings. Demand notice u/s 156 is issued in respect of every assessment order for addition to income.
Upon receiving the demand notice, the amount stated is to be paid within 30 days by the assessee. In some cases, after the approval of the Joint Commissioner of Income Tax, you may have less than 30 days to respond.
In case you fail to respond to the notice received u/s 156, then you will either have to pay Interest u/s 220 and Penalty u/s 221.
Notice u/s 148 – Service of Notice where Income has Escaped Assessment
Where the assessing officer (AO) has reasons to believe that you have not disclosed your income correctly in your return and thus, you have paid lower taxes or where you have not filed your income tax return at all in a case where you should have ideally filed it as per Income Tax law, it is termed as income escaping assessment. Under such circumstances the assessing officer is entitled to assess or reassess your income, as the case maybe. Before making an assessment or reassessment u/s 147, the Assessing officer (AO) shall serve a notice under section 148 to furnish the return of income within the time specified in the notice.
Assessing Officer (AO) must record his reasons for doing so before issuing the notice u/s 148.
Notice u/s 245 – Intimation to set off Demand and Refunds
Section 245 Tax notice is the notice by the Income Tax Department to the assessee, where tax demand has not been paid for the previous years, and he wants to set off the current year refund against that demand. Thus as per section 245, the Assessing officer can adjust refund against the tax demand, outstanding from the taxpayer.
In simpler words, Intimation under section 245 is received when:
- Tax demand is pending; and
- The taxpayer may have claimed a refund from Income Tax Department in some other Assessment Year.
However, the adjustment of demand and refund under Section 245 can be done only after a proper notice and a reasonable opportunity for being heard given to the assessee.
The time limit to respond to the notice is within 30 days from the day of receiving of the notice. In case you do not respond within the aforesaid time limit, the assessing officer (AO) can consider the non-response as consent and proceed with the adjustment. Therefore, it is advisable to respond to the notice at the earliest.