Income Tax notice - Check how to deal with it in India
Income Tax notice - Check how to deal with it in India

Income Tax notice – Check how to deal with it in India

Updated: Jan 29, 2020

In 2019, the Income tax department issued notices of scrutiny to 58,322 cases under phase-I for the assessment year 2018-19. If you also get such a notice, then don’t panic and keep calm because mostly these notices are for verification, reassessment or to clear any discrepancy in the ITR filing.

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You may also read – Income tax slab for Assessment Year 2020-21.

Let’s discuss various types of notices and how to deal if you receive any notice from the income tax department.

When you can receive a notice from IT department

#1. Discrepancies in return filed

You may get a notice if the income tax department finds any discrepancy in the information submitted by you in the income tax return. Discrepancies can be because of the reasons below.

  • You forgot to declare some income like interest earned on fixed deposits.
  • You didn’t provide complete information.
  • You have claimed a deduction under the wrong section.

You can also read – How to file ITR online in India.

#2. Documentation review

The income tax department wants you to review certain documents or ask you to furnish some documents. In such a case, produce said documents immediately.

#3. TDS mismatch error

This one of the most common errors found in ITRs that is a mismatch in the TDS amounts. It may happen because of any error or delay in TDS filing at your employer’s end.

#4. Investments in the name of spouse 

Income tax sends you a notice if they find that you didn’t inform about the investments in the name of your spouse. You may have purchased some assets in the name of your spouse with the expectation to evade taxes. Assets may be land, fixed deposits, mutual funds or stocks.

Make sure you are declaring such income at the time of ITR return.

#5. Random Scrutiny

These are random notices that the IT department issue to produce you additional documents, rectify any error or anything pending at your side.

Nature of Income tax notices

I am going to list the most common notices that you can receive from the income tax department.

Under section 139(9)

You will get a notice Under section 139(9) if the income tax department has found any defect in your income tax return.

Under section 142(1)

You will get a notice Under section 142(1) if the income tax department wants you to produce additional information, documents to support your information in ITR, or income tax notice for not filing return, in case you haven’t done that.

Under section 143(1)

You will get a notice Under section 143(1) as an intimation of verification of your ITR against arithmetical mistakes, internal inconsistencies, tax calculations, and tax payment verification.

You can get notice against 3 categories-

  1. No demand No Refund means no tax is due and no refund is payable to the assessee.
  2. Demand determined if any tax is found payable after making adjustments on the basis of your return.
  3. Refund determined if any refund is found payable to the assessee on the basis of your return after making the adjustments.

Under section 143(2)

Notice of scrutiny. You will get a notice Under section 143(2) if you have understated income in the ITR, or you are over-claiming losses in your ITR as per department’s calculations or department feels that you are trying to evade tax. Scrutiny assessment is done under section 143(3).

You will get to know how to deal with such notices in the later section of this article.

Under section 148

You will get a notice Under section 148 if you haven’t disclosed a certain income in your ITR filing. Do go through your ITR and check if you have missed any income information there.

Under section 245

You will get a notice Under section 245 if you have any adjustments of pending tax dues or against the refund.

Also read – Easy ways to check income tax refund status online.

What should you do if you receive an income tax notice

Let’s discuss what important steps you should follow when you get an income tax notice.

#1. Keep Calm

The very first step when you receive notice is NOT TO PANIC (but don’t ignore the notice), just keep calm and go through the notice to take measurable action.

#2. Check the basic details

Read the notice thoroughly and check the details on the notice like your name, PAN number, assessment year, issuing officer, any reference number.

This practice is to ensure that the notice you received is in your name not meant for someone else who shares a similar name or DOB as yours.

#3. Check any discrepancy

You may get two columns of details in your notice –

  1. Column with title ‘As Provided by Taxpayer in Return of Income’
  2. Column with title ‘As Computed Under Section 143(1)’

Match every row in both columns. If you find a difference in the column amounts in any row, that’s the discrepancy you need to rectify. You can recheck your statements and documents to rectify that error.

#4. Prepare documents

Collect all the documents you have asked to produce by the department. Make two sets of all the documents and their cover letters. You can get a receipt acknowledgment on one set as a proof of submission of documents.

#5. Preserve the notice

Keep the notice along with the envelope until it is filed by the department. You may get a notice through email as well but try to keep documents intact, to avoid any last hour panic.

#5. Reply within the timeframe

Don’t be lazy in replying to IT notice because any delay may end up paying a hefty penalty as much as 300% of the dues and in some extreme cases jail up to 7 years.

You must reply to the notice even if you are not able to collect the required documents and request for some extra time to prepare for your side. This establish your honesty and obedience to the laws.

#5. Seek professional help

This is the final resort. If you think the discrepancy or information in the notice is beyond your understanding, then you should immediately consult your CA or any tax expert to get help in drafting a reply as well as preparing the right documents for your revert.

Conclusion

Always be calm and sincere in replying to the income tax notice. But best of all is always double-check your ITR at the time of filing to ensure the correctness to avoid such notices. Most of the notices are just for verification or removal of discrepancies in calculations, so don’t try to hide anything from department and follow legitimate ways to get tax deductions.

Also read –  Complete guide on Income tax deductions under section 80.

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