Been Served a Notice by the Income Tax Department? Here’s How You Can Respond

An income tax notice in one’s name can make anyone anxious.

It must be noted that all tax notices are not meant to petrify you. Every notice has a reason for issuance: some income tax notices are issued merely to give intimation under Section 143(1) and some warrant information for inquiry under Section 142(1).

Instead of panicking, it is important to draft a proper reply and respond in time to the income tax department. It is pertinent to understand the type and nature of tax notice in order to be able send a fitting reply.

Following are some of the most important tax notices you should know about-

Notice of Demand: Notice under Section 156 

This is issued by the tax department stating that you need to either pay the penalty or fine or any other amount that is due.

What you should do: You must make the payment of the requisite amount within 30 days. In case you fail to make the payment then you will be liable to pay simple interest @1% for every month under section 156 of the Act.

Defective Income Tax Return: Notice under Section 139(9)

If you get a notice under this section, you need not worry because this implies that there is some defect in the return that you have filed. A tax notice is termed defective when it is not filed with all the necessary documents or information as required under the law.

For example, if you have not filed your return in the correct format or have left a mandatory field empty or have not attached a statement of your computation. Under this scenario, the assessing officer suggests ways to rectify the return.

What you should do: Reply to this notice within 15 days from the date of receiving. You can also file the response to this notice online.

For doing that, visit here and login with your user ID, password and date of birth or date of incorporation. Then go to the e-file and click on e-file in response to notice u/s 139(9).

You can also seek an extension by writing to your local assessing officer, if you fail to revise your income tax return within 15 days.   

Consequences of not filing a tax return within the specified period: In case the assessee fails to rectify the return within stipulated time then the return will be deemed as invalid. This implies that the tax department treats it as the assessee not having filed the return at all.

Income is concealed or likely to be concealed: Notice under Section 131(1A) 

In case the Assessing Officer is of the opinion that the assessee has not disclosed his or her income accurately or is hiding true income, then the AO may issue a notice under this section. A notice under this section implies that the AO is intending to initiate an inquiry or investigate the matter to determine the true income of the assessee.

What you should do: There is no specified time within which the assessee is bound to reply to the notice under this section. You must keep all your account books, statement of accounts in place. The assessing officer can impound the books or other documents by providing the reason for the same.

Preliminary inquiry before assessment: Notice under Section 142(1)

A notice is given under this section if the department wants to make preliminary investigation and needs to inquire about a certain case before starting an assessment. The authorities may call upon all documents and details from the taxpayers concerning the particular case under assessment. You may get this notice if you have not filed your return in due time. The entire purpose of notices under this section is to inquire about the details of the assessee before making any assessment under the Act.   

What you should do: The assessee must provide all documents and details asked for under this section. You must submit these documents even if you feel that they are irrelevant. You must comply with this notice. If you have got a notice under this section but have not filed your return then you are required to file the income tax return within the time given in the notice and a proof of the same should be submitted along with the documents. 

Follow up of the notice issued under Section 142(1): Notice under Section 143 (2)

This is a follow up to the notice issued under section 142(1). This implies that either the AO has not received your documents or is not satisfied with your response. Now your return can be subjected to detailed scrutiny. Through this notice, the assessing officer may insist upon additional documents in support of deductions, exemptions, reliefs, allowance etc.

What you should do: Again, compliance to this notice is mandatory and the assessee must submit all the relevant documents to the department at the earliest. If the assessee fails to comply with this notice then the assessing officer can take their own decision based on best judgment assessment (under Section 144). The assessee can be penalised or prosecuted which may extend up to one year with fine or without fine.

Letter of intimation: Notice under Section 143 (1) 

A notice under this section is intended at informing the assessee that if he/she has paid the accurate amount of tax, or less tax than is their liability or more than is the required sum. Typically a person can get three types of notices under this section-

1. Intimation letter- It only implies that post the final assessment done by the tax authorities, your return calculation matches with the assessing officer’s computation.
2. Refund letter- This is, in fact, good news and implies that the by the calculation done by the assessing officer, you are liable to get a refund.  
3. Demand letter- This implies that as per the calculation of the assessing officer there is a shortfall in the amount of tax you have paid and hence you are required to pay the balance amount to the department.

What you should do: In the first instance where you get an intimation letter you only have to keep the notice for documentation for further reference. If it is a refund notice, then you don’t have to do anything, the department will initiate a refund to you. If the notice is of demand, then this notice becomes a notice of demand under section 156 and the assessee is required to complete the payment to the department within 30 days of receipt of intimation.

Income escaping assessment: Notice under Section 148

You get this notice if the assessing officer believes that some of your income has escaped assessment. Notice under this section serves as an intimation to initiate proceedings under Section 147.

What you should do: At the very first instance, you should file your return of income. Post that you can ask for the copy of reasons recorded by the assessing officer for issuing a notice under section 148. After receiving the details if the assessee feels the need, he/she can file objections to the issuance of notice.  

These are some of the common notices that can be received by an assessee. In case you receive any of the following notices it is advisable to consult a professional. Getting a tax notice is common these days so instead of panicking, handle the notice with care to avoid further issues.

Consult LawRato for any assistance required in filing income tax return.  

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