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What should you do when you get an income tax notice

05 Jan 2023

The very thought of receiving an Income Tax notice is quite unnerving for most people. There are 2 things for you to remember. Firstly, an Income Tax notice does not mean that you have committed a wrong. It just means that there is some discrepancy that the IT officer is not convinced about and therefore seeks your explanation. Secondly, your timely response to the notice also matters. You can responds by email, online on the Income Tax website, by physical mail or even through personal appearance before the Assessing Officer.


The most important thing is for you to realize what to do when you get an income tax notice. Remember, there is absolutely nothing to panic but what is more important that you reply to income tax notice within the time stipulated in the notice. Also ensure that your response is backed by adequate documentation. Lastly, if you have already registered your PAN online with the IT website for filing e-returns then you must also know how to check income tax notice online. It is uploaded into your secure area and you can download the PDF notice from there. In fact, if the notice pertains to a very minor aspect, you can also respond to the notice online itself.


Understanding the types of Income Tax Notices and how to responds to them..

There are 6 types of Income notices that individual taxpayers generally receive from the tax authorities. Here is what these notices mean and here is how to respond to them..


Wrong ITR form or tax underpaid: you could get notice under Section 139(9)..

This is a very technical kind of notice and they pertain to some small mistakes that you may have made while filing the tax returns. These include wrong ITR form used, questions on refund claimed, taxes still outstanding, mismatch in PAN card details, mismatch in the TAN details of your employer, mismatch with Form 16 etc. Normally you get up to 15 days to respond to the query and you can meet your Assessing Officer and close it out. However, in case you do not respond your return may be declared invalid and could also invite penalty and interest on delayed payment of tax. You can also respond online to the notice.


Notice for adjustment of refund against outstanding: notice under Section 245..

The IT department can open previous income tax files too and if the officer finds that your previous tax dues are not fully paid then the notice under Section 245 is issued for adjustment of these taxes outstanding against current or past refunds that are due to you. You can log in to the site and mention whether the demand is correct or incorrect and state the appropriate reasons. If required you can also meet the Assessing Officer (AO) and explain. Normally, such notices are minor in nature and if the AO is satisfied then they will just close the notice and process your refunds.


Mismatch between AO’s computation and your returns: Notice under Section 143(1)..

This notice is issued to you if there is a mismatch between the tax payable as per your returns and as per the records of the AO. Normally, such notices are issued online and the IT department has to issue these notices before completion of the relevant assessment year. Thus for AY2017-18, the notice has to be issued before March 31st 2018. This could pertain to tax underpaid, excess refund claimed etc. Any tax due will have to be paid within a period of 30 days. Ensure that this notice is immediately responded to as it could result in your return being held up or the refund being adjusted against the dues.


Discrepancies in Form 16 or Form 26AS: Notice under Section 143 (1A)..

This is a slight variant of the previous point and refers to situations when there is a clear difference between your Form 16 and your returns or the Form 26AS for TDS and your returns. Quite often, this could be a technical issue. For example, your tax saving investments may not have been recorded by your employer in your Form 16. Alternatively, the TDS deducted may not have been deposited. In such cases, first respond to the notice online within a period of 30 days and mention the reasons. In case of delay in deposit of tax by your employer, take it up with your employer immediately.


Some income has escaped assessment: Notice under Section 148..

This is a slightly more serious notice and the tax department also monitors the audit trail of such notices very closely. Section 148 notice is issued when the AO feels that some income has escaped assessment. The AO could have either traced this through their online mapping intelligence or through your purchases tracked through your PAN card which may not be proportional to your known sources of income. Notices for escaped income above Rs.1 lakh can even be sent after 6 years, so you need to be careful. You will have to meet the AO and file the assessment for the relevant year as directed. There will also be an interest cost and penalty imposed on you.


Delay in filing returns; Notice under Section 234(F)..

Normally all tax returns have to be filed before July 31st of the Assessment year for the Financial Year completed on March 31st. If you do not file returns by July 31st then there is a penalty. In the past such penalty was at the discretion of the AO but from this year the penalty will be compulsory. For delayed filing of returns you will pay a fine of Rs.5,000 if you file by December 31st and a fine of Rs.10,000 if you file after that.


There is nothing to panic if you get an Income Tax Notice. Respond clearly and honestly and don’t skip dates when the AO summons you. That is the key!

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