Income Tax Notice
An Income Tax Notice is a written/ formal communication from the Income Tax Department regarding any issue with your income tax return or tax payment. Sometimes, the Income Tax Department issues notice to a third party in respect of the tax issue of any other person. You might be curious to know the reason why Income Tax Department generally issues notices. Let’s answer your query…
Reasons for issuing income tax notice
There can be a number of reasons why the Income Tax Department can issue notice to any person. Some of the reasons are given below:
- Discrepancies in Tax Returns
Nowadays, income tax returns are furnished online through the Income Tax Portal. The income tax returns so filed are processed by the Central Processing Cell (CPC) of the Income Tax Department. If the CPC identifies any errors or discrepancies in the tax returns, it may issue a notice requesting you to provide additional information or make corrections to your return.
- Failure to file a tax return
Non-filing of an income tax return comes with penal consequences. If you are required to file income tax return but fail to do so, the Income Tax Department may issue a notice to you requesting you to file your ITR.
- Entering High-Value transactions
The Income Tax Department tracks the high-value transactions entered into by any person in the country based on his/her PAN. On the basis of such tracking and risk analysis, the Income Tax Department can issue you a notice requesting you to furnish ITR online or necessary details in respect of such transactions. Generally, the Income Tax Department issues notice under section 148 of the Income Tax Act in this regard.
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- Claim ineligible deductions or credits
The Income Tax Department allows claims for various eligible deductions under the Act on a self-declaration basis to income tax return filers. If any claim for deductions or tax credits is found to be ineligible on return processing, the Income Tax Department may issue a notice requiring you to either pay additional tax on the such ineligible claim or to furnish additional evidence in support of the claims.
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- Failure to pay taxes
In case you fail to pay tax timely, the Income Tax Department may issue a notice to you. Do you know that even you are liable to pay advance tax in case your estimated tax liability is more than Rs. 10,000 for the year? Such advance tax is paid on a quarterly basis. Failure to pay advance tax might result in an income tax notice requiring you to pay the advance tax.
- Underreporting or misreporting of income
If the income tax authorities are of belief that you have underreported/misreported your income, you may get a notice from the income tax authorities. Generally, notices are issued in this case under section 148 of the Act which bears a unique DIN (Document Identification Number). You can check the validity of the notice through the DIN appearing on the notice.
Sections under which income tax notices are issued
|
Section |
Purpose & Description |
|
139 |
This section deals with the filing of income tax returns. Section 139 specifies the requirements for the filing of income tax return and the consequences of failure to file a return. Under this section, income tax notices are issued generally when the return is defective and needs some corrective measures. |
|
143 |
This section deals with the assessment of income tax return filed. Section 143 prescribes the procedure to be followed by the income tax authorities where the return filed by the assessee is to be assessed by the department. |
|
148 |
Section 148 of the Income Tax Act deals with the reassessment of income tax returns. This section is generally applied by the income tax authorities when they intend to reopen an assessment earlier made. Notice u/s 148 is issued where the income tax officer has a reason to believe that income has been underreported or misreported in the original assessment. |
|
234 |
Section 234 of the Income Tax Act deals with the interest liability on the income tax. If the Income Tax Department assesses that the assessee has not paid or unpaid interest on tax at the specified rates, it may issue notice to the assessee requiring him/her to pay the shortfall interest. |
|
271 |
Penalties under the Income Tax Act are dealt with by the various subsections of section 271. Under this section, the Income Tax Authorities may invoke penal actions against the defaulting tax filers/ non-filers or tax-evaders. |
How to deal with Income Tax Notices:
If you have received an income tax notice, you must take the following steps to deal with it in a proper way:
- Firstly, read the notice carefully and understand the reasons for the issuance of the notice. Generally, the notices are issued point-wise by the income tax department.
- Collect the information/ documents sought by the notice so that a detailed reply could be made point-to-point against the such notice.
- Give a timely reply to the notice. Every notice contains a timeline in it. You should check the timeline and accordingly arrange the documents/ information. Try to give a reply point-to-point along with the documents sought. In case you are not able to arrange all the information and need further time, request the income tax authorities for adjourning the hearing for a few days.
- Keep copies of all replies made by you against the income tax notices. If replies are sent via speed post, keep speed post acknowledgment in safe custody. In case the replies are filed online, keep a print of acknowledgment of filing of reply on the Income Tax Portal.
What are the consequences of non-reply to the income tax notices timely?
In case you fail to make a timely reply to the income tax notices, the income tax authorities may impose penalties for non-compliance with the notice. In the case of assessment under section 143/148, non-reply to income tax notices may result in ex-parte assessment by the income tax authorities resulting in heavy demand and penalties.
Conclusion: It is very important to keep track of the income tax notices and make a timely reply to them. Ignoring an income tax notice can result in significant financial consequences and may also affect your financial reputation. For income tax notice reply services by professionals connect 09660930417
