Different types and reasons for important Tax notices

Different types and reasons for important notices

 

1. Section 142(1) Notice – Pre-evaluation investigation:

Section 142(1) Notice is generally intended to be used to invite taxpayers to provide the documents and details.

• • This notice is essentially sent after the notice required by section 142(1) has already been sent.
  • It means that AO was unsatisfied with the documents that were produced, or that AO did not receive any documents.
  • If assessors fail to follow the provisions of this section

1. 1. 1. This might lead in a Best Judgment Assessment u/s 144, or
      2. It may result in a penalty of Rs10,000 for each failure under Sec 271(1)(b).
      3. Prosecution under Section 276D, which can last up to a year with or without a fine.

2. Scrutiny Notice under Section 143(2) 

• • Notification is sent after the notice required by section 142(1) has already been sent. It indicates that AO was unsatisfied with the generated documents or that AO did not receive any documents.
  • Up to 6 months after finishing the relevant assessment year, this notification may be sent.
  • The AO may decrease the income under the returned income and may assess the loss above the returned loss as per Section 143v of the Scrutiny Assessment.
  • The notice could request that you produce deduction, exemption, allowance documents, other loss claim claims that you have claimed, and provide evidence of all income sources.
  • After a detailed inquiry, Article 143(2) allows the assessing officer to perform a regular evaluation.
  • If assesse does not comply with the provisions of this section:
  • It may result in Best Judgment Assessment u/s 144,
  • Penalized under Section 271(1)(b) for each failure, i.e. Rs10,000.
  • Prosecution under Section 276D for up to one year, with or without a fine.

3. Letter of Intimation – Notice under Section 143(1)

Section 143(1) allows for three different forms of notices to be sent as follows:

• • Intimation in which the notice is simply to be regarded as the final assessment of your returns because the AO has found your return to be consistent with his computation under Section 143. (1).
  • A notice of refund where there is excessive payment by the assessee by the officer’s computation.
  • Demand Notice if the officer’s calculations finds that your tax payment is insufficient. You will be given 30 days to pay the tax due on the notice.
  • The deadline for notification of the relevant assessment year is up to 1 year after completion.

4. Section 148 notice – Evaluation of income escape

• • If the AO has reasonable grounds to believe that any income subject to tax has escaped assessment, he may assess or reassess such income.
  • The AO must generally have a reason to start proceedings accordance to Sec 147.
  • AO carries the responsibility of stating the reasons.

5. Notice under Section 156 – Demand Notice

• • If, in connection with any orders passed, any tax, interest, penalty, fine or other sum is paid, the Assessee will receive a notice of demand stating the amount payable.
  • The tax so requested is payable, usually within 30 days of the notice of request service, which, with prior approval by JCIT, may be reduced by the AO.
  • The assessee is held liable to pay a simple interest u/s 220(2) @ 1 percent per month or part thereof at the end of the period allowable u/s 156, in the event of a later payment of tax, additional punishment u/s 221(1) may be imposed.

6. Defective Return Notice (Section 139(9)).

• • What is the definition of a Defective Return? – A return is considered defective if it is not accompanied by the required documents under the Act, such as annexures, statements, tax proofs, reports, and so on.
  • If the AO believes the assessee’s return is incorrect, he may notify him of the error and give him 15 days to correct it, or such longer period as the AO may allow.
  • If the defect is not corrected within the prescribed period, the return will be considered invalid, and the assessee will be deemed to have failed to file a return.

7. Notice under Section 245 – Refunds are set off against taxes that are still owed

• • The AO may modify the amount to be reimbursed with the sum payable by the assessee if any amount of refund is pending to the assessee and also any sum is payable under the Act. Primarily, it has to do with the ‘inter-adjustment of transactions.’
  • The Section 245 notice is more of an intimation letter than a demand notice.
  • The AO informs the assessee of the effect of the changes made to the amount payable to him in this notice.
  • It shows the adjusted amount, which can be an intimation or a demand notice for a lower amount still owing after the adjustment.

• Documents required in the event of a defective Notice?

The IT returns need to be fully revisited in most corrective actions against a defective notice. As a result, in order to generate a correction IT Return, the tax preparation will need all of the papers used in the initial IT Return preparation.

To ensure that the response to the defective notification is approved, the revision / correction must be thoroughly scrutinized.

• How do you respond to a 139(9) Defective Notice?

To respond to the defective notification provided under Section 139(9), follow the steps below :

1. 1. Go to the ITD e-Filing Portal and log in.
   2. Select ‘Response to Notice u/s 139(9)’ from the e-File menu.
   3. Fill in the blank spaces with details such as ITR, AY, e-Filing Acknowledgement Number, CPC Reference Number, Notice Date, Status, and Response. Select ‘Submit’ from the drop-down list.
   4. The taxpayers are shown all of the ITR flaws that have been found. In the ‘Do you agree with the defect?’ column, select YES or NO.
   5. If you selected ‘YES,’ upload the revised XML and submit it using the ‘Submit’ button.
   6. If you select ‘NO,’ fill in the Assessee Remarks section with your response and submit.

• After receiving an income tax notification, what should you do?

The measures below should be performed if you receive a notice under any of the above mentioned sections.

• • Read the notice carefully to understand why it was sent.
  • To make sure the notice is implied for you, check the fundamental details on the notice. Your name, PAN card number, mobile number, email identifier, etc. should be provided in the notice to ensure it is forwarded to you.
  • Find out if there was a mistake in your tax return that resulted in a notification being sent.
  • Any notice to avoid penalties and prosecutions within the prescribed period.
  • Take the assistance of the professional.

Frequently Asked Question on Income Tax Notices

Q.: What should I do if I receive an Income tax notification?

If you receive a notification from the Income Tax Department, you must understand why it was sent. For a variety of reasons, notices may be sent.

For example, notices may be delivered in response to the Income Tax Department’s requests for information and documents.

In this situation, you must submit all of the necessary information. If the ITR contains a mistake, notices may be sent to correct the problem.

To avoid potential penalties, you should correct any errors in your return and respond to the notice within the time frame specified by the income tax department.

Q.: What are the most commonly mentioned causes?

The following are the most common reasons that you might receive a tax notice:

• Amount of TDS reported is incorrect.
• An error in your tax return.
• Lack of all documents submitted.
• Your tax returns will not be submitted.
• If you invest and don’t mention it in your income tax returns in the name of your spouse,
• If high value transactions were completed during the financial year and were not properly reported in the return on income tax.
• If the evaluating officer performs a random review of your revenue tax return.
• When equity investment profits are not correctly reported for long-term capital gains.
• If the taxpayer does not make any revenue known.
• If an incorrect form for returning income tax is used to file a return.
• If the tax liability can be offset for your refunds.
• If in previous financial years you have evaded tax.

Q.: What should I do if I haven’t received TDS credit?

The department processes the return and gives intimation under section 143(1) once it is filed. Details of the income tax return provided by the Assessee and calculated by the income tax departments are included in the income tax bulletin.

It may be sometimes that the Assessee takes tax, deduction, etc. credit incorrectly or a tax credit may not be provided by the department.

An error that is apparent in the record may be corrected in accordance with Section 154 of the Revenue Tax Act. Some of the mistakes that can be corrected include:

1. Tax credit mismatch (TDS)
2. Advance tax mismatch
3. Chapter VI A deduction not permitted

Q.: If I receive the notification of income tax u/s 139(9) what should I do?

If the Assessing Officer considers the Assessee’s return to be defective, the Assessee may, by issuing a notice of income tax u/s 139(9) in the Income Tax Act, report the defect to the Assessee by giving us a chance of rectifying the defect within a period of 15 days. In certain cases where an income tax notice is issued pursuant to Article 139(9):

1. In cases in which Assessee is required to provide such data, the balance sheet and profit & loss statement shall not be submitted.
2. Return is filed prior to self-evaluation tax payment.
3. A refund has been claimed for tax deducted at source (TDS), but no income information is included in the return.
4. Tax details (TDS Other) are filled out, but no income information is provided in the return. To correct the error, in response to the income tax notice received within fifteen days of notification, a return on the income tax is required. If otherwise, the return is considered invalid.

Q.: What do I have to do if I have received a request for an Income Tax Intimation u/s 143(1)?

Intimation under Section 143(1), also known as Income-tax Notice 143(1), is the first stage in which all Income-tax returns are processed to correct arithmetic errors, internal inconsistencies (meaning bifurcation of a section such as Chapter VI A, etc.), tax calculation, and tax payment verification.

At this time, no income verification is performed. It is completed using computerised processing with no human intervention.

This is an intimation/income-tax notice for the processing of the assessee’s income-tax return. This income-tax notification is usually received as a pdf file via email from the Centralized Processing Centre (CPC) in Bengaluru.

Q.: What should I do if I receive an Income-tax notice stating that my Income-tax Refund has been reduced to account for an earlier year’s Tax Demand?

This Income-tax notice is delivered to the Assessee to advise them that the Income-tax authorities seek to modify the outstanding tax demands of an earlier year from the refund due.

The demand may be for an earlier Assessment Year, and when a refund is claimed, it is offset against the demand. The Income-tax Department cannot adjust the refund in response to demand on its own.

This notice is being sent to Assessee for this purpose. If you disagree with the adjustment, you may express your dissatisfaction via an online response from the Income-tax Department’s e-filing website.

The income-tax intimation under Section 245 will also include the time limit for responding, after which the adjustment will be considered final and no further action will be possible.

Q.: What should I do if I receive an Income-tax Intimation / Income-tax Notice pursuant to Section 143(1) (a)?

This income-tax notice is distinct from the income-tax notice issued under Section 143(1). this income-tax notice is being issued in order to elicit a response to the errors/incorrect claims/inconsistencies that are subject to adjustment under Section 143(1) (a).

When compared to Form 16, Form 16A, or Form 26AS, an income-tax notice u/s 143(1)(a) is an intimation from the Central Processing Centre (CPC) demanding clarification of the mismatch between the income and deduction.

If you agree with the mismatch, you’ll need to file an amended return. The online response must also be submitted using the e-filing website.

The income-tax intimation sent under section 143 (1)(a) will also specify the time limit for responding, which is usually 30 days from the date of the notice.

Q.: What is a section 142(1) income-tax notice?

The purpose of this income-tax notification is to obtain certain documents and information from taxpayers. The goal of an income-tax notice is to obtain information about the assessee before making a determination.

An income-tax notification can be issued in both circumstances where a return has been filed and when a return has not been filed and the deadline for filing has passed. The following notice is sent to the assessee:

• If an income tax return is not filed within the required time period, it must be filed.
• To produce specific accounts and documents such as a sales register, purchase register, voucher, receipts/proof of deductions taken, invoices for expenses incurred, and so on.
• To produce other details and documents as the Assessing Officer deems appropriate for the case.
• It is critical to provide the documents and information to the Assessing Officer within the time frame specified in the notice.
• It is critical to provide the documents and information to the Assessing Officer within the time frame specified in the notice.

Q.: What documents are required to respond to an Income Tax notice?

The documents required vary depending on the type of income-tax notice. However, the following documents are required to respond to any Income-tax notice:

• A copy of the income-tax notification
• Proof of income, such as Form-16 (part-b), salary receipts, and so on.
• TDS certificates, Form-16(part-a), and other documents
• Proofs of investment, if applicable

However, in some cases, the case should be reviewed only by tax experts. As a result, after you upload a copy of your income-tax notice, our Tax Experts will evaluate it and come up with a possible solution. You will be requested for the relevant documentation based on this.

Q.: What does the code EXC 001 on a tax return notice mean?

EXC -001 implies that you engaged in a transaction that was not permitted by the Income Tax Act. It applies to cash transactions totaling more than INR 10 lakh in a calendar month.

Is it possible for a salaried person to receive a notice from the Income Tax Department?

Yes, a salaried person will receive an income tax notice. The notice under Section 143(1) is an intimation that ITD sends to each taxpayer.

However, you may receive additional income tax notices if IT has reason to believe that you have concealed income or for any other reason.

Q.: How do I check the status of my tax notice?

If ITD issues a notice, it will be delivered by mail to your registered address.

You can verify notices you’ve received using the income tax site, but keep in mind that not all notices can be reviewed there; for all notices inquiries, go to the ITD and ask your question there.

Do I get an income tax notice if I make a current account transaction?

Yes, if there is a reason, the income tax department can issue notices for current account transactions as well.

Q.: What is the proposed adjustment communication u/s 143(1)(a) of the Income Tax Act of 1961?

The communication of proposed adjustment u/s 143(1)(a) of the Income Tax Act, 1961 refers to any information provided by the department indicating that they are proposing an adjustment to the refund claimed by you in your income tax return. Such an adjustment could apply to any outstanding demand from previous assessment years.

Q.: What can I do about the u/s 143(1) discrepancy I received?

The Income Tax Department issued a discrepancy in notice under section 143(1), and the discrepancy can be favorable or unfavorable.

If a demand is legitimate, it must be met. If the refund is INR 100 or more, IT will certainly pay you.

If any error is apparent from the record, you may file a rectification u/s 154 (1) correcting errors: Select the ‘Rectification’ option from the drop down list after clicking on ‘e-file.’

Q.: How long after I file my tax returns should I expect the Income Tax Department to conduct an audit or issue an assessment notice?

A notice of scrutiny assessment under section 143(2) can only be given for a period of six months after the end of the financial year in which the return was filed.

Q.: What happens if you don’t respond to a notice of tax evasion?

If you do not react to an income tax notice, you may face a variety of repercussions, depending on the type of notice you get. Fines of up to INR 10,000 can be imposed, as well as imprisonment for up to a year.

Q.: What is an income tax intimation letter?

After your return has been satisfactorily completed, the income tax department will send you an intimation letter / notice under section 143(1).

The information you provided at the time of the ITR filing is detailed and a corresponding column contains the details of the tax department.

Q.: How does you response to a notice?

A tax notice may be responded online. You can visit the income tax department’s website which is used to submit your returns electronically. Log into your online account and respond to the notice that has been sent to you.

Q.: What is the best way for me to pay my tax on demand?

On demand, you can pay online your tax. You can visit the income tax department’s e-filing web site and login to your account.

Then, under the e-File option, you can check the amount of outstanding tax demand under Response to Outstanding Tax Demand.

Then, in the Pay Tax column, select Click Here. You will be directed to the NSDL website, where you can complete an online form and pay the tax on demand.

Q.: What happens if I don’t respond within 30 days to the notice?

If you do not respond to the notice within 30 days, the income tax department will make the adjustment if there is an outstanding demand without providing you with another chance to respond.

Q.: How do I obtain a copy of my CPC income tax return?

ITRV (acknowledgement) is sent to your registered email address shortly after you file your ITR.

Otherwise, you can download it from your account on the official website of Income Tax India.

Q.: How do you go about correcting a tax demand that hasn’t been paid?

To respond to an outstanding tax demand online.

• Enter your PAN and password to access the Income Tax Dept  website.
• From the top banner, navigate to the e-file section.
• Proceed by selecting Outstanding Tax Demand.

Delhi ITAT held that the AO proceeded to initiate reassessment proceedings u/s. 147 of the Act and to issue notice u/s. 148 of the Act.

On the basis of borrowed satisfaction and without any application of mind and examination of the so called material and information received from the investigation wing to establish any nexus, even prima facie, with the such information. Pioneer Town Planners Pvt. Ltd vs. DCIT (ITAT Delhi)