Analysis of provisions of Income Tax Notices issued

Analysis of provisions of Income Tax Notices Issued

Even if you have filed your income tax returns before the due date, you may be surprised to get an intimation/notice from the Income tax department. You’d have no idea what it was or how to respond to it. Don’t worry; we’ll break it down for you so you can fully comprehend your notices.

First and foremost, you must be aware of the distinction between an intimation and a notice. Between the two, there is a razor-thin distinction. Intimation is to highlight the output of processing of your income tax return or conclusion of assessment of Assesee, & you may not be needed to act upon it (In spite of that there are a some exceptions to that).

When you receive a notice, though, you should take immediate action. The CBDT has announced the release of a new programme called as the Centralized Communication Scheme (CCS). According the plan, all communication will be done electronically over period.

Let’s have a look at the various notices and notifications issued by the income tax department.

Intimation U/s 143(1) of income Tax Act

After submission of ITR’s which is online processed by the Income tax Central Processing Centre. Income is computed after making the below adjustments to Total income in the income Tax Return:

• Disallowance of incorrectly claimed expenditure or loss;
• An incorrect claim (provided the incorrect claim is apparent from information filed by Assesee);
• All the Arithmetical error in the income tax return;
• Any income which has not been included in the income tax return.

After successful processing of the income tax return an intimation u/s 143(1) is issued by the Central Processing Centre under any of the 3 situations:

• A refund has been determined;
• There is tax liability to be paid;
• There is no demand or refund, but there is reduction in the amount of loss or an increase in the income.

If a tax demand is made, the intimation must be sent out within one year of the end of the fiscal year in which the return was filed.

• Intimation with no refund or no demand – It is usually happens after income tax return, if the dept has accepted the income tax return as filed without carrying out any adjustments to it.
• Intimation determining demand – issued in case of adjustments made U/s 143 (1) due to a discrepancy found & tax liability is arrived at.
• Intimation determining refund – issued where any interest or tax is found to be refundable either where no discrepancy is found in the income tax return already filed or after making adjustments as referred to in u/s 143(1) & after giving credit to the taxes & interest paid by the taxpayer.

Intimation Under Section 143(2) of income Tax Act

The purpose of this notice is to inform the assessee that his or her return has been selected for examination. It’s important to note that the section under which it’ll be examined isn’t the same as the one under which the notice was issued. Via detailed scrutiny, the assessing officer intends to be assured that you have not done any of the following:

• Paid lesser taxes or
• Claimed excessive loss; or
• Understated income;

The taxpayer is required to respond to the questionnaire and to provide the documents required by the income tax department via this notice. This notification must be served by the assessing officer within 6 months of the end of the assessment year to which it pertains.

Are you unsure what to do with an income tax notice like this? Allow us to assist you by using our Notice Upload Facility. You could also hire a tax professional to advise you.

Notice U/s 148 of Income tax Act

AO may have a reason to believe that you have not disclosed your income correctly & therefore, you have paid lesser  taxes. Alternatively, even if you were required by law to file your return, you may not have done so. Income evasion is the word for this situation. The assessing officer has the authority to assess or reassess your income in these cases, depending on the circumstances. Before making such an assessment or reassessment, the assessing officer shall send a notice to the assessee requesting that he provide his income return. Section 148 allows for the issuing of a notice for this reason.

According to Amendment in Finance Act 2021, w.e.f 1-04-2021, the timeline up to which the AO can re-open assessment of taxpayer is as below :

• Up to 3 Yrs from the end of the relevant AY  in normal cases &
• Beyond 3 Yrs but not more than 10 Yrs from the end of the relevant AY, if the AO has sufficient material evidence that income of INR 50,00,000/0 or more for a FY has escaped assessment.

Upto 4 years from the end of the relevant AY

• Any officer below the rank of Assistant Commissioner or Deputy Commissioner is not authorised to issue a notice. On the Joint Commissioner’s order, an AO can only issue a notice under Section 148 after recording the grounds for doing so. For the 2017-18 fiscal year, notices under section 148 can be issued until March 31, 2022.

Beyond 4 years but upto 6 years from the end of the relevant AY

• Only the Chief Commissioner or the Commissioner can issue a notice if he or she is satisfied that income has eluded assessment. The amount of income that has gone untaxed should be more than INR 1 lakhs. For the 2017-18 fiscal year, a notification under section 148 can be issued until March 31, 2024.

Beyond four years, but up to sixteen years from the relevant AY has ended

• If income from any asset (including financial interest in any entity) located outside India is taxable in India but has eluded assessment, a notice under section 148 might be issued. For the 2017-18 fiscal year, notices under section 148 can be given until March 31, 2034.

Effect of Amendment in the Finance Act, 2021

According current applicable law,  Notice U/s 148 can be issued up to 4 Yrs, up to 6 YRs or up to Sixteen Yrs, as the case may be. But from 1st April 2021, New Re-assessment applicable due dates will be applicable.

Time Limit for Last FY after Amendment in Finance Act 2021 enforced:

* So AO cannot issue notice for the Assessment year 2015-16 in normal cases. Also, for the FY 2016-17 Notice shall be issued before 31st-03-2021.

Section 245 Notice of Income tax Act

• A notice under Section 245 can be issued if the AO has cause to think that tax has not been paid for past years and he wants to offset the current year refund against that demand. However, you will only be able to amend your claim &  receive a refund if you have been given adequate notice and an opportunity to be heard.
• The deadline for responding to the notice is 30 days from the date it was received. If you do not answer within the specified time frame, the assessing officer may assume that you have given your consent and proceed with the assessment. As a result, it is advisable to respond to the notice as quickly as possible.

Notice U/S 142(1) of Income tax Act

A notice Under section 142(1) can be issued in the  below 2 situations:

• If you have not filed your return, but the assessing officer wants you to file it, or
• If you have filed your return, but the assessing officer requires additional information and documents;

Information is called for by AO, to enable the officer to make a true and fair assessment. which is being non-responsive to this notice u/s 142(1) has consequences,

• Prosecution which may extend up to one year
• A penalty of INR 10k can be levied for each such failure
• Both may apply as above

For query or help, contact: singh@carajput.com or call at 9555555480

No Extension of Date For Filing of Returns Due By 30th September

The CBDT has issued a press release stating that there will be no extension of the due date for filing Tax Audit and Income Tax Returns  Please plan your work accordingly.

Exact Text is given below:-

• No Extension of Date for Filing of Returns due by 30th September for Certain Categories of Assessees Including Companies, and Firms and, Individuals
• Engaged in Proprietary Business/Profession whose Accounts are required to be Audited; Taxpayers are Advised to file their Returns Well in Time to Avoid Last Minute Rush
• Income-tax returns for certain categories of assessees viz companies, firms, and individuals engaged in proprietary business/profession, etc
• Whose accounts are required to be audited, are to be filed by 30th September. The audit report is also required to be filed by the said date.
• Government has received representations from various stakeholders seeking an extension of the date for filing of returns and tax audit reports beyond 30th September.
• The reasons cited are delay in notifying the returns and related delay in availability of forms on the e-filing website.
• Matter has been considered. Income-Tax Returns Forms 3,4,5,6 and 7 which are used by the above-mentioned categories of assessees were notified.
• The forms were e-enabled and were available on the e-filing website of the Department from 7th August  giving enough time for compliance.
• Above said changes made to these forms are not extensive as compared to the earlier years. Further taxpayers entering into either international transactions or specified domestic transactions are required to file their returns by 30th November only.
• After consideration of all facts, it has been decided that the last date for filing of returns due by 30th September will not be extended. Taxpayers are advised to file their returns well in time to avoid last minute rush.