Income tax department notice is an intimation from the Income Tax department to an individual taxpayer. These notices arise when an individual/assessee, also known as the taxpayer files their income tax return and which is checked by the Income Tax Department. If there is any mistake/discrepancy/error is noticed by the department, then the taxpayer is sent a warning in the form of a notice.
Reasons for issuance of notice
- When income tax returns are not filed for an assessment year.
- A mismatch in TDS figures between the income tax returns filed by the taxpayer and what is available on the form 26AS records of the income tax department.
- Any mistakes or errors in the income tax returns filed by the taxpayer.
- If there is any financial transaction which is known by the income tax department, but the same is not reflected in the records of the filed documents.
- Sometimes essential details and documents of an individual are missing, in such circumstances; notices are issued asking the individual to submit the same.
- To carry out the scrutiny process under section 143(1) of the Income-tax Act.
Income Tax Department Notices
It is crucial to understand the types of Income Tax notices in order to file your reply as one cannot entirely depend upon a Tax consultant. Given below is a list of notices submitted under the Income Tax Department.
- Notice under section 131(1A) of the Income Tax 1961
Section 131(1A) of the Income Tax 1961 states the provision relating to the Income that is concealed or likely to be concealed. The notice is sent by the Income Tax Department when the Assessing Officer believes that an individual is hiding his income or is likely to hide his income. The notice is an intimation that the Assessing Officer initiates an investigation/enquiry. After giving reasons, the Assessing Officer can impound the books of accounts or any other documents.
- Notice under section 139(9) of the Income Tax 1961
Section 139(9) of the Income Tax 1961, lays down the provision relating to the Defective Income Tax Return. In the case of the Defective Income Tax Return, the Assessing Officer sends a notice to an individual/taxpayer, if the Income-tax return filed by the taxpayer is defective. Instances of defect mentioned under Section 139(9) are incomplete return filed, wrong Income Tax Return filed, and information is missing in the Income Tax Return, etc. A period of 15 days is given to the assessee to reply to the notice. If no reply has been filed in the prescribed time, then the return will be rejected by the Assessing Officer.
- Notice under section 142(1) of the Income Tax 1961
The Assessing Officer issues a notice under section 142(1) if there is any delay in filing Income Tax Return. If the return is not filed on time, then an individual will get a notice of preliminary enquiry under section 142(1) of the Income Tax Act 1961. The Assessing Officer can also ask an individual to furnish the documents for the assessment purpose. There is a time limit for serving a notice mentioned under section 142(1). The notice must be served before the end of the relevant assessment year. However, there is no timeline if an individual does not file the return. To avoid such notices, one must file Income Tax Return before the deadline.
- Notice under section 143(1) of the Income Tax 1961
The Assessing Officer issues a notice under section 143(1) if the TDS claimed is not matching with Form 26AS(Accounting Standard). To avoid such type of notice, one must check the TDS reported under Form 26AS and then proceed to file Income Tax Return. Hence, the TDS claimed under Form 26AS should match with the Income Tax Return.
- Notice under section 143(2) of the Income Tax 1961
If an individual fails to provide the documents that have been asked by the Assessing Officer under section 142(1) or if the Assessing Officer is not satisfied with the reply under section 142(1) then a notice can be issued under section 143(2) of the Income-tax Act 1961. Such a notice is issued for detailed scrutiny of the income generated through the investments made in the name of the spouse. Failure to declare the investments that are made in the name of the spouse would be considered as tax evasion. Sometimes, the Income Tax Department also issues such notices to scrutinize the Income Tax Returns to enforce tax compliance randomly. If the taxpayer has done high-value transactions, the department can send a notification to seek information relating to the source of funds. A satisfactory reply must be filed by stating the valid reasons and mentioning the source of income.
- Notice under section 148 of the Income Tax Act 1961
Even after the assessment, if the Assessing Officer believes that some of the income of an individual/taxpayer has been escaped from assessment, then a notice can be issued under section 148 of the Income Tax Act 1961. The Income Tax Department has the power to reassess previously filed Income Tax Returns in case if the Assessing Officer has a reason to believe that there was a tax evasion in the earlier years.
- Notice under section 156 of the Income Tax Act 1961
The Income Tax notice is served under section 156, if there is any penalty, fine, tax, or any other amount that is due from an individual/taxpayer to the Income Tax department. It is usually served after the assessment of the Income Tax Return. There is no time limit for serving such a notice. The taxpayer must deposit the amount payable within 30 days from the date of such notice.
- Notice under section 245of the Income Tax Act 1961
The notice under section 245 is issued by the Assessing Officer when the tax refund for the assessment year is adjusted against the tax demand due from an individual/taxpayer. The year of tax demand and the assessment year of refund can be different. Hence, the notice is issued for setting off tax refunds against tax payable. The refunds are adjusted within 30 days from the date of the notice.
- Misreporting Long Term Capital Gains from Equity
The notice will be issued, if an individual/taxpayer has misreported the Long Term Capital Gains from Equity. To avoid such notices, one must ensure that he has mentioned correct information and has done the right computation of Long Term Capital Gains.
One should never ignore a notice from the Income Tax Department. The reply must be filed within a stipulated period. In the case of scrutiny, one must provide with all the relevant documents and information on time to the Income Tax Department to verify the same. The fines imposed on a person who does not reply to the Income Tax notices are very high. Hence, it is essential for a taxpayer to know the reasons behind getting an Income Tax Department notice and to file the reply of the same notice in a prescribed period. Furthermore, it is always advisable to consult a professional before framing a reply notice to reduce the chances of legal consequences in the future.