Notices

Notice Under Section 133(6) 

The Income Tax Department has enacted the E-Verification Scheme 2021 which involves calling for information from those taxpayers where material difference is observed between the ITR field and data available in form AIS. The reason for such notice can be as follows

• ITR was not filed in spite of having income exceeding the basic exemption limit as per AIS.
• Taxable Income in the form of Salary, Interest Income, and Capital gain exists in the Annual Information Statement (AIS). However, values are not entered correctly in the ITR Form.
• Significant higher expenditure in the form of Purchase of immovable property, Foreign travel, and Purchase of Mutual funds/stocks in comparison to the Income declared in the ITR.

Steps To Respond To Notice u/s 133(6)

• Analyse the reason for receiving such notice and identify if there was any actual misstatement from taxpayer side or error from department.
• Login to the income tax portal >> Pending Action >> Compliance Portal >> E Verification.
• Provide detailed response along with necessary attachment in the questionnaire provided.
• If the misstatement is from the taxpayer and additional liability is required to be paid, then such taxpayer can file the Updated return u/s 139(8A) along with the necessary penalty voluntarily and provide a response accordingly.
• However, if the error is from the department side you can provide the response in the insights portal along with supporting documents.

Notice Under Section 142(1)

A notice under section 142(1) can be issued under two circumstances:

• If you have filed your return, but the assessing officer requires additional information and documents; or
• If you have not filed your return but the assessing officer wants you to file it.
• The information is called for to enable the officer to make a fair assessment. Being non-responsive to this notice has consequences,
• A penalty of Rs 10,000 can be levied for each such failure.
• Prosecution, which may extend up to 1 year.
• Both of the above.

Intimation Under Section 143(1)

After having filed your returns, it is electronically processed by the Central Processing Centre (CPC). The income is computed after making the following adjustments to the total income in return :

• Any arithmetical error in the return.
• An incorrect claim (provided the incorrect claim is apparent from the information filed).
• Disallowance of incorrectly claimed loss or expenditure.
• Any income which has not been included in the return.
• Upon successful processing of the return, an intimation under section 143(1) is issued by the CPC under any of the three instances:
• There is a tax liability to be paid.
• A refund has been determined
• There is no refund or demand, but there is an increase or reduction in the amount of loss.

In case there is a tax demand, then the intimation must be issued within nine months from the end of the year in which the return has been filed. For example, if you have filed your returns for Assessment Year (AY) 2024-25 on 27 July 2024, then an intimation can be issued anytime on or before 31st Dec 2025. Processing of returns under this section has been made mandatory from AY 2017-18.

How To Analyse The Above (Section 143(1)) Notice?

• The notice provides a comparative analysis of the date provided in the ITR and Computed u/s 143(1).
• Identify which line item is causing such additional liability.
• It can be a mismatch in Income, Deduction or Prepaid taxes.
• If such demand is due to an error, then Rectification return u/s 154 can be filed within a period 4 years from the end of such assessment year.
• If demand is accurate, then it can be paid off using the link provided.

Notice Under Section 143(2) 

The purpose of this notice is to notify the assessee that the return filed has been picked for scrutiny. It is pertinent to note that the section under which it will be scrutinized is different from the one in which the notice has been issued. Via detailed scrutiny, the assessing officer intends to be assured that you have not done any of the following:

• Understated your income.
• Claimed excessive loss.
• Paid lesser taxes.
• Through this notice, the taxpayer is required to respond to the questionnaire issued along with the documents required by the income tax department. The assessing officer is supposed to service this notice within 3 months after the completion of the assessment year to which it pertains.

Through this notice, the taxpayer is required to respond to the questionnaire issued along with the documents required by the income tax department. The assessing officer is supposed to service this notice within 3 months after the completion of the assessment year to which it pertains.

How To Respond To Notice u/s 143(2) 

• Carefully go through the notice and identify the reason why such notice has been issued, which will be provided in the Annexure.
• Prepare a response under a cover letter, providing a detailed explanation in a legitimate manner and answering truthfully to all the questions provided in detail.
• Log in to your Income tax portal under e-proceeding, provide the response to such notice with the cover letter and also attach the necessary documents as requested.

Notice Under Section 148

• An assessing officer may have a reason to believe that you have not disclosed your income correctly and, therefore, you have paid lower taxes. Alternatively, you may not have filed your return at all, even if you must have filed it as per law. This is termed an income-escaping assessment. Under these circumstances, the assessing officer is entitled to assess or reassess your income according to the case. Prior to making such an assessment or reassessment, the assessing officer should serve a notice to the assessee asking him to furnish his return of income. The notice issued for this purpose is issued under the provisions of Section 148.

The Effect Of Amendment In Finance Act, 2021

As per the current provisions, the notice under section 148 can be issued for up to four years, up to six years or up to 16 years, as the case may be. But with effect from 1st April 2021, the new reassessment due dates shall be applicable. 

• Let us understand the timelines for previous financial years after the amendment in the Finance Act 2021 came in force:

*Hence the assessing officer cannot issue notice for the AY 2015-16 in normal cases. Also, for the financial year 2016-17, the notice shall be issued before 31st March 2021.

Notice Under Section 245

• If the assessing officer has reason to believe that tax has not been paid for the previous years and he wants to set off the current year's refund against that demand, a notice under Section 245 can be issued. However, the adjustment of demand and refund could be done only if you have been provided proper notice and an opportunity to be heard. The timeline to respond to the notice is 30 days from the day of receipt of the notice. If you do not respond within the aforesaid timeline, the assessing officer can consider this as consent and proceed with the assessment. Therefore, it is advisable to respond to the notice at the earliest.

What Should Be Done After Receiving An Income Tax Notice?

When you get a notice under any of the aforementioned sections, you should take the following steps:

• Carefully read the notice to determine why it was sent.
• Examine the notice's basic details to determine that it is intended for you. To ensure that the notice is sent to you, it should include your correct name, PAN number, address, and so on. Check the assessment year given in the notice as well.
• Determine the mismatch in your income tax return that resulted in a notice being served, if any.
• To avoid penalties and prosecutions, respond to the notice within the time frame specified.
• Ensure that your response is backed by adequate information.
• Also, make sure to check that the notice you received is reflected in your income tax account online.

What Are The Most Common Causes Of Notice? 

The most common causes for which you might receive an income tax notice include the following:

• Inconsistency in the amount of TDS reported.
• An inaccuracy on your tax return.
• Failure to submit all required papers.
• Failure to file your tax returns.
• When you make investments in your spouse's name but fail to report them on your income tax returns.
• If high-value transactions occurred during the fiscal year but were not correctly disclosed on the income tax return.
• If the assessing officer randomly examines your income tax return.
• When long-term capital gains from stock investments are not properly disclosed.
• If the taxpayer fails to declare any income.
• If the incorrect income tax return form is used to file the income tax return.