Income Tax Notices : Types, Reasons, and How to Respond

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The income tax filing season is a busy time for taxpayers, but once it’s over, the possibility of receiving an income tax notice becomes a concern for many. These notices can be triggered for various reasons, from discrepancies in your tax returns to late filings. Here’s a comprehensive guide to help you understand the different types of income tax notices and what they mean.

What is an Income Tax Notice?

An income tax notice is an official communication sent by the Income Tax Department to a taxpayer. It serves as a formal mode of communication for various reasons, such as:

Filing or Not Filing Income Tax Return: Notices may be issued if you fail to file your returns.
Mismatch in Tax Declared/Tax Paid: If there’s a difference between the tax you’ve declared and what the department has on record, you might receive a notice.
Late Tax Payment: If your tax payment is delayed, a notice may be sent.
Discrepancies: Such as missed income declaration under a head like income from other sources.

Currently, income tax notices are typically sent as email attachments to the registered email ID on the e-filing website. You can also check under the “Pending Actions” menu on the official e-filing portal.

When Is an Income Tax Notice Issued?

There are several reasons why an Income Tax Notice may be issued, including:

Discrepancies: Any inconsistencies between details you declared in your ITR and what the department has on record can trigger a notice.
Filing Error: Errors in the tax return, such as using the wrong ITR form, can result in a notice.
Late Filing: Missing the filing deadline will result in a notice.
Excess/Short Payment of Tax: Notices can mention a refund amount or a tax demand.
Not Reporting High-Value Transactions: Failure to report high-value transactions, such as a cash deposit of over ₹2 lakh, will result in a notice.
Random Scrutiny: Your ITR might be picked for random scrutiny by the IT Department.

Types of Income Tax Notices in India

Here are the key types of income tax notices under the Income Tax Act, 1961:

Intimation Under Section 143(1):

This is a preliminary notice sent after your returns have been processed.
It could indicate that your tax calculation matches the department’s records (no action required), that you have paid excess tax (you’ll receive a refund), or that you have underpaid tax (you’ll need to pay the balance with penal interest).

Notice Under Section 143(2) and Section 143(3):

Issued as part of the scrutiny assessment process to ensure you haven’t understated income or paid lower tax.
No immediate action is required unless discrepancies are found during scrutiny, which might lead to a demand notice under Section 156.

Demand Notices Under Section 156:

A demand notice for payment of due tax.
It specifies the amount of tax owed and the payment deadline, often including penal interest.

Notice Under Section 142(1):

Issued to seek clarification or additional documentation after you’ve filed your returns.
May also be issued if you’ve filed belated returns.

Notice Under Section 139(9):

Known as a ‘defective return’ notice.
Issued when errors or omissions are found in your return. You have 15 days to respond and file a revised return.

Tax Notice Under Section 148:

Issued when the IT Department believes income has escaped assessment in a previously filed return.
You may be asked to furnish income details again for a specific financial year.

Summons Notice Under Section 131:

Summons you in-person by tax authorities.
Reasons include conducting inquiry, ensuring attendance for examination under oath, or demanding key documents.

Intimation Under Section 245:

Issued to seek confirmation that pending tax dues from a previous FY can be offset using the current year’s refund.
You have 30 days to respond; otherwise, the adjustment is made automatically.

What Should You Do When You Receive an Income Tax Notice?

While you can respond to an income tax notice on your own, it’s often advisable to seek expert help from a tax consultant or chartered accountant. This ensures that your response is appropriate and helps you take the correct course of action to resolve the issue.