Income tax notices sent by the Income Tax Department are real and need the required follow up, else we may find ourselves in an unavoidable sticky situation.
Income Tax Notice: With the dawn of the mobile era, we often receive messages saying we have won “xxx” amount of money, which most of us know are phony. Before this, we used to receive such notices in the post, asking us to respond to claim the prize, which were monetarily based or goods. While we can ignore these types of messages and notices, the notices sent by the Income Tax Department are real and need the required follow up, else we may find ourselves in an unavoidable sticky situation.
Responding to Various Tax Notices
Upon filing your income tax return, you may find yourself receiving any one of the following notices:
1. Notice u/s 139(9): If you receive a notice under this section, then you have most likely made a mistake in the filing of your taxes. You may have:
# Used the wrong ITR form
# Not paid the entire taxes due
# Wrong PAN or PAN mismatch
# Claimed deductions but not stated the income source
After receiving this notice, simply log onto the https://incometaxindiaefiling. gov.in/e-Filing/ , select “In response to notice u/s 139(9)”, and make the necessary changes and upload the correct information.
2. Notice u/s (148): You will receive this notice, if you have neglected to mention an income source or calculation. If the amount highlighted is more than Rs 1 lakh, then the notice can be sent anytime within a six-year time-frame and if it is less than Rs 1 lakh, then the notice can be sent anytime within four years from the end of the assessment year. So, if you are the recipient of this notice, you must ensure you file your return within the time limit specified by the assessing officer (AO)
3. Notice u/s 143(2): The notices under this section can be any of the following three, the last two of which are computer assisted:
1. Manual Scrutiny – After having been approved by the Income Tax Commissioner, the personally picked notice by the AO, will be sent.
2. Complete Scrutiny – When major inconsistencies are found, a thorough scrutiny of your return will be done.
3. Limited Purpose – When a few minor details are found to be inconsistent and need further clarification.
Upon receiving this notice, you will be called for a hearing to respond to the notice. Before appearing, collect all your return and other important documents and based on the clarification given by you at the hearing, one of the following will be the results:
1. If AO is satisfied with the information and clarification provided by you, he will pass the order u/s 143(3) without any addition.
2. If the AO feels that you have not reported all your income and he feels justified in making additions to your income, he will issue an order, whereby the additional income will get added and raise a tax demand u/s 156.
In case during the assessment proceedings you do not respond to the notices issued by the AO or without adequate reasons fail to submit the required document and information, then the AO may,
# Raise Penalty u/s 271(1)(b) – a penalty of Rs 10,000 maximum for each failure to respond
# Pass a Best Judgement Assessment Order, based on the information available with him
# May also impose a penalty of 50-200% of the amount of tax sought to be avoided as per the assessment order
# In rare cases, u/s 275D, you may face prosecution.
4. Penalty u/s 234(F): Pertinent to salaried individuals, who up until recently, were not diligent in filing their returns on time by July 31st of the assessment year. If the returns are not filed on time, then the individual can be fined a maximum penalty of Rs 5,000, depending on the decision of the AO. But starting with assessment year 2018-19, if filed after July 31st and before December 31st, then a minimum fine of Rs 5,000 will be levied. If it is filed after December 31st, then the individual will be fined a minimum of Rs 10,000. But, for individuals whose income is below Rs 5 lakh, they will face a penalty of Rs 1,000 maximum.
5. Notice u/s 143(1): This is simply an intimation in response to the tax return filed by you, which will do one of the following:
# The return filed by you matches the assessment of the AO and no further action is required
# You will be issued a refund, through the bank account stated in the return, as the amount of taxes paid is more.
# A demand notice, as you have paid less than the required amount of taxes and taxes are due by you, which will need to be paid within 30 days of receiving the demand.
6. Notice u/s 143(1A): If there is any mismatches, such as you have not included in your return all the income as reported in your 26AS, then these computer-assisted notices will be sent seeking necessary clarification. You will need to respond to this notice within 30 days by logging onto the income tax portal and uploading the proof needed to correct the mismatch.
While tax notices may not be as exciting as the fake winning prize notices, they are real and the prize that you will receive if unanswered or ignored will definitely not put a smile on your face.
(By Chetan Chandak, Head of Tax Research, H&R Block India)