What to do when you receive a notice from the Income Tax Department?
There have been growing instances where people are receiving different notices from the Income Tax Department by means of post or e-mail.
This article aims to highlight different situations in which income tax notices can be served upon an assessee and how to respond to these notices.
1. Notice for Scrutiny Assessments u/s 143(2) read with section 142(1)
Usually, these notices are served if an assessee undertakes a high value transaction or shows an item in the return of income that is unusual in respect of return of the previous year.
These notices are generally made on the basis of a Computer-aided scrutiny selection system where notices are issued and served if the assessee matches the criteria defined for issuing a notice of assessment.
The assessee should immediately consult his CA/Tax consultant when he receives such a notice in order to draft a proper reply to it.
2. Notice for Non-Filing of Income Tax Return
This type of notice is generally served when a person fails to file the income tax return for a particular year(s) and when he has filed the same for preceding years.
This notice is also given to people who enter into high value transactions but fail to file the return.
Also, many salaried individuals do not file returns under the belief that since the entire tax is deducted from their salary they do not have to file the return. This leads to service of a notice from the Income Tax Department.
What to do if you receive a notice for non-filing of Income Tax Return
(i). If you have received the notice manually i.e. by post or by hand, then you have to draft a suitable reply to the income tax authority issuing the notice, mentioning in detail the exact reasons why you did not file your income tax return
(ii). If you have been filing returns previously but have not filed it for the current year due to income being below the taxable limit, then you should clearly mention in the reply stating that since income was below the taxable limit there was no need to file the return of income.
(iii). If you have received such a notice for non-filing of return where the entire tax id deducted at source and there is no tax payable then you have two alternatives:
- If the time for filing the return has not passed, then you can file the return and attach the copy of the acknowledgment along with a suitable reply to the notice stating that the entire tax was deducted at source and there was no tax payable and therefore no tax evasion.
- If the time for filing the return is already over, then you have to prepare a computation of income showing that there was no tax payable and attach along with a suitable reply stating therein that the entire tax was deducted at source and there was no tax payable and hence there was no tax evasion.
(iv). If you have received notice of non-filing by mail i.e. a compliance notice then you should do the following:
- Login to your account on the Income Tax Department website.
- Go to the compliance section and select whether the return is filed or not.
- If the return is filed, then simply click the option that says ‘the return is filed’.
- If the return is not filed then click the option that says ‘return is not filed’. When you click on this option, there will be 4 options appearing from which you have to choose the most appropriate option applicable to you. These are as follows:
a) Return under preparation
b) Business has been closed
c) No taxable income
After selecting the most appropriate option, go to the ‘Related Information Summary’ tab where some information may be listed in respect of which you may have received this compliance filing notice. Here in the ‘Information Relates To’ tab, it asks whether such information belongs to the person who has received this compliance notice or to any other person. You can choose the appropriate option depending on the person to whom this information relates.
Most of the time, the information will relate only to the person who has received the compliance notice. The information relates to some other person only when there is a transaction, the income relating to which is clubbed in the income of the assesse or the return of some other person is filed with the PAN of the assessee as is done in the case of a legal heir.
Below are some measures that you can take to avoid receiving such notice:
- I suggest that you always file the income tax return even if your income is below the taxable limit for a particular year, especially if you have been filing the income tax return previously. Discontinuation in filing the return often leads to service of notice for non-filing of return.
- Also, often people enter into high value transactions but do not file a return for the same. One example is when a person sells or buys a property above Rs. 30 lac, information is given to the Income Tax Department in the form of AIR and if the assessee has not filed a return, a notice is given to the assessee for asking him to file such return.
- ·Similarly such notice can be given if the person enters into any transaction listed in the Annual Information Return (AIR).
Some common transactions to be taken care of are:
a) Cash deposit of 10 lakhs or more during the FY in savings account with any Bank.
b) Payment made against bills of credit card of 2 lakhs or more during the year
c) Purchase of Mutual funds worth Rs. 2 lakhs or more during the year.
d) Purchase or sale by any person of immoveable property valued at thirty lakh rupees or more.
Therefore, if any person enters into any of these transactions then he/she must ensure that the return is filed in respect of income/losses from such transactions otherwise receipt of notice is inevitable.
- Also, people often do not file return of income when the entire tax on their salary income is deducted at source. This often leads to service of notice for non-filing of return. It is mandatory to file the return if the total income exceeds the maximum amount not chargeable to tax whether or not the entire tax has been deducted at source unless any specific exemption is given for not filing the return. The return of income is filed to intimate the Income Tax Department that there is no tax payable for the year.
3. Notice for non-disclosure of income
If you have not shown any income in the ITR such as bank interest, income from shares or mutual funds then you will get a notice from the Income Tax Department for it
This generally takes place when income in respect of which, tax is deducted at source or information is given to the Income Tax Department in AIR.
Therefore you should always match the return of income with Form 26AS which relates to tax credits and ensure that all incomes shown as per Form 26AS.
If the incomes are not shown as per Form 26AS, then you have to file a revised return for the same if the time for filing the revised return is not over yet. Time limit for filing the revised return is one year from the end of the relevant assessment year to which the original return relates.
If the time limit for filing the revised return has already expired then you can file a revised computation along with a suitable reply to the notice. Taxes, if any, that remain to be paid due to the revised computation should be paid along with applicable interest and a copy of the challan should also be attached with the reply.
4. Notice for Belated Filing of Return
If you have not filed the IT Return by the due date, then you may receive a notice asking you to file the same. The Income Tax Department selects a date up to which it analyses who has filed the return and who has not done so and sends a notice to the non-filers.
If you have also received such a notice then you do not have to panic. Simply prepare a return of income and file it as soon as possible.
If it is not feasible to file the return soon, then a simple reply stating thatthe return is under preparation and would be filed soon before the due date will suffice.
5. Notice for Tax Credit Mismatch in the ITR
This intimation is generally served by the Income Tax Department when there is a mismatch in the TDS claimed in the ITR & TDS actually reflected in Form 26AS.
You need to identify the exact reason for the mismatch in TDS and file a rectification/ revised return accordingly. You may need to get the TDS corrected in Form 26AS first before filing for any rectification/revision.
6. Notice u/s 245 for adjustment of refund with any demand due
When you claim a refund in the ITR, the Income Tax Department has the authority to adjust this refund against any demand pending for earlier assessment years.
Before adjusting the refund, Income Tax Department gives an intimation of the amount of refund & demands determined and provides a period of 30 days to reply to the said intimation failing which the refund will be adjusted with pending demands.
Whenever you receive such a notice, the first thing to do is to examine the demands for the earlier years.
Once the reasons for the demands are identified, you need to take steps to rectify such demands by filing rectifications/revisions/payment of demand etc.
Once the above steps are taken, send a suitable reply to the Income Tax Department stating that you have taken steps for corrections of the demands and that the demands are incorrect and so the refund amount should not be adjusted against such incorrect demands. Make sure to reply within 30 days of the receipt of the notice.
7. Notice u/s 139(9) for Filing Defective Return
This notice is generally received when there is a mistake or a defect in the return filed. The assessee has 15 days to reply to such notice. If the assessee does not reply within 15 days the return will be deemed as not filed.
Whenever you receive such a notice, first identify the issue. Once you know the problem/mistake then correct such mistake and file a response to the notice under section 139(9). You can do this by generating the xml file again and after logging into your account on the Income Tax Department website, uploading it in the e-file tab under the heading e-file in response to notice u/s 139(9).
Here the filer has to select the assessment year and the form number.
Following documents/information is also to be provided when filing the response on the e-filing website:
- Acknowledgment number of the original return
- Communication reference number of notice u/s 139(9)
- Communication date as given in the notice
- Date of receipt of notice by the taxpayer
- Verification PIN/Password as written in the notice
If the time period of 15 days has already lapsed and you have not filed the response then you can file the return again which will be deemed as original return and if the time of original return has expired then it will be deemed as the return is not filed in time.
8. Notice for Non-Payment of Self Assessment Tax:
From AY 2014-15 onwards, return with tax payable is not allowed and will be deemed as a defective return. Therefore do not file a return with tax payable. However, if you still file such a return, you will receive a notice for defective return.
When you receive such a notice then immediately pay the tax payable and file the return again in response to notice under section 139(9).
Click here: Do Minors have to pay Income Tax
Important Tip: Pay your due taxes even if you cannot file returns of previous financial years.
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