Upon identifying discrepancies in an individual or entity’s Income Tax Return (ITR), the Income Tax (IT) department issues immediate notices to taxpayer, requiring prompt attention and compliance. Discrepancies may trigger notices under various sections of the Income Tax Act, and notice communication can be received through email or postal mail.
These notices cover scrutiny assessment, failure to file to ITR, late filing of Income Tax Return, defective ITR filing, non-disclosure of income, failure to file ITR with corresponding tax credits, or failure to pay self-assessment tax.
Various Income Tax Notice Categories
Let’s explore each notice category, detailing appropriate responses for each. Due to the diverse nature of income tax notices, responses to each type should be distinct.
1. Income tax Notice for Non-Filing of Income Tax Return (ITR)-
For a notice due to non-filing after high-value transactions or as a salaried individual with tax deductions, respondents must provide a comprehensive response. Articulate reasons for non-filing, especially if income was below the taxable limit. Individuals in high-value transactions must clarify reasons for not filing and rectify by filing the ITR if applicable.
A notice for non-filing by the due date requires a swift response by promptly filing the ITR, attaching the ITR-V, or indicating ‘Return under preparation.’
3. Non-Disclosure of Income Notice
Respondents should cross-reference their ITR with Form 26AS, file a revised return if necessary, and, if the deadline has passed, provide a fresh calculation of income and tax dues.
Upon receiving a notice for tax credit mismatch, cross-check and revise the ITR accordingly. Rectify any errors in Form 26AS.
5. Non-Payment of Self-Assessment Tax Notice
For cases where the ITR reflects tax due but remains unpaid, respondents must make the required tax payment and file a revised return.
6. Tax Evasion Notice
Notices related to possible tax evasion, such as understating taxable income, require careful consideration and accurate disclosure.
7. Notice of Demand
Responding promptly to notices under section 156 is crucial, ensuring compliance within the specified time frame for tax, interest, or penalties.
8. Notices Under Sections 142(1) and 143(2)
Acknowledging and responding to notices under sections 142(1) and 143(2) is essential, providing requested information in a timely manner to avoid fines and potential legal action.
9. Notice Under Section 245
Responding to notices under section 245, particularly in cases of setting off tax refunds with outstanding debts, requires prompt attention. If a tax refund is requested, but outstanding debts exist, Section 245 issues a notice. This notice informs you of tax refund and any prior outstanding demands. Failure to respond results in offsetting dues and refunds. Rectification or revision may be necessary to address issues in prior demands.
10. Notice Under Section 139(9)
Notices under section 139(9) necessitate a timely response, rectification request, or filing of a revised return. A response within 15 days is crucial; otherwise, the return is considered not filed. Timely rectification or revision is required to avoid this classification.
When responding to Income Tax Notices, stay calm. Seek guidance from a tax consultant, provide truthful responses with supporting evidence for a smoother resolution. Timely filing of the original ITR online facilitates the handling of income tax matters.
11. Notice of Demand (Section 156):
When an order mandates payment of tax, interest, or penalties, a notice of demand under section 156 is issued. The assessee must pay the specified sum within the notice’s given timeframe.
12. Notice Under Section 142(1):
This preliminary warning precedes the Income Tax Department’s scrutiny of your tax payment. The taxpayer is required to provide information on income, investments, taxes paid, assets, and liabilities. Even if seemingly irrelevant, failure to respond to Section 142(1) may result in fines or legal action.
13. Notice Under Section 143(2):
Issued following Section 142(1), this scrutiny notice arrives up to six months after the evaluation year’s end. A thorough examination is imminent, requiring submission of all relevant financial documentation promptly. Quick responses are vital to prevent fines and legal consequences; consulting a tax specialist is advisable.
14. Responding to Credit Card-Related Income Tax Notices
Scenarios Triggering Notices:
– Card used for a Rs.10 lakh+ purchase.
– Credit card bill payment exceeding Rs.1 lakh.
Responding to Credit Card Transaction-Related Notices
To avoid income tax notices related to credit card transactions:
1. Be cautious about expenditures.
2. Ensure accurate data in tax returns.
3. File returns promptly.
4. Provide details of high-value transactions during ITR filing.
Stay vigilant, promptly address Income Tax Department communication, and seek professional advice for complex tax matters and legal compliance.
Tracking High-Value Transactions by IT Department:
1. Banks, post offices, or companies report high-value transactions to the IT Department.
2. Form 61A, ‘Statement of Financial Transaction,’ notifies the IT Department.
3. Investigation Wing evaluates high-value transactions.
4. Form No. 26AS, revised from June 01, 2020, displays details of high-value transactions.
Handling Income Tax Notices:
When receiving a notice, avoid panic. Seek help from a tax consultant if unsure about responding. Provide truthful replies with supporting documents. If ITR revisions are needed, do them promptly. Filing the original ITR online facilitates smoother handling of notices.
Responding to Notices on the Income Tax Portal:-
Steps:
1. Visit the Income Tax e-Filing Portal.
2. Log in using PAN details.
3. Navigate to ‘e-File,’ check for notices.
4. Click “Provide” to view and respond.
5. Choose response options: demand is correct, disagree, partially correct, or agree for adjustment.
6. Submit and check for follow-up notifications periodically.
Advisory to Avoid Income Tax Notices
1. Be cautious with credit card spending.
2. Ensure accurate data in tax returns.
3. File returns promptly.
4. Keep credit card transactions below Rs.2 lakh (If not Filing ITR)
5. Match income details in the ITR with Form 26AS.
6. Disclose high-value transactions during ITR filing.
Addressing Income Tax Notices Online :- To respond efficiently on the Income Tax Portal:
1. Visit the e-Filing Portal.
2. Log in with PAN card details.
3. Navigate to ‘e-File,’ check notices, and click “Provide” to submit a response.
4. Choose from response options.
5. Submit the response and periodically check for follow-up notifications.
