Common income tax notices

and what actions to take upon receiving them:

Under Section 143(1)-Customary notice
In case you have received a notice from the income tax department under section 143(1), then no need to stress out. This one is just a customary notice cum intimation given to income tax assess as a part of the department’s routine exercises. In most cases, this is just an intimation stating that the income tax return has been successfully processed. This intimation can be sent by the tax department till the expiry of one year from the end of financial year in which the return is filed.

What to do: Usually there’s no compulsion to respond to such notices, unless they state the presence of some mismatch or mathematical errors in income declared while filing return, incorrect PAN details or some other error. If there’s any tax due on your part, it needs to be paid within 30 days. Moreover, if any rectification against the intimation needs to be filled, then it should be filled immediately to avoid further complications or penalties, if any.

Under Section 156: Demand Notice
Income tax notice under section 156 is issued against any outstanding dues such as penalty, tax, interest, fine etc, usually post assessment of income tax return. The notice issued by the Assessing Officer specifies the amount due and instructs tax payer to clear the dues on time to avoid penalty. An interest rate of 1% per month (under section 220) will be charged till the time the total amount due is not paid. Your AO can also impose a penalty equalling the outstanding dues (under section 221).

What to do: Upon receiving such demand notice from the tax department, you must deposit outstanding dues within 30 days of receiving the notice. Note that in special cases, the assesse may have less than 30 days to respond, subject to approval of joint commissioner of income tax.

Under Section 142(1) and 143(2)-Inspection notices
Whenever the tax department requires any form of verification, clarity or reassessment, it may serve you notice under section 142(1) and 143(2). The notice under section 142(1) can be issued by the tax department after the related assessment year has ended.

The other inspection notice, under section 143(2) of the Income tax act is a follow up notice for the one sent under section 142(1), when the assessing officer (AO) isn’t satisfied with the response or upon failure to present the required documents. In case you have not filed tax return before the relevant assessment year ends, the AO may serve a notice, directing you to furnish return of income.

Income tax department can send such notices before the expiry of six months from the end of financial year in which the return is filled.
What to do: Upon receiving notice under section 142(1), you need to respond within the stipulated time mentioned in the notice. For the follow up notice {Section 143(2)}, you may have to appear before the AO either personally or through a representative on the date specified in the notice. However, in case of e-proceedings, you need to file proper response within the allowed time.

Under Section 148-Show cause notice
Notice under section 148 is sent when tax department is of the view that the tax payer concealed part of income to escape tax, thereby resulting in shortfall in tax deposit. The tax department can send this notice within four years from the end of assessment year, in case the income escaped amounts up to Rs. 1 lakh, and within six years if income escaped is above Rs.1 lakh or if income related to any asset located outside India but chargeable to tax, is concealed

What to do: Furnish the return within 30 days or within the time specified in the notice. The Assessing officer (AO) is bound to supply the reasons for issuing such notice, if the assesse asks for the same. Otherwise, the AO cannot go ahead with proceedings for the assessment.

Under Section 245: Refund adjusted against the tax demand
This intimation cum notice under section 245 is issued when the assesse had a tax demand pending with the tax department and that amount has been claimed as a refund in another assessment year. The assessing officer would therefore adjust the refund (fully or partially) against any tax demand outstanding from the tax assesse. There isn’t any time limit to serve/issue such notice to the assesse.

What to do: The tax payer has to respond to such notice/intimation within 30 days of receiving it. The adjustment is done automatically if the assesse fails to respond within the stipulated time. more