“The income tax created more criminals than any other single act of government.”–Barry Goldwater. I know how it feels when we receive a notice through inbox or through post. But all income tax notices are not a finger on you. Many time IT department send you communication using the various income Tax Sections. Let’s see what kind of income tax notice intimation are common and your course of action.
With the change in technology, IT department issue lot of communication, which resembles notices or a call, but are meant for information purpose. Such information is called “intimations”. But some are real notices or “call for action”.
One must know the broad meaning of such notices and how he has to progress. Lets us check some of these communications with their sections and subsections.
Most common income tax notice intimation – that assesses receive:
Notice under Section 139 (9)
You’ll get notice under this section normally after you or your CA has filled Income Tax Returns. This intimation simply says you have filled a defective ITR. And these defects could be:
- If you’ve chosen wrong ITR form
- ITR not filled properly or left a mandatory field empty.
- Claim a refund on IT, but not disclosed your proper income.
- If name displayed on PAN card is different from name filled in return, then also you’ll get notice under this section.
What next– You have to respond in next 15 days of receiving the notice. Log in to the e-filing portal of the website of the department. Choose the e-file option and fill the form of answer to notice 139(9). In case you are not able to do it or find help, send the written clarification to the nearest Income Tax Officer. In case you want more time, a request by submitting a written request and get acknowledgment.
Notice under Section 143(1)
This is an information rather than notice. This is to inform you that your return has been checked by the department. Now your return can be ok, or you have deposited more tax than required or you have not included some earning. In that case, you need to pay more tax. So this intimation informs if your return is matching with the department’s estimate or it’s exceeding or less.
What next– No issues and nothing to be done if the return filled meets estimates. If you filed more tax, you’ll get it back in your account. But if you paid less, then you’ll have to accept the department’s calculation by going on the Income Tax Website. You need to pay due to tax within 30 days of issuing the notice.
Section 143 (1) (a)
Notice will be issued under this section if-
If there is a difference in income or deductions between Form 16 & returns filled. This is the reason you need be very serious when you declare tax deductions before the starting of the financial year and then at the end of the financial year. Any deviation of more than 10% is not good.
The reasons can be difference in tax rebate claim under 80C, Sec 24, Sec 80CCD, Sec 80E, Sec 80DD, Sec 80 DDB, Sec 80TTA or Sec 10 Exemptions.
What Next– You have to respond within 30 days. Just see what they are asking for. If you agree, accept it provide the information. You can upload related documents on e-filing portal or submit at nearest IT office.
Section 143(2)
This is the serious trouble or what we call “scrutiny”.
Notice under this section means that the Income Tax Department has started investigating your income. This action takes place after the initial assessment of income tax returns filed by you.
This means the Assessing Officer is not satisfied or has not received documents related to your income tax treatment. He has chosen your return for a detailed review.
You’ll get 2 types of notice in this. In the first place, documents or facts are confirmed on one of two points. In the second notice, there is a notice to get more information about the IT discrepancies.
If the taxpayer fails to provide the details asked for in the notice, an assessment without involving the taxpayers can be made by the department.
What next- Keep documents ready & arrange them. In case you require more time, a written request is mandatory. Do not forget the hearing/appearing date. On finding of flaws, fine of Rs 10 thousand can be imposed. Under section 276 D there can be a punishment of up to 1 year, in severe cases of willful concealment of income.
My Own Case:
Even though I belonged to personal finance industry, I had very less knowledge on the functioning of Income Tax Department. In 2009 my wife received an amount of 6 lakhs from her mother, and like a prudent investor, I invested this in Liquid Funds. I forgot to mention this in returns for my wife. This was my fault No.1.
We received a notice in 2014 under Sec 143(2). I was not in Jaipur and so did not pay much head for 3-4 months. I thought what malice would IT department have against a “housewife”. They have bigger fishes to fry. This was Mistake no. 2.
My father took notice of my negligence and in my absence, he escorted my wife to Income Tax office. It is just like a Sarkari office and Income Tax Officer blasted about our negligence to appear before. My wife had never faced such tormented moments. Then IT officer turned to my father and said “Bauji, ye to bachey hain, aap to samajhtey ho. Ghar baar bik jayega is matter ko nibtatey” (Sir, kids are immature but you are experienced. You will have to sell everything to pay back to the department to resolve this case).
Then you know, I had to do what we should have done 6 months ago. I got the thrashing for my procrastination and we immediately hired a CA. It took few thousands in penalty, few lakhs as “other expenses”, Rs 15000 as CAs fees and 1.5 years of agony to get the things cleared.
Hope you will not make the rookie mistake I committed.
Section 148
You’ll receive this notice if any kind of income is not shown while filing income tax return. If the Tax Department believes that some income was not shown in ITR he can issue notice under Sec 148.
There is a time limit to the notices. If the income is 1 lakh or less than that, then you can receive notice within 4 years (of assessment year). If it’s more than 1 lakh then can receive notice within 6 years.
So normally these notices are for the previous financial years hence also called as reassessment notices.
What next– First assessee is told to file returns (if not filled). Then you can ask for the reason for the notice. This involves challenging the reason mentioned in the notice with documents. The assessing officer has to provide reason and time frame to submit responses. Finally, after the response, the Officer passes a written order of whether he is satisfied or assessee is guilty or he needs more documents. It may few rounds before a favorable verdict.
Section 234(F)
This is a new section included in Income Tax law. In this financial year, until July 31, there can be a penalty for not filing the return. In the assessment year 2018-19, after 31st July to 31st December, the penalty will be Rs 5000. After 31st December, it will be Rs 10000.
Although, those who have earned less than 5 lakhs, their maximum penalty is Rs 1000.
Section 245
You may receive this prior to refund getting credited. If you have a previous due or tax payable, the income tax department will adjust it from current years refund. But they cannot do so on their own so they issue a notice under section 245. In case they are right, you cannot do anything. The due amount will be balanced with refund amount and left over (if any) will be paid. But in case you have paid earlier, update that on the website so that they are notified.
I am not a Chartered Accountant so I would request you to read it from knowledge point and not a legal point. Feel free to take help for CAs as they are experts.
Hope this article and my personal story will equip you to face Tax Authorities with more authority. Share you brush ups with income tax notice intimation below.
