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What is Income Tax Notice and What Are Its Different Types?

Income Tax Notice is a communication that you might receive from the Income Tax Department after you have filed your income tax return form, due to a variety of reasons. While many might think that a tax notice is received because of some discrepancy i

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What is an Income Tax Notice?

An income tax notice is an official communication sent by the Income Tax Department to a taxpayer. It serves as a formal mode of communication for various reasons such as filing or not filing income tax return, a mismatch in the tax declared/tax paid, late tax payment, or other other discrepancy such as missed income declaration under a head like – income from other sources. Typically, such a notice outlines the issue at hand and may request further documentation, clarification, or payment of additional tax.

Currently, you can receive an income tax notice as an email attachment sent to the email id you have registered on the e-filing website. You can also log into your account on the official e-filing portal and check under the menu “Pending Actions” to view/download any notices that might require your immediate attention.

When Is an Income Tax Notice Issued?

There are a number of reasons why an Income Tax Notice may be issued. Below are some common ones:

Discrepancies: Any inconsistencies between details you declared in your ITR and what the department has on record as per Form 26AS can trigger a notice.
Filing Error: One common reason is an error in the tax return you have filed such as using the wrong ITR form
Late Filing: If you miss the filing deadline, a notice for this will be issued
Excess/Short Payment of Due Tax: This notice can mention a refund amount or a tax demand from tax authorities as applicable
Not Reporting High Value Transactions: A notice will also be issued if you have missed reporting high value transactions in your ITR such as cash deposit of over 2 lakh in your bank account during the fiscal
Random Scrutiny: If your ITR is picked for scrutiny at random by the IT Department, you will receive a notice to that effect

Note: The above list of possible reasons for receiving an income tax notice is illustrative and not exhaustive.

Types of Income Tax Notices in India

As mentioned in the earlier section, there are quite a few different reasons why an income tax notice may be issued. The Income Tax Act, 1961 contains various provisions for the issue of different types of IT notices and below are the key ones that taxpayers should keep in mind:

Intimation Under Section 143(1)

This is perhaps the most common type of notice from the IT department usually referred to as an “Intimation u/s 143(1). This is a preliminary notice sent after your returns have been processed. This type of notice could imply any one of the following:

Your tax calculation matches with the department: No action is required.
You have paid excess tax for the fiscal. The excess will be refunded with interest, if applicable, using the applicable income tax refund mechanism.
You have underpaid due tax as per tax authorities. The balance tax amount needs to be paid with penal interest, if applicable using the applicable Income Tax Challan.

Notice Under Section 143(2) and Section 143(3)

These two types of notice are closely related. An income tax notice u/s 143(2) is issued by tax authorities as part of the scrutiny assessment process u/s 143 (3). This type of scrutiny assessment may be undertaken by assessing officer in order to ensure that the tax payer has not understated income, paid lower tax or shown excessive loss to reduce tax liability. While you do not need to take action on receiving such a notice, if closer scrutiny reveals discrepancies you might receive another income tax notice u/s 156 subsequent to the scrutiny assessment.

Demand Notices Under Section 156

Notices issued u/s 156 or any of its subsections are typically a demand notice for payment of due tax. If you have unpaid taxes, the Income Tax Department will send you a notice under this section, specifying the amount of tax you owe and the date by which you need to make the payment. Usually such tax payment demands also feature a commensurate fine and penal interest charges that are clearly mentioned in the notice. If you have received such a notice, it might be advisable to seek the help of a tax expert or CA for figuring out the next step.

Notice Under Section 142 (1)

This type of income tax notice may be issued after you have filed your income tax returns when the Assessing Officer (AO) seeks clarification or additional documentation related to your filed ITR. Examples of such additional income tax documents may include a statement of assets and liabilities, produce accounts/documents to support income or tax saving investment claims, etc. Additionally, a tax notice under Section 142(1) may also be issued if one has filed belated returns i.e. ITR was filed after the due date.

Notice Under Section 139(9)

A tax notice u/s 139(9) is often referred to a ‘defective return’ notice. If the IT department finds errors or omissions in your tax return, you’ll get a notice under this section. It could relate to missed income declaration, incorrect personal information, using the wrong ITR form, mismatch between TDS and tax paid, etc. On receiving a Section 139(9) notice, you have a stipulated time period, usually 15 days, to respond and file a revised return, if required.

Tax Notice Under Section 148

An income tax notice u/s 148 is issued with respect to ITR that have been filed at an earlier date. The Income Tax Department can send this type of notice if the assessing officer believes some income has escaped assessment in a previously filed tax return. In such a situation you may be asked to furnish income details again for a specific financial year along with any other supporting documents such as proof of tax saving investments made during the specified period.

Summons Notice Under Section 131

If you receive an income tax notice under Section 131 or its sub-sections such as 131 (1A), it means that you have been summoned in-person by tax authorities. Common reasons for issuing such a summons include:

For conducting inquiry by the IT Department for discovery, inspection and/or verification of different documents or people
In order to ensure attendance of a person for examination under oath
To demand the production of key documents such as book of accounts, Form 16, home loan amortisation schedule, etc. from the assessee

It is mandatory to respond to such as summons request as non-compliance might lead to legal action from the tax authorities along with potentially hefty fines.

Intimation Under Section 245

This intimation notice is issued by the IT department in order to seek confirmation from the assessee that pending tax dues for any previous FY can be offset using the income tax refund issued in the current assessment year. On receiving an income tax notice u/s 245, you can respond with agreement or disagreement with corrective action such as filing a revised return within a period of 30 days. If you do not provide a response within the stipulated time, the tax authorities will complete the adjustment automatically and issue the balance refund amount.

While there is no rule against responding to an income tax notice on your own, it might be advisable to seek expert help from a tax expert or chartered accountant. This can help ensure that your response is appropriate and you are aware of the correct course of action to resolve the issue at hand.

FAQs

I was late in filing my ITR this year. Will I receive an income tax notice?

Within how many days do I need to respond to an income tax notice?

How do I check if an income tax demand notice is real?

I have not yet received an income tax notice, but I made a mistake when I filed my ITR. What should I do?

My annual income is less than Rs. 2.5 lakh, so I do not tax returns. Will I receive an income tax notice?

ARN NO: Feb24/Bg/04K

Sources:

carajput.com/learn/income-tax-notices-in-india-meaning-and-types.html

tax2win.in/guide/income-tax-notice-us-143-2

tax2win.in/guide/income-tax-notices

vakilsearch.com/blog/file-an-income-tax-return/

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