Types of Income Tax Notices

The income tax department sends different types of notices to taxpayers depending on the cause of the notice. These notices are as follows –

Latest News

A notice is served by the assessing officer u/s 142 (1) in two cases. Firstly, if the officer requires additional information and documents pertaining to your income tax returns. Secondly, if the return has not been filed but the officer wants the return to be filed. If you do not respond to the notice served under Section 142(1), you would face a penalty of INR 10,000, prosecution for up to 1 year or both.

If the AO believes that a defective income tax return is filed, he would serve you notice under this section. The error can be missing information, use of the wrong ITR form, incomplete return, etc. The officer would also highlight the defect in the income tax return and recommend the solution thereof. You get a period of 15 days to respond to the notice. If you do not respond, your ITR would be rejected.

This notice is sent in cases where the assessing officer(AO) has a reason to believe that a taxpayer has filed his ITR on a lower income or not filed when he was mandated by the law. The time limit to send the notice under this section depends on the amount and nature of income escaped.

If there is any type of demand like penalty, fine, tax or any other amount which the taxpayer is supposed to pay to the income tax department, a notice under Section 156 would be issued. This notice is also called the notice of demand and the taxpayer should pay the due amount within 30 days of receiving the notice.

After you file and verify your ITR, they are processed online by the tax department. Post this initial assessment, the tax department sends an intimation to all the taxpayers u/s 143(1). It contains information related to an additional tax liability or refund or if the loss amount mentioned in the return should be increased or decreased or if filed return is perfect.

A notice u/s 143(2) is sent to the taxpayer if the Tax Department chooses to scrutinize the ITR of the taxpayer. The assessing officer sends this notice within 6 months from the end of the financial year in which the return is furnished. After the notice is received by the taxpayer, he/she should reply to the questionnaire issued by the income tax department and submit all the additional documents requested.

If the assessing officer believes that the tax-payer is concealing his income or a part thereof, he can serve a notice under this section. Through the notice, the assessing officer can enquire the books of accounts of the taxpayer and investigate into the taxpayer’s income.

This notice u/s 245 of the Income Tax Act is served by the assessing officer(AO) if it is believed that you have not paid taxes in the previous FY where you had a tax liability and the tax refund of the current FY can be used to pay off the tax liability. You are required to respond within 30 days, failing which, the AO would consider it as consent to adjust the tax refund with previous tax liabilities and then issue your refunds after such adjustments.

Did you receive tax notice? Let us help you respond to the IT Department.

- Tax2win has expertise in responding to Income Tax Department

- Our experts would help you avoid legal consequences by assisting in responding accurately.

What should be done after receiving an income tax notice?

When you receive a notice under any of the afore-mentioned sections, the following steps should be taken –

  • Read the notice thoroughly to find out why it has been sent
  • Check the basic details on the notice to ensure that the notice is meant for you. The notice should contain your correct name, PAN Card number, mobile number, email ID, etc. to authenticate that it is sent to you.
  • Find out the discrepancy in your income tax return which caused a notice to be served, if any.
  • Respond to the notice within the stipulated time period to avoid penalties and prosecutions.
  • Take expert help.

What are the most common causes of notice?

The most common causes for which you might receive an income tax notice include the following –

  • Mismatch in the amount of TDS reported
  • An error in your income tax file
  • Lack of submission of all the documents
  • Non filing of your tax returns
  • When you invest in the name of your spouse and do not mention the same in your income tax returns
  • If high value transactions have been done during the financial year and they have not been properly reported in the income tax return
  • If a random scrutiny of your income tax return is done by the assessing officer
  • When long term capital gains earned from equity investments are not reported correctly
  • If any income is not disclosed by the taxpayer
  • If a wrong income tax return form is used for filing the income tax return
  • If your refunds can be set off against the tax liability
  • If you have evaded tax in previous financial years
notices

FAQ’s on Income Tax Notice

Q- What does the code EXC 001 mean in income tax return notice?

EXC -001 means that you have done a transaction which is beyond that permission of Income Tax Act. It is for cash transactions exceeding INR 10 lakh in a month


Q- Does a salaried person get an income tax department notice?

Yes, a salaried person also gets income tax notice. The notice u/s 143(1) is an intimation which is sent by ITD to every taxpayer.However, you can receive other income tax notices if IT has reasons to believe that income has been concealed by you or on any other grounds.


Q- How do I check my tax notice?

If any notice has been issued by ITD, then it will be delivered at your registered address by post.You can check notices received by you through income tax portal but remember not all the notices can be checked through portal, for all notices enquiry, you can visit ITD and ask your query there.


Q- Do I get income tax notice for current account transactions?

Ans: Yes, income tax department can issue notices for current account transactions as well, if it has a reason to do so.


Q- What is the communication of proposed adjustment u/s 143(1)(a) of the Income Tax Act, 1961?

Ans: The communication of proposed adjustment u/s 143(1)(a) of the Income Tax Act, 1961 refers to any information by the department that they are proposing some adjustment against refund claimed by you in income tax return. Such adjustment could be in respect of any outstanding demand of previous assessment years.


Q- How can I rectify the discrepancy received in u/s 143(1)?

Ans: The Income Tax Department issued discrepancy in notice u/s 143(1) and i discrepancy can be favourable or not.If any demand raised is correct then pay the same.If any refund is of INR 100 or more then IT will pay you certainly.
If any mistake is apparent from record, you can file rectification u/s 154 (1) correcting mistakes: Click on ‘e-file’, and choose the ‘Rectification’ option from the drop down list.


Q- For how long after I file tax returns should I be prepared for any kind of scrutiny or assessment notice from the Income Tax Department?

Ans: A notice u/s 143(2) for scrutiny assessment can only be issued upto a period of six months from the end of the financial year in which the return was furnished by you.


Q- What to do if I get a tax notice?

Ans: If you get an income tax notice, you should understand why the notice has been sent. Notices may be sent due to various reasons. For example, Notices may be sent for the details and papers required by the Income Tax Department. In such a case, you need to provide the details as required. If there is any error in the ITR, then notices may be sent to rectify the error. In such a case, you should then rectify any error in your return and respond to the notice with the time specified by the income tax department to avoid possible penalties.


Q- What happens if you dont respond to tax notice?

Ans: If you dont respond to the income tax notice, there can be different types of consequences depending upon the type of Notice which you would have to face. Such consequences include fines of up to INR 10,000 and also imprisonment for up to a year.


Q- What is an intimation letter from income tax?

Ans: An intimation letter / notice under section 143(1) is issued by the income tax department after your return is successfully processed. It has the details of information you have submitted at the time of filing of ITR and a corresponding column showing the details asper information available with the tax department.


Q- How do you reply to notice?

Ans: You can reply to an income tax notice online. You can visit the online website of the income tax department which is used for e-filing of returns. Log into your online account and respond to the notice which you have received.


Q- How do I pay my tax on demand?

Ans: You can pay your tax on demand online. To do so you can visit the e filing website of the income tax department and log into your account. You can then check the amount of outstanding tax demand under Response to Outstanding Tax Demand under the e-File option. Then, under the Pay Tax column choose Click Here. You would be taken to the NSDL website wherein you can fill the online form and pay the tax on demand.


Q- What happens if I dont respond to the notice within 30 days?

Ans: In case you dont respond to notice within 30 days the income tax department will make the adjustment if there is some outstanding demand without giving any further opportunity to respond.


Q- How do I get my CPC income tax return?

Ans: ITRV(acknowledgement) is received on your registered mail ID soon after you file ITR. Otherwise it can also be downloaded from your account on income tax India official website.


Q- How do you correct outstanding tax demand?

Ans: To submit your response for outstanding tax demand online

  • Login to income tax india efiling website using your PAN and password
  • Go to e file section from the top banner
  • Select Outstanding Tax Demand and proceed

CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.