The income tax department sends tax notices to taxpayers if any error is noticed in the submitted income tax return (ITR). Depending on the type and classification of the error and your action about the notice, the tax department starts proceedings against you. Therefore, it is crucial to understand the circumstances under which you could receive an income tax notice and the possible reasons behind it. This will help you be better equipped to respond appropriately when such a notice is issued. While there are various types of income tax notices that taxpayers may receive, not all of them are applicable to individuals.
Here are a few of the tax notices that a salaried individual can get if errors are detected in their ITR:
1. Section 143(1)(a) tax notice
This tax notice is called an intimation notice and it is sent when the tax department has processed the submitted ITR successfully. This intimation notice will inform whether the calculations submitted in the ITR have been accepted by the income tax department. If there is a mismatch between the calculations you submitted and the calculations accepted by the tax department, then the reason for this will also be mentioned in the intimation notice.
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Possible reasons behind 143(1) mismatch intimation notice: “Such intimation as stated above may be issued in case of ITRs filed under section 139(1) / 139(5) as well as those ITRs filed in response to notice issued under section 142(1). Inconsistencies between ITR filed by taxpayers and income computed as per section 143(1) can arise due to arithmetical errors, any incorrect claims, disallowance of any set off or disallowance of any expenditure, miscalculation of interest under section 234A/B/C, mismatch of details in tax return vis-à-vis Form 26AS, etc,” says CA (Dr.) Suresh Surana.
When can this intimation notice be issued: Surana says that such an intimation notice has to be issued within nine months from the end of the financial year in which the ITR is furnished. “Before issuing intimation under section 143(1), the taxpayer is issued an intimation under section 143(1)(a) proposing adjustment to the ITR filed,” says Surana. For an ITR filed for FY 2023-24 (AY 2024-25), this intimation notice will be issued on or before December 31, 2025.
Time limit to respond to such a notice: You need to take action only when there is a mismatch between your ITR calculations and the tax department’s calculations. If the intimation notice is issued due to a refund or there is no mismatch between your ITR calculation and the tax department’s, you need not respond. “The taxpayer is expected to file his response within 30 days from the date of issue of intimation under section 143(1)(a) either agreeing / disagreeing with the adjustment proposed,” says Surana.
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2. Section 139 (9) defective ITR notice
You may get a tax notice under section 139 (9) if your submitted ITR is found to be defective by the income tax department on account of incomplete or inconsistent information. “The ITR may be treated as defective due to various reasons. For instance, usage of wrong ITR Form for the purpose of furnishing an ITR,” says Surana.
Possible reasons for receiving a defective ITR notice: Some of the common reasons for receiving a defective ITR notice include: claimed HRA in ITR but breakup of salary does not show any HRA component, TDS on income claimed while filing ITR but the corresponding income is not reported. For example, FD interest not declared in the ITR, but TDS deducted on such an FD is claimed.
By when can such a defective ITR notice be issued: This notice can be issued within nine months from the end of the financial year in which the ITR is filed. For ITR filed for FY 2023-24 (AY 2023-24), a defective ITR notice can be issued on or before December 31, 2025.
Time limit to respond to defective ITR notice: “If your return is found defective, you will get 15 days of time from the date of receiving the notice or as the time duration specified in the notice to rectify the defect in the return filed by you. However, you may seek Adjournment and request for an extension,” said the income tax department on its website as of September 17, 2024.
3. Section 142(1) tax notice
This tax notice is also known as an inquiry before assessment notice. “Notice under section 142(1) may be issued to the assessee requiring him to furnish an ITR if no such ITR has been furnished under section 139(1),” says Surana.
Possible reasons behind this notice: The reason behind this notice is that the tax department wants clarification about why you did not file an ITR despite there being evidence you earned an income above the basic exemption limit and AIS, etc shows various sources of income. You need to answer all the queries raised by the income tax department and provide the requisite details and documents to support the claim made in the submitted ITR.
By when can such a notice be issued: There is no time limit on issuing such a notice.
? Time limit to respond: “The taxpayer would be required to respond to the notice within the timeframe specified in the notice which is generally 15 days” says Surana.
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4. Section 143 (2)
This notice is known as a scrutiny assessment notice, and it is sent when the tax department wants to do a detailed assessment of the submitted ITR and confirm the genuineness of all the claims (income and deductions) made by you.
Possible reasons behind this notice: “Notice under section 143(2) can be issued to the assessee taxpayer for the purpose of making scrutiny assessment under section 143(3). Scrutiny assessment is a detailed assessment carried out in order to confirm the correctness and genuineness of various claims, deductions, etc. made in ITR furnished by the assessee,” says Surana.
By when can such a notice be issued: “Such notice has to be given within 3 months from the end of the financial year in which such an ITR was filed,” says Surana.
Time limit to respond: Generally, 15 days’ time is given to respond to such a notice, however, the time limit to respond to such a notice would be mentioned in the notice itself. “All you need to do is submit your response to the assessing officer by way of uploading the necessary documents,” says Surana.
5. Section 148
This notice is sent when there is income that escaped assessment. This notice is issued when the assessing officer (AO) has any evidence suggesting that your income has escaped assessment in the previous year. Surana says that the tax department will issue a show cause notice under section 148A (b) before issuing notice under section 148 to ask why the case should not be selected for reassessment (show-cause). You will have to file the response either objecting to such reassessment or seek information from the assessing officer.
“Post obtaining a response from the taxpayer or in case no response is received from the taxpayer, the income-tax department shall pass its order under section 148A(d) determining whether it is a fit case for reassessment with prior approval of specified authority,” says Surana.
Possible reasons behind this notice: The reason behind this notice is because of the evidence which the AO has suggesting that a certain income of yours escaped assessment.
By when can such a notice be issued: “Notice under section 148 can be issued within 3 years 3 months with effect from September 1, 2024, from end of relevant assessment year in case income that has escaped assessment doesn’t exceed Rs 50 lakh. However, in case the income that has escaped assessment exceeds Rs 50 lakh, the reassessment can be done up to 5 years 3 months with effect from September 1, 2024, from the relevant assessment year,” says Surana.
Time limit to respond: “The taxpayer would be required to respond to the notice within the timeframe specified in the notice which is generally 30 days,” says Surana.
6. Section 245
Under this section, the income tax department can offset the present year’s income tax refund due to any previous years’ outstanding tax demand. This adjustment only happens if there are outstanding income tax dues or tax refund due in the current year.
Possible reasons behind this notice: If you have any outstanding tax due from any previous year that you have not settled or paid, then you are considered an ‘assessee’ in default. In the Interim Budget 2024, the finance minister amended Section 245 and withdrew outstanding tax demands up to Rs 25,000 pertaining to the period up to FY 2009-10 and up to Rs 10,000 for FY 2010-11 to 2014-15.
When can this notice be issued: There is no time limit for sending this notice.
Time limit to respond: “The intimation notice shall also contain a time limit (which is generally 30 days) up to which an assessee may provide the required response, failing which, the adjustment shall be considered as final,” says Surana. If you have any objection to this notice, or you already paid the outstanding tax demand amount then submit a response providing evidence of such a tax payment.
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Other notices that taxpayers can get
According to S. Sriram, Partner, Lakshmikumaran & Sridharan attorneys, here are some other notices which you may get:
Section 154: “If the ITR is processed/ accepted by the income-tax authorities by passing an order, and thereafter, any apparent error in the claims made in the return is discovered, the income-tax authorities can also issue a notice under section 154, to rectify the apparent errors. Generally, the order rectifying the error should be passed within 4 years from the end of the year in which the order sought to be rectified is passed.
Section 263: If the Commissioner of Income-tax (CIT) finds that his/ her subordinate officer has passed an order which is erroneous, and prejudicial to the interest of the Government, then, within 12 months from the end of the year in which erroneous order is passed, the CIT can issue a notice under Section 263, to revise the order passed by the subordinate officer.”
