Income Tax Notices

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Income Tax Notices

Notice from Income Tax Department is generally for the purpose for seeking information, explanation, clarification from assesses. As a principle of natural justice, law ensures opportunity of being heard within a reasonable time and upon serving notice this principal is followed.
No response or follow up with matters highlighted in notice can further result in liability to pay interest, late fee and penalty. And, in some cases of default can also be reason for attachment of property and assets with or without trip to jail. So, one should be prompt and diligent in reply of notice from Income Tax Department within reasonable time along with sufficient and appropriate evidence.
Tax experts understand the complexities of legal notice and comparing it with fact of the case they conclude with best possible reply considering genuine interest of assesses. Submit Tax helps in resolving your issues concerned with Income Tax Notice by quick and professional talent.

Common Types of Notices under Income Tax Act, 1961

Notice under section 142(1): Inquiry before Assessment

Notice under section 142(1) is served for preliminary investigation before starting assessment for a tax period. Documents, information or explanation can be called upon by assessing officer who considers that the details provided in income tax return is not to his satisfaction or raises eye-brow. It forms basis the basis of launching assessment which can be also done if income tax return has not been filed at all by the assessee.
Default in complying to notice under section 142(1) can result in penalty of Rs. 10,000/- or prosecution which may extend to 1 year or both. It can also lead to best judgement assessment under section 144 which means assessing officer can pass judgement on case based upon available input with him.

Notice under section 143(2): Scrutiny Notice

Notice under section 143(2) is issued for scrutiny of return filed by the assessee. For ease and convenience of assessee, revised format to serve notice under section 143(2) of Income Tax Act, has been notified which necessitates three formats for scrutiny notices as Limited Scrutiny (Computer Aided Security Selection), Computer Scrutiny (Computer Aided Security Selection), and Compulsory Manual Scrutiny.
Scrutiny notice is served if assessing officer is reasons to believe that tax liability has been supressed, income understated or expenditure inflated or provisions of income tax are violated. Deadline to issue notice under this section is before the expiry of six months from the end of financial year in which return is filed. For example, if ITR for F.Y. 2017-18 is filed in F.Y. 2018-19, then scrutiny notice can be served by AO before 30th September, 2019.

Notice under section 148: Income Escaped Assessment

Notice for assessment, reassessment or re-computation is served in case AO has reasons to believe that assessee income has escaped assessment. Income escaped case arises when tax liability is understated in filed return or no income tax return is filed although tax liability exists.

Time limit for issue of notice under section 148 is within four years from the end of relevant assessment year for any amount of income escaping assessment. For financial year 2017-18 relevant assessment year is 2018-19. So, for any amount of escaped income for the period financial year 2017-18, notice for income escaped assessment under section 148 can be served on or before 31st March, 2023.

Time limit for issue of notice under section 148 is within six years from the end of relevant assessment year if the escaped assessment amounts to or is likely to amount to Rs. 1 lakh or more for that particular year. For financial year 2017-18 relevant assessment year is 2018-19. So, for any amount of escaped income more than Rs. 1 lakh for the period financial year 2017-18, notice for income escaped assessment under section 148 can be served on or before 31st March, 2025.

Time limit for issue of notice under section 148 is within sixteen years from the end of relevant assessment year if the income in relation to any assets including financial interest in any entity located outside India, chargeable to tax, has escaped assessment. For financial year 2017-18 relevant assessment year is 2018-19. So, for overseas income amount has escaped assessment for the period financial year 2017-18, notice for income escaped assessment under section 148 can be served on or before 31st March, 2035.

Notice under section 156: Demand under Income Tax

Notice under section 156 for demand under income tax is served to recover tax, interest, late fee or penalty. Generally, notice for demand is issued to enforce orders passed in assessment and that order directs to pay any amount to revenue. Time limit to pay the amount as demanded through this notice is often of 30 days. Failure to pay the due amount on time attracts further interest & penalty.

Notice under section 245: Refund adjusted against Tax Demand

Notice under section 245 is issued to set off refund of a year with existing tax demand of any previous year. Department of income tax ensure that refund is payable if and only if existing previous period tax arrears are recovered after providing an opportunity of being heard upon service of notice for same. Assessee has to respond within time line of 30 days as mentioned in the notice else its concluded that consent has been granted to adjust refund against tax due.

FAQ

What is income tax notice ?
Income tax notice is issued by the Internal Revenue Service (IRS) informing taxpayers about the correction or default in the income tax return. Internal Revenue Service can issue tax notice for many reasons.
What are the reasons for issuing tax notice ?
There are many reasons IRS issued tax notice:

  • Non filing of Income Tax Return( ITR)
  • TDS Error
  • Non- disclosure of other incomes
  • Error in income tax return
  • Mismatch in income and expenses
  • Not mentioned of PAN or Quoting
  • incorrect PAN
  • Not declared the previous employers income
How many types of Income tax notices ?
There are seven types of notice which is issued by the Internal Revenue Service( IRS)

  • Inquiry before assessment – Notice under Section 142(1)
  • Scrutiny Notice – Notice under Section 143(2)
  • Letter of Intimation – Notice under Section 143(1)
  • Income escaping assessment – Notice under Section 148
  • Notice of Demand – Notice under Section 156
  • Defective Return – Notice under Section 139(9)
  • Set off of refunds against tax remaining payable – Notice under Section 245
What does section 143(2) talks about ?

Section 143(2) stated that the notice is sent after notice which means notice is sent after u/s 142(1) has already been sent. This is because AO was not satisfied with the documents which was sent earlier or may be AO has not received any documents.

What is notice under section 142(1) ?

Section 142(1) stated that notice is served to taxpayer for documents and details,

Reply to tax notice is necessary ?

Yes, respond to tax notice is necessary. Not replying to tax notice cause many consequences.