All that you should know about different types of Income Tax Notices!

(Last Updated On: June 1, 2017)

Have you ever been petrified at the sight of an income tax notice in your name!! It will come as a relief to you that not all notices are meant to scare you. There is a reason for every notice to be issued by the income tax department (“department”). Some notices give you information [like an intimation under section 143(1)], some warrant information from your end [inquiry under 142(1)]and some communicate that an audit is required by the tax department with respect to the income position declared in your income tax return [like scrutiny notice issued under section 143(2)].

Let’s get into the details!

Notice under section 143(1) – Intimation

This is the most common type of notice that is received by individuals/ firms/ companies after filing their income tax return. This notice is basically an acknowledgement of your return by the department whereby the figures as declared by you in the return of income is either accepted by the department or a further tax claim is made based on department’s internal records/ calculations.

As a procedure, information declared by you in the income tax return is matched against internal records of the department for details like taxes deducted at source and advance taxes paid and subsequently the arithmetical accuracy of computation of income.

The above check is done by a computerised mechanism which throws up errors caused due to internal inconsistencies and arithmetical inaccuracies. Once done, appropriate adjustments to your computation of total income are made (like correct figures of TDS being incorporated, interest calculations etc.) and an intimation under section 143(1) is sent.

If you have correctly incorporated all information from 26AS (department’s database information of taxes deducted at source), computed the tax payable and interest (under section 234A/ 234B/ 234C) appropriately and paid/ claimed correct self-assessment tax/ refund, then it is most likely your action point will be none.

In case there is a discrepancy/ mismatch with the internal records of the department, the refund claimed by you may be reduced, or there could arise a tax payable situation. In the case of a tax payable scenario, a notice under section 156 will also be issued along with the intimation. This additional notice is the “notice of demand” providing information of the exact amount payable by you after the revised computation. It is advisable that the said amount is first paid off by submitting the relevant challan (to avoid any accumulating interest on non-payment). However, in case you feel that the amount payable as determined by the department is incorrect, a rectification application may be filed justifying why the claim made by the department is incorrect.

Time limit for issue of notice: Anytime within one year from the end of the financial year in which the return is made.

Notice under section 139(9) – Notice for defective return

While filing your return of income, you may have made certain mistakes which warrant the return as “defective”. Some examples are – leaving your ITR with a tax payable status (all returns should ideally show a tax refundable position or a nil tax payable), missing information in the ITR (say your P&L and balance sheet information were not filled in) etc.

In case you filed a return with a defect, a notice under section 139(9) shall be issued mentioning the kind of defect. The assessee is expected to make good the defect within 15 days of the intimation of the defect in the return, failing which the return will be treated as an invalid return. A condonation of delay may be granted in case the correction is made after the expiry of the said period.

Notice under section 142(1) – Inquiry notice before assessment

This notice plainly calls for information from your end. It is not a scrutiny notice and hence you need not sweat! Basically, the following types of information may be called by issuance of this notice:

  • Return of income in case not filed earlier:

Missed filing your return even after the belated date deadline! Well, this is the notice you may get just in case you haven’t filed any return for a particular assessment year. It will call for submitting your return of income in a prescribed form before a date specified in the notice. So if you haven’t filed your return at all, just wait for this one to come!

  • Information, documents and accounts:

If you are a Company, you will remember that when you filed your return of income online, information like financial statements, other proofs etc were not attached along with. Similarly, for individuals, documents substantiating, for example, capital gains, profit from the business, the claim of 80C deduction etc, if any, were also not attached. If you have received this notice, it is more likely that such information is asked now.

Notice under section 143(2) – Notice for commencement of scrutiny proceedings

Following the notice of inquiry, the department reviews the information submitted by you under section 142(1) and decides whether or not your case is worthy of selection.

An issue of this notice calls for detailed assessment/ audit of the information submitted in the return, which may include attending before the assessing officer and clarifying facts, making written submissions for providing details and producing evidence to substantiate the income/ profits/ gains/ losses.

After hearing the facts and contentions of the assessee and after taking into account all relevant material gathered by the tax officer, an “assessment order” in writing is issued determining the revised income and the sum payable (or refund) by the assessee. This revised income may arise due to disallowances of certain deductions/ claims made by the assessee or enhancing the income declared by the assessee.

Time limit for issue of notice: Anytime within a period of six months from the end of the financial year in which the return is furnished.

Notice under section 156 – Notice of demand 

Notice of demand is generally issued by the department when a tax amount (including any interest, penalty, fine etc.) is determined as payable. Usually, this notice is accompanied along with the intimation issued under section 143(1) (when an upward revision is made to the income details) or along with the assessment order issued on completion of the scrutiny proceedings. It clearly states the amount payable by the assessee when the department revises your income and hence the tax payable.

The amount so stated is required to be paid by the assessee within 30 days of receipt of the notice, failing which interest under section 220(2) starts to accumulate.

Notice under section 148 – Notice to commence reassessment proceedings

This notice is issued to reopen a case (or some time to check the income first time) which was already assessed earlier, in case the assessing officer has a reason to believe that any income chargeable to tax had escaped assessment.

Before making such an assessment / reassessment, the assessing officer is required to serve a notice under section 148. Also, before issuing such notice, the AO should have a valid reason to reopen the case and should also record his reasons for issuing such notice.

Notice under section 245 – Intimation to set off of demands and refunds

Say, you have a refund due from the department for one assessment year and a demand payable for another assessment year. The department then sets off the payables against the receivables and intimates the balance pending to be received/ refunded to the assessee via this notice. This notice may be accompanied by a notice of demand under section 156 if the net result is an amount payable by the assessee.

The above is a usual list of notices received by assessees. On receipt of any such notice, it is advisable to consult a professional before any action is taken so that probable litigation is avoided. A good advice taken always nips problems in the bud! So, in case you’ve received any notice and wondering what to do next, simply contact us at [email protected] or +919660996655, and we’ll be happy to help 🙂