Types of Income Tax Notices

Types of Income Tax Notices in India — A 2026 Practitioner's Guide

Every major income tax notice in India has a specific legal basis, a fixed response window, and real financial consequences if you ignore it. In 2026, notices are generated by an automated analytics engine that cross-references your return against AIS, TIS, Form 26AS, and SFT data — not by a field officer acting on suspicion. Understand what each notice demands and how many days you have to act, and you convert a stressful letter into a manageable compliance task. Miss the window, and an intimation becomes a confirmed demand, a demand becomes a recovery, and a recoverable situation becomes a penalty order.

The Data Ecosystem That Triggers Notices

Before looking at individual notices, you need to understand why they are issued. The department now runs four overlapping data layers in real time:

• Annual Information Statement (AIS): Consolidates transactions reported by 50+ Statement of Financial Transaction (SFT) filers — banks, mutual funds, registrars, employers, crypto exchanges, and foreign remittance intermediaries.
• Taxpayer Information Summary (TIS): The aggregated view of AIS — what the system expects you to declare in your return.
• Form 26AS: Tax Credit Statement covering TDS, TCS, advance tax, and self-assessment tax deposits.
• Faceless assessment infrastructure: Routes all notices centrally through the National Faceless Assessment Centre (NaFAC), Delhi, with no jurisdictional link to a local officer.

When your return deviates from these data sources — even by an inadvertent omission — CPC Bengaluru or NaFAC generates a notice automatically. This is not personal; it is algorithmic. That also means your response must be data-driven, not argumentative.

Section 143(1): Intimation — Process It, Do Not Ignore It

Section 143(1) intimation is the first thing you receive after filing. CPC processes your return and issues an intimation showing three possible outcomes: (a) no adjustment — income matches, no tax due or refund payable; (b) additional demand — CPC found a mismatch and wants more tax; or (c) refund reduced — CPC disallowed something and trimmed what it owes you.

Time limit: CPC must issue the 143(1) intimation within 9 months from the end of the FY in which you filed. For AY 2027-28 (return filed in FY 2027-28), the latest intimation date is 31 December 2027.

If there is a demand: You have two paths. Agree with the computation — pay within 30 days and the matter closes. Disagree — file a rectification request under section 154 on the portal. You can file a 154 application within four years of the intimation. Common errors CPC makes: TDS credit mismatch (CPC relies on Form 26AS; your AIS may show a corrected figure), disallowance of a 80C deduction not visible in the return form, or an arithmetic adjustment in 80D/80G claims.

Do not treat a 143(1) demand as a minor administrative matter. An unpaid demand — even one you disagree with — attracts interest under section 220(2) at 1% per month from the day after the 30-day period expires. On a demand of Rs. 80,000 left unpaid for five months, that adds Rs. 4,000 in interest before you have even started the substantive dispute.

Section 245: Refund Adjustment — Thirty Days or You Lose It

Section 245 intimation is distinct from section 143(1). It proposes to set off your current-year refund against an outstanding demand from an earlier year. The department cannot make this adjustment unilaterally — it must notify you first and give you a chance to object.

You have 30 days to respond. After 30 days, silence is treated as consent, your refund is adjusted, and you lose the opportunity to contest the underlying old demand.

Worked Example: Section 245 in Practice

You file your AY 2027-28 return and expect a refund of Rs. 52,000. The portal sends a section 245 intimation noting an outstanding demand of Rs. 75,000 from AY 2022-23. You had contested that demand before the Commissioner of Income Tax (Appeals) [CIT(A)], and your appeal is still pending.

What you do: Log into e-Proceedings within 30 days. Select "Disagree" and attach: (a) a copy of the appeal memo filed before CIT(A), (b) the appeal number and date, (c) any stay order. State clearly that the demand is subject to appeal under section 246A and cannot be enforced during pendency. If the officer still adjusts — which can happen — you have a clear record to pursue a refund of the adjusted amount once the appeal is decided in your favour. Do not let the 30 days pass.

Section 139(9): Defective Return — Fifteen Days to Fix It

Your return is marked defective when it is materially incomplete. The most common defects in practice:

• Business or professional income declared in ITR-3/ITR-4, but Schedules BP, P&L, and Balance Sheet are blank or missing
• TDS credit claimed but the underlying income is not declared anywhere in the return
• A mismatch between gross receipts in the return and the figure in Form 26AS exceeding the threshold
• Return submitted without tax payment when tax is clearly payable (negative tax liability entry is left blank)

Window to respond: The Assessing Officer (AO) gives you 15 days to file a corrected return (extendable on request). If you miss this entirely, the return is treated as never having been filed — which triggers belated-return status, interest under sections 234A, 234B, and 234C, and removes your ability to carry forward losses.

Procedural step: Go to incometax.gov.in → e-Proceedings → notice under section 139(9) → respond → file a fresh corrected return. When filing the corrected return, select the option "filed in response to notice under section 139(9)" rather than filing it as a voluntary revised return under section 139(5). This distinction matters for record-keeping and penalty purposes.

Section 142(1): Inquiry Before Assessment

Section 142(1) has three distinct sub-clauses; each demands a different action:

A 142(1)(ii) notice often arrives as a precursor to a formal scrutiny notice under section 143(2). It typically asks for bank statements, investment proofs, rent receipts, capital gain computation, or business contracts. Non-compliance can result in a best-judgment assessment under section 144 — where the AO uses available information and his judgment to estimate income, almost always unfavourably.

Document strategy: Respond with an indexed compilation. If the notice asks for "all bank statements for FY 2026-27," provide complete statements for every active account, with a cover letter that maps each account to the relevant schedule in your return. Partial disclosure raises more questions than it resolves.

Section 143(2): The Scrutiny Notice — Your Most Important Response

Section 143(2) is the formal initiation of detailed scrutiny. From this point, the AO examines your return line by line and can make additions to your income.

How cases are selected in 2026: Risk parameters are algorithmic — high deductions relative to income, AIS mismatches above a threshold, foreign assets declared in Schedule FA, large capital gains with unusual transaction patterns, returns linked to a searched person, and sectoral data analytics flagged by CBDT for the year.

Critical time limit: The notice must be served within 6 months from the end of the FY in which you filed the return. For AY 2027-28 (return filed before 31 March 2028, so the FY of filing is FY 2027-28): the 143(2) notice is valid only if served by 30 September 2028. A notice served after this date is legally invalid; you can challenge it in a writ.

Assessment must be completed under section 153 within 12 months from the end of the assessment year. For AY 2027-28: the outer deadline for the assessment order is 31 March 2029.

Worked Example: Responding to a Section 143(2) Notice

You are an independent consultant who declared professional income of Rs. 18,00,000 in AY 2027-28. Your Form 26AS shows TDS credits from three clients totalling Rs. 19,40,000 in gross receipts. The 143(2) notice queries the Rs. 1,40,000 discrepancy.

Response structure:

1. One-line position: "The discrepancy of Rs. 1,40,000 represents two invoices raised in March 2027, against which payment and TDS deduction were received by the client in April 2027 (FY 2027-28) and are therefore not included in FY 2026-27 income."
2. Documents annexed:
3. Annexure A: Copies of Invoice No. 34 and Invoice No. 35, both dated 28 March 2027
4. Annexure B: Bank statement extract showing receipt of Rs. 1,40,000 in April 2027
5. Annexure C: Form 16A from the relevant client reflecting deduction in Q1 FY 2027-28
6. Computation table: Declared income Rs. 18,00,000 (FY 2026-27) + Rs. 1,40,000 (FY 2027-28 receipt) = Rs. 19,40,000 (total TDS base). No income has escaped tax.
7. Closing: "In view of the above reconciliation, no addition is warranted. A personal hearing is requested if the Assessing Unit requires further clarification."

Under faceless assessment, the officer reviewing your file has never met you and cannot ask an informal follow-up question. Your first response is effectively your only hearing. Make it complete.

Section 148 and 148A: Reopening Completed Assessments

Section 148 is the notice that reopens a completed assessment on the ground that income has escaped taxation. It is the most consequential notice in practice.

Section 148A: Mandatory Pre-Reopening Process

Following the Supreme Court's judgment in Union of India v. Ashish Agarwal (2022) and the Finance Act 2022 amendment, the department must now complete a four-step sequence before issuing a section 148 notice:

1. 148A(a): Conduct inquiry with prior approval of the specified authority
2. 148A(b): Serve a show-cause notice — you get a minimum of 7 days (extendable to 30 days) to respond and present your case
3. 148A(c): Consider your reply
4. 148A(d): Pass a reasoned order before issuing the section 148 notice

If the department issues a 148 notice without completing the 148A(d) order, or without giving you a real opportunity to respond at the 148A(b) stage, the notice is bad in law — a direct ground for challenge before the High Court under Article 226. Verify this sequencing the moment you receive a 148 notice.

Time Limits for Reopening

Practical check: Suppose you receive a 148A notice in April 2026 for AY 2022-23, and the alleged escaped income is Rs. 30 lakhs. The 3-year reopening window for AY 2022-23 expired on 31 March 2026. A notice issued in April 2026 for that year is time-barred in this scenario. Check the dates before drafting any substantive response.

Section 153A and 153C: Notices Following Search

If the Income Tax Department conducts a search under section 132 at your premises, or finds your documents at a third party's premises:

• Section 153A applies to the searched person — covers the six assessment years immediately preceding the search year, plus any pending assessment for the year of search
• Section 153C applies to a "related person" — the AO of the searched person forwards the documents to your AO, who then issues a 153C notice for the same period

These are high-stakes matters involving potential undisclosed income, penalty under section 271AAB (as notified), and prosecution under section 276C. Assessment must be completed within 12 months from the end of the FY in which the last search authorisation was executed (section 153B). Engage specialist representation from the date of the search itself, not after the notice arrives.

Section 156 Demand Notice and the Cost of Delay

After any assessment order — whether under section 143(3), 144, or 147 — the AO issues a section 156 demand notice stating the exact tax, interest, and penalty payable.

• Payment window: 30 days from the date of the notice
• Interest for delay: Section 220(2) charges 1% per month (or part of a month) on the unpaid balance from the day after the 30-day window closes

Worked penalty calculation: An assessment order for AY 2025-26 raises a demand of Rs. 3,00,000. You file an appeal before CIT(A) but do not apply for a stay and do not pay even the minimum 20%. Seven months later, the stay has still not been applied for. Interest under 220(2) = Rs. 3,00,000 × 1% × 7 months = Rs. 21,000 — which is then added to the principal demand. The smarter move: pay 20% of the demand (Rs. 60,000) and apply for a stay of the balance within 30 days of the demand notice.

Section 270A and the Penalty Series

Penalty notices under the 270/271 series are issued separately from the assessment order and require a separate opportunity to be heard.

If the addition in your assessment order rests on a debatable legal position — a genuine difference in interpretation of the law — argue specifically for immunity from penalty under the proviso to section 270A(6). This defence, properly argued with supporting judgments, is regularly accepted. If the addition is based on concealment or false entry, immunity is not available.

Common Mistakes and How to Avoid Them

1. Treating 143(1) as optional reading. A 143(1) demand is legally identical to a post-assessment demand after 30 days. File a rectification under section 154 promptly if you disagree; pay promptly if you agree.

2. Missing the 30-day section 245 window. Many taxpayers notice their refund is missing only when the next year's return is processed. Check "Outstanding Demand" and "Pending Actions" on the e-filing portal every quarter — not just at filing time.

3. Sending an incomplete 143(2) response. Under faceless assessment, the officer has no way to call you for an informal clarification. An incomplete first response routinely leads to an ex-parte addition. Treat your written response as the entirety of your case.

4. Skipping DIN verification. Every notice must carry a Document Identification Number (DIN). Verify it at incometax.gov.in → Authenticate Notice/Order Issued by ITD, before submitting any response. A notice with an invalid or absent DIN is not a valid notice — do not respond to it without legal advice, and never ignore a valid one on the assumption it is fake.

5. Assuming old demands have expired. Demands from earlier years remain alive in the portal system and can be adjusted against future refunds (section 245) or enforced in recovery proceedings. Review "Outstanding Demand" annually and resolve old disputes through rectification, appeal, or Vivad Se Vishwas as appropriate.

6. Conflating section 148 with section 143(2). A 143(2) scrutinises a return that was recently filed. A 148 reopens a chapter the department had already closed. The defences, time-bar arguments, and strategy differ substantially — do not treat them as variations of the same problem.

Step-by-Step Response Framework for Any Notice

1. Verify the notice: Check DIN on the portal. Confirm the section, your PAN, and the correct assessment year — misdirected notices for a wrong AY are more common than you expect.
2. Log the deadline: Count response days from the date on the notice, not the date you saw it on the portal. If the notice was uploaded three days before you checked, you have already lost three days.
3. Read the exact requirement: Is it asking for documents, an explanation, or both? Is there a computation in dispute? Do not conflate different types of demand in a single response.
4. Reconcile with AIS/TIS/Form 26AS: Most 143(2) queries are data reconciliation problems. Run the numbers in a spreadsheet before writing a single word.
5. Prepare an indexed response: Cover letter (position in one paragraph) → numbered list of annexures → physical annexures in sequence. Number every page.
6. Submit through e-Proceedings: This is the only valid submission channel under faceless assessment. Do not email the AO or courier documents.
7. Download and save the acknowledgement: It is your proof of timely response if the officer later records that you did not reply.
8. Diarise the order deadline: If the officer has a statutory deadline to pass an order after your response (e.g., 12 months from end of AY for 143(3)), track it. An officer who misses their own statutory deadline hands you grounds for a writ or complaint.

Key Takeaways

• Section 143(1) is a CPC computation, not an accusation — dispute via section 154 rectification within four years if wrong; pay within 30 days if you agree.
• Section 245 adjusts your refund against old demands — you have exactly 30 days to object; after that, silence is legally treated as consent.
• Section 143(2) starts scrutiny — valid only if served within 6 months of end of the FY of filing; respond through e-Proceedings with a self-contained, document-backed submission.
• Section 148 reopens completed assessments — the mandatory section 148A show-cause process must precede it; check the time-bar status and the 148A(d) order before drafting any reply.
• Section 156 demands must be paid or stayed within 30 days — unpaid demands compound at 1% per month under section 220(2), turning a manageable tax liability into a larger recovery action.
• Faceless assessment makes your written response your only effective appearance before the officer — make it precise, indexed, and entirely self-explanatory.
• DIN verification is non-negotiable — an unverifiable DIN means the notice is invalid; a valid notice ignored on any ground leads to ex-parte orders and recovery.