An income tax notice represents a formal written communication dispatched by the Tax Department to a taxpayer, signaling the identification of an issue within their tax account. Such notices are dispatched for a variety of reasons, encompassing scenarios such as unfiled tax returns, assessment procedures, or requisition of specific information. Upon receipt, it becomes incumbent upon the taxpayer to promptly address the notice within the stipulated timeframe; failure to do so may entail the imposition of penalties or sanctions. Thus, a comprehensive understanding of the distinct categories of Income Tax notices becomes imperative.
Notification under Section 139(9) pertaining to Defects in ITR Filing
- Individuals, irrespective of whether they are associated with companies, firms, or other entities, are mandated to file income tax returns if their earnings surpass the non-taxable threshold.
- Should an Assessing Officer (AO) discern discrepancies within an individual’s filed return, they initiate the issuance of a notice under section 139(9), which extends a window of fifteen days for rectification, a duration that may be prolonged upon request.
- Failure to rectify the identified issues within this stipulated timeframe results in the invalidation of the return, analogous to not having filed it in the first place.
- However, should the rectification process occur post the initial timeframe but prior to the AO’s assessment, the delay may be excused.
- In contrast, in cases where the window for filing for the relevant Assessment Year (AY) is still open, the individual has the option to submit a fresh return if rectification is not executed, though this would render the original return void.
Section 142(1) Notice of Inquiry – Diverse Facets of Income Tax Notices
- This provision empowers an Assessing Officer (AO) to request an individual’s income return if it remains outstanding or to procure essential documents for the purpose of assessment.
- The underlying goal is to amass pertinent details from the taxpayer before the assessment process commences, thereby streamlining the overall procedure.
- The AO progresses with the assessment solely upon satisfaction with the submitted return and accompanying documents.
- Even if the taxpayer considers the documents requested as irrelevant, compliance remains obligatory.
Failure to adhere to this notice could culminate in the following consequences:
- The assessment was conducted through the application of best judgment under section 144 of the IT Act, 1961;
- Imposition of penalties in accordance with section 271(1)(b) of the IT Act, 1961;
- Initiation of legal proceedings under section 276D, potentially resulting in a one-year prison term and monetary fines.
Section 143(1) Notice of Intimation
- This clause involves the evaluation of returns filed under sections 139 and 142(1) by the AO. Typically taking the form of an intimation, it is received by nearly all taxpayers.
- The intimation serves to compare the taxpayer’s data with the AO’s assessment outcomes.
- Adjustments are made for errors, erroneous claims, disallowances of losses, deductions, expenditures, or unreported income.
- The taxpayer is alerted if a declared loss is adjusted and yet no tax, interest, or refund implications arise.
- However, this intimation is not admissible beyond a year from the Financial Year (F.Y.) of return submission.
During the return processing phase, the income tax department transmits an intimation that encompasses three possible scenarios:
- Increase in tax liability, payable within 30 days.
- Potential additional tax refund.
- No further action required, as the return and AO’s assessment are in alignment.
Section 143(2) Scrutiny Notice
- A notice issued under this provision signifies the selection of the taxpayer’s income for a comprehensive examination.
- When a return has been filed but the AO is dissatisfied or suspects understated income, inadequate tax payment, or improper loss calculation, this notice is issued.
- It mandates the taxpayer’s presence at the AO’s office or the submission of evidence supporting the filed return.
- This notice is time-bound, remaining valid for a span of six months from the Financial Year (F.Y.) in which the return was submitted.
Section 148 Notice for Escaped Income Assessment
When the Assessing Officer (AO) harbors suspicions of tax evasion concerning an assessee’s income, as outlined in Section 147, the AO possesses the authority to review, reevaluate, or recalibrate the return.
The Timeframes for Notices under Section 148 are as follows:
Income evasion up to Rs. 1 lakh: Notice within 4 years from the conclusion of the relevant Assessment Year (AY) by the Assistant Commissioner, Deputy Commissioner, or higher authority.
Income evasion exceeding Rs. 1 lakh: Notice issued between 4 to 6 years from the conclusion of the relevant AY by the Chief Commissioner or Commissioner.
Income evasion involving foreign assets taxable in India: Notice issued between 4 to 16 years from the conclusion of the relevant AY.
Section 156 Notice of Demand – Outstanding Income Tax Liabilities
- This notice is dispatched subsequent to a directive from a Court, Tribunal, or Authority to fulfill obligations related to taxes, interest, penalties, fines, or other dues.
- The Assessing Officer (AO) delineates the amount owed within the notice.
- The recipient is obligated to remit the specified sum within thirty days from the date of the income tax notice.
- No specific timeframe is stipulated for the issuance of this notice.
- Non-compliance results in the recipient being classified as a defaulter, thereby incurring a simple interest of 1% per month (under section 220, subsection 2), along with the potential imposition of penalties (under section 221, subsection 1).
Section 245 Notice for Refund Offset
- This notice arises when an individual carries unpaid tax liabilities from a preceding fiscal year but is also eligible for tax refunds in the current fiscal year.
- In such instances, the AO possesses the authority to offset the refund against the outstanding amount instead of refunding it directly.
- However, such offsetting only transpires following the issuance of a written notice to the concerned individual.
- The notice outlines the adjusted amount and its implications on the remaining due sum.
- Thus, this notice primarily functions as an informational letter rather than a demand for payment.