This is a step-by-step guide to handling income tax notices, which will help you understand each section and take the appropriate steps.
As soon as any citizen receives an income tax notice, the reaction is the same, and the feeling is a jolt of anxiety followed by some scrambling for the meaning of the notice. The majority of notices sent by the Income Tax Department are routine notices and the correct response to a notice is dependent on the section of the Income Tax Act under which the notice has been issued. The first preliminary step is critical: understanding the section: you’ll find out what they’re looking for, and how much time you have for a response!
Common Income Tax Notice Sections
Section 139(9): Defective Return
A notice raised under Section 139(9) is generated when there are inconsistencies like mismatch between declared income and TDS claims or income schedules are not attached in the return. Fifteen days is the department’s time limit for correcting and re-filing the return. This is typically the most straightforward notice to address, and is typically not a real tax problem, but rather a clerical one. The solution will be to file a corrected return in the portal with a reference number to the original acknowledgment number.
Section 143(1): Intimation After Processing
This is an intimation which is not sent as a notice per se; rather, it is sent after the return has been completed by the Centralised Processing Centre. It typically alerts to a refund, tax demand, or it verifies that the return matches the department’s records. In cases where a demand is raised because of mismatch in computation, it is advisable to look at the intimation and compare it with the return filed and see that some mismatch is occurring may be arising due to TDS credit not getting reflected correctly in the Form-26AS or in the Annual Information Statement.
Section 143(2): Scrutiny Assessment
If you have been notified of a Section 143(2) return, it is being investigated thoroughly. This is at random or if a risk parameter was activated in the department’s system by certain figures in your return. The notice itself does not suggest wrongdoing, but it will cause the assessing officer to scrutinize the details of your income, deductions, and paperwork. Getting it right here involves presenting supporting evidence for every piece of information in the return organised in a way that would be useful in the assessment proceedings, such as investment proof as well as business expense records.
Section 148: Income Escaping Assessment
A notice under section 148 is a more severe notice and is sent when the department is convinced that income has been missed in an earlier year. This may be because of unreported income, high dollar transactions that do not match the tax return, or information from third parties (banks or property registrars). These time scales and consequences are important and a response must include an explanation and supporting documentation. This is a type of notice that can really make a difference because the consequences are so serious.
Section 156: Notice of Demand
Any tax due shall be conveyed by means of a notice of demand, as the result of an assessment completed under the regular course of assessment or scrutiny. This notice details how much is owed and when it is due for payment, usually 30 days. When there’s a demand you don’t agree with, the appropriate action is to make a rectification request or appeal within the deadline; otherwise the demand may accrue interest and eventually be placed in the recovery process.
Section 245: Adjustment Against Refund
This section permits a modification of a refund from a previous year, from an outstanding demand. There are times when many taxpayers receive a demand for payment that they don’t notice, and consequently when they receive their refunds, they are surprised that their refunds have been reduced or that a payment is due. The window for response is typically brief and tax payers are entitled to challenge an underlying claim should it be wrong or have already been settled.
Section 133(6): Call for Information
This is a notice that requests particular information or documents if they are being sent to someone, usually a third party (e.g. a bank), but sometimes to a person or entity in relation to another person’s notice or a wider verification process. The answer should address the question, be submitted on time and include supporting documents if applicable.
General Principles Applicable to All Income Tax Notices
The following general principles apply to all sections:
There are some practices that are important in each of the sections in the notice. Review the notice completely before taking action as the number indicates what to do. Be sure to meet the answer calendar—most sections have specific deadlines and will not accept late answers that will be considered incomplete. Ensure supporting documentation is kept organised and ready as the vast majority of replies rely on supporting documents rather than on simple explanations. And refrain from a defensive or general reply, as officers will be judged based on documentation and not reply tone.
Why Section-Specific Handling Matters
A common mistake that tax payers make is treating all income tax notices as equal. A deficient return notice requires quick remedial work, and scrutiny/reassessment notices require a well-constructed case with documentary support. When you understand what kind of notice you are getting, you can have a strategy for how to handle it.
