Received a tax notice from I-T Department? Here’s what you should do

Here are some common reasons why income tax notices are issued and the process for responding to such notices.

Received a tax notice from I-T Department? Here’s what you should do

With significant digitization, tax authorities now have wider access to taxpayer information and are ready to adopt a higher level of study on an equivalent. One fallout of this is often that taxpayers are nowadays receiving a significant number of notices, automated or otherwise, from the tax authorities. It is, therefore, important to know their significance and the way these could also be skilled.

Here are some common reasons why tax notices are issued and therefore the process for responding to such notices:

1. Notices to make the sure filing of tax returns

Automated reminders are issued before the maturity requiring taxpayers to file the tax returns in a timely manner to avoid penalties. A tax notice under section 142(1) (i) could also be issued requiring the taxpayer to furnish the return if not filed within the maturity.

What to do: Taxpayers got to file their tax returns where required. If there's no got to file the income tax return, suitable intimation could also be provided to the authorities.

2. Proposal of adjustments to the taxable income

Discrepancies or mismatch in the information disclosed within the tax returns could trigger notices under Section 143(1)(a). as an example, where the income reflected in Form 26AS ( the Annual Tax statement) isn't included within the tax returns, or the salary income reflected within the tax returns doesn't match thereupon in Form 16, the authorities would propose an adjustment which might increase the taxable income.

“The taxpayer is required to see and ensure whether the income is correctly reported within the ITR and supply an electronic response via the tax portal. The response might be a confirmation of the proposed adjustment during which case the taxpayer can file a revised income tax return or afflict the proposed adjustments by furnishing a legitimate reason within the e-proceedings section. The response must be filed within the stipulated period which is usually 30 days from the difficulty of such a notice to avoid automatic adjustment by the tax department,” says Saraswathi Kasturirangan, Partner, Deloitte India.

Confirmation on refund claimed within the ITR

When the taxpayer has claimed a refund, a communication seeking confirmation of an equivalent would be issued. The taxpayer must confirm the refund amount after verification of an equivalent with the ITR filed for the year. If any changes are to be made, then a confirmation must be provided informing the I-T department that a revised return would be filed for the year (if within the deadline for filing the revised return).

3. Processing of ITR and issue of intimation

The I-T department carries out a preliminary assessment of all ITRs filed and informs taxpayers of the results of such preliminary assessment. This assessment primarily includes verification of the tax calculation, tax payment, correction of any arithmetical errors, and inconsistencies. this is often provided to the taxpayer by way of intimation under Section 143(1) of the tax Act within 1 year from the top of the fiscal year during which the return is filed.

Where the changes made aren't acceptable to the taxpayer, the remedy is out there within the sort of requesting for rectification or filing an appeal.

Defective or incomplete return of income

An intimation from the I-T department is shipped to the taxpayer when the I-T department identifies defects within the income ITR filed under section 139(9) of the Tax Act.

“The taxpayer must answer the notice within 15 days from the date of receiving such notice by either revising the return to rectify the defects or providing suitable clarification or seeking an extension,” says Kasturirangan.

Income tax scrutiny assessment

The tax authorities devour certain tax returns for detailed verification on a sample basis. In such cases, a notice under section 143(2) of the Tax Act would be issued to the taxpayer. The scrutiny might be limited or entire.

“Under limited scrutiny, a taxpayer is merely required to submit details concerning specified transaction/ query that the scrutiny has been initiated. However, just in case of entire scrutiny, the I-T department can ask the taxpayer to furnish an exhaustive list of documents/information concerning the income and therefore the transactions which the taxpayer has entered into, during the year. Such notices need to be issued within 6 months from the top of the fiscal year during which the returns are filed,” informs Kasturirangan.

The queries raised by the I-T department within the notice should be answered by the taxpayer by filing the submission electronically or by way of physical submission with the AO because the case could also be. Once the scrutiny assessment is complete, the taxpayer would receive an order under section 143(3) of the Tax Act from the I-T department.

In order to form sure that the taxpayer is conscious of the status of his tax returns filed, it's advisable to log in to the e-filing portal (https://incometaxindiaefiling.gov.in) using his PAN and therefore the registered password and check the compliance status under the tab ‘My Account’. this can help the taxpayer to supply the responses during a proactive manner to the tax authorities.