Income Tax Notice: Tax notice received from Income Tax Department, what to do?
Let us know about some common income tax notices, what they mean and what you should do if you get such notices.
The government’s laws related to filing income tax returns are strict. You may get a notice from the Income Tax Department even for a minor mistake in filing a tax return. However, a notice from the Income Tax Department does not always mean that you may face problems. There can be many reasons for sending such notifications. Let us know about some common income tax notices, what they mean and what you should do if you get such notices.
Demand Notice (under Section 156)
Under section 156, an income tax notice is issued against the outstanding amount, interest, penalty etc. Such information is usually sent after the assessment of income tax return. The notice is issued by the Assessment Officer who instructs for the due amount and asks the taxpayer to deposit the outstanding amount on time to avoid any penalty. An interest rate of 1 percent per month (under section 220) is charged till the withdrawal of the total outstanding balance. Assessment officer can impose fine up to the amount of unpaid amount (under section 221).
What to do in this case
After receiving such notice from the Income Tax Department, the person has to deposit the outstanding amount within 30 days of receiving the notice. Apart from this, in special cases less than one month can be given for depositing the outstanding amount.
Customary Notice [under Section 145 (1)]
If any such notice comes to you, there is no reason to panic. The notice from the Income Tax Department under section 145 (1) is a traditional notice given to the IT assessee as a part of the regular practice of the department. Generally, this is just a notice that states that income tax returns have been successfully processed. This information can be sent by the tax department from the end of the financial year to the end of one year in which the return is filed.
What to do in this case
Generally, you do not need to give some answers for this unless there are some mistakes in the income or there is no mismatch while filing the return. However if there is any outstanding balance, it will have to be paid within a month. Also, if any type of information about the information needs to be corrected, it should be done immediately to avoid any complication or penalty.
Inspection notices [under Section 142 (1) and 143 (2)]
Such information is issued only when the Income Tax Department needs some kind of verification, clarification or re-assessment. The notice under Section 142 (1) can be issued by the Income Tax Department after the relevant assessment year is over. Notices under Section 143 (2) are sent by the Department for compliance with the notice sent under Section 142 (1), if the Assessing Officer is not satisfied with the response or failure to submit the required documents.
What to do in this case
On receiving notice under section 142 (1), the person has to reply within the stipulated time given in the notice. For notice under Section 143 (2), which is a follow-up notice, a person may have to appear before the Assessment Officer either personally or through a representative.
Show cause notice (under section 148)
A show cause notice is issued under Section 148, when the Income Tax Department feels that the taxpayer has not disclosed all the sources of income to evade tax. If there is an amount of Rs 1 lakh to avoid income, then notice can be sent by the department within four years from the end of assessment year. If the amount withheld from the income is more than Rs 1 lakh or if the income related to any property located outside India but is chargeable to tax, and concealed, a notice can be sent within six years.
What to do in this case
Return within a month or return in the specified period. Assessment officer is obliged to give reasons for issuing such notice if any person asks for it.
Refund adjusted against the tax demand (under Section 245)
This notice is issued under section 245 when tax demand is pending with the Income Tax Department and the amount has been claimed as a refund. The Assessing Officer will adjust the refund (fully or partially) from the tax assessee against any tax demand arrears. There is no time limit for giving / issuing such information to the assessee.
What to do in this case
Taxpayer has to reply to such notice / notice within 30 days. If it fails to respond within the stipulated time, the adjustment is made automatically.
