If an error is found in your filed ITR, the income tax department can send you an income tax notice. According to tax experts and chartered accountants, there are broadly six types of income tax notices that a salaried individual may receive from the income tax department.
Read below to find out what are the different types of income tax notices that you may receive.
1. Section 143 (1) notice: Intimation notice
This notice is sent to an individual after the income tax department processes the ITR. The notice informs an individual whether his ITR calculations match with that of the income tax department. If there is a mismatch, then this intimation notice will inform whether there is a refund due or additional taxes are payable. An individual will get this notice, even if there is no mismatch or error in the ITR.
When can this notice be issued: “The intimation notice under section 143 (1) will be issued within nine months from the end of the financial year in which the ITR is furnished under Section 139 or in response to notice under section 142 (1). For ITR filed for FY 2022-23 (AY 2023-24), the intimation notice will be issued on or before December 31, 2024,” says Manmeet Kaur, Principal Associate, Karanjawala & Co, a Delhi based law firm.
Time limit to respond: If the intimation notice is issued due to a refund or if there is no mismatch between you and the tax department’s calculation, then you do not need to respond. However, if there is a tax demand, the taxpayer is expected to respond within 30 days from the date of issue of intimation notice either agreeing/disagreeing with the adjustment proposed.
2. Section 139(9): Defective ITR
According to Archit Gupta, founder, Clear, a tax filing platform, “Notice under section 139(9) of the Income Tax Act, 1961 is sent when there are some errors in the filed ITR. The tax department will send this tax notice requiring the assessee to correct the errors by filing a revised ITR.”
Some of the common reasons to receive this income tax notice according to Gupta are as follows:
When can this notice be issued: According to Sanjoli Maheshwari, Executive Director, Nangia Andersen India, a business consultancy company, “Income tax notice under section 139(9) may be issued within nine months from the end of the financial year in which the return is filed.” Hence, for ITR filed for FY 2022-23 (AY 2023-24) (due date July 31, 2023), the tax department can issue a notice on or before December 31, 2024.
Time limit to respond: The tax notice will mention the due date by which an individual will have to respond. “Usually, the tax department allows individuals a 15 days’ period to respond,” says Gupta.
3. Section 142: Inquiry before scrutiny assessment
The reason this notice is issued is that the income tax department wants to seek clarification why ITR was not filed, despite the individual earning an income above the basic exemption and evidence of various sources of income being present in AIS, etc.
“Notice under section 142(1) may be issued to the assessee taxpayer requiring him to furnish tax return if no such return has been furnished under section 139(1),” says Dr Suresh Surana, founder, RSM India, a tax, audit and consultancy company.
“Further, such notice may also be issued requiring the assessee to produce accounts or documents required to make an assessment and furnish in writing any information on matters. For instance, a statement of all the assets and liabilities of the assessee,” says Surana.
“An individual will be required to answer all the queries raised by the tax department through notice issued under section 142(1) and provide the requisite details and documents asked in support of the claim made in the ITR filed within the time prescribed in the notice,” says Maheshwari.
When can this notice be issued: “There is no maximum time limit prescribed for issuing a notice under section 142 (1),” said Maheshwari.
4. Section 143 (2): Scrutiny assessment
This income tax notice is sent to the salaried individual to do a detailed assessment of the ITR and confirm the correctness and genuineness of incomes and deductions claimed in the ITR.
“Notice under section 143(2) of the Income Tax Act, 1961 would be issued to the individual for the purpose of making scrutiny assessment under section 143(3),” says Surana.
“Usually, a questionnaire is attached in this type of notice along with the list of documents which is required to be submitted by an individual. Responding to the tax notice is an online process. This scrutiny process will go on till the time the income tax department is satisfied that all its questions have been answered by the individual truthfully and in a satisfactory manner. There is no clear saying when the income tax department will be satisfied.” says Gupta.
When can this notice be issued: According to Maheshwari, in case the ITR has been selected for scrutiny, then notice under section 143(2) can be issued “within three months from the end of the financial year in which the return is filed.” For FY 2022-23 (AY 2023-24), the tax department can send this notice on or before June 30, 2024.
Time limit to respond: The time limit to respond to such notice would be mentioned in the notice itself. All you need to do is submit your “response to the assessing officer by way of uploading the necessary documents,” says Surana.
“Generally, the time limit is 15 days to respond to scrutiny notice,” says Gupta.
5. Section 148: Income escaping assessment
This tax notice is issued when the assessing officer (AO) has any information which suggests that a certain income of an individual has escaped assessment in the previous year. This means that an individual has not reported certain income in the ITR filed in the previous year.
“Before issuing notice under section 148, the income-tax department will issue a show cause notice to the individual under section 148A(b). This show cause notice is issued to provide reasons why a particular ITR was selected for reassessment,” says Surana.
An opportunity will be given to individuals as to why reassessment proceedings should not be initiated. Based on the information provided by the individual, the assessing officer can either continue with the reassessment proceedings or dispose of the case.
When can this notice be issued: The time period for issuing a notice under this section depends on the amount of income that has escaped from assessment. The tax notice will be issued within 3 years from the end of the relevant assessment year if income is below Rs 50 lakh.
“However, if the income exceeds Rs. 50 lakh the reassessment of the ITR filed can be done up to 10 years from the relevant assessment year with the prior approval of specified tax authority,” says Surana.
For example, if an income has escaped assessment in FY 2016-17 (AY 2017-18) then the income tax department can send notice till FY 2025-26 (AY 2026-27) if the income exceeds Rs. 50 lakhs or more. If escaped income is less than Rs. 50 lakhs, the tax notice can be issued up to FY 2019-20 (AY 2020-21).
Time limit to respond to such notice: The notice will mention the time limit for response. Usually, the tax department allows 30 days to respond to the tax notice.
6. Section 245: Adjustment of tax payable with refund amount
The income tax department has the power to set off income tax refunds due for a particular year against an outstanding demand of previous years. This adjustment only happens if there are outstanding income tax dues or tax refund due in the current year.
“An intimation notice under section 245 may be issued to the taxpayer in case the income tax department intends to adjust current year’s income tax refund with any of the pending tax demand of the taxpayer from the previous years,” says Surana.
If you have any objection to this notice, or you have already paid the outstanding demand, “then the taxpayer should submit a response providing evidence of payment and requesting the department not to make the proposed adjustment,” says Maheshwari
“An assessee will have outstanding tax dues when he/she has missed the timeline to pay income tax dues. Here an assessee is considered as an assessee in default. As per section 222, tax recovery officers can issue notices to such assessee in default for recovery of unpaid demands. Such recoveries can be made from properties owned by such assessee in default, which may include but not limited to land, building, bank accounts, and income tax refunds too. Section 245 empowers the income tax department to make such recoveries from refund payable to an assessee,” says Chartered Accountant Mehul Aggarwal, Partner, J M K P & Co LLP, a Delhi based CA firm.
When can this notice be issued: “There is no time limit for issuing this tax notice under section 245. This means that if as per the income tax department, a taxpayer has an outstanding tax demand for FY 1999- 2000 (AY 2000-01), and for FY 2022- 23 (AY 2023-24) has a tax refund due, then tax officer can set off the refund with the outstanding demand,” says Maheshwari.
Time limit to respond: The time limit for responding to this notice will be mentioned in the notice. “Generally, 30 days from the date of issuing the notice is allowed to individuals to respond,” says Surana.
After you have responded to this tax notice, the income tax department will examine the reason for your objection or agreement with the tax demand in the notice.
“The Income Tax Act has specified time limits to issue a specific tax notice. Beyond the specified time limit specific tax notices should not be issued. However, in practical situations individuals get tax notices beyond the expiry of timelines. An individual must verify if the tax notice issuing time limit exceeded or not. It may happen that tax notice was issued before the expiry of the time limit. But it is doubtful if the tax notice was received by the individual on time,” says Aggarwal.