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We become surprised when we receive any intimation or notice from Income tax department even when we have successfully filed our Income tax return.

First thing we have to understand the difference between an intimation and a notice. Intimation is just the outcome of the processing of return and we may not be required to act upon it although there are few exceptions to it. However, when notice is received from the department then you have to mandatory act on it.

1. Intimation under Section 143(1)

when the return is processed by the department then the intimation under sec. 143(1) is issued by CPC reflecting any of the three situations:

  • If there is more tax liability to be paid, need to be paid within 30 days of receiving the demand.
  • If any additional refund is determined.
  • If the return filed matches with the assessment of AO and no action is required.

 Income is computed by the AO after making the following adjustments to the total income –

  • Any arithmetical error.
  • An incorrect claim.
  • Disallowance of incorrectly loss or expenses.
  • Any income not included.

No intimation under this sub section shall be sent after the expiry of one year from the end of the financial year in which the return made.

2. Notice under Section 139(9)– Defective Return –

Return can be considered as defective by the Assessing officer. The defect can be are as follows: –

  • Wrong ITR filed.
  • Missing Information.
  • Incomplete Return.

If the AO consider the return as defective return, then he will intimate the same and gave the opportunity to rectify the defect within 15 days from the date of such intimation.

If the defect is not rectified within the given period, then the return will be considered as invalid return and it will be deemed that no return has been filed.

3. Notice under Section 142(1) – Inquiry before assessment –

A notice under this section can be issued under these situations: –

  • If the return has filed, but the Assessing officer requires additional information and documents for the purpose of making an assessment.
  • If the return has not filed, but the Assessing officer wants the return to be filed.

The basic purpose is to ask the details of the assessee before making the assessment. It is served to ask for the documents and details from the assessee and to take that case under assessment.

AO may or may not start the assessment after compliance with this notice, depends upon the documents served by the assessee. If the AO is satisfied with the documents or return, he may not start the assessment process.

To comply with this notice is mandatory even if the assessee thinks that the accounts or the documents required are irrelevant.

If the assessee does not comply with this notice: –

  • It may result in Best Judgement u/s 144.
  • Penalty u/s 271(1)(b) i.e. Rs. 10000 for such failure.
  • Prosecution u/s 276D may extend to 1 year with fine.

4. Notice under Section 143(2) – Scrutiny Notice –

If the Assessing Officer is not satisfied with the produced documents or with the responses of the assessee against income tax notice u/s 142(1) then you will get the Notice u/s 143(2) which means that your return has been selected for the detailed scrutiny by AO.

 AO may ask the assessee to either attend his office himself or produce the relevant supporting, and evidences in support of his claim.

Through the detailed scrutiny, the Assessing Officer wants to ensure that the assessee has    not done any of the following: –

  • Understate the income.
  • Claimed excessive loss.
  • Paid less taxes.

 In this notice, the assessee is required to reply to the questionnaire issued along with   all the documents required by the Income tax department.

Notice under this section can be served only before the expiry of six months from the end of the FY in which the return is furnished.

5. Notice under Section 148 – Income escaping assessment

If the AO has reason to believe that the assessee has not disclosed the income correctly or have paid the lower taxes or have not filed the return then in all cases it is termed as Income escaping assessment. Under these situations, AO assess or reassess the Income, as the case may be.

To initiate the proceedings u/s 147, AO should serve a notice u/s 148.

Timelines for issuance of notice u/s 148 are as follows: –

  • Notice can be served within 4 years from the end of relevant AY if the income escaped assessment is Rs. 1 lakh or less than that. Notice cannot be issued by any officer below the rank of Assistant Commissioner or Deputy Commissioner.
  • Notice can be served beyond 4 years but upto 6 years from the end of relevant AY if the income escaped assessment is more than Rs. 1 lakh. Notice can only be issued by the Chief Commissioner or Commissioner.
  • Notice can be served beyond 4 years but upto 16 years from the end of relevant AY if income in relation to any asset located outside India is chargeable to tax in India but has escaped assessment.

6. Notice under Section 156 – Notice of Demand

Where any tax, interest, penalty, fine or any other sum is payable in respect of any order passed, then the AO serve the notice u/s 156 to the assesse specifying the sum so payable.

Assessee can deposit the amount payable within 30 days from the date of Income tax notice.

There is no time limit to serve this notice.

In case of delay in payment of tax, the assessee shall be deemed to be in default and liable to pay simple interest u/s 220(2) @1% for every month or part thereof and further penalty u/s 221(1) may be imposed.

7. Notice under Section 245 – Set off Refunds against tax remaining payable –

Notice u/s 245 is issued when the tax refund for an AY is adjusted against the tax demand dur from the assessee. There is no time limit to serve this notice.

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June 2024