Be Aware of Latest Income Tax Notice & Scrutiny
To avoid further penalties or legal consequences, it is essential that you carefully read and understand the contents of the notice, collect all the necessary information, and respond promptly and accurately within the specified deadline.
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An income tax notice and scrutiny are part of the assessment process conducted by the income tax department to ensure the accuracy and compliance of taxpayers’ financial information. As a result of the notice, the taxpayer may be required to provide additional information or documentation, or to pay additional taxes or penalties.
- Types of Income Tax Notice
- Documents Required to Reply to an Income Tax Notice
- Checklist for Income Tax Notice
- Services of Income Tax Notice
- Why FINAUX
There are various types of income tax notifications that an individual or entity may receive from the Income Tax Department, including some common ones such as:
Intimation under Section 143(1) | This is an intimation sent to the taxpayer after the Income Tax Department processes the return. It contains details of the income and deductions claimed by the taxpayer and the tax liability calculated by the department. |
Notice under Section 139(9) | If there are any discrepancies in the return filed by the taxpayer, the Income Tax Department may issue a notice under Section 139(9) asking the taxpayer to rectify the errors. |
Notice under Section 143(2) | This notice is issued by the Income Tax Department when it wants to scrutinize the taxpayer's return in detail. The taxpayer may be asked to produce documents or other evidence to support the claims made in return. |
Notice under Section 148 | This notice is issued when the Income Tax Department believes that income has escaped assessment and wants to reopen the assessment for a particular year. |
Notice under Section 245 | If the taxpayer has any outstanding tax liability, the Income Tax Department may issue a notice under Section 245 to adjust the refund due to the taxpayer against the tax liability. |
Notice under Section 271(1)(c) | This notice is issued when the taxpayer is found to have concealed income or furnished inaccurate particulars of income. |
Notice under Section 143(3) | This notice is issued after the completion of the assessment proceedings and contains the final outcome of the assessment. The taxpayer is required to pay any tax liability, along with interest and penalty, if applicable. |
Note: It is important to respond to these notices within the specified time period and provide the required information and documents to the Income Tax Department. Failure to do so can lead to penalties and legal consequences.
The required documents vary depending on the type of income tax notice received.
Basic documents needed to reply to an income tax notice include:
- A copy of the income tax notice
- Proof of income source, such as Part B of Form 16, salary receipts, etc.
- TDS certificates, Form 16 (Part A)
- Investment proof, if applicable
It's advisable to seek our opinion of tax experts to review the notice.
After uploading the income tax notice copy, our tax experts will review it and suggest the necessary documents to provide a solution.
Step 1: Within 30 days of receiving the intimation notice under Section 143(1) of the Income Tax Act 1961, the taxpayer should prepare a reply.
Step 2: Failure to respond within the prescribed time will lead to processing the Income Tax Returns with necessary adjustments without providing any opportunity to the taxpayers.
Step 3: Cross-check the name, address, and PAN number mentioned in the notice.
Step 4: Verify the assessment year mentioned and the e-filing acknowledgement number.
Step 5: Revised returns can be filed only when there is a mistake in the original ITR filing. Revised returns must be filed within 15 days.
Step 6: Rectification returns can be filed only when the taxpayer has found any fault or error in the order sent by the Income Tax Department.
Step 7: On page 2 of the notice, the reason for the notice has been issued is mentioned, along with the difference in the income mentioned in the filed returns and Form 16/16A/26AS.
Step 8: If the intimation notice demands payment of an additional tax amount, that is, demand notice, it should be treated as the notice of demand under section 156.
Step 9: If a notice of demand is received, the taxpayer must respond within 30 days to avoid a penalty imposed by the assessing officer, which includes 1% interest per month from the 30-day expiry period.
The Income Tax Act of 1961 mandates that notices, summonses, orders, or any other communication be served by delivering or transmitting a copy through a method sanctioned under the Act. Here are the different methods of serving income tax notices.
Recipient: Income Tax Notices are addressed directly to the individual, but in the case of a minor, they are addressed to their guardian. Rectification of incorrect descriptions of the assessee is possible. However, in cases where the identity of the assessee is entangled with their status, the name mentioned on the return may become relevant.
Service by Post: Income tax notices can be sent by registered post. According to Section 27 of the General Clauses Act 1897, proper addressing, pre-payment, and posting by registered post are necessary to initiate service. Deliveries can be made to any address, employee, agent, or authorized person.
Service by Affixture: If a defendant refuses to sign the acknowledgement or the officer cannot locate the defendant, a copy of the summons or IT notice can be affixed to the outer door or any other noticeable part of their residence or place of business.
HUFs and Partnership Firms: If an assessing officer discovers the total partition of any HUF, income tax demand notice can be served on the person who was the manager of the HUF. If the concerned person is deceased, the notice will be served to all adults who were part of the firm or other Association of Persons. Income tax notice in India concerning the income of the firm or association may be served on any personnel who were former partners or members of the association assessed for taxation.
Closed Business: If a business is closed, the assessing officer has to serve a notice on the person whose income is subject to assessment. In the case of a firm or association of persons, an income tax notice in India will be served on any members who were part of the firm during discontinuation. In the case of a company, An IT notice will be served to the principal officer or director.
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What Should Be Done After Receiving an Income Tax Notice?
- Diligently peruse the IT notice to ascertain its purpose and rationale for issuance.
- Scrutinise the essential particulars provided on the notice to confirm its intended recipient. It is crucial that the notice accurately reflects your name, Permanent Account Number (PAN), address, and other pertinent details to verify its authenticity. Additionally, verify the assessment year specified in the ITR notice.
- Identify any disparities within your income tax return that may have prompted the issuance of the notice.
- Respond to the IT notice within the prescribed time frame to mitigate potential penalties and legal actions.
- Ensure that your response is substantiated by comprehensive and pertinent information.
- Verify that the received notice is duly reflected in your online income tax account.
- Get in touch with the FINAUX expert to navigate the complexities of the notice and the associated proceedings.
Take the first step towards financial empowerment by addressing your tax notices effectively.
With our expertise and personalized support, we aim to alleviate your concerns and resolve your tax notices efficiently. Beyond addressing immediate challenges, our goal is to become your trusted financial well-being partner, offering proactive strategies and insights to help you achieve long-term financial stability and success. With Finaux by your side, you can navigate tax complexities with confidence and pave the way to a brighter financial future.
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