Take notice of the taxman’s mails

The I-T Dept can issue notices for a range of reasons; respond to them appropriately

The return-filing season is not the only time when the taxman can keep you on your toes. You must consider yourself lucky if the rest of the year passes without any other surprise from him — for, there can be many. One of the most common is the receipt of various notices.

The I-T Department can issue notices for a range of reasons such as non-filing of return, filing of incomplete return or close scrutiny of sources of income. Whatever be the reason, if you don’t respond, you may be asking for trouble. Here are some of the common notices that you must be aware of.

Notices before assessment

Usually, you have time till the end of the assessment year to file your return. For instance, even if you missed the August 31 deadline this year, you can file the return until March 31, 2019, for the income earned in 2017-18, after paying a penalty for late filing. If you don’t meet that deadline, too, you can expect a notice under Section 142(1) from the Tax Department, asking you to file your return.

Even if you have filed your returns on time, you need to be on the vigil. For one, under the 142(1) notice, the department can also get back asking for documents, accounts or other details, for which you will have to respond appropriately. If your return is considered incomplete, you could also get a notice under Section 139(9) for filing a defective return. Earlier, when returns were to be filed with several supporting documents, they were considered defective if the assessee missed out on attachments such as calculation of total income, tax computation, proof of payment of self-assessment tax, etc. Now, since returns are annexure-free, a defective return provision could be invoked, say, if you used the wrong return form, there is a mismatch in the name on the PAN and the return, or specific details such as the bank IFSC code are missing.

If you end up getting such a notice, you need to refile your return within 15 days from the date of receipt of the intimation.

Notices on assessment

Notices under Section 143 are served on assessment or after. A 143(1) notice is sent to all those who have filed their returns. This notice will tell you whether the department agrees with your income and tax calculations for a particular year. If it does, you don’t have to act on the notice. But if the department finds that you have missed declaring an income or have claimed certain deductions for which you may not be eligible, or there is a tax-credit mismatch, it may point these out and raise a demand.

If you agree with it, you need to pay the additional dues within 30 days of receipt of the intimation. Otherwise, if you find any mistakes in the department’s assessment, you can request for ‘rectification’ on the I-T Department’s website.

Under Section 143(2), to ensure you have not understated income or computed excessive loss or under-paid the tax, you may receive a notice to provide any evidence in support of the return and/or be present at the department on a particular date. After taking in to account all relevant material gathered, the assessing officer will make an assessment and determine the tax payable on your part.

Assessment based on Section 143(2) notice is commonly called ‘scrutiny assessment’. To eliminate human interface and bring down the scope for harassment of assessees when they appear in person, scrutiny assessment is gradually being moved online..

Other notices

What if you don’t respond to the notices sent to you? In cases where the return of income is not filed or if there is no cooperation from your side in terms of furnishing information/explanation called for, or if account books are not reliable or are incomplete, the department has the right to do an assessment on its own. In such a case, you will receive a show cause notice under Section 144, asking you why the department shouldn’t proceed with a best judgement assessment.

If the Tax Department feels that any income has escaped from being taxed in the original assessment made under sections 143(1), 143(3) or 144, the same can be brought under the tax net by resorting to assessment under Section 147. A notice for assessing such income escaping assessment will be sent under Section 148.

Finally, if the Income Tax Department wants to adjust any refund due to you against any outstanding demand from earlier, it has to notify you before the adjustment is carried out. If the department proposes to do this, it will sent a notice under Section 245, giving you a chance to explain, in case you have any objections.

It is in your best interest to appropriately respond to the notices may you receive. You can approach your auditor or an e-return filing intermediary who provides round-the-year services to taxpayers. If you don’t act on the notices, you may be liable for penalty/prosecution.

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