Notices under Income tax

Any person may receive a notice that has originated from Income tax department.In this post we will discuss various notices under Income tax act and how to deal with them.

There can be following notices under Income tax act

Demand /Investigation Related/Defective return

Section under which the notice is issued Purpose When Issued
143(1) Summary Assessment This is an assessment based upon the return submitted .Basically this is only an intimation that your return has been processed
142(1),143(2) Notice for Regular Assessment and Initiation of Proceedings respectively. Department selects cases for detailed investigation based upon various criteria .This is called Scrutiny assessment in general parlance
147,148 Notice for assessing the Income which has escaped assessment In certain cases some income is left to be assessed either due to not being reported by the assessee or due to any other reason .This is called escaped from assessment.
131 Basically this is for third party verification During the course of assessment of an assessee there are instances when any transaction is found recorded that has its origin in third party hence to verify that transaction that third party is called for
245 Demand Adjustment Issued for old outstanding demand to be adjusted against any refund
144 Best Judgement Assessment Basically this is a letter of intent issued by the Assessing officer when the Assessee is not co-operating wherein the Notice says that the department now intends to assess the income on the basis of records available with it.This is called Ex-parte assessment in general parlance
200A Intimation of Demand/Refund in case of TDS This intimation is issued after processing of TDS returns
206CB Intimation of Demand/Refund in case of TCS This intimation is issued after processing of TCS returns
139(9) Intimation of Defective Return When there is any defect noticed after filing of return by any assessee the this intimation is issued and the assessee is given time to rectify the defect

Recourse on receipt of notice given above:

Generally the notices are classifiable under two catagories one is for an assessment to be made and another is post facto assessment.

Pre assessment cases:

  1. One should consider the notice in totality 
  2. The reason given for the notice is generally given in the notice itself except when an intended notice of assessment is there in which case also details are provided by the department if asked
  3. After the receipt of notice one should prepare the true affairs of its accounts, income declared etc and file the same with the department along with proper supporting backed by documents such as bank statements, confirmations ,sale and purchase details etc.
  4. Although in all cases of assessments the department sends a detailed questionaire which contains all details required by the department hence once should prepare the documents based upon it.
  5. It is advisable in cases of assessment to consult an expert as many legal issues are to be considered though an assesse can always present its case on its own
  6. In cases of investigation/third party confirmation the reply should be filed with complete details within due time with acknowledgement obtained.
  7. In cases of sec 147/148(Income escaping assessment) if the return has been filed earlier and the assessee feels that the income declared was correct then a statement of such intent should be filed.However if no return is filed then it should be now filed and copy of such return filed should be given with reply.
  8. In cases of sec 144 generally the notice contains a detailed computation which the Assessing officer calculates and intends to impose a tax .In this case the reply should strongly oppose the calculation and should contain your own computation backed with own Income .
  9. Cases of demand adjustment generally arises due to the tax paid by the assessee but not updated in portal.In these cases the proof of tax paid should be provided with the reply.

  Post Facto Assessment cases:

  1.  The notice generally contains the details which should be checked for the reason of demand
  2. if it is found that the demand is correct it should be paid and the reply filed with proof of deposit.Any delay in paying the demand attract interest from the date of demand due which is generally after 30 days of order by which the demand is created.
  3. If it is found that the demand is wrong as per assessee then proper reason should be filed with the department with an acknowledgment of the reply filed.
  4. In cases of defective return the defects should be removed by filing the revised return and filing a reply to the notice online

Penalty/Prosecution Notices

This aspect will be covered in a separate post

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