Income Tax News: Got An IT Notice ? Don't Panic ! Check Types, Triggers and Your Smart Response Guide

Getting an income tax notice from the Income Tax Department is a shocking experience for any taxpayer. But one must understand that not every notice speaks of wrongdoings. Oftentimes, they are routine communication or clarification. The most crucial thing to do in such cases is to remain calm, understand the intent of the notice, and respond accordingly within the specified timeframe.

Understanding Types of IT Notices

The Income Tax Act issues various types of notifications, each for a specific purpose:

• Intimation under Section 143(1): This is the most common intimation, an auto intimation after processing of your Income Tax Return (ITR). It informs you whether there is any mismatch between your return submitted and the department's computation, i.e., a demand for additional tax or a refund.

• Defective Return Notice under Section 139(9): Issued if there is a defect or lack of information in your submitted ITR, so it becomes defective. You are allowed to remove the defects.

• Notice under Section 142(1): This is a notice asking you to provide additional documents or information to complete an assessment, or sometimes to file a return if you haven't.

• Scrutiny Notice under Section 143(2): This is where your return has been selected for close examination, usually on pre-specified reasons triggered by their Computer Assisted Scrutiny Selection (CASS) system. It entails a more detailed response with supporting documentation.

• Demand Notice under Section 156: Issued if there is any tax, interest, or penalty to be paid by the taxpayer.

• Notice under Section 148: This is in respect of income escaped assessment, i.e., the department believes that certain income was not reported.

General Triggers for an IT Notice

Several reasons may trigger an income tax notice:

• TDS Mismatch: TDS differences reported in your ITR and appearing in Form 26AS or Form 16/16A.

• ITR Errors/Inaccuracies: Simple data entry mistakes, incorrect deductions claimed, or variation in income reported.

• Non-filing of ITR: In case you are required to file but have not, or have filed a late return.

• High-Value Transactions: High-value transactions like big cash deposits/withdrawals, credit card transactions, or real estate purchases/sales worth more than stated amounts, which you cannot explain in your return.

• Discrepancy in Income: When income sources that are well known to the department (e.g., from renting property, investments) are not reported fully in your ITR.

Your Smart Response Guide

After receiving notice, do the following:

• Read Carefully: Carefully read the specific section, reason, and deadline given in the notice.

• Verify Authentication: Always check the notice on the Income Tax e-filing portal (incometax.gov.in) under the 'e-Proceedings' or 'Authenticate Notice/Order issued by ITD' category. Never respond to suspicious emails or SMS.

• Gather Documents: Gather all the financial records, bank statements, investment proofs, and all other papers about the matter in question.

• Draft a Clear Response: Answer each of the points raised in the notice briefly and clearly. If disputing an error, admit it. If disputing, provide sound reasons and evidence to support them.

• Submit Online: Most responses can be submitted online via the e-filing portal in the 'e-Proceedings' tab. Ensure you receive an acknowledgment of receipt.

Overlooking an income tax notice is the last option, as it can attract penalties, best judgment assessments, or even litigation. A timely and well-documented response is the solution to resolving the matter amicably.