Income Tax News: Important! Want to Avoid Tax Notice? Don't Make THIS Mistake

Income Tax News: A person may receive notice under section 139(9) of the Income Tax Act, 1961 if the Assessing Officer (AO) finds that their income tax return (ITR) is "defective." Let's take an example where you have filed your ITR but your name on your PAN card is spelt differently than it is on the ITR form. Your ITR will be deemed deficient as a result of this. The income tax department will issue you a notice as soon as the ITR is deemed deficient.

What does a defective ITR mean?

"Notice under section 139(9) may be issued to an individual in case his/her income tax return has been declared as defective by the assessing officer on account of incomplete or inconsistent information," states Dr. Suresh Surana, Founder of RSM India, a tax and audit organisation.

The income tax department may designate an ITR as faulty for a variety of reasons. For instance, it is possible for a taxpayer to file his return using the incorrect ITR form, or the taxpayer may have computed his income incorrectly, etc.

Which errors may result in a flawed ITR?

Inaccurate data in AIS

It might be that you filed your ITR with the incorrect challan number, that you paid your advance tax for the incorrect assessment year, or that your employer filed the incorrect TDS return, which caused your Form 26 AS, AIS, and TIS to automatically populate with the incorrect data and cause the problem. It can also occasionally occur that the bank deducting the TDS amount entered the incorrect amount in their TDS returns.

Similar to this, there are a lot of ways you could include incorrect tax information in your filed ITR by accident. Therefore, it would be prudent to always double-check the challans and make sure that the TDS information in your AIS (Annual Information Statement) matches the information on your bank records. You can ask the tax agency to make corrections to the information in your AIS if you still believe it to be inaccurate. In the event that the AIS is inaccurate and you remain silent, it will be presumed that all of the information included in the AIS is accurate.

TDS is withheld, but revenue is not disclosed

“Mismatch in income and TDS reported in return with details reflected in Form 26AS of the taxpayer is a common reason for treating a return as defective,” said Vijay Bharech from Deloitte Haskin & Sells LLP, a tax, audit and business consulting firm.

He added, “Do keep in mind that TDS being deducted from income but income not being declared would not be considered as concealment of income. Section 143 provides that the taxpayer should be intimated before an adjustment is made on account of income appearing in Form 26AS."

Although needed, a tax audit was not completed

For FY 2022–2023 (AY 2023–2024), individuals with business income are required to submit their income tax audit report by September 30, 2023. "Even if an audit by a certified CA is required, the ITR will be marked as faulty if it is not completed. Furthermore, if he does not get his accounts audited or does not provide a report of audit under Section 44AB in Form 3CA and Form 3CB or Form 3CD, as the case may be, by the deadline, a penalty under Section 271B may be imposed', stated Naveen Wadhwa, deputy general manager (DGM) of Taxmann, a book publishing company with headquarters in Delhi.

Partial tax payment

The ITR may be deemed defective if the taxpayer has paid taxes in part against their net tax due or if the amount of the tax payment is different from what is indicated as tax payable in the tax return.

How may a defective ITR be corrected?

If the deadline for filing an income tax return in a given assessment year hasn't passed, the taxpayer may file the return as a revised or new one, according to Bharech.

Please take note that, for FY 2022–2023 (AY 2023–24), the deadline for filing an amended return is December 31, 2023. The taxpayer cannot file a new or amended return after this deadline has expired. At that point, responding to the notice would be the only course of action left. Keep in mind that there are situations in which filing an updated ITR is permissible under income tax laws.

Opportunity for Rectification within 15 Days

"The Assessing Officer may provide the individual with an opportunity to rectify the defect within 15 days from the date of receiving the notice. However, the Assessing Officer is empowered to extend the time limit if the individua; makes an application for an extension of time,” said Wadhwa. The ITR will now be deemed invalid if the taxpayer does not reply to the notice. This would indicate that a person did not submit an ITR for that assessment year.

"Submitting an ITR in response to a defective ITR notice does not invite any penalties. However, if the individual fails to file a revised return rectifying the defects, the return will be deemed invalid. In such a scenario, penalties may be imposed on the individual for the non-filing of the ITR,” said Wadhwa.

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