139(9) – How to Respond to a Defective Return Notice?

Making a mistake or two is completely normal when you're doing something you don’t often do or are not used to doing – like filing income tax returns. Sometimes we may miss entering certain information. Sometimes there could be an error. In these situations, your return is labelled as a ‘defective return,’ and the income tax department will issue a notice of defective return as per Section 139(9). This notice aims to help you correct any mistakes. However, if these issues aren't fixed promptly, they could lead to some undesirable consequences. In this article, we will discuss scenarios that can result in your return being marked as defective, along with how to respond to the defective return notice u/s 139(9).

What is a defective return?

The tax authority sends out a defective return notice when they find mistakes or inconsistencies in your ITR. These mistakes might involve missing or conflicting information, errors in calculations, or other issues. The purpose of this notice is to prompt taxpayers to correct these errors and make sure that their tax return provides precise and complete information.

Defective return notice is issued under section 139(9) via an email to your registered email id. You can also access the same on the income tax e-filing portal.

How will I receive notice u/s 139(9)? 

IT Department will issue the notice u/s 139(9) to your email ID registered with the income tax department. The subject of the email will be 'Communication under section 139(9) for PAN AWZXXXXXXX for the Assessment Year 2023-24'.

What is the password for 139(9) notice?

The defective return notice is attached in the email and password protected. The password to open defective return notice u/s 139(9) is PAN in lowercase followed by date of birth in DDMMYYYY format. 
Example: if your PAN is MNOPQ1212C and your date of birth is 12/10/1987, the password would be: mnopq1212c12101987

Time limit to respond to defective notice

If you receive a defective return notice, you must respond within 15 days of receiving the notice. If the response is not filed within 15  or the extended days allowed, the original return filed is treated as an invalid return. Consequently, your refund will also not be processed, if any.

Situations in which defective return notice will be issued

The Assessing Officer may consider the below-mentioned reasons, errors or omissions while issuing a defective return notice under section 139(9):

1. Incomplete Income Tax Return (ITR): If the ITR lacks necessary details in its annexures, statements, or mandatory columns, such as income from all sources are not mentioned, etc.

2. Missing Tax Information: If taxes have been paid but their details are omitted in the ITR, including information about TDS, TCS, advance tax, or self-assessment tax.

3. TDS and Income Mismatch: TDS is claimed. but corresponding income is not offered for tax in the ITR. 

Example: If you have earned interest income from term deposits and tax has been deducted by the bank, both interest income and tax deducted should be reported in the ITR. However, while filing a return through Cleartax, all your income details will be auto-populated from the income tax department and there is also an option to upload 26AS which will help in preventing such discrepancies right from the start.

4. Bookkeeping Issues: Incomplete or non-submission of mandated books of accounts, such as trading accounts, Profit and Loss accounts, Balance sheets, and others may lead to defective return notice.

5. Income Tax Audit Concerns: If an audit is required to be done under section 44AB, the complete audit report, including profit and loss account, Balance sheet and auditors report, should be submitted. In the absence of these documents or submission of an incomplete audit report, you may invite a defective return notice.

6. Cost Audit Non-compliance: Failure to submit 'Cost Audit' details as required by the Companies Act, 2013, can lead to a defective return notice.

7. Presumptive Taxation Inaccuracies: In cases of presumptive taxation, providing inaccurate computation of presumptive income, non-disclosure of relevant details, or mismatched gross receipts can trigger a defective return notice. 

Example: For instance, gross receipts not mentioned in the Profit and Loss account, or the amount mentioned is more than Rs. 2 crore in ITR 4, will lead to a defective return notice.

8. Tax Payment Discrepancies: If taxes are partially paid or the paid amount doesn't align with the tax liability in the ITR, a defective return notice may be issued.

9. Incorrect details in ITR: Filing an ITR with incorrect details regarding turnover, income limits, or inappropriate reporting for a specific head of income can lead to a defective return notice.

10. Mismatch in the name: When the name mentioned in the ITR does not match the name on the PAN card.

How to Respond to Defective Return Notice u/s 139(9)?

If the Assessing Officer considers the return to be defective, then a notice will be sent to the taxpayer. The taxpayer will have 15 days time to respond to the notice.

• Revise your return addressing the defects pointed out by the Income Tax Department within 15 days.
• If you are unable to complete these revisions within the given timeframe, you have the option to seek an extension.

If the defect is not rectified within a period of 15 days or the extended days allowed, your return may be treated as an invalid return. This could potentially lead to consequences like interest, penalty, non-carry forward of losses and forfeiture of specific exemptions.

How to revise your income tax return in response to the notice

Step 1: Check the reason for defective notice.

An income tax return (ITR) may be marked defective for various reasons. Say you have received a defective notice because there is a mismatch between Form 26AS and your ITR. Download Form 26AS from the IT portal and check if you have earned any income on which tax has been deducted, for e.g.:

• interest income from term deposits;
• dividend income or 
• any other income 

Ideally, you should have reported both your income and the tax deducted in your ITR. However, if you claim only TDS but miss out on reporting the income, you may receive a defective notice. 

Step 2: Once you identify the reason, log in to ClearTax and revise your return

Steps on how to respond to defective notice u/s 139(9) on Cleartax:

1. Log in to ClearTax with your credentials.

2. On the top right corner >> Click on ‘My Account’ >> Select ‘My Tax Returns’ from the dropdown menu as shown below.

3. Click on ‘View details’, scroll further down, and click on ‘Mark your ITR as Revised’.

4. Add the income details you missed disclosing in your original ITR and rectify the defect. Make sure you are correctly addressing the error due to which the return was considered defective.

5. After making the necessary changes, kindly check if any tax is payable. If yes, then make the payment and update the challan details. (Refer to this guide) 

6. Once done, go to ‘My Accounts’ section again >> click on ‘Prepare Rectification JSON u/s139(9)’. 
 

7. Click on ‘My tax return is final and ready for filing under section 139(9)’. Enter CPC Notice number and date of notice from the email you received from the department and click on download JSON.

You will have to upload this JSON file on the income tax portal. The steps are listed below.

Step 3: Steps on how to respond to defective notice u/s 139(9) on income tax portal
1.  Log in on the e-filing website with your user ID (PAN/Aadhaar number) and password.
2. Click on ‘Pending Actions’ and then select ‘E-proceedings’. 

3. Click on the ‘View Notices’. Here, you can view the notice and submit your response. After reading the notice, click on ‘Submit Response’.
 

4. You can see the error description to understand the defect and its probable resolution is also mentioned alongside.
If you agree with the error details, select the ‘Agree’ option and ‘Offline utility’ as the mode of response.

5. Complete the ITR filing by uploading the JSON file that you downloaded from Cleartax.
6. If you disagree with the defect, you can proceed by selecting the ‘Disagree’ option. You will also have to give reasons for disagreement in the text box provided.

7. Check the box ‘Response cannot be modified after submission’ and then click on ‘Submit‘.
8. Now click on the ‘Proceed to e-verify‘ button to e-verify your response for defective notice u/s 139(9). You can e-verify by any of the methods.
9. You will see a confirmation message with an acknowledgement number on the screen upon successful uploading.