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Notices Issued Under the Income Tax Act

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3You may be surprised to receive an intimation/notice from the income tax department even if you have filed your income tax returns within the due date. You would not be sure about what it is and how to respond to it. Don’t worry, we will break it down for you to help you understand your notices in detail.

First and foremost, it is important that you understand the difference between an intimation and a notice. There is a very thin line of difference between the two. Intimation is to highlight the outcome of the processing of your return or conclusion of assessment, and you may not be required to act upon it (although there are a few exceptions to it). However, when you receive a notice, it requires you to act on it. Recently, the Central Board of Direct Taxes (CBDT) has notified a new scheme known as Centralized Communication Scheme (CCS). The scheme states that, gradually, all communications will happen in an electronic mode.

Income tax update for section 142(1)

Time limit to respond to Income Tax notices u/s 142(1) issued up to 24.12.2019 is now later of the following:
10 January 2020
Date mentioned in notice

Where the time limit for issue of any notice is expiring between 20 March 2020 and 29 June 2020, such notice can be issued by 30 June 2020.

Let us now understand various notices/intimations issued by the income tax department.

1. Intimation Under Section 143(1)

After having filed your returns, it is electronically processed by the Central Processing Centre(CPC). The income is computed after making the following adjustments to the total income in the return:

  • Any arithmetical error in the return;
  • An incorrect claim (provided the incorrect claim is apparent from the information filed);
  • Disallowance of incorrectly claimed loss or expenditure;
  • Any income which has not been included in the return

Upon successful processing of the return an intimation under section 143(1) is issued by the CPC under any of the three instances:

  • There is tax liability to be paid;
  • A refund has been determined;
  • There is no refund or demand, but there is an increase or reduction in the amount of loss

In case there is a tax demand, then the intimation must be issued within one year from the end of the year in which return has been filed. For example, if you have filed your returns for Assessment Year (AY) 2016-17 on 27 July, 2016, then an intimation can be issued anytime on or before 31 March, 2018.

Processing of return under this section has been made  mandatory even if a scrutiny notice is issued from the AY 2017-18.

2. Notice Under Section 143(2)

The purpose of this notice is to notify the assessee, that the return filed has been picked for a scrutiny. It is pertinent to note that the section under which it will be scrutinized is different from the one in which the notice has been issued. Via a detailed scrutiny, the assessing officer intends to be assured that you have not done any of the following:

  • Understated your income;
  • Claimed excessive loss; or
  • Paid lesser taxes

Through this notice, the taxpayer is required to respond to the questionnaire issued along with the documents required by the income tax department. The assessing officer is supposed to service this notice within 6 months after the completion of the assessment year to which it pertains.

For instance, Rohit filed his return on 20th May 2018 for the AY 2018-19. Here notice under section 143(2) can be issued to Rohit within 6 months after completion of the AY to which it pertains i.e. 30th September 2019.

Are you not sure about what to do with such an income tax notice? Use our Notice Upload Facility to allow us to help you out. Alternatively, you can even seek the help of a Tax Expert.

3. Notice Under Section 148

An assessing officer may have a reason to believe that you have not disclosed your income correctly and therefore, you have paid lower taxes. Alternatively, you may not have filed your return at all, even if you must have filed it as per law. This is termed as income escaping assessment. Under these circumstances, the assessing officer is entitled to assess or reassess your income, according to the case.

Prior to making such assessment or reassessment, the assessing officer should serve a notice to the assessee asking him to furnish his return of income. The notice issued for this purpose is issued under the provisions of Section 148. There are various timelines to be adhered to for the issuance of notice under Section 148 and they are:

Upto four years from the end of the relevant AY:

Notice cannot be issued by any officer below the rank of Assistant Commissioner or Deputy Commissioner. An assessing officer can only issue a notice under Section 148 on the direction of the Joint Commissioner after recording the reasons to do so.

For AY 2017 -18 notice under section 148 can be issued till 31st March 2022

Beyond four years but upto six years from the end of the relevant AY:

Notice can only be issued by the Chief Commissioner or Commissioner is satisfied that income has escaped assessment. The amount of income which has escaped assessment should be more than Rs. 1,00,000.

For AY 2017 -18 notice under section 148 can be issued till 31st March 2024

Beyond four years but upto sixteen years from the end of the relevant AY:

Notice under section 148 can be issued if income in relation to any asset (including financial interest in any entity) located outside India, is chargeable to tax in India but has escaped assessment.

For AY 2017 -18 notice under section 148 can be issued till 31st March 2034.

4. Notice Under Section 245

If the assessing officer has reason to believe that tax has not been paid for the previous years and he wants to set off the current year refund against that demand, a notice under Section 245 can be issued. However, the adjustment of demand and refund could be done only if you have been provided a proper notice and an opportunity to be heard.

The timeline to respond to the notice is 30 days from the day of receipt of the notice. If you do not respond within the aforesaid timeline, the assessing officer can consider this as a consent and proceed with the assessment. Therefore, it is advisable to respond to the notice at the earliest.

5. Notice Under Section 142(1)

A notice under section 142(1) can be issued under two circumstances:

  • If you have filed your return, but the assessing officer requires additional information and documents; or
  • If you have not filed your return, but the assessing officer wants you to file it.

The information is called for, to enable the officer to make a fair assessment. Being non-responsive to this notice has consequences,

  • A penalty of Rs 10,000 can be levied for each such failure
  • Prosecution which may extend up to 1 year
  • Both of the above