Dear Neha
First of all check WHAT IS THE ERROR CODE in the notice?
If its Error code 3 than file a return u/s 139(9) keeping all the amounts same, but show some cash balance in Balance sheet and enter 0 in sundry debtors etc.
If its error code 31 than you shall have to maintain books of accounts u/s 44AD. You have to file the return once again and this time Part A of B/S and P&L has to be filed.
IT Dept is correct.. if its error code 31 than check the last 3 IT returns you will come to know that in every year you would have shown income u/h PGBP and the income is more than 1.2 lakhs, and as per section 44AD this year you have to maintain books of accounts......
Best wishes