6 Myths About Income Tax Notices That Cost Business Owners Money

Every notice season brings free advice from relatives, neighbours and WhatsApp groups. "Just ignore it, it's automatic." "Pay it and forget it." Some of this advice is harmless. Some of it can cost you real money.

Here are six myths worth dropping before your next notice arrives.

Myth 1: A notice means I did something wrong

Reality: Many notices are system-generated. A figure in your return differs from AIS, Form 26AS or a processing rule, and a documented reply often settles it. Scrutiny, reassessment and penalty notices are different, and those deserve professional help from day one.

Myth 2: If I ignore it, it will lapse

Reality: The clock keeps running. For proposed adjustments in a section 143(1) intimation, you have 30 days to respond, and if you do not, the adjustment can be made without your side on record. An appeal to the CIT(Appeals) must be filed within 30 days of the order or demand being served, and a delay is condoned only for a reasonable cause.

Myth 3: The new Income-tax Act wiped out old notices

Reality: The Income-tax Act, 2025 came into force on 1 April 2026, but notices and proceedings for earlier years,

Myth 4: I can pick the old regime in my return, like my salaried friends

Reality: Salaried taxpayers choose in the return itself. If you have business or professional income, you must file Form 10-IEA on or before the return due date and quote its acknowledgement number in the ITR. Without it, the return can be processed under the default new regime, and a demand appears. And once you opt out, you can return to the new regime only once.

Myth 5: Paying the demand quickly is always the safe move

Reality: A valid demand keeps accruing interest, so do decide quickly. But check first. A demand caused by a missing acknowledgement or a TDS credit that is not showing can often be corrected with the right proof, and paying blindly means paying for a problem that may not exist.

Myth 6: A short letter saying 'please rectify' is enough

Reality: A vague reply proves nothing. A good reply has one numbered point for each difference, and each point states the figure, the reason and the document that supports it. Keep the tone calm and factual.

What to do instead

1. Verify. Log in to the e-filing portal yourself and confirm the notice appears there. Never click links in the email.
2. Reconcile. Download AIS, TIS and Form 26AS and list every difference from your return.
3. Reply with proof. Send numbered points with documents before the date printed on the notice, and have a CA review it first.