It is common for the taxpayers to get anxious when they receive the Income Tax Notice. But not every such notice requires concern. Here are the few cases in which the taxpayers need not worry more because most of the notices require a simple request for clarification, so recognizing the nature of the notice may reduce the unnecessary panic and ensure timely compliance too.
Situations where you need not worry much
These notices can be generally resolved with a prompt and timely response.
1. Mismatch in Form 26AS/TIS with your income tax return filed
Minor discrepancies in the income reported, TDS, or any financial transactions
Illustration:
You declared salary income of Rs 12,00,000, but your Form 26AS shows salary income of Rs 13,00,000 and TDS on salary of Rs 10,70,000.
The CPC sends a notice asking for clarification of the mismatch.
Action: With such income mismatch, determine the nature of such mismatch, and if Form 26AS is found to be correct, file the revised return, or in the case of TDS mismatch, you simply upload the employer's revised Form 16 or file a rectification after employer correction.
2. Intimation u/s 143(1) with small variation/adjustment
Disallowance is due to a mismatch in the deductions so claimed; it needs to be addressed immediately through a response or filing rectification.
Illustration:
You claimed Rs 25,000 for medical insurance (80D), but the system detects a data mismatch and allows Rs 20,000. The intimation reflects a small change in refund or tax payable.
Action: If the claim is correct, file a rectification with proof; otherwise, accept the adjustment.
3. Routine verification of documents towards the confirmation of deductions claimed or income disclosed
The department may seek supporting documents to verify deductions (e.g., 80C, 80D, HRA) or some income disclosures. These are not scrutiny proceedings.
Illustration: You claimed a significant amount of HRA exemption but forgot to upload rent receipts or failed to provide any proof, and then the department asks for proof.
Action: Upload rent receipts and landlord PAN. The issue gets closed, and this may not convert into scrutiny unless major discrepancies exist.
4. Request for additional documentation as supporting
Some intimations may simply require some documentation proof.
Illustration: You have deposited more than Rs 10 lakh in your bank account. A query is issued asking whether these deposits represent savings, loans, or business receipts to determine the nature of income.
Action: Upload your bank statement along with the explanation as required.
5. Auto-generated reminders towards everification or advance tax, etc.
Situations where you should pay immediate attention
1. Notice received under section 143(2) towards scrutiny (asking for all the information and explanations)
The Assessing Officer may call for complete information, evidence, and explanations. Prompt and timely compliance is required in these cases.
Illustration: You showed a turnover of Rs 80 lakh, but AIS reflects bank credits of Rs 1.2 crore. The Assessing Officer issues a 143(2)-notice asking for books of accounts, bank reconciliations, expense proofs, and explanations for differences, if any.
Action: Respond with detailed documentation. Not responding to this notice can lead to best-judgment assessment and penalties.
2. Intimation u/s 143(1) with very huge variation or demand notice to pay such differential tax
If a significant demand is raised due to mismatch, disallowances, or incorrect reporting, it must be addressed immediately through rectification, response, or appeal, as applicable.
Illustration: CPC disallows your entire 80C or 80D deductions due to mismatched data and raises a demand of Rs 125,000.
This is not routine and needs urgent action.
Action: Review reasons and file rectification or file appeal if needed.
3. Notice received due to non-filing of income tax return for a particular financial year
If the department believes income is taxable but no return is filed, responding and filing the pending return will be required to avoid penalty or prosecution.
Illustration: You sold shares for Rs 25 lakh or have some other capital gains but did not file ITR, assuming gains were exempt. The system flags such kinds of transactions and issues a notice asking why a return is not filed.
Action: File the pending return immediately with explanation. Failure to comply thereof may lead to penalty or prosecution in extreme cases.
4. Any reassessment proceedings under section 148.
Notice under Section 148 indicates that income may have escaped assessment. These proceedings are serious and time-bound. Immediate action will be necessary.
Illustration: The department receives information that you purchased property worth Rs 80 lakh but did not report related income sources. A notice under Section 148 is issued, reopening your assessment.
Action: Submit the return in response to 148 along with the explanation to the queries mentioned in the notice.
Receiving notices does not always mean trouble because timely responses resolve most of the cases easily. However, notices relating to scrutiny, large mismatches, under-reporting, or reassessment should never be ignored. Timely compliance protects the taxpayer from penalties, interest, further scrutiny, and prosecution exposure (rare, but possible in serious non-compliance).
CAclubindia
