Demand notice issued against updated return filed

ITR 620 views 3 replies

Sailendra Damaraju

5 Points Joined November 2024

Hello Experts,

I’m seeking guidance regarding a Demand Notice issued for an updated return for ITR AY 2021-22. Here’s a summary of the situation:

Initially, we filed the Original Return but missed reporting an amount of approximately ₹90,000. After three months, we consulted the same CA, who advised us to seek assistance from another CA to file an updated return due to his prior commitments.

The second CA, after reviewing the situation, recommended filing an updated return as well. Both CAs cross-checked the TDS amounts provided by the employer.

Issue with Demand Notices:

1. First Demand: The Original Return triggered a demand of around ₹4.25L. Both CAs mistakenly entered two key amounts incorrectly:

The amount meant for Section 10(10A) was entered under Section 10(10AA).

Similarly, the amount for Section 10(10AA) was entered under Section 10(10A).

We corrected this by filing a rectification request to interchange the values, and the demand was subsequently removed by the ITD.

2. Updated Return Demand: After filing the updated return, two demands (with the same DIN) were issued for AY 2021-22:

Demand 1: ~₹5.4L (₹4.25L plus interest and penalty, totaling around ₹8L).

Demand 2: ~₹16.4K (tax for additional income in the updated return, including interest, totaling around ₹22.5K).

Initially, our CA advised us to disagree with both demands. After four months, with accumulating interest, we consulted a third CA, who advised us to agree to the second demand since it was accurate. Not realizing both demands had the same DIN, we uploaded a challan to respond, which inadvertently agreed to both demands.

Attempts to Resolve:

We approached the JAO after the Demand Facilitation Center suggested it. However, the JAO mentioned they lack the access needed to make changes, recommending rectification through the Income Tax Department instead. Unfortunately, the rectification dashboard shows an error ("Total Income sought to change. Rectification doesn’t allow that") when we attempt to upload a corrected JSON file with the reversed amounts.

Currently, if this issue remains unresolved, the demand could exceed ₹12L due to continued interest accumulation.

Clarification of Section Details:

Commuted Pension Value: ₹17L (to be entered in Section 10(10A))

Leave Encashment: ₹3L (to be entered in Section 10(10AA))

However, they were mistakenly entered as:

Section 10(10AA): ₹17L

Section 10(10A): ₹3L

Could you please advise on the best course of action to resolve this situation? Any assistance would be greatly appreciated. Thank you!

Replies (3)

Rama chary Rachakonda

Master in Accounts & high court Advocate

9447 Points Joined December 2011

Firstly, it's important to acknowledge that mistakes have been made in the past, and it's essential to correct them to avoid further complications.

Based on your summary, here are some key points to address:

1. Rectification of Original Return: You have already filed a rectification request to correct the mistakes in the Original Return. Ensure that this rectification is processed and accepted by the ITD.

2. Updated Return: Since you have already filed an updated return, focus on resolving the demands related to it.

3. Demands with the same DIN: Unfortunately, you have agreed to both demands inadvertently. Now, you need to rectify this mistake.

To resolve this situation, consider the following steps:

A. Rectification of Updated Return: - File a revised updated return with the correct information, ensuring that the mistakes are rectified. -

Use the correct sections for Commuted Pension Value (Section 10(10A)) and Leave Encashment (Section 10(10AA)).

B. Rectification of Demands: - Since you have already agreed to both demands, you need to approach the ITD to rectify this mistake. -

Explain the situation to the ITD and provide evidence of the mistakes made. - Request them to remove the incorrect demand (₹5.4L) and only consider the correct demand (₹16.4K).

C. Communication with ITD: - Ensure that you maintain clear communication with the ITD, providing all necessary documentation and explanations. - Follow up regularly to ensure that your rectification Further Complications: -

Ensure that all future filings and communications with the ITD are accurate and timely to avoid further complications. By following these steps,

you should be able to resolve the situation and minimize any additional interest or penalties.

Sailendra Damaraju

5 Points Joined November 2024

Hi Sir,

Thank you for your prompt advice on the matter.

In your response, File a revised updated return with the correct information, ensuring that the mistakes are rectified. ~ this mean Rectification?

If yes, I tried doing this way ~ Services > Rectification> New Request> Return Data Correction (offline) and uploaded ITRU.json as corrected by CA.

I'm getting this error:

The rectification request being sought to be filed cannot be considered by CPC. You may approach your jurisdictional Assessing Officer with an application for rectification u/s.154 of the Act.

Under Section 154 of Income Tax Act 1961, an application for rectification can be filed only to correct mistakes apparent from records. In the rectification request filed, Gross total income/Total income is sought to be changed. This is not a mistake apparent from record. Hence your rectification request cannot be entertained.

Attached image for the same.

thank you.

Sailendra Damaraju

5 Points Joined November 2024

Originally posted by : Rama chary Rachakonda
	Firstly, it's important to acknowledge that mistakes have been made in the past, and it's essential to correct them to avoid further complications. Based on your summary, here are some key points to address: 1. Rectification of Original Return: You have already filed a rectification request to correct the mistakes in the Original Return. Ensure that this rectification is processed and accepted by the ITD. 2. Updated Return: Since you have already filed an updated return, focus on resolving the demands related to it. 3. Demands with the same DIN: Unfortunately, you have agreed to both demands inadvertently. Now, you need to rectify this mistake. To resolve this situation, consider the following steps: A. Rectification of Updated Return: - File a revised updated return with the correct information, ensuring that the mistakes are rectified. - Use the correct sections for Commuted Pension Value (Section 10(10A)) and Leave Encashment (Section 10(10AA)). B. Rectification of Demands: - Since you have already agreed to both demands, you need to approach the ITD to rectify this mistake. - Explain the situation to the ITD and provide evidence of the mistakes made. - Request them to remove the incorrect demand (₹5.4L) and only consider the correct demand (₹16.4K). C. Communication with ITD: - Ensure that you maintain clear communication with the ITD, providing all necessary documentation and explanations. - Follow up regularly to ensure that your rectification Further Complications: - Ensure that all future filings and communications with the ITD are accurate and timely to avoid further complications. By following these steps, you should be able to resolve the situation and minimize any additional interest or penalties.