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What to do if you get an income tax notice
September, 09th 2016

It is that one email that you don’t want to see. A notice from the income tax department now comes on email and causes a panic attack in most homes. Don’t get nervous because every notice need not mean paying more money, or worse, more harassment. There are various types of notices that you may receive; some could just be an information alert, others may need to you act. Here are some notices that you may come across, and what you need to do about them.

Types of notices

A notice can be issued after an income tax return (ITRs) has been filed. But at this stage it may be just an intimation, and you don’t need to take any action. “The most common form of intimation is under section 143(1). Sometimes it states that your return has been successfully processed. At other times, it may be about adjusting your taxes or tax deducted at source (TDS) and to show additional tax payable or refundable,” said Archit Gupta, chief executive officer and founder, Cleartax.in. “Usually, any incorrect TDS claims are adjusted. The taxpayer can respond to the notice. If no response is received within 30 days from issue of notice, the adjustment is made,” he added.

A notice can also be issued if you fail to file your return within the prescribed time. “Under section 143(2), a notice can be issued requiring the taxpayer to submit her return,” said Gupta.

Apart from these intimations, other notices can be broadly classified into three types. “General notice for verification, notice for regular assessment or reassessment and notice for limited scrutiny,” said Neeraj Agarwala, partner, Nangia & Co, a chartered accountancy firm.

A general notice for verification is issued to check transactions. For example, “a taxpayer may receive a notice of cash deposit or initial public offer (IPO) subscription,” said Agarwala. “Such notices typically require you to only confirm whether you have filed your return and if this transaction was included. This notice should not be construed as a scrutiny notice,” he added.

If the notice is about assessment or reassessment, “it indicates that the taxpayer’s case has been selected for detailed scrutiny. It will generally be accompanied by a questionnaire seeking information,” said Agarwala.

If the notice is related to limited scrutiny, you have to provide details of particular aspects mentioned in the notice.

Go through the email and do what is needed as early as possible because most notices require time-bound response.

You can reply to almost all tax notices online, through your tax filing account on www. incometaxindiaefiling.gov.in. For each tax notice, a particular response procedure has to be followed. Once you receive such an email, access your income tax account under the head ‘My Account’. Here you can see the refund and demand status. Or, after logging in, you can click on the ‘My Pending Actions’ tab on the dashboard. You can also click on ‘Worklist’ and then ‘For your action’ to see if any demands or arrears are there for you.

To respond to any intimation, go to the ‘Response to Outstanding Tax Demand’ tab, select the correct assessment year, and click on ‘Submit’. Then select among these options (based on whether you agree or disagree with the tax authority)—demand is correct, demand is partially correct or disagree with demand.

If you think the demand raised is correct, then click on the option ‘demand is correct’. If any refund is due, outstanding demand along with interest is adjusted against it. If some tax is still due, pay immediately.

If the demand is only partially correct, enter the correct and the incorrect amounts, along with reasons.

The third choice is ‘Disagree with demand’. There are two choices here—partially or fully disagree. You have to mandatorily give one or more reasons as to why the demand is incorrect.

Once you successfully submit your response, you will get a transaction ID. Click on the ‘View’ link under the response column to see what you have submitted. You can also contact your respective assessing officer for clarification.

If the content of the notice is simple and you can respond on your own, then do so. But if it is complex, take professional help. “The taxpayer can appoint an authorised representative to appear on her behalf. Or, she can accompany the representative during scheduled hearings,” said Agarwala.

Things to remember

If you don’t respond to the tax notices within the time allotted, there can be various implications. “Non-compliance of a tax notice would attract penalty of Rs.10,000 and may lead to judgement assessment by the tax officer,” said Agarwala. In some cases, “prosecution up to one year may also apply,” said Gupta.

If you need more time to reply, request for an adjournment. “This (decision) is up to the discretion of the tax officer,” said Gupta.

If you receive an email from the tax department, don’t be nervous about it but don’t ignore it either. Read through it and take corrective measures if needed. If you find the matter difficult to resolve, take an expert’s advice.

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