The Income Tax department issues notices to some assessees and requires them to respond. Abhishek Murali, president, All India Tax Payers’ Association (AITPA), decodes all you need to know about such notices.

What is an income tax notice? What are the common reasons for issuing it?

Once a return of income is filed, it has to be processed and accepted. This is normally a system-driven process. The computer algorithm or Income Tax Officer/Commissioner may determine that the return of income has to be looked into regarding certain specific aspects. This could be due to a computer flagging specific parameters or because information had been received from sources about the taxpayers’ income. Hence, a notice is issued to the taxpayer to check on the same, before making an addition to the income (and increasing the tax payable).

How to check if I have received a notice?

Earlier, notices used to be sent physically to the registered address. Now, it is sent by e-mail and also uploaded on the Income Tax Portal under the taxpayers’ PAN. If you have updated your e-mail ID and mobile number, you will also receive an SMS regarding the same.

What should a taxpayer do when he/she has been issued an income tax notice. What is the deadline for responding to it?

Each type of notice, depending on the subject matter, has a specific deadline. The taxpayer has to mandatorily respond to all notices, even if the reason for notice is incorrect.

What are the consequences if one does not reply within the deadline?

The first consequence would be that the income of the assessee is likely to be increased by the disputed amount (as specified in the notice). If the income has increased, so is the tax payable on the income (along with interest). There is also a penalty that will be levied on the taxpayer for not disclosing their details properly in the return of income. An additional penalty for not responding to the notices can also be levied by the Income Tax department.

What are the key points to keep in mind while replying to income tax notice?

Address all the questions sought by the Income Tax Department. Wherever time is needed to compile information or submit them, request reasonable time. Address only the issue mentioned in the question. Attempting to gain sympathy for a personal issue may not be helpful if it does not specifically address the questions raised.

What can a taxpayer do if an adverse order is passed?

If the Income Tax Order passed (after the notice is issued), is against the taxpayer or adverse, he/she needs to appeal against the order to get remedy. Notices often pertain to subject matters that are complex and can have a larger ramification for the taxpayer. Hence, it would be advisable to seek professional guidance while responding.