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Received income tax notice? Here is what it means and what you need to do
August, 20th 2018

Now even a slight inaccuracy in the filing of tax returns can get you a notice from the Income Tax Department.

In a bid to shore up its tax revenue and bring more people under the tax net, the government has tightened the laws related to the filing of income tax return. Now even a slight inaccuracy in the filing of tax returns can get you a notice from the Income Tax Department. However, a notice from the I-T department does not always imply that you are in trouble. There might be several reasons behind such notices. Here are the common income tax notices, what they mean and what you must do upon receiving them.

– Demand Notice (under Section 156):
An I-T notice under Section 156 is issued against outstanding dues such as tax, interest, penalty, etc. Such notices are usually sent post assessment of the return. The notice is issued by the Assessing Officer which specifies the amount due and asks the taxpayer to clear the dues on time to avoid any penalty.

An interest rate of 1 per cent per month (under Section 220) is charged until the clearance of the total outstanding amount. The Assessing Officer can also impose a penalty equivalent to the unpaid amount (under Section 221).

Here is what you need to do:-

After receiving such demand notice from the I-T department, the individual must deposit the outstanding dues within 30 days of receiving the notice. Moreover, in special cases, the assessee may have less than a month to clear the dues.

– Customary Notice [under Section 145 (1)]:
In case such a notice has arrived at your doorstep, then there is nothing to worry. Notice from the I-T department under section 145 (1) is just a customary cum intimation given to an I-T assessee as a part of the department’s routine exercises. Normally, it is just an intimation which states that the income tax return has been processed successfully. This intimation can be sent by the tax department till the expiry of one year from the end of the financial year in which the return is filed.

Here is what you need to do:-

Usually, there is no need to respond to such notices unless there is a mention of some mathematical error in income declared or some kind of mismatch while filing the returns. If there is any outstanding amount, it needs to be paid within a month.
Also, if there is any kind of correction needed against the intimation which needs to be filled, it should be done immediately to avoid any complications or penalties.

– Inspection notices [under Section 142(1) and 143(2)]:
Such notices are issued, whenever the governing body requires any kind of verification, clarification or reassessment. The notice under section 142(1) can be issued by the I-T department after the related assessment year has ended.

The notice under Section 143 (2) is sent by the department to follow up for the notice sent under Section 142 (1), if the Assessing Officer is not satisfied with the response or failure of submission of required documents.

Here is what you need to do:-

Upon receiving the notice under Section 142 (1), the individual needs to respond within the stipulated time mentioned in the notice. For the notice under Section 143 (2), which is a follow-up notice, an individual might have to appear before the Assessing Officer personally or via a representative.

– Show cause Notice (under Section 148):
A show cause notice under Section 148 is issued when the I-T department is of the view that the taxpayer has not revealed all the sources of income to escape tax. The notice can be sent by the department within four years from the end of the assessment year, in case the income escaped amounts up to Rs 1 lakh. A notice can be sent within six years if the income escaped is more than Rs 1 lakh or if income related to any asset located outside India but chargeable to tax, is concealed.

Here is what you need to do:-

Provide the return within a month or the time specified in the notice. The Assessing Officer is bound to give the reasons for issuing such notice if the assesses asks for the same.

– Refund adjusted against the tax demand (under Section 245):
This notice under Section 245 is issued when a tax demand is pending with the I-T department and the amount has been claimed as refund. The Assessing Officer would adjust the refund (fully or partially) against any tax demand dues from the tax assessee. There isn’t any time limit to serve/issue such notice to the assessee.

Here is what you need to do:-

The taxpayer has to respond to such notice/intimation within 30 days of receiving it. The adjustment is done automatically if the assessee fails to respond within the stipulated time.

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