Income tax notices and what should the tax payer do

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The government has extended the Income tax return filing date till August 31st, 2018 which means that you get more time to file the return carefully and ensure that there are no mistakes. However, in case you have received the notice from the Income Tax Authority, there is a process to go about it. Recently, there have been an increase in the number of Income tax notices sent by the department due to changes made in the income tax rules about which most of the income tax payers are not aware.

Section 143(1) – Customary Notice – You don’t have to loose your sleep over this notice from the income tax department because it is just a customary notice as mentioned above and can be categorized as the department’s routine exercise.  In most of the cases, through this notice the authorities just inform you that the return has been processed. You are not required to respond to this notice usually. However, if it states about the mathematical errors or mismatch then in the income tax declared during filing of the return or other issues such as incorrect PAN details, then you would need to take appropriate action. If the notice mentions about any tax is due then you have to pay the same within 30 days of getting the notice. Also, if the authorities have mentioned any amendments to be done, then it should be taken care of immediately to avoid further action or penalties, if any.

Moreover, if any rectification against the intimation needs to be filled, then it should be filled immediately to avoid further complications or penalties, if any.

Notice under section 156: Demand Notice – In case the authorities come across any outstanding dues such as interest, fine, penalty and so on, Income tax notice under section 156 is issued. Assessing officer issues the notice wherein the amount due is mentioned accompanied by the instruction to the tax payer. Until, the tax payer does not clear the tax dues, the interest rate of 1% per month would be charged under section 220. However, under section 221, the authority can also impose a penalty equal to the outstanding dues. If you get such a notice, then it is advices to settle the dues within 30 days and in special cases where the duration given is less than 30 days, it would have been approved by the Join commissioner of Income tax which means that you are liable to follow the instructions and clear all the dues within time limit mentioned.

Inspection Notice – If the Income tax department is seeking any clarification or verification, they would serve you inspection notice under section 142(1) and 143(2). The notice under section 142(1) is issued to the tax payer usually after the related assessment year has ended. There is also a follow up notice under section 143(2) of the Income tax which is sent when the assessing officer is not satisfied with the response to the notice served under 142(1).

Refund adjusted against the Income Tax – Under section 245, the AO would intimate through the notice that the refund has been adjusted against any income tax demand outstanding from the tax assesse. In case the tax payer does not respond to such notice, the refund would be adjusted automatically.

Show cause notice – Under section 148, the tax department serves the show cause notice within four years from the end of assessment years, in case the undisclosed income is above Rs 1 lakh and within six years if income escaped is above Rs 1 lakh or related to any asset outside India but tax is chargeable. The taxpayer has the right to know the reason of the notice served and upon getting the notice he would have to furnish the return under 30 days or the time mentioned by the officer in the notice.


About Author

An MBA in finance, I like to cover the wide range of topics related to Taxation, SEBI, Finance and anything that is Public Helpful. The motive is always to make it simpler for the taxpayers understand the system better and take informed decisions.

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