Filing the income tax return (ITR) isn’t always the end of your tax journey. Even after submission and verification of returns, you may get a notice from the Income Tax Department. While this can seem intimidating, most notices are routine and manageable. Understanding these and responding correctly can help avoid penalties, save time, and maintain peace of mind. If you do get a notice, following these tips can keep you from panicking and inviting further trouble.
- DON’T IGNORE: Every notice has a deadline; missing it can result in penalties.
- USE FORM 26AS & AIS: These will help you to verify and reconcile your income and TDS data.
- BE ACCURATE: Mismatches can lead to additional scrutiny or tax demands.
- ACT PROMPTLY: Even minor notices can lead to complications if unaddressed.
- SEEK EXPERT HELP: For complex notices, consult a chartered accountant or a tax professional immediately.
Here is a simple guide to common income tax notices and how to deal with them.
Section 143(1)
Intimation after return processing
This is the most frequent notice. It compares your filed return with the department’s records. It is sent if there is a TDS mismatch, calculation errors, incorrect deductions, or in case of delayed filing.
What to do
- Log in to the income tax portal and review the notice.
- If correct, no action is needed.
- If tax is payable, pay within 30 days.
- If incorrect, file a rectification with documents.
Section 245
Adjustment against previous dues
If you’re eligible for a refund, but have pending tax dues from previous years, the department may adjust it.
What to do
- Check the notice in your portal under ‘e-Proceedings’.
- Agree or disagree with the reasons within 15 days.
- No response leads to the automatic adjustment of your refund.
Section 142(1)
Inquiry before assessment
This is a preliminary inquiry when your return isn’t filed or the department needs extra details.
What to do
- File your return, if pending.
- Submit the requested documents by the given deadline.
- Ignoring this can lead to penalties or scrutiny.
Section 139(9)
Defective return
If your return has errors or is missing data, it’s considered defective. The common issues it deals with are missing income details and incorrect deduction entries.
What to do
- You have 15 days to correct and re-file.
- Log in, access the notice under ‘e-Proceedings’, and respond.
- Failing to act may make your return invalid.
Section 133(6)
Request for financial information
This notice seeks clarification on transactions like high-value cash deposits or property purchases.
What to do
- Share relevant documents, such as bank statements or agreements.
- Submit within the deadline to avoid further scrutiny.
HRA and TDS mismatch notices
These are sent when your house rent allowance (HRA) claim or TDS details don’t align with the department’s records.
What to do
- Ensure tenant TDS compliance if rent exceeds Rs. .50,000 a month.
- Keep rent receipts and the landlord’s PAN.
- If the mismatch is real, file an updated return and retain documents for future reference.
Section 143(2)
Scrutiny notice
This notice means your return has been selected for a detailed check.
What to do
- Cooperate by submitting all proofs, including income, deductions, or expense claims.
- Attend hearings if called, or respond through the portal.
- No response may lead to tax assessments based on estimates.
Section 148
Income escaping assessment
It is issued when the department believes some income was left undisclosed in previous returns.
What to do
- File a revised return or give explanation as per the notice.
- Justify the source of income and submit relevant proof.
- Ignoring this can lead to the reopening of past assessments and penalties.
Section 271AAC(1)
Penalty for unexplained income
If unexplained income, like sudden large deposits, is found during scrutiny, this notice may be issued.
What to do
- Provide documentation explaining the source of income.
- Penalties of up to 60% apply if the income is found to be unexplained.
