Received an Income Tax notice after filing? don't panic, do this first
What triggers an income tax notice?
An income tax notice can be triggered by issues as straightforward as a mismatch. This occurs when the income you have declared does not match with the data available in your Form 26AS or AIS (Annual Information Statement). Other common triggers include missing documents, claiming a deduction without adequate supporting evidence, or not reporting certain interest income.
Furthermore, high-value transactions, such as a substantial bank deposit, a property acquisition, or significant credit card expenditures, can draw the tax department's attention.
In most instances, these are not indicative of fraud or malpractice, but rather discrepancies or gaps in information. Fortunately, these issues are typically resolvable. Here are the key steps you should take upon receiving such a notice.
Read the notice carefully and understand its purpose
Notices are issued under various sections of the Income Tax Act, each serving a distinct purpose. For example:
Section 143(1): This represents the initial, automated assessment of your tax return. The Income Tax Department compares your submitted return with the data it already possesses, including TDS details, bank interest, or income from other sources. If all information aligns, you will receive an intimation confirming it. However, if a discrepancy is identified, this notice may inform you of an adjustment to your tax liability or refund amount.
Section 139(9): A notice under this section indicates that your tax return is considered 'defective' due to missing or incorrect information. It requires you to rectify the identified deficiencies.
Section 143(2): Conversely, receiving a notice under this section signifies that your return has been selected for a detailed scrutiny by the tax department. A tax officer will conduct a thorough examination to verify your income, deductions, and claims.
Check the notice date and respond within the deadline
Every notice specifies an issue date and a deadline for your response, typically ranging from 15 to 30 days. Failure to adhere to this deadline could result in the department processing your return without your input, or even the imposition of penalties. What's most important is to act promptly, even if it requires seeking professional assistance.
Match your Form 26AS and AIS with your return
You may receive a notice if there is a discrepancy between the income reported in your tax return and what is reflected in your Form 26AS or AIS. The system will flag instances where you have overlooked reporting income from sources such as bank interest or dividends.
For example, if you declared ₹10 lakh as total income, but your AIS indicates an additional ₹25,000 from unrecorded fixed deposit interest, you could receive a Section 143(1) notice adjusting your tax liability. To prevent such scenarios, it is always advisable to cross-verify your Form 26AS and AIS before filing, particularly if you derive income from multiple sources.
Respond on the income tax portal with supporting documents
You can conveniently submit your response online through the official Income Tax portal. Simply upload all relevant documents, like salary slips, TDS certificates, or investment proofs, and provide your clarification under the 'e-Proceedings' tab.
Don't hesitate to seek professional help if the matter is complex
While straightforward notices can often be managed independently, more complex situations, such as scrutiny notices under Section 143(2) or reassessment under Section 148, may warrant the expertise of a tax professional.
Don't let a tax notice cause undue stress. While some may indicate errors, many are simply part of the standard process, and solutions are always available. Your best approach is to examine it closely, respond without delay, and get expert help if the situation is complex.
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Here's what they said: Rahul Sateeja, Partner, DMD Advocates, says: 'This ruling marks a significant development in tax penalty jurisprudence. It emphasises that even under the newer Section 270A regime, tax penalties are not merely about ticking boxes but involve a fair process that considers the taxpayer's intent and actions. The key takeaway from this ruling is that it reassures taxpayers that if they are honest and proactive—even when faced with mistakes or misleading advice—they are protected by law. Salaried taxpayers and those relying on consultants now see a tribunal recognising their situation and not penalising them for third-party misleading advice or fraud.' Gopal Bohra, direct tax partner, N. A. Shah Associates LLP says: 'In this case, the taxpayer was unaware about the incorrect or excessive claims made by the consultant in his income tax return and had relied entirely upon the consultant's expertise. 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