Different Types of Income Tax Notices You will Come Across
Income tax is a scary thing for everyone. When you see a notice from the Income Tax Department in your mailbox, you get scared, don’t you? However, income tax notices are not always scary as one may think of. In this post here, we will list 7 such notices and try to understand their meanings so that next time you see one in your mail box. However, we do need to say that there are actually more than 7 income tax notices. We cannot actually cover all of them in a single article. Hence, we will keep our article limited and focus on the most common and most important notices that people receive.
Before we start, you need to know that you really do not need to reply to all income tax notices you receive. Whether you need to reply or not will depend on the nature of the notice you receive. Hence, it is absolutely necessary that you understand the notice properly.
Also, you will not always require the services of a Tax Consultant. A tax consultant is always there to help but there is a problem. The consultant will always have some financial interest and hence, he or she may, on purpose, actually make things a bit complicated for you to understand. The more tangled you become, the more help you will need and hence, the more earnings for the consultant. Thus, it is very important that you do some studies on your own and go for thorough research. This will prevent some unwanted complications and you can better understand the notices that you receive and often end up solving things on your own.
Let us begin…
Type 1: Notice of Defective Income Tax Return – Section 139(9)
This notice is sent when the officer responsible for assessment of the filing things that the filing made by the assessee is incorrect or is defective. Don’t panic! This notice is actually a very robust and comprehensive one. The Assessment Officer actually gives a number of things along with the notice. What does he give? Here are the things that he will give:
- Proper descriptions of the errors that he finds.
- The solutions that you can possibly use to rectify those errors.
What types of defects can you expect? Well, there are several but some of the commonest ones are:
- Incomplete returns.
- Parts of information missing.
- File a wrong income tax return etc.
When you get a notice for this, you will have 15 days to respond to the email. In case you do not do so within 15 days, the file will go for assessment and will simply be rejects.
Now, when you reply to the email, you really do not need to go head and accept whatever the Assessment Officer says. It is not necessary to agree to everything being said. You can actually counter the officer and state the reasons for not agreeing. However, do keep in mind that the counter arguments you are providing abide by the rules. Hence, it becomes very important that you know the Income Tax rules very well.
Type 2: Notice for Likely Concealment or Concealment of Income – Section 131(1A)
There is absolutely not time frame attached to this notice. Remember that this notice once issued means an action will be taken. Exactly when, that is not known. This notice is sent only when the Assessment Officer thinks that you have either concealed your income or there is a likelihood of you concealing the income. What this notice actually means that the Assessment Officer will actually order an investigation or inquiry. You can expect a legal custody of the accounts books and any other document that the officer thinks will be necessary for the inquiry or investigation. So, don’t conceal your income. It will only mean trouble. Also, you do not actually need to reply to this email. There is nothing you can do. If you have concealed or if there is a likelihood of you concealing your income, be ready for an investigation.
Type 3: Notice for Preliminary Inquiry Before Assessment – Section 142(1)
This is a notice that you will receive if you do not file the return within time. However, this notice may also be sent to you if the Assessment Officer needs to verify your Income Tax Return claims, that is, your claim about your income, investment, expenditure etc. In this scenario, you will be required to provide the necessary documents as asked for and required for the inquiry. Once this notice is given, you will have time until the end of the assessment year (AY) to provide the necessary documents. For example, you filed your income tax return and the assessment will be done for year 2016-2017. In such a case, you will have time until March 31, 2017 to cooperate and provide whatever documents have been asked for. If not, the officer may actually order legal custody of accounts and documents to complete the inquiry. In case you did not file your return on your own (for example, a tax consultant can file the income tax return on behalf of you), the time limit given is not valid.
Type 4: Notice Following Up on Notice U/S 143(2)
Well, in the previous point (U/S 142(1)), you will be required to provide necessary documents and proofs that what you have declared is true. However, if you do not respond to that notice within the time provided or if you do respond but the Assessment Officer thinks that the response is not satisfactory, the officer will actually order a detailed inquiry. The Assessment Officer in that case may ask the assessee to:
- Either physically visit the Assessment Officer at his or her office.
- Or, ask the assessee to provide necessary proofs, evidences, particulars and supporting documents to prove the authenticity of the income that has been declared.
You need to act on this notice. There is a time frame for that. You will have 6 months’ time to respond to this notice. These 6 months will be counted from the end of fiscal year for which the return was filed. So, if you filed your return for fiscal year 2016-2017 and you received a notice under section 143(2), you will have time until September 30, 2017 to respond because the fiscal year will end on March 31, 2017 and 6 months will be counted from April 1, 2017, which will end on September 30, 2017.
Type 5: Notice for Assessment of Income Escaped – Section 148
There is a saying – “to err is human”. Every human makes mistake and when it comes to filing income tax returns, mistakes can happen. Also, a new Assessment Officer may come in who may look into previous returns and come to conclusion that the previous Assessment Officer made a mistake. In both scenarios, you can expect this notice.
Wondering? Well, see, assessment may be over and you paid off the taxes. However, even after assessment, the officer may actually think that there was a mistake and some income was not correctly assessed. This is actually very common. In the notice, you may be asked to file a return once again for either assessment or for reassessment or for recomputation.
Are there any specific time frames? Yes, there are! There are two scenarios:
- If the escaped income is INR 1 lakh or less than that, you will given a time frame of 4 years to file a return for the purpose of recomputation, reassessment or assessment. This 4-year time frame will start counting from the end of the assessment year in which the original return was filed and is now being questioned. For example, you filed your return and was assessed in 2016-2017. When this assessment year is complete, you will have 4 years to file a return. This means that you will have to file the return within March 31, 2021.
- If the escaped income is above INR 1 lakh, you will have to file a return within 6 years from the end of the assessment year in which the original return was filed. So, as per above example, you will have time till March 31, 2023 to file a new return.
Type 6: Demand Notice – Section 156
In case you have any dues, the income tax department will demand that money. Money can be demanded for fine, tax, penalty or any other kind of dues. This notice will be issued only and only after the assessment of the income tax return has been completed. However, it is not necessary that the notice will be served immediately. It may be sent to you immediately or it can take years to serve the notice. But be sure that if there is anything pending, you will get this notice. Though the income tax department may send the notice to you anytime after the assessment has been done, you will be obligated to make the payments within 30 days from the date on which the notice was created and sent to you. Usually you get an email so, you will not have to worry about time getting consumed for the notice to arrive you. Once the notice is emailed to you, it will reach to you electronically within a few minutes.
Type 7: Notice for Adjusting Refund Against Demanded Tax – Section 245
This notice is only an intimation that the Income Tax Department will be sending to you. It is very simple and there is nothing to worry about. When the income tax department partially or full adjusts the tax refund for a given assessment year against the tax that the income tax department demands from tax payer. The assessment year for tax demand and that of the tax refund can be totally different. This notice can be sent to you anytime and there is actually no time frame for it.
That’s all for this post. The important notices that you can receive from the income tax department have been explained in the simplest possible language. In case you still have any questions or concerns, feel free to drop us a message. Also remember, if you are receiving any notices under sections 147, 144, 143(3) and 143(1), there is something you need to worry about because these are not just mere notices. They are actually assessments and you will have to comply as request and that too within the given time frame. Failure to do so will actually lead to several problems. Try to avoid those problems. Taxation is a very sensitive issue. So, it is advised that you study about income tax rules and regulations and gain thorough knowledge. It will help you to avoid taxation issues in near future.