What to Do When You Get an Income Tax Notice

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INTRODUCTION

It is that one email that no one wants to see. A notice from the income tax department now comes on email and causes a panic attack in most homes. It is advisable not to get nervous because every notice need not mean paying more money, or worse, more harassment. There are various types of notices that an individual may receive while some could just be an information alert, others may need the individual to act. Here are some notices that any person may come across and what could be done about them.

TYPES OF NOTICES

A notice can be issued after an income tax return (ITRs) has been filed. But at this stage it may be just an intimation, and there is no need to take any action. The most common form of intimation is under section 143(1). Sometimes it states that the return has been successfully processed. At other times, it may be about adjusting the taxes or tax deducted at source (TDS) and to show additional tax payable or refundable. Usually, any incorrect TDS claims are adjusted. The taxpayer can respond to the notice. If no response is received within 30 days from issue of notice, the adjustment is made. A notice can also be issued if one fails to file his/her return within the prescribed time. Under section 143(2), a notice can be issued requiring the taxpayer to submit his/her return

Apart from these intimations, other notices can be broadly classified into three types. General notice for verification, notice for regular assessment or reassessment and notice for limited scrutiny. A general notice for verification is issued to check transactions. If the notice is about assessment or reassessment then it indicates that the taxpayer’s case has been selected for detailed scrutiny. It will generally be accompanied by a questionnaire seeking information. If the notice is related to limited scrutiny then one has to provide details of particular aspects mentioned in the notice.

HOW TO REPLY

It is advisable to go through the email and do what is needed as early as possible because most notices require timebound response. One can reply to almost all tax notices online, through his/her particular tax filing account on www.incometaxindiaefiling.gov.in. For each tax notice, a particular response procedure has to be followed. Once an assessee receives such an email, he needs to go to income tax account under the head ‘My Account’. The refund and demand status can be seen there. Or, after logging in, click on the ‘My Pending Actions’ tab on the dashboard. The individual can also click on ‘Worklist’ and then ‘For your action’ to see if any demands or arrears are there for his particular account. To respond to any intimation, go to the ‘Response to Outstanding Tax Demand’ tab, select the correct assessment year, and click on ‘Submit’. Then select among these options (based on whether the assessee agrees or disagrees with the tax authority)—demand is correct, demand is partially correct or disagree with demand.

If the assesee thinks the demand raised is correct, then he should click on the option ‘demand is correct’. If any refund is due, outstanding demand along with interest is adjusted against it. If some tax is still due, it should be paid immediately. If the demand is only partially correct, enter the correct and the incorrect amounts, along with reasons. The third choice is ‘Disagree with demand’. There are two choices here—partially or fully disagree. The individual has to mandatorily give one or more reasons as to why the demand is incorrect. Once the response is successfully submitted, the assessee will get a transaction ID. Click on the ‘View’ link under the response column to see what you have submitted. If the content of the notice is simple and you can respond on your own, then do so. But if it is complex, take professional help. The taxpayer can appoint an authorised representative to appear on his behalf. Or, he can accompany the representative during scheduled hearings.

THINGS TO REMEMBER

If the individual don’t respond to the tax notices within the time allotted, there can be various implications. Noncompliance of a tax notice would attract penalty of Rs.10,000 and may lead to judgement assessment by the tax officer. In some cases, prosecution up to one year may also apply. If the individual needs more time to reply, he should request for an adjournment. This decision is up to the discretion of the tax officer. If any person receives an email from the tax department, it is advisable not to be nervous but he should not ignore it either. One should properly go through it and take any corrective measures


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