Income Tax Notice
Professional Income Tax Notice Response Services by Casela Advisors
Receiving an Income Tax Notice from the Income Tax Department can be unsettling, but it’s not something to panic about. At Casela Advisors, we specialize in guiding individuals and businesses through every step of responding to Income Tax Notices, ensuring accurate compliance and timely resolution of issues.
What Is an Income Tax Notice?
An Income Tax Notice is an official communication issued by the Income Tax Department to a taxpayer. It may request additional information, clarify discrepancies in a filed return, initiate an audit, demand tax payment, or verify a refund claim. The notice outlines specific requirements—such as supporting documents or explanations—that you must furnish to resolve the matter.
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Common Reasons for Receiving an Income Tax Notice
- Discrepancies in Tax Returns
- Mismatch between declared income, claimed deductions, and department records (Form 26AS).
- Notice seeks clarification or additional proof to resolve mismatches.
- Non-Filing of Tax Returns
- Failure to file an Income Tax Return by the due date triggers a reminder notice.
- Notice prompts you to submit your return to avoid penalties.
- High-Value Transactions
- Transactions (e.g., property purchase, large investments) not aligned with declared income.
- Notice asks for proof of source of funds.
- TDS / TCS Mismatch
- Differences between TDS/TCS shown in Form 26AS and figures in your tax return.
- Notice requests supporting documents (Form 16/16A, challan copies) to reconcile.
- Property Transactions
- Property sale or purchase values declared below guideline values.
- Notice seeks explanations and valuation documents.
- Random Scrutiny Selection
- The Department selects certain returns for detailed examination under Section 143(2).
- Notice demands comprehensive documentation and proof of income/deductions.
- Demand for Tax
- Department calculates additional tax, interest, or penalty due to adjustments in your return.
- Notice under Section 156 specifies amounts outstanding.
- Refund Verification
- If you claim a refund, the department may issue a notice to verify eligibility before processing.
- Foreign Assets or Income
- Discrepancies or incomplete disclosures related to foreign bank accounts, investments, or income.
- Notice requires detailed declaration and supporting proofs
Types of Income Tax Notices
| Notice Type | Description |
|---|---|
| Notice u/s 143(1) – Intimation | Sent to inform taxpayers of arithmetic errors, incorrect claims, or inconsistencies in the filed return. If you wish to revise your return, you must do so within 15 days; otherwise, adjustments are made before processing. |
| Notice u/s 142(1) – Inquiry | Issued when additional documents or information are needed after the return is filed. Requires submission of specific proofs to complete processing. |
| Notice u/s 139(1) – Defective Return | Triggered when a filed return lacks essential information or contains incorrect data. You must rectify defects (upload missing schedules, correct PAN, etc.) within 15 days to avoid return rejection. |
| Notice u/s 143(2) – Scrutiny | Indicates your return has been selected for in-depth examination. You must provide detailed evidence of income, expenses, and deductions. |
| Notice u/s 156 – Demand Notice | Specifies outstanding tax, interest, penalty, or any other sum due from you. Clearly mentions the amount payable and due date. |
| Notice u/s 245 – Adjustment Notice | If the Department intends to adjust a current refund against past unpaid demands, a notice under Section 245 is issued. You must respond within 30 days or the Department may assume your consent for adjustment. |
| Notice u/s 148 – Income Escaping Assessment | Issued when the assessing officer believes you haven’t disclosed certain income or failed to file a return. Requires you to furnish a return of income for the specified assessment year. You must respond to avoid reassessment. |
How Income Tax Notices Are Served
- Direct Delivery
- Notices are addressed to the taxpayer and sent via registered post.
- Ensure your PAN, name, and address are correct to receive notices promptly.
- Posting at Premises
- If the taxpayer is unavailable or refuses to acknowledge delivery, the notice may be affixed at the taxpayer’s residence or business.
- Notices to Groups or Entities
- For Hindu Undivided Families (HUFs), notices go to the HUF Karta or adult members if the Karta is deceased.
- Partnership firms and associations receive notices addressed to current or former partners/members.
- Closed businesses: notice is sent to the individual whose income is assessed; for firms, any partner at the time of closure; for companies, the principal officer or director.
Steps to Take After Receiving an Income Tax Notice
- Read the Notice Carefully
- Identify the section under which the notice is issued, the assessment year, and the specific issues raised.
- Verify Authenticity
- Log in to your e-filing account on the Income Tax Department portal to confirm the notice appears under “View Notices/Order.”
- Check your PAN, name, and address on the notice to ensure it’s meant for you.
- Determine the Issue
- Understand whether the notice relates to mismatched TDS, unreported income, defective return, or demand for additional tax.
- Gather Relevant Documents
- Collect Form 16/16A, challan copies, bank statements, investment proofs, property sale/purchase deeds, and any other documents cited in the notice.
- Prepare a Timely Response
- Draft a reply addressing each point in the notice, attaching documentary evidence (e.g., bank transaction records, audited financials).
- Submit the response through the e-filing portal or at the designated office within the stipulated timeline.
- Seek Professional Assistance
- If the notice involves complex discrepancies or you are unsure how to proceed, consult Casela Advisors’ tax experts. We provide tailored guidance to address every aspect of the notice.
- Track Further Communications
- Monitor your e-filing dashboard and registered email for any follow-up notices or responses from the tax authorities.
How Casela Advisors Assists with Income Tax Notice Responses
- Notice Analysis & Consultation
- Our tax experts thoroughly review the notice to identify the exact issue—whether it’s mismatch in TDS, unreported income, or defective return.
- We offer personalized consultation to explain the implications and outline a response strategy.
- Document Compilation & Verification
- We assist in identifying which documents (Form 16, bank statements, investment proofs, property valuations, etc.) are needed.
- Our team cross-verifies all proofs to ensure consistency with department records (Form 26AS, AIS).
- Drafting & Filing the Response
- Prepare a professional response letter citing relevant sections of the Income Tax Act.
- Attach all supporting documents in the prescribed format and sequence.
- Electronically upload the response via the Income Tax e-filing portal or deliver to the concerned Assessing Officer before the deadline.
- Follow-Up & Compliance Assurance
- Monitor the status of your notice on the e-filing portal.
- Coordinate with tax officers for any additional queries or hearings (if notice u/s 143(2) or 142(1)).
- Ensure any rectification or revised return is filed within the stipulated window to avoid penalties.
- Penalty Minimization & Dispute Resolution
- If the notice involves a demand under Section 156, we assist in calculating interest and penalty, advising on payment options or challenging wrongful demands.
- Represent you before the departmental authorities or appeal to higher authorities if required.
- Ongoing Compliance Support
- Post-notice resolution, we provide guidance on best practices to prevent future notices—accurate TDS/TCS reconciliation, proper documentation of high-value transactions, and timely filing.
Documents Required to Respond to an Income Tax Notice
Depending on the type of notice, you may need:
- Copy of the Income Tax Notice (pdf or hard copy)
- Proof of Income Sources
- For salaried: Part B of Form 16, salary slips, Form 26AS TDS details.
- For professionals: invoices, receipts, bank statement showing receipts.
- TDS Certificates (Form 16A / Form 16) and Challan Copies (Challan 281).
- Investment Proofs (e.g., insurance, mutual funds, fixed deposits).
- Property Documents (sale deed, purchase agreement, valuation reports).
- Bank Statements and Loan Statements (for high-value transactions).
- Accountant / Auditor Certificates (if financial statements have been audited).
- Casela Advisors’ specialists will review the notice, identify required documentation, and guide you on gathering and organizing all proofs for a robust response.
Faqs
FREQUENTLY ASKED QUESTIONS
Check your e-filing account under “View Notices/Order.” Genuine notices appear there and are addressed to your PAN. Verify the notice date, reference number, and your details (PAN, assessment year) to confirm authenticity.
Response timelines vary by section:
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Notice u/s 143(1): 15 days to revise your return.
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Notice u/s 139(1): 15 days to rectify a defective return.
-
Notice u/s 245: 30 days to respond to refund adjustment.
-
Other notices: The deadline is specified in the notice—respond before the deadline to avoid penalties or reassessment.
Yes. Under Section 139(5), you can file a revised return before the end of the relevant assessment year or before completion of assessment, whichever is earlier. For notice u/s 143(1), revise within 15 days of notice receipt.
Ignoring a notice can lead to automatic assessment (best judgment), interest & penalties, or recovery proceedings. Always acknowledge and respond within the stipulated timeframe.
