When you get a sudden or unexpected notice from the income tax (I-T) department, this could be due to several reasons. For example, you might not have filed an income tax return on time. Or, you might not have reported income correctly, or you may have reported excessive losses, or there could be calculation errors.
“Taxpayers generally receive I-T notices under Section 139(9), 143(1), 143(2), 143(3), 245, 144, 147, 148, 156 (notice of demand) of the Income Tax Act, 1961, due to non-filing of ITR, claiming of inauthentic tax refund, hiding of taxable income, computing excessive tax losses, long term capital gains (LTCG), scrutiny, among others,” says Suneel Dasari, founder, CEO, EZTax.in, an online income tax filing portal.
Here are the things you could do when you receive a sudden I-T notice:
- Check The Basics: “Is it really your name on the notice? Is your PAN number mentioned correctly? Which assessment year is it meant for? Who is the issuing officer? What is their designation? Is there a document identification number? What is it?” says Archit Gupta, founder and CEO, Cleartax, a tax portal .
- Understand The Issue: Read the communication you received end to end. Then, work around the legalese and understand what exactly the I-T department is trying to tell you.
- Figure Out The Discrepancy: The new intimation format has two columns. If a particular row shows different amounts in these two columns, that is the source of your discrepancy.
- You could reply to any tax notice online through www.incometaxfiling.gov.in, a tax filing account. For each tax notice, you need to follow a particular procedure. Once you receive such an email, you need to go to your income tax account under ‘My Account.’ You can check the refund and demand status here. After logging in, you could click on the ‘My Pending Actions’ tab on the dashboard or ‘Worklist’ and then ‘For your action’ to check any demands or arrears that are there for you in your name.
- To respond to any intimation, you need to visit the ‘Response to Outstanding Tax Demand’ tab. Then select the correct assessment year, and click on ‘Submit.’ From among these options, select whether – demand is correct, demand is partially correct, or disagree with demand.
- If you feel the demand raised is correct, click on ‘demand is correct.’ If any refund is due, outstanding demand along with interest is adjusted against it. If there’s some tax still unpaid, you must pay immediately. If your demand is only ‘partially correct,’ you must enter the correct and the incorrect amounts, along with reasons.
- If you click on ‘disagree with demand,’ there are two options – partially or fully disagree. You need to compulsorily give one or more reasons as to why the demand is incorrect.
- After successfully submitting your response, you will get a transaction ID. Next, you need to click on the ‘view’ link under the response column to check what you have submitted. You could also contact your respective assessing officer for further clarification.
- If your notice is simple enough to handle, you could respond to it yourself; otherwise, you must seek professional help. If you fail to respond to the tax notice within a stipulated period, there could be various implications. Non-compliance with a tax notice could attract interest, a penalty of Rs 10,000 for up to a maximum of the total due. This may also lead to judgment assessment by the tax officer. In some cases, prosecution for up to one year may also apply.
- In case you need more time, you could request for an adjournment. However, this decision is up to the discretion of the tax officer.