There are many scenarios where the Assessing Officer (AO) or Department of Income Tax can send Income tax notice or ask for any document or clarifications from an individual. There is an irreplaceable fear in individual of Income tax intimation/ notice but Assessing Officer send notice with an intention to verify or inform to an individual. Let’s see all the scenarios.
1. Delay In Filing Income Tax Return
If an individual has a taxable income he/she should file the income tax return (ITR) within the time prescribed under the Income Tax Act, 1961. If the individual has not filled the return, a Income Tax notice will be sent by the Income tax before the end of the assessment year as a reminder to file the return as belated return with fine.
2. Claimed TDS Not Matching FORM 26AS
Under section 143(1) (notice of demand), tax notice is issued if the TDS amount disclosed in ITR does not matched with FORM 26AS or FORM 16 or 16A. Hence, before filling the return make sure that TDS is correctly recorded.
3. Undisclosure of Income
A notice will be issued if the Income Tax department detect any income of person that has not been disclosed in his/her ITR. Hence, the individual should file ITR with all the income honestly. As tax department can find the income of assesses from different sources like banks, employers, etc. Read more : Penalty for not showing the income in Income Tax Return
4. Income Escaped for any previous year
The Assessing Officer can give a notice to the assesse even after filling of return, if he think any income is escaped or return is wrongfully filled under section 148. The notice is supposed to be given within 4 years from the concerned assessment year, if the difference of income is less than Rs 1 Lakh. However, If the income escaped is Rs. one lakh or more the notice under section 148 can be issued within 6 years from the end of relevant assessment year subject to provisions of other section in the act.
5. Tax Refund adjusted
If your income tax refund of current year is adjusted against the tax payable of any Previous Year, a notice will be issued by the Income Tax department to inform you about such practice. The assessment year of tax refund and the assessment year in which it is adjusted can be different.
6. Defective Return
Under section 139(9), if Income tax return filed by an individual is defective then income tax department will issue a notice explaining the defect and how to rectify it. If an individual within 15 days from such intimation doesn’t rectify the return then the return will be considered invalid return. The period of 15 days can be extended at discretion of The Assessing officer. Further if an individual rectifies the defect after 15 days or such extended period but before assessment is made, the Assessing Officer can ignore the delay and consider the return as valid return.
An income tax return will be considered defective if you provide incomplete details or proper documents not attached.
7. Payment Of Advance Tax
If Assessing officer is of the opinion that the individual is liable to pay advance tax, then he will issue an order regarding the amount of advance tax, installment/ installments for the payment of such advance tax. The order can be issued at any time during the assessment year but before the last day of February. Read More: Advance Tax liability : Calculation, Due dates, Interest
8. Capital Gain From Equity
An individual who has income more than Rs 1 Lakh as capital gain from long term on which (Securities transaction tax) STT has been paid shall pay income tax at the rate of 10%. He/she should carefully cross check all the documents while filling the details of such income. As all the records are now available online, any misreporting or miscalculation of such an income can get you a notice from Income Tax Department.
9. High Value Transactions
If an individual has done high value transactions during an assessment year whether the individual has filled ITR or not, Income tax department can send him/her notice enquiring about the source of income and documents regarding those. The notice will be issued within 6 months from the end of the financial year under section 143(2).
10. Investment made in the name of spouse:
If an individual invest in the name of their spouse and earns from it, such income should be disclosed in the ITR of individual under clubbing of income principles. Further if an individual has not disclosed such income he/she is likely to get a notice from income tax department.
11. Sudden changes in income or investment levels
If there is a sudden significant drop in income or a sudden sharp increase in income levels, the tax department will be on high alert. That’s the reason Ratio section of Income is highly important.
12. Choosing the wrong ITR Form
Every year the income tax department releases new and updated Income Tax Return (ITR) forms that have different eligibility criteria. Each ITR form is based upon different sources of income to be reported. Since the forms are revised every year, it may so happen that taxpayers no longer have to file the same ITR they filed last year based on the changes. They may also have to disclose additional details due to introduction of new fields which are added every year. The selection of incorrect ITR form may lead to an intimation from the Income Tax department.
13. Refer to Valuation Officer
Under section 55A or 56(2)(x)(b) related to capital assets, when an assessing officer is of the opinion that value of asset claimed by the assesse is at variance with Fair Market Value (FMV), then the Assessing officer refer that asset for valuation to valuation officer. Further if there is difference in the valuation by the officer and the assesse, the Income Tax department send a notice to the Assesse intimiating the difference and variance in tax according to it.
14. ITR picked for scrutiny
The income tax department can also randomly scrutinize returns to enforce tax compliance. Therefore, if you receive any notice specifically under section 143(2), it means your return filed is in under scrutiny by your income tax Officer. The Income tax scrutiny can be related to mismatches or inaccurate reporting, return filed and all related documents, or it can be based on predefined criteria issued every year by the income tax department.
15. For tax evasion in earlier years
The Income Tax Act gives the income tax department power to reassess previously filed Income Tax returns. Therefore, the department can issue a notice to the taxpayer. An Assessing Officer can pick tax returns for reassessment based on certain pre-defined criteria. Notice for reassessment is sent only when tax officer has reasons to believe that income which was chargeable to tax has escaped assessment.
Important Points to be Considered
1. As soon as you get a notice from the Income Tax Department or Assessing Officer, reply within the time and manner prescribed along with the documents required as verification or proof.
2. Maintain all the Documents regarding the taxable income and cross check them with your broker, TDS deductors, banks etc.
3. In case you don’t know how to reply to these notice consider consulting a professional Chartered Accountant or Tax Consultant. As not reply to these notice may cause you a huge penalty.
4. While filling your return cross check all the incomes, documents and fill your return thoroughly and timely or consider a professional Chartered Accountant or Tax Consultant as doing this you can get save from receiving any notice at the first place.
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The author of above article is Krittika Pahwa.
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