Income tax notices made thousands of individuals worried

Income tax notices made thousands of individuals worried : Many taxpayers expressed dissatisfaction over receiving notices for claiming deductions that are exclusive to cooperative societies. However, they must reply within 15 days to avoid having their refunds adjusted or having to pay more taxes.

Numerous taxpayers have contacted tax professionals and intermediaries once more even though the last chance to e-verify income tax returns expired on August 31. This time, they must reply to notices accusing them of making deductions for which they are not even qualified.

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Thousands of taxpayers in Gujarat and Maharashtra received notices under Section 143 (1) asking them to explain why they had claimed deductions under Section 80 P. Deductions are sums that are used to offset investments or other expenses that lower your income.

Only cooperative societies qualify for this deduction; individuals are not eligible. If a cooperative society receives income from a banking or credit facility, agricultural activity and products, or a cottage industry, they are eligible for deductions of Rs 15,000–20,000 when determining total income under Section 80P.

“Incorrect notices regarding proposed adjustments under Section 143 (1) (a) are being sent for claiming Section 80 P deductions. But we haven’t claimed these deductions for our clients as they aren’t eligible to claim them. These are sent not for returns filed by cooperative societies, but individual income tax returns,” said an expert.

Tax Portal System error

Deductions under Section 80 P cannot be made or allowed for the assessment year 2023–2024, according to the emails’ notices. People must therefore respond to the notices within the allotted 15-day window.

“It is an additional burden for both individuals and tax professionals as we do not claim any fee from the client for what seems to be purely a system-driven error but needs attention,” said by expert.

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What if you do not check the notice email or fail to respond?

If you do not respond to the notice of adjustment under Section 143 (1), then there could be suo moto adjustment of the said deductions against any refund due to you. Apart from reduction in refund, you could also be asked to bear taxes along with interest and penalty even though it is an error in the system.

Chartered accountant bodies told they are likely to approach the Central Board of Direct Taxes regarding these notices.

“Even though audits for other taxpayers are ongoing, there are a ton of notices that need to be addressed. Customers are dissatisfied with us because they received a notice despite filing thorough, timely, and accurate returns. By Saturday, September 2, 2023, we would contact the income tax division.” said a member of the Karnataka State Tax Practitioners Association.

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For the assessment year 2022–2023, many high net worth individuals have already received scrutiny notices. These are connected to people who have filed multiple deductions, and the artificial intelligence program alerts us to their existence. The system determines whether certain deductions are, on the surface, implausible.

Even though Form 16 lists a number of deductions, it also lists others, including Section 80G and 80GG. Donations enable a person to lower their tax obligation, but they must share supporting documentation to stand by their claims.

Additionally, notices of scrutiny have been sent to those who have sizable investments in both India and abroad, particularly those who are claiming losses. The tax division is looking for documentation of the exemptions and deductions that have been claimed, as well as the sources of previous investments.