Income Tax Notice – Top 10 Reason; Some hacks to save from it


ITR Season is here, and as more and more taxpayers are filing their ITR, they are either getting notice from the income tax department or are worried that they might get one. The income tax department serves a notice only in case of any discrepancy or when there is a doubt about the validity of income declared in ITR. Let’s look into some reasons, why an individual might get a notice from the department:-

Delay In Filing I-Return: –

The basic and foremost reason, an individual might get notice is, if an individual has a taxable income and hasn’t filed the return within the time prescribed as per the government, i.e., 31st July in case of individuals, HUF, and non-audit cases.

Claimed TDS Not Matching with FORM 26AS:

Notice is issued if the TDS reflected in ITR doesn’t match FORM 26AS or FORM 16 or 16A. Hence, before filing the return make sure that TDS is correctly recorded by various deductors.

Non-Disclosure Of Income:-

A notice will be issued if the Income Tax department detects an individual’s income that has not been disclosed in his ITR. Hence, the individual should file ITR with all the income, honestly.

Income Escaped Assessment:-

The Assessing Officer can give a notice to the assessee even after filing the return if he thinks any income is escaped or the return is wrongfully filed under section 148. The notice can be received for 4years from the concerned assessment year if the difference in income is more than 1L but if the income escaped is more than 1L then the period for receiving a notice is six months.

Refund adjusted:-

If your tax refund is adjusted against the tax payable a notice will be issued by the Income Tax department to inform you about such adjustment. The assessment year of tax refund and the assessment year in which it is adjusted can be different.

Defective Return:-

If the Assessing officer considers that the return filed by an individual is defective then he 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 an invalid return. The period of 15days can be extended at the discretion of The Assessing officer. Further, if an individual rectifies the defect after 15days or such an extended period but before the assessment is made, the Assessing Officer can ignore the delay and consider the return as a valid return.

Payment Of Advance Tax:-

If the Assessing officer thinks 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.

LTCG From Equity:-

An individual who has a capital gain of more than 1L from the long term on which securities transaction tax (STT) has been paid and tax is paid 10%, and carefully filed the details. Misreporting or miscalculation of such an income can get you a notice from Income Tax Department.

High-Value Transactions:-

If an individual has done high-value transactions during an assessment year whether or not the individual has filled ITR or not, the Income tax department can send him a notice enquiring about the source of income and documents regarding those. The notice will be issued within 6months from the end of the financial year.

Investment Made In The Name Of Spouse:-

If an individual invest in the name of their spouse such income should be disclosed in the ITR of the individual under clubbing of income principles. Further, if an individual has not disclosed such income he/she is likely to get a notice from the income tax department.

Refer to Valuation Officer:-

When an assessing officer thinks that the value of the asset claimed by the assessee is at variance with Fair Market Value (FMV), then the Assessing officer refersto that asset for valuation to the valuation officer. Further, if there is a difference in the valuation by the officer and the assessee, the Income Tax department sends a notice to the assess intimidating the difference and variance in tax according to it.

However, some hacks can save you from getting the notice, we are easy to follow:-

  1. Most importantly, file your ITR with honest details and with the deadline, and if unintentionally you have missed or wrongfully filed the return, rectify it as a revised return, after filing the original return.
  2. Report losses generated in an assessment year. If you don’t report loss-making transactions, the government might assume that you earned profit and you are trying to suppress your income.
  3. Always, cross-check the information or details of your ITR with Form16, Form16A received from the respective company, 26AS, Annual Information Statement, and Taxpayer Information Statement. You can easily download them from the income tax portal. The password of AIS & TIS is <panddmmyy> PAN & Date of birth/incorporation in small alphabets.
  4. Nowadays, almost everyone is investing in shares, crypto, and mutual funds, don’t forget to take the complete summary detail from the broker or the website/app you are investing through. You need to give full information about the capital gain & loss that occurred during the assessment year.
  5. In case, you have received the notice from the income tax department, don’t forget to reply within the time prescribed and with all the necessary and enquired documents. If you having trouble replying to the notice, consider taking professional help.

The basic documents required to reply to the notice are:-

  1. Copy of the Income Tax Form & acknowledgment.
  2. Form16 A & B (salary details), Form 16A (TDS certificate), and any other proof of source of income.
  3. Investments/ Deduction Proof, if any applicable.
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