Reasons You Can Get an Income Tax Notice & Steps to Follow

Receiving an income tax notice can be a cause of worry. It is essential to understand these notices sent by the income tax department. You must understand what is an income tax notice of assessment and how to tackle them.

Whenever a taxpayer files the income tax return in the income tax department, it is checked by the department for any discrepancies, mistakes, and errors. If they find any of these, they send a notice to the assessee and ask for clarification. This notice is called an income tax notice. The income tax department can send it for various reasons. Let’s tell you how to avoid income tax notice.

1. If you file the IT return late

Under section 139(1), if a person has a taxable income, they must file a tax return to the income tax department. It has to be filed after the financial year ending when all the accounts are closed. The IT department gives a deadline, and it gives several reminder notices before and even after the deadline. The reminders are generally automated to remind the assessee their returns need to be filed. If you don’t file it before the deadline, a penalty is charged for that.

To prevent getting these types of notices, one must file the IT return before the deadline of that assessment year.

2. If you have not disclosed an income

The income tax department gets information about your income from various sources like employers or different banks. If any taxpayer has not disclosed any income intentionally or by mistake, the IT department sends a notice under section 139(9) or 143(1) for not disclosing his income. Even if you have not reported any income received as bank interest or from a share, the IT officer can confirm it from the concerned authorities. In that case, also, they send a notice to you regarding the same.

If you want to avoid these types of notices, you must check all financial statements from your account. Then, list up the income received from all the income sources and then calculate your IT return. If any income is left out by mistake and the IT return does not match with the records, you will receive a notice for that.

3. If the IT department pick you for inspection

The income tax department inspects the IT return files randomly to ensure tax compliance. If your file is checked and there is a mismatch between the information provided and the records, you may get a notice under section 143(2) for scrutiny. The best way to tackle it is to revert to the notice as soon as possible with the required clarification and documents. You will be relieved if all your files are in order.

To avoid these types of notices, always file your IT return on time. In addition, keep all the supporting documents and evidence of income ready for clarification in case of any claim under scrutiny.

4. If you file a defective return

The tax return may seem to be a difficult job for ordinary people. It includes accounting knowledge as well as a lot of calculations. If you have filed the IT return incorrectly, a notice can be sent under section 139(9). You have to respond to this notice within 15 days and submit the revised IT return in the required format.

If you want to avoid getting this notice, check through various portals before filing your tax return. If you still find it difficult, you can also take the help of a chartered accountant for this.

5. If the IT department needs clarification for earlier years’ tax payment

Under section 148, the tax department can reassess the previous years’ income tax filed by a taxpayer. They can send a notice of assessment, asking for documents and evidence of income from that taxpayer. This is done when the IT department has reasons to believe that there was fraud and intentional hiding of income from a taxpayer. This is considered especially in the case of high-value transactions, and a notice can be sent to the assessee under section 147.

To avoid this type of notice, you must file the tax on time, and the total amount from all income resources should be filed. If the IT department finds a discrepancy and a notice has been received, you must respond within the deadline with sufficient evidence and clarification.

6. If you don’t report LTCG properly

When you are filing the ITR, any type of long-term capital gain has to be mentioned in the list of equity. A long-term capital gain of more than 1 lakh for a year that is listed on equity and equity-related mutual funds and on which one has paid the STT will be eligible for tax payment of 10 percent. When officers check high-value transactions, they can easily find the equity gains and send a notice for clarification.

To prevent these types of notices, you must get your statements prepared from the mutual fund agency or any broker to deal with them. Then you may fill the form with the correct information. Finally, you can do the calculations or get it done from CA and save yourself from getting a notice and a penalty under section 270A.

7. If your claimed TDS does not match with form 26AS

If the TDS is not the same in form 16 or 16A and form 26A, it may result in a mismatch found by the IT department. A notice will be sent to you under section 143(1).

To avoid receiving such notice while filing the IT return, you must check that the TDS reported by various deductors is correctly listed in the form 26A. You may approach the deductors for corrections in case of any mistake or mismatch.

8. If you have not declared the investments made in the name of your spouse

According to the law, any income received from investments and assets acquired in your spouse’s name is payable by you. Therefore, you must add this income source to your list of incomes and must mention it in the IT return. If there is any mismatch, the IT officer may question you during the assessment. They can cross-check the information from sources like banks, employers and failure to justify may result in a penalty.

To avoid getting such notice, you must declare the income generated from any investments done from your earnings in the name of your spouse.

9. If any high-value transaction

IT department keeps an eye on the high-value transactions done by any individual. If you have done any high-value transaction, the IT department may check your accounts and select you for scrutiny. They may send you a notice for clarification on the transaction and ask you for details of the income source. You must respond to the notice within 21 days with a valid reason and file an income tax return correctly.

To handle the notices for high-value transactions, the assessee must reply to the notice with a satisfactory explanation and evidence of the transaction so that the IT department considers it and closes the case.

10. If you have not cleared earlier tax payable and ask for a tax refund

If you have not cleared the dues and you still have to pay some previous tax amount, any tax filing for returns can be questioned by the IT department. The assessing officer can ask you to settle the amount with the return and may issue a notice under section 245 to set off a refund against the pending tax amount.

It is pertinent that the assessee should check their accounts for any tax dues and must clear them before filing a new IT return.

To avoid receiving a notice of outstanding tax payment, you must check your e-filing portal and look for any tax dues. Clearing those dues on time will allow you to file an IT return without any discrepancies.

Conclusion

To summarise, all these types of notices may knock on your door anytime if you are not aware of the Income-tax laws and filing the IT return appropriately. You just have to be sure about listing various transactions and incomes in the form, and there you go; you are ready to handle these notices.

Also Read:

1) Income Tax Rules for Non-Residential Indians (NRIs)
2) How to Start Your Own Income Tax Business?
3) How to prepare GSTR-4 annual return for composition taxpayers using offline tools?
4) What Are The Tax Deductions for Joint Property Owners?

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FAQs

Q. Why do we get a tax notice?

Ans. If we don’t file the IT return properly or any data provided by us in the IT return does not match with the information received from banks and employers, the IT department sends a notice under various sections asking for clarification on those transactions.

Q. What is an income tax notice of assessment?

Ans. Under section 148, the tax department can reassess the previous years’ income tax filed by a taxpayer. This is an income tax notice of assessment, asking for documents and evidence of income from that taxpayer.

Q. Why is a notice for reassessment sent by the IT department?

Ans. The notice for reassessment is sent if the Assessing Officer has reasons to believe that the information provided is incomplete and certain income is not listed in the IT return filing. So, the taxpayer has to provide sufficient evidence for doubt clarification.

Q. What if we don’t respond to the notice?

Ans. If someone does not respond to the notice within 15 days, the tax return filed is considered invalid, and the penalty is charged to the taxpayer.