Income Tax Notice

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An Overview of Income Tax Notice

The Indian tax system includes an essential portion of income tax, and taxpayers must abide by its rules. However, there are times when the tax authorities may send income tax notices to people or companies. The tax division uses these notifications to communicate differences, probable non-compliance, or the need for additional examination. For India's tax regulations to be upheld, responding to income tax notices is crucial. Individuals and enterprises can reduce the chance of obtaining income tax notifications and guarantee efficient tax operations by being proactive, keeping proper records, and consulting professionals. Awareness and education about tax regulations are essential to prevent tax-related problems and guarantee a hassle-free tax experience. 

Income Tax Notice 

An income tax notice is a notice sent by the Income Tax Department to a individual or company informing them of a specific issue concerning their income tax obligations. It allows the tax department to request clarification, correction, or further information about an individual's income or tax filings. The notification might be given for a variety of reasons, including disparities in income reported, failure to complete income tax returns or suspected tax evasion. 

Each income tax notification serves a specific purpose and necessitates a prompt response from the recipient. It is essential to understand the substance of the notification and take proper action to resolve the tax department's concerns. In India, an income tax notice is a formal notification from the tax department demanding that individuals or corporations address particular issues with their income tax liabilities.

Reasons for Receiving an Income Tax Notice 

Some of the reasons for receiving an Income Tax notice are mentioned below: 

  • Investments are made secretly under a spouse's name.
  • High-value transactions that were underreported.
  • Failure to provide the required paperwork.
  • Unpaid self-assessment tax obligations.
  • Not submitting tax returns.
  • Random examination by the evaluating officer.
  • Long-term capital gains from equities investments are not accurately reported.
  • Concealment of income.
  • The reported TDS amount is incorrect.
  • Submitting a tax return with a mistake.
  • Incorrect filing of tax returns on income.
  • Refunds are offset against tax liabilities from the preceding year.
  • Tax evasion cases in the past.

 

Types of Income Tax Notice 

Defective Income Tax Return – Section 139 (9): In accordance with Section 139(9) of the Income Tax Act of 1961, the AO may issue a Defective Income Notice. This notification informs the taxpayer of the found errors and gives a chance to fix them within a given time limit. The Assessing Officer will contact the taxpayer and provide them with a chance to fix the problem within 15 days if they determine that a return is invalid for reasons such as filing the incorrect ITR, missing information, or an incomplete return. The return will become invalid if the error is not fixed within the allotted time frame, treating it as though it never existed. 

Inquiry Notice – section 142 (1): In India, the income tax agency will send a legal letter known as an investigation notice under Section 142(1). It is sent to people or organizations in order to start a conversation or get information about their tax returns. The recipient of this notification is required to provide detailed information, supporting Paper works, or justifications regarding their earnings, spending, investments, or any other relevant financial transactions. Additionally, even if your return hasn't been submitted yet, an officer requires that it be. If you don't respond to the Section 142(1) notice, you risk receiving a 10,000 fine, one year in imprisonment, or both if you don't comply with the notice's requirements. 

Intimation of Return – section 143 (1): A taxpayer will get an Intimation of Return under Section 143(1) from the Income Tax Department informing them of the assessment of their income tax return. The agency uses an automated procedure to compare the information in its database to the return that the taxpayer has filed. The notification might contain information about any changes made to the return, such as any new tax liabilities or refunds that must be paid. It includes details on any new tax obligations or refunds if the return's loss amount should be increased or lowered, and whether the return has been filed properly. 

Scrutiny notice – section 143 (2): A Notice pursuant to Section 143(2) will be sent by the income tax department if it chooses to examine a taxpayer's income tax return. Within 6 months of the end of the fiscal year in which the return was submitted, the assessing officer sends this notification. The taxpayer must answer right away to the income tax department's question and supply all Documentwork after getting the notice. 

Notice under section 148: This notification is provided when the assessing officer (AO) has grounds to suspect that a taxpayer has submitted his ITR with a lower income or has not done so by the deadline stipulated by law. The time limit for issuing the notification under this article shall be determined by the amount and kind of income evaded 

Notice under section 245: When the income tax refund for a specific Assessment Year (AY) is subtracted from the outstanding tax demand from the assessee, a notification is issued under Section 245 of the Income Tax Act. This notice does not include a deadline for serving it, unlike some other notifications. The notification acts as a communication from the income tax division to the taxpayer, alerting them of the adjustment and the reasons behind it. 

Demand notice – section 156: A notice under Section 156, also known as a notice of demand, would be sent out if taxpayer is required to pay any form of demand, including a fine, tax, penalty, or any other amount to the income tax department. The taxpayer has 30 days from the day they received the letter to make the payment. 

How will Enterslice Help You?

  • Consultation and advice on income tax notices
  • Advice from a team of professionals who have expertise in tax field on various aspects of income tax notice and how to comply with income tax rules and regulations.
  • Enterslice will help in Document preparation and complying of the evidence required when an income tax notice is received.
  • Enterslice will help you in handling all the problems timely, so that no important deadline is missed.
  • The team of professional of Enterslice will also guide you through important rules and regulation relating to income tax and filing of tax returns, in order to avoid penalties.

Frequently Asked Questions

Yes, an income tax notification might be received by a salaried individual as well. Every taxpayer receives a notification from ITD pursuant to Section 143(1). However, if ITD has cause to think that you have disguised income or for any other reason, you may still get further income tax notices.

A penalty might be imposed on the taxpayer if they fail to react to a notice within the allotted period. Depending on the inaccuracy or notification, these fines could vary.

A notification from the income tax division to a person or organization regarding their tax issues is known as an income tax notice. For a number of reasons, including anomalies in the income declared, failure to complete income tax returns or suspected tax evasion, you could get a notice.

When you get a notification, do the following:

  • Read and comprehend the notification completely.
  • Compile all pertinent records and data concerning your tax issues.
  • Take into account enlisting the help of a chartered accountant or tax specialist.
  • React within the allotted time frame and remedy the issues mentioned in the notification.

 

Any notices that ITD has issued will be sent to your registered email address. You can verify the notices you've received using the income tax site, but keep in mind that not all notices can be examined there; instead, you can contact ITD and submit your question there.

If you don't respond to the Section 142(1) notice, you risk receiving a 10,000 fine, one year in jail, or both if you don't comply with the notice's requirements.

 

 

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