Income Tax

How to Respond to a Notice Issued for Non-Compliance or Non-Filing of Returns?

The Income Tax Department may direct the notices for several reasons, such as in case of non-filing of the income tax returns, defect detected in the filed ITR, or other instances where the respective department needs any other documents or additional information. One such is a Notice for Non-Compliance, which is sent by the Tax department to an individual who has failed to file an ITR.

Nothing is alarming about the notices that one has received. However, the Taxpayer needs to understand the notice first, the purpose of the notice, the order made in the notice, and then finally, take steps to comply.

When a Notice is issued for Non-Compliance or Non-Filing of Returns?

In many aspects, one does not file an income tax return, specifically for the reason that the Taxpayer’s income does not reach a threshold limit for one specific year. In that scenario, there is a high chance that the Taxpayer may receive a notice for non-compliance or non-filing of ITR. Therefore, it is recommended that any Taxpayer file a return for every financial year, irrespective of income, to avoid any notice dispatching from the Income Tax department.

How are the defaulters tracked?

The income tax department uses a project system known as the Non-filers Monitoring System (NMS). This system is used to track down the taxpayers who are non-filers of income tax returns for a financial year, and then it takes quick action against the defaulters. The identified defaulters/non-filers are notified by various means, such as SMS, e-mails, and letters (in batches).

In case a notice is issued, the respective assessee can check information in detail on the e-filing portal (by logging into the user account). Moreover, the response can also be filed through the portal.

How to respond to the notice issued for non-filing of ITR

Step 1: Open the website for filing a response to the notice issued for Non-filing of ITR by filling in the details (User ID and Password)

Step 2: Once you are logged in, a “compliance” tab will be visible on the dashboard, providing two options: (i) View and submit my compliance and (ii)View my submission.

Step 3: Click on “view and submit my compliance,” which will show various details, including details for the assessment years for which:-

• The return has not been filed as per the department record or
• The department requires third-party information.

Step 4: Select option first, “The return has not been filed as per the department record.”

Step 5: On selection, two further options will appear: (i)The return has been filed, (ii)The return has not been filed. You may select option (ii) if your concern is that you have received the notice for non-filing of the IT.

[Note: If in a scenario you have received a notice even on filing the return, you may select ‘Return has been filed’ and fill in the corresponding details like acknowledgement number and/or date for filing the return. However, the details will automatically update if the return has been e-filed.]

Step 6: On selecting the option, the dropdown menu will show the following options: (i)Return under preparation, (ii)Business has been closed, (iii)No taxable income, (iv)Others (on selecting the others tab, it mandatory to file remarks). You may select the reason for the non-filing of ITR from the dropdown. On selection, the final form page will appear.

Step 7: You can fill in all the details and then click on “submit” for application submission.

The submitted response (online) will be subject to verification by the Income Tax Department. If found acceptable on verification, the case will be closed. You can check the status by logging in to your account on the e-filing portal. In case you have not filed an Income Tax Return, the case will be escalated to the ground formation for further evaluation.

Penalties and Non-compliance of ITR

The defaulter taxpayer can be subject to the following consequences if one does not respond to an Income Tax Notice or fails to respond under any circumstances.

Section 139 (9)

When a Defaulted Taxpayer does not respond to the notice issued within the required time prescribed [15 days after the notification date of Assessing Officer (AO)], in that situation, the respective return can be subject to invalidity and, therefore, penalties, interest (non-carry forward of losses), and loss of specified exemptions.

Section 143 (1)

A tax notice under section 143(1) is the intimation letter sent by an AO. In case a defaulted taxpayer fails to respond to a notice under the respective section within the prescribed time frame. In such circumstances, the Income Tax Return (ITR) will be subject to evaluation only after making the required adjustments detailed in the income tax notice.

Section 143 (1a)

A notice under section 143(1a) is a system-generated notice sent to the Taxpayer as per this provision in a scenario where there is any difference in the income specified in the ITR. If a defaulted taxpayer fails to reply to a notice within the required time frame, a penalty on the defaulter/taxpayer will be raised by the department.

Section 148

A penalty¹ on the defaulter/taxpayer will be raised by the department if the Taxpayer fails to respond to a notice under section 148, which is issued by the AO if there is suspicion that some amount/income has escaped assessment.

Section 234 (F)

A penalty on the defaulter/taxpayer will be raised by the department under section 234 (F) of the Income Tax Act if a taxpayer was obligated to file an Income Tax Return form but failed to do so within the allotted period. In that case, a late fee shall be paid while filling out their ITR form. The overall revenue/amount and the time taken to file the Income tax return will specify the sum of fees.

When filing one’s Income Tax Return, it is essential to conduct a detailed check of all the details and documents and have a Chartered Accountant re-evaluate the said details and documents. By doing so, the possibility of getting a notice can be avoided.

Conclusion

In many circumstances, a taxpayer who regularly files an Income Tax Return fails to file an ITR. Circumstances can include non-taxable amounts or the closing of a business or company. In that case, it is possible to receive a notice from the Income tax department. The notices are system-generated based on a formula. However, even after filing an ITR, the Taxpayer receives notice for non-compliance(rarely). In all of the above scenarios, the Taxpayer may respond to the notice through their regular account through which one files ITR to avoid any issues in further time.

Read our Article: Submit response in the e-compliance portal for Income Tax queries

FAQs

1. https://en.wiktionary.org/wiki/penalty