Income tax is a crucial area for every tax payer. Each year millions of people in India file returns and pay a portion of their income to the Income Tax Department whereby the Government is able to generate revenue for its development programs.
Though most of the people in India consider income tax as a liability and headache, actually income tax determines the credibility of a person. Irrespective of whether you are buying a house or a brand new car, most of the time the seller wants your IT return file.
Nonetheless, there may be times where the Department of Income Tax will send you a notice that demands your presence to the respective IT office with the necessary documents.
In such a situation, what do you do? The very first thing is to calm down and avoid getting panicked. The second thing is to go through the notice and locate the section for which you are being called. Currently, there are 5 different section under which the department can call you, they are:
1. Defective Return – Section 139(9)
One of the most common reasons for sending a notice is defective returns. Under this case, the Assessing Officer (AO) believes that the return filed has missing information. This may be related to income or expense. The taxpayer will get 15 days to correct their defective return. Failure to do so will result in void-ab-initio.
What you should do?
You should login to your account on https://www.incometaxindiaefiling.gov.in/ and reply or fulfill the requirement.
2. Hidden Assets or Liabilities – Section 142(1)
Under this case, the AO believes that the tax payer has not disclosed all his assets or liabilities correctly. The AO may demand the status of a particular asset or liability on a particular date or produce any related documentation for further assessment. People who do not honour this notice will be fined ₹10, 000 and/ or prosecution upto an year.
3. Issues related to Deductions claimed – Section 143(1)(a)
Notice For: There may be a case where the Central Processing Centre (CPC) believes that there is an inconsistency between the income of the tax payer and the amount of deduction claimed through Form 16 or Form 16A. The scenario also includes Form 26AS. Alternatively, a notice under this section can also reach taxpayers who have paid extra tax than they should have actually done (tax refund).
What you should do?
If there is tax due or demand in the notice then you must pay within 30 days of the notice. If there is minor mismatches of calculation then you can ignore it.
Increase in tax liability/ reduction of return – Section 154
If the Assessing Officer (AO) believes that the filed tax liability of a taxpayer is lower than its actual amount or the tax refund claimed by the tax payer is hyped, then a notice may be sent to the respective tax payers showcasing the concerned matter. Usually mistakes on account of gender or mismatch in advance tax results in such mistakes.
5. Adjustment of tax demand against refund – Section 245
The Assessing Officer (AO) may return to a tax payer for claiming an outstanding demand from the previous assessment year. This case takes place when the tax payer has filed for a refund, but had an outstanding demand in the previous AY. The AO may send the concerned person with an intimation to set off the refund amount with the outstanding figure.
You can reply with the time as specified by assessing officer.
Thus, we find that the Assessing Officer have a wide range of reasons to send you a notice. Instead of getting nervous and panicking, it is always better to understand the situation and requirement followed by taking corrective actions.