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Have you received any income tax notice so far? Are you the lucky one? or the unlucky one! If yes, next 5 minutes is worth investing your time. A notice issued on you does not necessarily mean you have committed a crime. Even a minor error in tax return can invite a notice from the tax department.

The Mission of Our Income Tax Department is “To promote Compliance with our direct tax laws, through caring taxpayer service and strict enforcement, and thus realize maximum resources for the Nation.”

With the above mission in the mind, recently Income Tax department are sending Notice to various assesses.

Major reasons to expect notices or communication from Income Tax Department are as follows:-

  • Income is more than the exemption limit and ITR (Income Tax Return) is not filed.
  • Income does not exceed exemption limit but TDS (Tax Deducted at Source) is deducted and ITR is not filed.
  • TDS mismatch in ITR filed and 26AS (Govt. record).
  • Arithmetical errors in ITR filed.
  • Investments in the name of spouse or minor kids but you are claiming deduction for them.
  • For setting off refunds against remaining tax payable
  • Misreporting LTCG from equity
  • For tax evasion in earlier years 
  • Non-disclosure of foreign assets and Indian assets in certain cases.
  • Unsecured loan or advances taken/given to others.
  • High value transactions:
    1. Cash deposits in a bank totaling Rs. 10 lakh or more in a year.
    2. Credit card purchases of Rs. 2 lakh or more.
    3. Mutual fund investments of Rs. 2 lakh or more.
    4. Purchase of bonds and debentures worth Rs. 5 lakh or more in a year.
    5. Sale or purchase of property worth Rs. 30 lakh or more.

Let’s explore few of the above reasons with examples:-

1.Delay in filing Income Tax return

If you’re nearing the ITR filing deadline and still haven’t filed your returns, you will receive a reminder to do so. Notice may be issued under Section 142(1)(i) of the Income Tax Act that requires you to furnish the return.

2. For scrutiny assessment

You may receive a notice specifically under section 143(2). This means that the ITR filed by you has come under the tax authorities’ lens. Such scrutiny can be related to anything from a mismatch to inaccurate reporting etc.

3. Settlement of refunds against remaining dues and tax payable by you

You may also receive a notice if there are any dues in the form of tax, penalty, fines or any other sum payable by you. In case you claimed a refund, the assessing officer may send you a notice as an intimation that the dues will be adjusted against the Income Tax refund you have claimed.

4. For non-disclosure of income or if some income has escaped assessment.

If the income tax authorities believe that not all income from various sources has been declared then a notice is served to you on grounds of non-reportage. To avoid such incidences of non-disclosure of income while filing your Income Tax Return, you should collect all your financial statements and evidence of all your income sources, including payslips, bank statements, invoices etc.

5. A misreported LTCG from equity

Long-term Capital Gains derived from equity has to be declared and reported in your ITR. It is a complex computation, and tends to be miscalculated. Under Section 143(3), this could be included as taxable income and interest can be charged on the income tax shortfall.

6. When the TDS claimed by you does not match with Form 26AS

Your TDS at the time of filing the ITR should match with the one mentioned in Form 26AS and Form 16 or 16A as per Govt. records. If a mismatch is found, a notice will be issued under Section 143 (1).

7. For non-declaration of investments made in the name of spouse

Income from such investments is taxable in your hands, the non-disclosure of which will invite a notice from the Income tax authorities.

Unaware of the fact that whether such notices are issued to you?

It is advisable to Login to the e-filing portal (https://incometaxindiaefiling.gov.in) using your PAN and the registered password and check the your notice status. Or Consult your Tax expert to solve your Tax puzzles easily.

Suppose you have received one such notice. So what to do next?

Do not panic, simply oblige the query. Respond to the notice, and furnish the documents and information the department has sought. File a rectified return and pay the tax due, if any, within the stipulated period.

Reply to all notices issued!

Eg1. If the notice is about complete scrutiny or reassessment, you may have to undergo detailed scrutiny. Such notices come along with a questionnaire asking for information on a particular transaction, asset or income.

Eg2.If the notice is related to limited scrutiny, you have to provide details of particular assets mentioned such as when it was purchased, its cost and source of fund. The notice will also specify the date before which such information and documents are to be submitted.

Now with Faceless Scheme the government has introduced an e-proceeding facility under which all notices can be responded to online. Not responding to the notice could cost you a lot of time, money and in some cases, it could also lead to imprisonment.

Match the pieces and get the right picture.

You can either choose to represent your case yourself or authorise a tax expert to do so. The latter option is better as a professionals will fully understand each and every explanation sought and respond appropriately.

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