NOTICE FROM INCOME TAX DEPARTMENT
One of the biggest worries of income tax
payers is getting notice from Income Tax Department. The Department issues
notices under various provisions of Income Tax Act. The purpose of the same is
to ensure greater tax compliance.
In recent times, the Department has access
to wide range of financial information of taxpayers and the same is utilized
for identifying potential cases of tax evasion. Department also takes help from
computer-aided scrutiny system (CASS), which generate cases where there is
discrepancy in income tax return data.
REASONS FOR NOTICE FROM
INCOME TAX DEPARTMENT
Some common reasons leading to notice from
Income Tax Department may include;
1. Escaped Income
If the
taxpayer has knowingly or unknowingly left some part of income from the income
tax return, he or she may get a notice from the department,
2. Not filing returns if income is above exemption limit
As per income tax provisions, it is
mandatory to file income tax return if the income is above the exemption limit
for the relevant year.
3. Not declaring income from all sources
Tax payer is
required to pay taxes on total taxable income during the year. Therefore it is
necessary to include salaries etc. from all employers and other taxable income from
all relevant sources in the income tax return. For example, there may be income
from interest earned on bonds, fixed deposits,
recurring deposits etc. which should be included in the total income.
4. Mismatch in TDS details as per Form 26AS and details filed in
income tax return
There may be difference between TDS details as per Form 26AS and details
filed in income tax return. Both should be reconciled and differences should be
rectified before filing the income tax return.
5. Mismatch in income,
expenses and investments
Generally, investments and expenditure of
the tax payer should match with his or her income. Otherwise, it may create
suspicion of escaped income which may lead to notice from the department.
VARIOUS SECTIONS UNDER
WHICH NOTICE CAN BE SENT
There are various
sections under which Income Tax Department may send notice. These sections
include;
NOTICE UNDER SECTION 131
Income Tax Department has got power under this section related to discovery
of escaped income and production of evidence etc. The department under this
section may ask a tax payer to submit further documents to verify income source and investment
details.
NOTICE UNDER SECTION
139(9)
Under this section, the tax payer receives intimation of probable defect in
the income tax return and he or she is given an opportunity to rectify the same
within 15days from the date of such intimation or within such extended period
as may be allowed. If the defect is not rectified within the aforesaid period,
the return may be considered as an invalid return and accordingly the assessee may
be deemed to have furnished no return.
NOTICE UNDER SECTION 142
(1)
This section provides
that the department may make necessary enquiries before completing assessment.
INTIMATION UNDER SECTION
143 (1)
Under this section
department may intimate the tax payer to pay excess tax amounts due to reasons
such as calculation errors etc.
NOTICE UNDER SECTION 143
(2)
This is a service of
notice for regular assessment. Detailed scrutiny assessments are done under
this section. It can be served only if a return has been filed. All relevant
documents related to investments, claim for tax deductions, allowance and
source of income in the relevant financial year are generally called for.
It has to be served
within the time limit of 6 months from the end of the Financial Year in which
return of income is filed.
NOTICE UNDER SECTION 148
Under this section
notice is issued in those cases where income tax department has reason to
believe that some income has escaped assessment.
NOTICE UNDER SECTION 156
Where any tax,
interest, penalty, fine or any other sum is payable in consequence of any order
passed, the department may serve upon the assessee a notice of demand under
this section, specifying the sum so payable.
WHAT TO DO WHEN NOTICE IS
RECEIVED
Taxpayers need not
worry if they get notice from the Income Tax Department. Instead, they should
try to understand the reason for the notice and act accordingly. The taxpayer
should collect all documents related to the assessment proceedings including Form
16 (in case of salaried employees), Form 16A, details of income and expenses, bank
statements along with narration of entries therein, credit card statements, details
of loans, gifts and investments etc.
On the basis of the
above documents and queries asked in the notice, a proper reply should be
prepared for submitting to the income tax officer on the hearing date. It
should be kept in mind that the case may go for some months before a final
decision or order.
Although the assessee
himself may pursue the matter, he or she may take the professional help of a Chartered
Accountant, as providing less or more information than necessary, may go
against him/her.
CA. Brijesh Baranwal
Mumbai
Note:
1. The above write up is only for awareness purpose and should not
be considered as expert opinion.
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