New Delhi: A sudden notice from the Income Tax Department can become a cause of worry for you. However, you must remember that you can get a tax notice for various reasons. These could include not filing an income tax return (ITR) on time, calculation errors, not reporting income correctly or even claiming excessive losses.
Here are some common reasons why income tax notices are issued:
Notices to ensure filing of tax returns
If you have not filed your return by the deadline, in such a case, you may receive an automated notice from the income tax department. You get this notice before the end of the assessment year for which the return is due.
Rishabh Singhal, Partner, Singhal & Agarwal, CA firm said: “If a person has not furnished his income tax return, then the assessing officer may issue a notice under section 142(1)(i), requiring the assessee to file his return within the specified time.”
Proposal of adjustments to the taxable income
Discrepancies or mismatch in the information disclosed in the tax returns could trigger notices under Section 143(1)(a). For instance, where the income reflected in Form 26AS ( the Annual Tax statement) is not included in the tax returns or the salary income reflected in the tax returns does not match with that in Form 16, the authorities would propose an adjustment which would increase the taxable income.
The taxpayer will need to verify the same and confirm the same to the I-T Dept. As a taxpayer, you need to reply by an electronic method through the website of the Income-tax department. The response needs to be filed within the stipulated period which is generally 30 days from the issue of such a notice to avoid automatic adjustment by the Income Tax Department.
It is also worth noting that the taxman also sends a confirmation notice when you have claimed a refund. You will just have to confirm the same to the department with the ITR filed for the year. In case of changes, confirmation needs to be provided informing the I-T department that a revised return would be filed.
Processing of ITR
The I-T department carries out a preliminary assessment of all ITRs filed and informs taxpayers of the result of such preliminary assessment. This assessment primarily includes verification of the tax calculation, tax payment, correction of any arithmetical errors, and inconsistencies.
Singhal said: “Where a return has been filed by an assessee, the total income/loss shall be computed after making some adjustments for arithmetical errors, any incorrect claims which are apparent from the return, etc. These adjustments are made only after giving an intimation to the assessee, and any response from the assessee is considered before making any adjustment.”
“Intimation under section 143(1) shall be sent where any tax, interest or fee is found payable or receivable, after making the above adjustments, or where the adjustments made above result in any change in the income or loss of the assessee, but nothing is payable by him,” he added.
The first thing is not to panic in case you get a notice and respond to any such notices in a timely manner. Now, the government has introduced an e-proceeding facility under which all notices can be responded to online. In case you don’t understand the notice, take the help of a chartered accountant to respond to it.