Receiving a notice from the Income Tax Department can leave you in a state of panic. As a responsible taxpayer, you try your best to file your Income Tax Return in the most efficient manner. However, if there is any discrepancy or reason to doubt the validity of your evidence or declaration, the Income Tax Department will serve you with a notice. Let us have a look at these situations in detail and explore ways of avoiding them.

  1. Delay in filing Income Tax return

    For each assessment year, you should file your ITR before the deadline. 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. You should also be aware that the Income Tax Department might penalize you, so make sure you respond to the notice in a timely manner.

  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 claim 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 pay slips, bank statements, invoices etc.

  5. A misreported income from capital gain

    Capital Gains whether short term or long term have to be declared and reported in your ITR. It is a complex computation, and might get miscalculated. Under Section 143(3), this could be included as taxable income and interest could be charged on the income tax shortfall. On similar lines, you are often answerable for the high-value transactions you undertake. These may also come under scrutiny and the best way is to respond to them with documentary evidence and clarity.

  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. If a mismatch is found, a notice will be issued under Section 143 (1). The taxpayer should submit either the revised return or submit the response to the query.

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

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

  8. Dis-allowances / Defects in Income Tax Return

    Getting income tax notices can be burdensome and unnecessarily lengthen an already tedious process. So, always ensure all declarations and disclosures are made while filing your ITR. Also, you should check the Income tax portal on regular intervals to avoid any penalties on account of delayed or non-submission of replies to the authorities. Filing of Returns is not enough in some cases. Income Tax returns should be accompanied by some forms. Below are some examples of defects in Income Tax Returns

    1. Foreign Income – Form 67 should be submitted along with Income Tax Return
    2. Arrears – Form 10E should be submitted along with Income Tax return
    3. If the net profit from business / profession exceeds 1.2 lakhs, then Profit & Loss and Balance sheet should be filled. Otherwise, the Income Tax return may be treated as defective.