notice u/s 142(1)
Understanding Notice under section 142(1) of Income Tax Act
November 12, 2018
Various Assessments under IT Law
Various Assessments Under Income Tax Law
November 12, 2018

Consequences of not Responding to an Income Tax Notice

Last Update Date : November 12, 2018

consequences of not responding to an income tax notice

Income tax is the hardest thing to understand and it gets more difficult to understand for an individual when he gets a notice. He gets into the scariest of his nightmares. And when you are unable to respond to it well in time, in can be threatening. Failure in responding to this notice, will give your worst fears a place in reality. It becomes utmost important to know the consequences of not responding relating to such notices in order to avoid heavy fines and penalties and to comply with IT department’s demands

Section 142(1)

Notice u/s 142(1) is usually served to call upon documents and details from the taxpayers and to take a particular case under assessment when a case is being selected for scrutiny. This notice can be sent to an assessee before or after assessment of his tax return.

Section 142(2A)

Under section 142(2A) notice is given for special audit of books of accounts.

Section 131

Section 131 of the Income Tax Act empowers the income tax authorities to conduct enquiries. When any preceding is pending, the Assessing Officer (A.O.) is empowered to:

  • Discovery and inspection;
  • enforce the attendance of any person, including any officer of a banking company and examine him on oath;
  • compel the production of books of accounts and other documents; or
  • issue commissions.

Consequences of not Responding

  • If the notice under this section is sent by Assessing Officer and not responded well in time, the assessee can attract a penalty of ₹ 10,000 for each failure under section 272A of the Income Tax Act.
  • Further, there is no jail in the said case, but there is a power of arrest in case of summoning under section 131.
  • However, in case, where the notice under section 131 is sent by the investigation wing, the failure in responding to such notice can lead to search under section 132 in addition to the penalty under section 272A of the Act.

Section 131(1A)

This type of notice is issued in the case where the Assessing Officer is of the opinion that the assessee has not disclosed his/her income accurately or is hiding his/her true income. The notices are issued for the purpose of making any enquiry or investigation in order to determine the true income of the assessee.

Consequences of not Responding

In case the assessee fails to respond or is unable to produce the documents required, a penalty of up to ₹ 10,000 can be levied under section 272(1)(c).

Section 133(6)

Notice under this section is given to the taxpayers or related parties for the purpose of seeking certain details of transaction undertaken during the year under consideration. However, even if there are no transactions undertaken, the person who receives such notice from the income tax department is required to give reply stating his factual position. The person cannot ignore such notices as it may lead to fines and penalties and further actions by the issuer of the notice.

Consequences of not Responding

If the above mentioned notice seeking transaction details is not complied with or not responded well within the specified time, it can lead to a penalty of ₹ 10,000 under section 272A of the Income Tax Act.

Section 139(9)

An income tax notice under this section can be received in the following cases:

  • If the Income Tax return is filed using the wrong ITR form
  • If the tax due is not entirely paid
  • If the refund has been claimed for the deducted tax but the relevant income has not been mentioned
  • If there is a mismatch in the name on the form and the PAN card
  • If the taxes are being paid but the income is not listed.

Such notices shall be responded within a time limit of 15 days of the date of intimation, the non-compliance of which may lead to the following consequences.

Consequences of not Responding

If the assessee fails to respond and rectify the return within 15 days of such intimation, then the return shall be deemed as invalid and the income tax department treats it as the tax return not been filed at all.

Section 143(1)

There are three types of intimations under section 143(1):

  • The notice can simply be considered as preliminary assessment of a return since the Assessing Officer finds it to be matching with his computation.
  • It can be a refund notice where Assessing Officer finds under his calculations that the assessee has paid excessive tax.
  • It can be a payable notice where Assessing Officer finds under his calculations that the assessee has shortfall in the tax paid. The notice demands the payment of shortfall in tax within 30 days of such intimation.
  • Time limit for the notice to be served is up to 1 year after completion of relevant Assessment Year. Notice is sent after the expiry of one year from the end of the Financial Year in which the return is filed.

Consequences of not Responding

If the notice is not responded well in time, it may delay the tax refund or tax department may send you a notice of demand under section 156 and may also initiate recovery proceeding after 30 days if any additional taxes is payable by the assessee.

Section 143(2)

A notice issued under section 143(2) of Income Tax Act is the second chance from the Tax Department, who upon receiving the tax return finds minor or major discrepancies in either under-reporting of income or over-reporting of losses. Recipients of this notice may find themselves having to appear for a hearing to defend themselves with supporting proof. Failure to take this notice seriously will result in hefty penalties and in severe instances imprisonment as stated.

Consequences of not Responding

  • If it is chosen to not respond to this notice, then the assessing officer will make the adjustments as per the details available to him and close the assessment.
  • There is no further opportunity to refute the judgement except by an appeal under section 246 of the Act because of the failure to furnish the proof requested in the notice sent earlier.
  • Moreover, the officer can treat it as willful failure to respond and can levy a penalty under section 272A of ₹ 10,000 for each failure.
  • In addition to the above penalty, the non-response to such notice can also have a punishment of jail under section 276D which may be extended to a term of one year with or without fine.
  • This penalty is levied if a taxpayer fails to comply with any notice issued under section 142(1) or section 143(2) or a direction under section 142(2A).

Section 143(1)(a)

The income Tax department sends this notice in order to seek a response to the errors/ incorrect claims/ inconsistencies which attract adjustment(s) under Section 143(1)(a) of the Income Tax Act. It tends to seek the clarification to the mismatch between the income and deduction when compared to Form 16, Form 16A or Form 26AS. The assessee receiving such kind of notices are required to respond within a period of 30 days from the date of intimation.

Consequences of not Responding

If the assessee fails to respond within the specified time, the return is processed after making necessary adjustment(s) under section 143(1)(a) without providing any further opportunities in this matter.

Section 148

Notice under this section serves as an intimation to initiate proceedings under Section 147. The Assessing Officer believes that some of the incomes of the assessee had escaped assessment. Reassessment can be asked under this notice.

Consequences of not Responding

Not responding to a notice under section 148 can lead to the following consequences:

  • Rigorous imprisonment which shall not be less than 6 months but which may extend to seven years and with fine where tax sought to be evaded exceeds ₹ 25 lakh (₹ 1 lakh up to 30-6-2012)
  • Rigorous imprisonment which shall not be less than 3 months but which may extend to two years (3 years up to 30-6-2012) and with fine in other cases.

Section 245

Under this section the Assessing Officer has sufficient causes to believe that there is an outstanding demand from the previous assessment year, and the Assessing Officer proposes to adjust against the current year’s tax refund due. As per section 245, if the income tax department wishes to adjust any refund due to a taxpayer against any past outstanding demand in his/her name, then the taxpayer must be notified before the adjustment between the demand and the refund due, so that he/she has the chance to explain why such an adjustment is not justified and that why the demand needs to be rectified if any error has taken place in raising the demand.

Consequences of not Responding

If an assessee fails to respond or pay the amount demanded under section 245, in such case he shall be liable to interest, penalties and may be prosecution according to chapter XVII-D of the Income Tax Act. The interest levied shall be 1% per month for default in payment under section 220(2).

How H&R Block can help you?

Receiving a scrutiny notice is never a pleasant experience and failure to respond to it correctly can result in further proceedings or penalties. To ensure any notices you receive are handled with care and attention to detail, consult your personal tax experts at H&R Block India to get instant tax notice assistance.

  • Have you received an Income Tax Notice?
  • H&R Block can help you deal with notices issued u/s 139(9), 143(1), 143(2), 148, 156 & more
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