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Understanding Different Tax Notices Under IT Act

Last Update Date : April 27, 2019
Estimated Read Time: 6 min

tax notice

Right from our school days, we had a notice board on which our every notice was displayed, be it regarding our class sections, exams, cultural day activities etc. Being a school kid, every notice was being read carefully and on the very same day. As we moved to the college, the eagerness of receiving a notice reduced. The notice was being read two-three days later. Further, during graduation, the notices were read may be on the last day. Graduation gives you a job, and the salary that you earn from the job is taxable. Any discrepancies in tax filing earn you a notice in return. So now according to the trend, this notice needs to be neglected, shouldn’t it? No! You shouldn’t. This notice is probably the one which requires the utmost attention of yours if you do not want to land in trouble.

You may receive any one of the following notices if there is any point of disparity in your Income Tax return filings.

Notice under Section 142(1)

Notice under Section 142(1) is usually sent to call the documents and details from the tax payers and to take a particular case under assessment. This notice can be sent to payer before or after assessment of his tax return.

By serving a notice under section 142(1), your AO may ask you to

  • Furnish a return of income in respect of which you are assessable, where you have not filed your return of income within the normal time allowed (which may include return in respect to your own income or income of another person for which you are liable to be assessable), e.g., in case of a legal guardian/ deceased person;
  • Produce accounts or documents which he may require to make an assessment;
  • Furnish in writing any information on matters including your statements, for example, statement of your assets and liabilities on a particular date;

[ Read: Understanding Notice u/s 142(1) ]

Notice under Section 143(1) and Section 143(1)(a)

Notice u/s 143(1) is simply an intimation in response to the tax return filed by you, which will do one of the following

Tax PayerAssessing OfficerStatusAction
File ReturnAssessmentMatchNo action
Return Filed > Actual Tax payableRefund
Return Filed < Actual Tax payablePayment within 30 days of receiving demand.

If mismatches, such as deductions claimed u/s 80C or income difference under the head ‘Income from other sources’, form 26AS used as a form for comparison of data are found in your returns and Form 16, then this computer-assisted notice under section 143(1)(a) will be sent for clarification for the same. You will need to respond to this notice within 30 days by logging onto the income tax portal and uploading the proof needed to correct the mismatch.

[ Read: Notice u/s 143(1) and u/s 143(1)(a) ]

Notice under Section 143(2)

The notices under this section can be any of the following three, the last two of which are computer-assisted:

  • Manual Scrutiny: Based on few criteria, some cases are selected for scrutiny every year. The Assessing Officer takes up the hearing of this scrutiny in person.
  • Complete Scrutiny: When major inconsistencies are found, thorough scrutiny of your return will be done.
  • Limited Purpose: When a few minor details are found to be inconsistent and need further clarification, such cases are picked up for scrutiny under limited scrutiny purpose.

Upon receiving this notice, you will be called for a hearing to respond to the notice. Before appearing, collect all your respective year’s return filing copy and other relevant documents on which the specific query is raised and based on the clarification given by you at the hearing, one of the following will be the results:

  • Prosecution u/s 276D:  up to one year with the possibility of a fine also
  • Penalty u/s 271(1)(b): a penalty of Rs 10,000 maximum for each item under scrutiny
  • Best Judgement Assessment: AO will accept your clarification and decide the appropriate tax liability if any

[ Read: Responding to Notice u/s 143(2) ]

Notice under Section 147 and Section 148

IT Department has the power to scrutinise your tax return within 6 months from the end of the financial year in which it is filed. Notice under section 147 is a regular scrutiny assessment, and your case may get selected for this type of scrutiny based on certain pre-defined criteria. This notice does not necessarily mean that tax department believes that you have done something wrong.

You will receive notice under section 148 if you have neglected to mention an income source or calculation. If the amount highlighted is more than Rs 1 lakh, then the notice can be sent anytime within a six-year time frame and if it is less than Rs 1 lakh, then the notice can be sent anytime within four years from the end of the assessment year. So, if you are the recipient of this notice, you must ensure you file your return within the time limit specified by the assessing officer(AO).

[ Read: Understanding Notice u/s 147 and 148 ]

Notice under Section 154

If there is any mistake in any order passed by the Assessing Officer, it can be rectified under section 154.

To rectify any mistake apparent from the record, an income-tax authority

  • Amend any order passed under any provisions of the Income-tax Act.
  • Amend any intimation or deemed intimation sent under section 143(1).
  • Amend any intimation sent under section 200A(1) (section 200A deals with processing of statements of tax deducted at source, i.e. TDS return).
  • Amend any intimation under section 206CB.

Notice under Section 156

This is the notice of demand issued by the Income Tax Department when any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed. The notice specifies the sum which is payable against the respective consequence.

This demand notice is accompanied by an intimation notice under section 143(1) or along with the assessment order that is issued on completion of the scrutiny proceedings. Notice of Demand u/s 156 is issued in respect of every assessment order for addition to income.

Notice under Section 234(F)

Applicable to salaried individuals who were not diligent in filing their returns on time by July 31st of the assessment year. For the assessment year 2018-19, if filed from 1st August to 31st December, a fine of Rs 5,000 will be levied.  If it is filed after December 31st, the individual can be fined up to Rs 10,000.  Additionally, for individuals whose income is below Rs 5 lakh, they can face a penalty of Rs 1,000.

Notice under Section 245

The notice served by the income tax department to the tax payer, on whom there’s an outstanding demand from earlier years and a refund is claimed in another assessment year. In such a case as per section 245, the Assessing Officer can use the refund against the tax demand which is outstanding from the taxpayer.
In simpler words, Intimation under section 245 is received when a tax demand is pending from the IT Department; and the taxpayer may have claimed a refund from IT Department in some other Assessment Year.

Under Section 245, the adjustment of refund and demand can be made only after informing to the assessee after giving an opportunity to him to correct any mistake which might have occurred in raising or adjusting of the demand.

How H&R Block can help you?

If you have received any one of the notices and are worried about how to respond to it, get in touch with our highly qualified tax experts at H&R Block who will help you resolve the issues you face.

  • 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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Chetan Chandak (B.Com, LLB)
Chetan is the Head of Tax Research at H&R Block (India) with an experience of more than a decade in tax advising. He is also a regular contributor for some of the leading news publications in India such as Economic Times, Financial Express and Money Control. Professionally, Chetan is fascinated by international taxation and expat-related tax research.

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