What are the types of income tax notifications? Don't know enough about the potential income tax implications for your business?

When we receive Income Tax notices, we often worry, but these notices have a purpose. Some income tax notices contain information, such as a notice of a tax liability under section 143(1) or information for a tax return investigation under 142(1).

In contrast, others are informed that an audit is required, and so on. This article will provide an overview of important Income tax information.

Why do you get an income tax notice?

Income tax notices are issued for various reasons under the Income Tax Act. Here are some basic reasons for receiving a notice:

• Not filing ITR.

• Delay in ITR filing

• Faulty ITR filing 

• Not declaring all sources of income in your ITR.

• Incomplete payment of taxes, interest, or other charges linked with the Income Tax Department.

• If your ITR is selected for review, it will be reviewed.

• The tax refund you receive is useful to offset any tax liability.

• If there is a difference in the amount of loss you mentioned while filing your ITR file.

• If income shown in ITR differs from income shown in 26As and vice versa.

What are the types of notices of income tax in India?

1. Intimation under section 143(1)-

According to Intimation section 143(1), means an announcement of information to the ITR department IRS to the taxpayer. This is a way to notify taxpayers about any of math errors or changes that need to be made.

By this, Emails from the Income Tax Department can be a concern for anyone. However, this is not a problem if you have received an e-mail that is under regulation 143(1) as per the income tax department.

There is nothing to worry about as this is just a notification and does not endorse any type of rule or examination issued by the Income Tax Department. This notification may process in the following cases:

• If you are eligible to receive a refund from the tax department

• Any taxes or interest due

In short, this computerized reporting or notification is issued under Section 143(1) for any false tax returns or mathematical errors.

1. Notice under Section 142(1)-

Receiving a Notice under Section 142(1) to Inquire before the Assessment from the assessing officer is a serious matter that requires your immediate attention. There are two possible reasons for this notice. The officer may require additional documents and information related to your tax returns, or they may demand that you file your tax return if it has not been filed yet.

It is imperative that you respond to this notice promptly and comply with the officer's requests, as failure to do so may result in a fine of Rs. 10,000 or imprisonment for up to one year, or both. The purpose of this notice is for the officer to gather more information about you before making a decision on the Act, and it may be related to the preliminary investigation phase during the evaluation. Don't take this notice lightly and ensure that you provide the officer with all the necessary information to avoid any legal consequences.

1. Notice under Section 143(2): 

This notice is to inform the taxpayer that their tax return has been selected for examination. It is important to note that the area of examination may differ from the section under which the notice was given. 

The assessing officer will conduct a thorough scrutiny to ensure that the taxpayer has not engaged in any of the following: - 

• Paid less taxes than required 

• Claimed excessive losses 

• Understated their earnings

Intimation form u/s 143(2)-

You will get one of the following intimations under Section 143(2):

Limited Investigation-

This is CASS (Computer Assisted Scrutiny Selection) where the samples are selected based on set criteria. These are issues with incorrect or inconsistent return information. The investigation will be limited to specific types of recovery and status such as foreign debt or property sales.

Full Investigation-

All supporting documents will be thoroughly reviewed and resubmitted. These samples will be presented in relation to CASS. Although the scope of the test is not limited to this type, the A.O (Assessing officer) cannot verify documents beyond the Certain A.Y.

Manual Investigation-

Samples are selected for comprehensive investigation based on the guidelines defined by the CBDT(Central Board of Direct Tax); Guidelines may vary from year to year.

The taxpayer is required to answer the questionnaire provided and submit the relevant documentation requested by the Department of Income Tax. The assessing officer must issue this notice within six months of the end of the assessment year. For example, say, Mr Ram filed his income statement on 31 July 2019 for the financial year 2018-19. The A.O. can only issue a notice under section 143(2) within 30 September 2020. This is because he can issue the notice only six months from the end of the financial year 2019-20, the financial year now, Mr. Ram filed a return.

What happens if you don't respond the notice-

If you do not respond to the notice within the specified time.

-You may be liable to a penalty of Rs.10,000 under section 272A for any failure to answer.

-The investigating officer can close the investigation with the information in his possession and the final decision under section 144.

-This amount can be considered a higher tax, resulting in higher taxes and penalties that you must pay.

-If you choose to oppose the higher tax requirement, a minimum of 20% of the tax must be paid before filing a complaint with the higher authorities.

1. Notice u/s 139(9)-

Section 139(9) of the Income Tax Act discusses the protocol when an error is discovered in a submitted Income Tax Return (ITR). The Assessing Officer (AO) is required to clearly communicate the issue to the assessee and offer affordable accounting solutions in Delhi NCR to correct it.  

An Individual has 15 days to respond or before the evaluation is made. Failure to make a response within this timeframe will result in the AO denying the return due to a contravention of 139(9).

Typical errors found include faulty ITR submissions, incomplete returns, and imperfect details. The assessee has the option to accept or dispute the assessment made by the AO. However, most often, the assessee accepts the error without question. 

If the assessee disagrees with the error description, they may respond to the income tax notice and provide reasons for the mistake. It is important to note that the assessee must be aware of all the rules for this to be a valid response.

1. Notice under Section 156 –

Section 156 of the tax law requires the tax department to serve a notice of demand to an individual taxpayer if they owe tax, penalty, fine, or any other amount. This notice is usually issued after the assessment of the taxpayer's ITR. The taxpayer has 30 days from the receipt of the notice to pay the tax amount. There is no time limit for issuing this notice. It's worth noting that the notice of demand can also be referred to as a notice of income tax under sections 143(1) or 200A.

1. Notification Under 148 (C) to Commence Proceedings-

This notice is issued when a case is analyzed by an office and can be reopened only when the officer confirms no chargeable income was reported in the tax return.

Before making an assessment or reassessment, the Assessing Officer (AO) must issue the notice as required by Section 148. The AO must provide valid reasons for restarting the case and note the reason for issuing the notice.

1. Notification under Section 245-

The tax department issues a notification to taxpayers under Section 245 of the tax notice. This notification indicates that the IT Department has determined an outstanding tax demand from previous years and that a refund is necessary for a different assessment year. 

If the taxpayer has not yet paid their tax claim, the AO can adjust the refund under Article 245 to cover the outstanding amount.

If a taxpayer has overpaid their taxes, they may be eligible for a refund from the IT Department in a different Assessment Year. Section 245 states that any adjustments to the demand or refund can only be made after the taxpayer has been formally notified. The assessor is also given the opportunity to correct any errors that may arise during the adjustment process.

Conclusion-

In conclusion, it is crucial to carefully review any income tax notices received from the Income Tax Department and promptly respond to them. Failure to do so may result in financial consequences.