- Date : 18/06/2021
- Read: 5 mins
- Read in हिंदी: करदाताओं को जारी की जाने वाली ७ प्रकार की आयकर नोटिस
The different purposes that various Income Tax notices serve as per the Income Tax Act.
There are several sections under the Income Tax Act which define the notices that can be served by the Income Tax authorities. Each of these notices serves a specific purpose and the section indicates the reason(s) for which the notice has been served. A taxpayer need not worry about all types of notices, since some of them can be quite routine.
1. Section 131(1A)
You will receive a notice under section 131(1A) if the Income Tax department thinks you have income that you failed to report. Under this section, the officers of the Investigation Wing carry out enquiries and collect evidence in the course of their search operations. These searches may involve authorised officers who can exercise the powers mentioned in section 131(1). A notice under section 131(1A) is issued after the conclusion of income tax search and seizure under section 132 of the Act.
2. Section 142(1)
This notice is issued in case of default of the taxpayer in filing his or her return of income. Notice under section 142(1) can be issued even after the end of an assessment year and there is no time limit on the issuance. Return of income can be filed under section 139 and its subsections, section 148, and section 153. Apart from these three sections, a return can also be filed under section 142(1) as a response to the notice issued under the same section. If the assessee fails to respond to the notice under 142(1), a best judgement assessment under section 144 is carried out by the assessing officer.
3. Section 143(1)
This is the most commonly received notice by taxpayers and is more like an intimation. It is a system-generated intimation that is sent to all taxpayers who have filed their return of income. The Central Processing Center (CPC) sends this intimation after an assessment of the mathematical accuracy, absence of inconsistency, tax calculation, and tax payment verification of the filed return. The system compares the return with the department’s records and the comparison is provided in the intimation.
4. Section 143(2)
A notice under section 143(2) is issued to taxpayers who have any discrepancies in their return of income. Upon receipt of the notice, the taxpayer has to reply to it along with supporting evidence in their defence. A notice under section 143(2) is issued based on the findings of scrutiny assessment or detailed assessment under section 143(3). Notice under section 143(2) can be issued only within six months from the end of the financial year in which the return was filed. There are three types of notice issued under this section. Limited Scrutiny cases are based on the computer-assisted selection of returns. Complete Scrutiny is done based on returns and supporting evidence flagged by the Computer Assisted Scrutiny Selection. Thirdly, Manual Scrutiny cases are selected based on CBDT defined criteria.
Related: Explainer: Income tax notices and what they mean
5. Section 148
Section 148 allows the assessing officer to flag an assessee if the officer believes that such person has taxable income that has escaped assessment. This notice cannot be served after the expiry of three years from the relevant assessment year unless with the permission of the Principal Chief Commissioner, Principal Commissioner, Chief Commissioner, or Commissioner, assuming the assessee was subject to scrutiny assessment in previous years. In case of failure to disclose material facts, the time limit of six years for reopening has now been reduced to three years, provided the escaped amount is below Rs 1 lakhs. The time limit remains 10 years in case of concealments above Rs 50 lakhs.
If the Assessing Officer is below the rank of Joint Commissioner (JC), the notice has to be served with the JC satisfied about the fitness of the case.
6. Section 156
An assessing officer can raise a demand notice under section 156 for any tax, interest, fine, penalty etc. that may arise from any other section of the Income Tax Act. The assessee can either agree with the demand, or agree that it is partially correct, respond that the demand is incorrect but agree to adjustment, or completely disagree with the demand. This can be done through the e-filing portal.
Related: 5 Tax filing mistakes that can get you a tax notice
7. Section 245
A notice under section 245 is served to adjust a taxpayer’s refund, or part thereof, with any outstanding demand against such taxpayer. The outstanding demand may be for an earlier assessment year as well. Response to section 245 notice can be made similar to a notice under section 156. In your response, you have to explain why such an adjustment should not be made. The decision to instruct the CPC about the adjustment or refund is made by the assessing officer based on the review of your response.
It is fair to say that all Income Tax notices need to be issued at different stages of income tax assessment. Merely receiving an Income Tax notice is not a cause of concern in itself, as long as you are aware of the specific demand and information it communicates. See how Government leveraging data analytics to catch tax evaders
There are several sections under the Income Tax Act which define the notices that can be served by the Income Tax authorities. Each of these notices serves a specific purpose and the section indicates the reason(s) for which the notice has been served. A taxpayer need not worry about all types of notices, since some of them can be quite routine.
1. Section 131(1A)
You will receive a notice under section 131(1A) if the Income Tax department thinks you have income that you failed to report. Under this section, the officers of the Investigation Wing carry out enquiries and collect evidence in the course of their search operations. These searches may involve authorised officers who can exercise the powers mentioned in section 131(1). A notice under section 131(1A) is issued after the conclusion of income tax search and seizure under section 132 of the Act.
2. Section 142(1)
This notice is issued in case of default of the taxpayer in filing his or her return of income. Notice under section 142(1) can be issued even after the end of an assessment year and there is no time limit on the issuance. Return of income can be filed under section 139 and its subsections, section 148, and section 153. Apart from these three sections, a return can also be filed under section 142(1) as a response to the notice issued under the same section. If the assessee fails to respond to the notice under 142(1), a best judgement assessment under section 144 is carried out by the assessing officer.
3. Section 143(1)
This is the most commonly received notice by taxpayers and is more like an intimation. It is a system-generated intimation that is sent to all taxpayers who have filed their return of income. The Central Processing Center (CPC) sends this intimation after an assessment of the mathematical accuracy, absence of inconsistency, tax calculation, and tax payment verification of the filed return. The system compares the return with the department’s records and the comparison is provided in the intimation.
4. Section 143(2)
A notice under section 143(2) is issued to taxpayers who have any discrepancies in their return of income. Upon receipt of the notice, the taxpayer has to reply to it along with supporting evidence in their defence. A notice under section 143(2) is issued based on the findings of scrutiny assessment or detailed assessment under section 143(3). Notice under section 143(2) can be issued only within six months from the end of the financial year in which the return was filed. There are three types of notice issued under this section. Limited Scrutiny cases are based on the computer-assisted selection of returns. Complete Scrutiny is done based on returns and supporting evidence flagged by the Computer Assisted Scrutiny Selection. Thirdly, Manual Scrutiny cases are selected based on CBDT defined criteria.
Related: Explainer: Income tax notices and what they mean
5. Section 148
Section 148 allows the assessing officer to flag an assessee if the officer believes that such person has taxable income that has escaped assessment. This notice cannot be served after the expiry of three years from the relevant assessment year unless with the permission of the Principal Chief Commissioner, Principal Commissioner, Chief Commissioner, or Commissioner, assuming the assessee was subject to scrutiny assessment in previous years. In case of failure to disclose material facts, the time limit of six years for reopening has now been reduced to three years, provided the escaped amount is below Rs 1 lakhs. The time limit remains 10 years in case of concealments above Rs 50 lakhs.
If the Assessing Officer is below the rank of Joint Commissioner (JC), the notice has to be served with the JC satisfied about the fitness of the case.
6. Section 156
An assessing officer can raise a demand notice under section 156 for any tax, interest, fine, penalty etc. that may arise from any other section of the Income Tax Act. The assessee can either agree with the demand, or agree that it is partially correct, respond that the demand is incorrect but agree to adjustment, or completely disagree with the demand. This can be done through the e-filing portal.
Related: 5 Tax filing mistakes that can get you a tax notice
7. Section 245
A notice under section 245 is served to adjust a taxpayer’s refund, or part thereof, with any outstanding demand against such taxpayer. The outstanding demand may be for an earlier assessment year as well. Response to section 245 notice can be made similar to a notice under section 156. In your response, you have to explain why such an adjustment should not be made. The decision to instruct the CPC about the adjustment or refund is made by the assessing officer based on the review of your response.
It is fair to say that all Income Tax notices need to be issued at different stages of income tax assessment. Merely receiving an Income Tax notice is not a cause of concern in itself, as long as you are aware of the specific demand and information it communicates. See how Government leveraging data analytics to catch tax evaders
