Income Tax, Income Tax Notices

All About Different Types of Notices Under the Income Tax Act, 1961

1.       Section 139(9) – Defective Income Tax Return

Where the Assessing Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect.

So in what situations is Income Tax return considered defective?

Such returns are considered defective if:

(a)   The annexures, statements and columns in the return of income for computation of GTI have not been filled in.

(b)   Return is not accompanied by a statement showing the computation of the tax payable on the basis of the return.

(c)    The return is not accompanied by proof of tax including TDS,TCS , Advance Tax or Self Assessment Tax paid – please note that there are no attachments to be made to individual returns. Only details of taxes paid have to be included.

(d)   Return is not accompanied by the report of the audit referred to in section 44AB, wherever the same is applicable.

(e) There is a mis-match between the details as per PAN card and the information filed in the return.

Time Limit for reply

The Assessee is required to rectify the return within 15 days of receipt of such intimation. Assessee can seek additional time to rectify the return by applying to the Assessing Officer  – this can be done through log-in one the Income Tax E Filing website.

Where the defect is not rectified within 15 days, the return is treated as an invalid return i.e. it is presumed that the assessee has failed to furnish the return.

However, the Assessee can request for condonation of delay – the Assessing Tax Officer has power to condone delays and treat the return as valid.

2.       Section 142(2) – Inquiry before Assessment

The assessing officer may serve an inquiry under section 142 (2) on any person in following cases:

a.       Where return has not been filed within the time allowed under section 139(1) (31 July for individuals).

b.      to produce, or cause to be produced, such accounts or documents as the Assessing Officer may require.

c.       Furnish in writing such information and on such points or matters as the Assessing Officer may require.

This notice is issued usually before a scrutiny assessment. If the Assessing officer is satisfied with the response received, no further assessment proceeding will be followed.

Further, time limit to issue notice is before the end of relevant Assessment year i.e. for March 2019, notice for scrutiny assessment can be issued before 31 March 2020.

Time Limit for reply

Tax Payers will be required to reply within the time period mentioned in notice.

3.       Section 143(2) – Assessment

The assessing officer may serve a notice requiring the assesse to produce any evidence or information required if he under the opinion that the assesse has understated the income or computed excessive loss or has not under-paid the tax – this is referred to as scrutiny assessment.

The notice must be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished i.e. for return for year ended 31 March 2019, the notice can be served by 30 September 2020.

Incase the  Assessee fails to comply with  notice issued u/s 143(2), then he shall be liable:

  1. Penalty u/s 271 amounting to Rs. 10,000 plus prosecution.
  2. The Assessing Officer may proceed with best judgement assessment u/s 144.

Time Limit for reply

Tax Payers will be required to reply within the time period mentioned in notice.

Time Limit for completion of Assessment

Assessment u/s 143(3) should be completed within the period of 18 months from the end of the relevant assessment year in which the income was first assessable i.e. 21 months from March 2020 in case the return has been filed for 2018-19.

4.       Section 148 – Issue of notice where income has escaped assessment

Where the Assessing officer has reasons to believe  that any income chargeable to tax has escaped assessment for any assessment year, then he may assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under section 147

He is also empowered to re-compute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned.

However, items which are the subject matters of any appeal, reference or revision cannot be covered by the Assessing Officer under section 147.

Time limit for issue of notice under Section 148 is in accordance with Section 149 i.e. within 4 years from the end of relevant Assessment Year i.e. 31 March 2024 in case of return filed for financial year 2018-19.

However, where the amount escaped is likely to exceed Rs.1,00,000 then the notice can be issued within 6 years from the end of relevant Assessment Year.

Further, where the income escaped relates to foreign assets then the time limit has been extended to upto 16 years from the end of relevant Assessment Year.

Time Limit for reply

Tax Payers will be required to reply within the time period mentioned in notice.

 Time Limit for completion of Asessment

The Assessment under Section 147 should be completed with 9 months (12 months for the notices served on or after 1st April 2019)from the end of the FY in which notice was issued.

5.      Section 156 – Demand Notice

When any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under this Act,  Assessing Officer shall serve upon the assessee a notice of demand specifying the said amount in prescribed form to be paid.

Time Limit for payment

The amount which is demanded in the Section 156 demand notice has to be paid by the Assessee within a period of 30 days after the date of receipt of the notice.

Incase the assesse fails to make payment within the time limit provided under the section 156 tax notice then the assesse will be liable to:

  1. Interest u/s 220- Interest at the rate of 1% per month or part thereof is payable after the expiry of the 30 days time provided under section 156 tax notice.
  2. Penalty u/s 221- A penalty u/s 221 may be imposed by the AO on the assessee but it should not be more than the amount demanded in the Demand Notice.

An appeal would need to be filed by the tax payer against demand order of the Assessing Officer to the Commissioner (Appeals). Generally, the tax payer would need to make payment of 20% of the tax demanded when appeal is filed.

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