Received ITR notice from taxman? Avoid these last minute tax troubles

Union Finance Minister Nirmala Sitharaman revealed that the government has issued one lakh notices for non-filing of returns and misrepresentation of income. These notices were primarily sent to individuals with income close to Rs 50 lakh. In the wake of tax troubles, tax experts advise against panicking and suggest ways to effectively address the notices.

Types of income tax notices

Section 139(1) - Incomplete or Inaccurate Information
This notice is sent if the tax return is found to be incomplete or contains inaccurate information. Taxpayers are required to rectify the flaws within 15 days of receiving the notice.

Section 143(2) - Additional Information Required
If the tax officer is dissatisfied with the information or documents provided by the taxpayer, a notice under Section 143(2) is issued, requesting further details for additional review.

Section 156 - Demand Notice
The Income Tax Department issues a notice under Section 156 (demand notice) if the taxpayer owes money in the form of taxes, interest, penalties, or other debts. The notice clearly states the amount owed.

Section 245 - Adjustment against Refund
When the tax officer believes that the taxpayer owes back taxes, a notice under Section 245 is sent, seeking to deduct the amount from the current-year refund. However, taxpayers must be given adequate notice and a chance to respond within 30 days before any adjustments are made.

Section 148 - Failure to File Return
In case the officer believes that the taxpayer has not filed the required return, a notice under Section 148 is issued. The assessing officer is then authorised to review the income.

How to tackle the notices

"Responding promptly and accurately to these notices is crucial. Taxpayers have 30 days from the date of the notice mandated by Section 143(1) to respond," said Arpit Suri, CA and personal finance expert. 

Steps to address the notice-:

1. Check the identity information provided in the notice, including name, address, and PAN number.
2. Verify the assessment year and the e-filing acknowledgement number.
3. If there was an error in the initial ITR filing, taxpayers have 15 days to file the updated returns.

"If the Income Tax Department's order is found to contain errors or inaccuracies, taxpayers should submit a rectification return. It is essential to understand the reason for the notice and identify the discrepancy between the reported income on Form 16/16A/26AS and the income mentioned in the notice," he added.

Respond to demand notices (section 156)

To avoid interest and penalties, taxpayers must respond to demand notices issued under Section 156 within 30 days, say experts.

"Taxpayers can log in to the official website of income tax filing using their user name and password to view outstanding tax demands. By visiting the 'e-file' tab and selecting 'Response to outstanding tax demand,' they can access the required information. Additionally, the "Know Your Jurisdictional AO" option under the "Services" menu on the income tax e-filing system helps individuals learn more about their jurisdictional assessing officer," Suri explained.

While addressing the 164th Income Tax Day the chairperson of the Central Board of Direct Taxes (CBDT) Nitin Gupta said that for the fiscal year 2022-23 more than 4 crore income tax returns (ITR) have been filed so far and the government has processed more than half of such ITRs, resulting in Rs 80 lakh refunds.