The Income Tax Department sends notices at different points in the return-processing and assessment process. The reason for a notice, as well as the action required, depends on the relevant provision of the Income-tax Act.
Some notices seek clarification or corrections, while others relate to scrutiny, reassessment, refund adjustment or revision of an earlier order. A taxpayer should read the notice carefully, check the cited section and respond within the specified period.
Notices linked to return processing
A notice may be issued when the department identifies a possible mismatch or apparent error while processing an income tax return. The issue could concern deductions, tax credits or information reported by an employer, bank or another institution.
The proposed adjustment should be compared with the taxpayer’s records. If it is accurate, it can be accepted. If it is disputed, an online response with supporting evidence should be submitted before the deadline.
A return can also be treated as defective because of missing information, incomplete disclosures or another prescribed defect. In that situation, the taxpayer needs to correct the shortcomings and file the revised return within the specified time. Failure to do so may result in the return being treated as invalid.
An infographic explaining the key facts in Eight income tax notices and how taxpayers should respond.
Requests for information and scrutiny
Under Section 142(1), the department can seek additional information, documents or explanations needed for an assessment. The notice can also require a taxpayer to file a return where one has not been filed.
The requested material should be furnished through the e-proceedings portal within the prescribed timeline. The response should be complete and supported by relevant records.
A scrutiny notice is issued when the return is selected for verification. The examination may cover reported income, deductions, exemptions or other tax positions. Taxpayers should answer the queries and provide supporting evidence while cooperating with the assessment proceedings. Timely compliance is essential.
Reassessment and refund adjustment
A Section 148 notice is issued when an Assessing Officer proposes to reassess income believed to have escaped assessment. Such action remains subject to the conditions and safeguards prescribed under the Income-tax Act.
An infographic explaining the key facts in Eight income tax notices and how taxpayers should respond.
The recipient should examine the basis of the notice, file the return when required and provide a detailed response. Professional advice is advisable in these cases.
A Section 245 notice concerns a proposed adjustment of an income tax refund against an outstanding demand connected with another assessment year. The taxpayer should first verify whether the demand is correct. A valid demand can be accepted. If it is disputed or has already been paid, an online objection with supporting evidence can be filed.
Rectification and revision of assessment orders
A Section 154 notice deals with a mistake apparent from the record. Examples include clerical, arithmetical or other obvious errors in an order.
The proposed rectification should be reviewed and a response submitted where necessary. If the mistake is genuine, the rectification should be accepted. Otherwise, objections should explain the reasons for disagreement.
A Section 263 notice is issued when the Commissioner considers an assessment order passed by an Assessing Officer to be erroneous and prejudicial to the interests of the revenue, and proposes to revise it.
The taxpayer should submit a detailed written explanation of why the order is neither erroneous nor prejudicial to the revenue. The submission should include supporting legal and factual evidence. Professional representation is generally recommended.
Key response points
- Check the section, issue and deadline stated in the notice.
- Compare proposed adjustments or demands with relevant tax records.
- Provide complete information and supporting documents through the required online process.
- Correct defective returns within the specified period.
- File objections where a demand, adjustment or proposed rectification is disputed.
- Consider professional representation for reassessment and revision proceedings.
