An Income Tax notice is a written communication from the Income Tax Department to a taxpayer indicating an issue with their tax account. This notice can be issued for various reasons, such as failing to file an income tax return, making an assessment, or requesting specific information. The tax department has recently issued approximately 22,000 tax notices  to individuals and other taxpayers.

Many taxpayers worry when they receive a notice from the Income-tax Department. Reasons for receiving a notice might include calculation errors, inaccurate income reporting, or making excessive loss claims.

Don't worry! Let's delve into these scenarios and explore how to prevent them. We have compiled a list of the most common reasons for receiving an Income Tax Department Notice. This blog also includes steps to avoid problems after receiving a notice under Section 133(6)  of the Income-tax Act.

Taxpayers are receiving notices from the Income-tax Department under section 133(6) of the Income-tax Act under the "e-verification scheme-2021" or otherwise, when the competent authority approves the notices.

The mis-match may arise from various sources, such as Annual Information Statements, TDS statements, or disparities in exemptions and deductions:

• Income-tax collects information from a wide range of sources and reflects it in the Annual Information Statement and the income disclosed in the income tax return,
• Tax is deducted as per the TDS statements filed by the tax deductor and income is disclosed in the return.
• The employer's Form No. 16 exemptions and deductions, as well as the employee's return of income containing such exemptions and deductions.

If the taxpayer is able to provide an explanation for the mismatch, he may reply to the notice by providing the required justification and supporting documentation.

But if the taxpayer fails to provide an explanation for the mismatch, which could be the result of underreporting income or an excessive or incorrect claim of exemptions and deductions, he may still file an updated return after the deadline for filing a revised return, provided that the eligibility requirements, time limit and  conditions  given below are met:

Who is eligible to file?

Any person, irrespective of whether, in respect of an assessment year, he  has filed  or not  -

• Original return required to be filed within the date u/s 139(1),
• Belated  return u/s 139(4), or
• Revised return u/s 139(5)

Time limit for filing

Within two years from the end of the relevant assessment year. For example updated return for assessment year 2021-22, the updated return can be filed on or before 31-03-2024

Who is not eligible?

A person is not eligible to file an updated return, in any of the following circumstances  -

• Where the updated return is  a loss return,.
• Where the updated return results in reducing the total tax liability determined on the basis of  original return, belated return or revised return filed,.
• Where the updated return results in refund or increases the refund due on the basis of  original return, belated return or revised return filed,.
• If a search has been initiated or requisition has been made in the case of such person.
• If a survey has been conducted in the case of such a person.
• a notice has been issued to the effect that any books of account or documents,money, bullion, jewellery; or valuable article or thing, seized or requisitioned in the case of any other person belongs to such person.

In the circumstances mentioned in (IV) to (VI), the restriction on filing updated return is in respect of the financial  year in which a search is initiated, a survey is conducted or a requisition is made and for any assessment year preceding such an assessment year.

The following are the other  circumstances under which a person shall not be eligible to file an updated return:

• where  an updated return has been already been filed  for the assessment year; or
• where  any  assessment, reassessment, recomputation or revision proceeding for assessment year is pending  or has been completed
• where the Assessing Officer has communicated prior to the date of furnishing the updated return any information available with him for the assessment year under–
  • the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976
  • the Prohibition of Benami Property Transactions Act, 1988
  • the Prevention of Money-laundering Act, 2002
  • the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (22 of 2015),
  • received under an Exchange of Information agreement (DTAA)
• Where any prosecution proceeding under Income-tax has been initiated for the assessment  prior to the date of furnishing updated return,.

Condition of payment of additional tax

The person is required to pay additional income-tax payable at the time of furnishing the updated return equal to,

• 25% of aggregate of tax and interest payable, if such return is furnished 12 months from the end of the assessment year; or
• 50% of the aggregate of tax and interest payable, if such return is furnished after the expiry of one year but before two years from the end of the assessment year.

Conclusion:

If you receive an ITR notice, don't panic. Find the reason for the notice and take the necessary actions to resolve it.

You have two options: submit the required documents or file an updated return for the relevant assessment year, or  take help from a tax professional platform like Prosperr.io.

Prosperr.io  is an innovative and user-friendly platform for managing individual income tax. It maximizes your eligible tax savings and automates income tax management. Click here for a free demo.

Getting income tax notices can be frustrating and time-consuming. Always make sure to include all disclosures and declarations when submitting your Income Tax Return (ITR).

[Disclaimer- The article is only for educational purposes. The relevant provisions of the Income-tax Act may be referred to, for complete understanding.]