NOTICES ISSUED BY INCOME TAX DEPARTMENT UNDER INCOME TAX LAW
In this Guide on Notices by Income Tax Department, you will able to get in-depth knowledge on various notices issued by the Income Tax Department.
Notices under income tax are issued in relation to various assessment carried out by income tax department.
What is assessment – Every taxpayer has to furnish the details of his income to the Income-tax Department. These details are to be furnished by filing up his return of income. Once the return of income is filed up by the taxpayer, the next step is the processing of the return of income by the Income Tax Department. The Income Tax Department examines the return of income for its correctness. The process of examining the return of income by the Income- Tax department is called as “Assessment”.
Following Notices are issued by income tax department
Notice u/s 143(1) (Intimation)
This notice is made while making assessment u/s 143(1).
Assessment u/s 143(1) – This is a preliminary assessment and is referred to as summary assessment without calling the assessee (i.e., taxpayer). At this stage, the total income or loss is computed after making the following adjustments (if any), namely:-
- any arithmetical error in the return; or
- an incorrect claim (*), if such incorrect claim is apparent from any information in the return;
- disallowance of loss claimed, if return of the previous year for which set-off of loss is claimed was furnished beyond the due date specified under section 139(1); or
- disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return; or
- disallowance of deduction claimed u/s 10AA, 80IA to 80-IE, if the return is furnished beyond the due date specified under section 139(1); or
- addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return.
NOTICE U/S 143(1) is made as an intimation to assessee for the adjustment to be made by Assessing Officer while making assessment under 143(1).
Time limit of response – The assessee should respond within 30 days from issue of notice u/s 143(1).
Notice u/s 143(2) (Scrutiny assessment)
This notice is made while making assessment u/s 143(3).
Assessment u/s 143(3) – This is a detailed assessment and is referred to as scrutiny assessment. At this stage a detailed scrutiny of the return of income will be carried out. At this stage a scrutiny is carried out to confirm the correctness and genuineness of various claims, deductions, etc., made by the taxpayer in the return of income.
NOTICE U/S 143(2) –
- If the Assessing Officer considers it necessary or expedient to ensure that the taxpayer has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, then he will serve on the taxpayer a notice requiring him to attend his office or to produce or cause to be produced any evidence on which the taxpayer may rely, in support of the return, the assessing office shall issue notice u/s 143(2).
- The taxpayer or his representative (as the case may be) will appear before the Assessing Officer and will place his arguments, supporting evidences, etc., on various matters/issues as required by the Assessing Officer.
- After hearing/verifying such evidence and taking into account such particulars as the taxpayer may produce and such other evidence as the Assessing Officer may require on specified points and after taking into account all relevant materials which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the taxpayer and determine the sum payable by him or refund of any amount due to him on the basis of such assessment.
NOTICE U/S 142(1)
The Assessing Officer can issue notice under section 142(1) asking the taxpayer to file the return of income if he has not filed the return of income or to produce or cause to be produced such accounts or documents as he may require and to furnish in writing and verified in the prescribed manner information in such form and on such points or matters (including a statement of all assets and liabilities of the taxpayer, whether included in the accounts or not) as he may require.
NOTICE U/S 142(2A) (Special audit)
Section 142(2A) deals with special audit. As per section 142(2A), if the conditions justifying special audit as given in section 142(2A) are satisfied, then the Assessing Officer will direct the taxpayer to get his accounts audited from a chartered accountant nominated by the principal chief commissioner or Chief Commissioner or Principal Commissioner or Commissioner and to furnish a report of such audit in the prescribed form.
NOTICE U/S 144 (Best judgement)
Notice u/s 144 is served while making assessment u/s 144.
Assessment u/s 144 – As per section 144, the Assessing Officer is under an obligation to make an assessment to the best of his judgment in the following cases:-
- If the taxpayer fails to file the return required within the due date prescribed under section 139(1) or a belated return under section 139(4) or a revised return under section 139(5).
- If the taxpayer fails to comply with all the terms of a notice issued under section 142(1).
- If the taxpayer fails to comply with the directions issued under section 142(2A).
- If after filing the return of income the taxpayer fails to comply with all the terms of a notice issued under section 143(2), i.e., notice of scrutiny assessment.
- If the assessing officer is not satisfied about the correctness or the completeness of the accounts of the taxpayer or if no method of accounting has been regularly employed by the taxpayer.
From the above criteria, it can be observed that best judgment assessment is resorted to in cases where the return of income is not filed by the taxpayer or if there is no cooperation by the taxpayer in terms of furnishing information / explanation related to his tax assessment or if books of accounts of taxpayer are not reliable or are incomplete.
NOTICE U/S 144 –
- If the conditions given above calling for best judgment are satisfied, then the Assessing Officer will serve a notice on the taxpayer to show cause why the assessment should not be completed to the best of his judgment.
- No notice as given above is required in a case where a notice under section 142(1) has been issued prior to the making of an assessment under section 144.
NOTICE U/S 148 (Escaped income)
Notice u/s 148 shall be served while making assessment u/s 147.
Assessment u/s 147 – This assessment is carried out if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year.
Notice u/s 148
- For making an assessment under section 147, the Assessing Officer has to issue notice under section 148 to the taxpayer and has to give him an opportunity of being heard.
- If the Assessing Officer has reason 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 this section. 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.
NOTICE U/S 139(9) (Defective 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 within a period of fifteen days from the date of such intimation or within such further period Assessing Officer may allow
- If the defect is not rectified within the said period of fifteen days or the further period so allowed, then the return shall be treated as an invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return.
Provided that where the assessee rectifies the defect after the expiry of the said period of fifteen days or the further period allowed, but before the assessment is made, the Assessing Officer may condone the delay and treat the return as a valid return.
NOTICE U/S 156 (Notice of demand)
When any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under this Act, the Assessing Officer shall serve upon the assessee a notice of demand u/s 156 specifying the sum so payable.
NOTICE U/S 245 (Set off of refunds against tax remaining payable)
Where any refund is found to be due to any person, the Assessing Officer, Deputy Commissioner (Appeals), Commissioner (Appeals) or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under this Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under this section.