Understanding Income Tax Notices in India: Types and Triggers

Dealing with income tax notices can be stressful, but understanding why they are issued and how to respond can help you stay compliant and avoid penalties. This article explains what an income tax notice is, when it is issued, and the different types you may receive from the Income Tax Department.

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What is an Income Tax Notice?

An income tax notice is an official communication from the Income Tax Department sent to individuals or businesses regarding discrepancies, non-compliance, or additional information required for tax assessment. Notices can be issued for various reasons, including non-filing of returns, mismatched income details, or scrutiny under different sections of the Income Tax Act.

When is an Income Tax Notice Issued?

The Income Tax Department may issue a notice in the following cases:

✔ Non-Filing of ITR – If you fail to file your Income Tax Return (ITR) within the due date.

✔ Mismatch in Reported Income – When your reported income differs from the data available with tax authorities.

✔ Scrutiny Assessment – If your ITR is selected for detailed examination.

✔ Undisclosed Income – When the department suspects you have hidden or underreported your income.

✔ Random Selection – Some tax returns are picked for verification as part of routine assessments.

✔ TDS Discrepancies – If there is a mismatch in TDS (Tax Deducted at Source) claims and actual deductions.

✔ High-Value Transactions – If you have large deposits, property purchases, or high-value investments that are flagged for review.

Types of Income Tax Notices & Their Meaning

1. Notice under Section 131 – Income Concealment Inquiry

Issued when the Assessing Officer (AO) suspects that you are concealing income or suppressing financial transactions. The AO may request you to provide relevant financial documents and appear for inquiry.

2. Notice under Section 139(9) – Defective Return Notice

Sent when the Income Tax Department finds errors or missing details in your filed ITR. You must rectify and resubmit it within the specified time frame.

3. Notice under Section 142(1) – Inquiry Before Assessment

Issued when additional documents or clarifications are required before processing your return. It may also be sent if you fail to file your ITR.

4. Notice under Section 143(1) – Intimation Notice

This is an automated notice sent after preliminary assessment of your ITR. It can be:

• Refund Notice – If you have paid excess tax.

• Tax Demand Notice – If additional tax is due.

• No Discrepancy Notice – If your return matches department records.

  
  

5. Notice under Section 143(2) – Scrutiny Notice

Issued when your return is selected for detailed scrutiny. You must provide supporting documents to justify your claims.

6. Notice under Section 143(3) – Detailed Scrutiny Assessment

If the Assessing Officer is not satisfied with your explanation under Section 143(2), they may demand further information under Section 143(3) before finalizing the tax assessment.

7. Notice under Section 148 – Income Escaping Assessment

Sent if the department believes you underreported or failed to disclose certain income sources. You may need to file a revised return.

8. Notice under Section 156 – Demand Notice

Issued when you owe additional tax, penalties, or interest to the Income Tax Department. You must pay the amount within the given deadline.

9. Notice under Section 245 – Adjustment of Refund Against Tax Due

Issued when your pending tax dues are adjusted against your expected refund.

How to Respond to an Income Tax Notice?

✅ Read the Notice Carefully – Identify the section under which it was issued.

✅ Gather Relevant Documents – Keep necessary proofs like income details, tax challans, and bank statements.

✅ Consult a Tax Expert – Avoid mistakes by seeking professional help.

✅ File a Response Before the Deadline – Ignoring a notice can lead to penalties or legal action.

Need Help with Your Income Tax Notice?

If you've received an income tax notice and are unsure how to respond, BizAarambh is here to assist you. Our expert tax consultants will guide you through the process, ensuring compliance and peace of mind.

📞 Contact us today for expert consultation!