Income Tax Notices

Various types of Income Notices received by the Taxpayers

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income tax Notice

In India, the Income Tax Department often issues notices under various sections of the Income Tax Act 1961 to taxpayers. These notices have far-reaching implications for taxpayers and serve different purposes, such as requesting additional information, conducting audits, or informing taxpayers about discrepancies in their tax filings.

Taxpayers need to understand the significance of these notices as they enable them to respond efficiently and avoid any potential penalties. To help you better understand this, here is a breakdown of some standard income tax notices frequently issued in India.

What are the common reasons for Income Tax notices?

Differences between reported income and government records.
Not filing a return despite having taxable income.
Seeking refunds that are disproportionate to taxes paid.
Failure to accurately report foreign income.
Mistakes in the tax return form.
Incorrect consolidation of multiple employment income sources.
Incorrect reporting of capital gains or losses.
Inaccurate reporting of property transactions.

Lack of evidence for claimed investment deductions.

Incorrect asset valuation on tax returns.
Ignoring previous income tax notices.
Large, unexplained credits or investments in accounts.
Involvement in high-risk financial transactions.
Disproportionate claims for medical expenses.
Omission of a bank account, especially foreign accounts and mandatory to disclose. Assessment can be done backdated for 14 years.
Frequent updates to contact information that raise suspicion.
Payments do not match tax return figures.
Misreporting or not reporting gains from stock transactions.
Errors in calculating or claiming depreciation on assets.
Claiming insurance premiums inconsistent with income level.
Failure to report income from partnerships.
Someone else uses your PAN for financial transactions.
Filing a tax return using incorrect or outdated forms.
Errors in carrying or setting off previous years’ losses.
Not reporting the sale of financial or physical assets.
Engaging in transactions that exceed certain thresholds.
Discrepancies between claimed TDS and TDS as per Form 26AS.
Omitting or underreporting income streams.
Being randomly selected for detailed scrutiny.
Failing to report income deferred from previous years.
Errors in the listed Permanent Account Number.
Claiming tax credits without proper evidence.
Discrepancies in claims for charitable donation deductions.
Large cash deposits were unaccounted for during demonetisation, and there needed to be sources for how the cash was earned.
Transactions suggesting potential tax evasion.
Suspiciously large agricultural income claims.
Repeated revisions of already filed returns.
Lifestyle does not match reported income.
If double taxation relief is inappropriately claimed and Form 67 is not filed, the claim under Section 90/91 will be rejected.
Failing to comply with required statutory filings.
Not reporting one-time or unusual income gains.
Omissions in reporting withdrawals from retirement accounts.
Missing forms or documents with the tax return.
Deductions claimed for expenses not legally deductible.
Claims related to properties that do not exist.
Errors in claiming deductions for education expenses.
Not reporting income from side businesses or freelance work.
The income earned from rental properties needs to be correctly reported where the owner is identified as the tax-payer and not the person receiving the income
Failure to report transactions from joint accounts.

What to do when the notice is received

Understand the type of notice, the tax year in question, and the specifics of what is being asked or stated.
Compare the information in the notice with your tax return for the specified year to understand any discrepancies or issues.
Pay close attention to the deadlines specified in the notice for responding or making payments, if applicable.
Draft a response addressing the issues raised in the notice. Include any requested documentation, and keep copies of all correspondence.
Ensure the notice has a valid DIN per tax department guidelines for authenticity.
Collect all relevant documents, such as bank statements, investment proofs, and previous tax returns, that may be needed to respond to or comply with the notice.
Consult with a tax professional or accountant, such as www.cfoangle.com, for expert advice on proceeding and ensuring proper compliance.
Monitor the situation after your response to ensure it has been resolved or prepare for further communication from the tax department.

What are the common types of Notices

Notice under Section 142(1) - Non-Filing of Income Tax Return

Regarding taxation, it's not unusual for the Income Tax Department to send a preliminary inquiry notice before conducting an assessment. This is a routine step in the process, and it's meant to call for the relevant documents and details from the taxpayers.

Essentially, the notice is a request for clarification and supporting documents necessary for completing the assessment. This is usually the first step in the process; further steps may be required before the evaluation is completed.

Notice under Section 143(1) – Intimation

This notification will inform you about your tax return filing status. The notice serves as an intimation and can indicate one of two things:


  • Acceptance: The tax department has accepted the tax return you filed without any changes or corrections.
  • Adjustment: The tax department has identified an arithmetic mistake, incorrect claim, or discrepancy in the return that needs to be corrected. In this case, the notice will communicate the required changes.

Notice under Section 143(2) – Scrutiny Assessment

If you receive this notice, the tax department will select your return for a thorough examination. The main objective of this scrutiny is to ensure that you have provided accurate information regarding your income, expenses, and taxes paid.

The department will closely scrutinise your return to check if you have understated your income, overstated your costs or losses, or failed to pay the required taxes in any form. This notice should be issued within six months from the end of the financial year your tax return was filed.

Notice under Section 143(3) – Assessment

This notification is sent once a thorough review of a taxpayer's assessment has been conducted and any inconsistencies or under-evaluations have been identified. It requests that the taxpayer pay an additional tax based on the revised assessment.

Notice under Section 148 – Income Escaping Assessment

When the Assessing Officer believes that some income has yet to be assessed, they may notify the taxpayer. This notice indicates that the department is initiating reassessment proceedings.

The taxpayer must file a return of the income assessed within the time frame specified in the notice. It's crucial to understand that responding to this notice requires taking specific steps, such as gathering relevant documents and information, consulting with a tax professional if necessary, and submitting a response to the department promptly and accurately.

Notice under Section 156 – Demand Notice

When the Income Tax Act mandates the payment of any tax, interest, penalty, exemplary charges, or any other due amount, the Notice of Demand is issued to the taxpayer. This notice requires the taxpayer to pay the outstanding amount within 30 days of receiving the notice. Failure to comply with this notice could result in further legal action taken by the tax authorities. It is, therefore, essential to ensure timely payment of the amount demanded to avoid any legal complications.

Notice under Section 245 – Adjustment of Refunds Against Tax Remaining Payable

When the tax department intends to adjust a refund against any outstanding tax due from the taxpayer, they issue a notice to inform the taxpayer of their intention. The notice warns taxpayers that their refund may be adjusted to cover their tax liability.

However, before the department can make any such adjustments, they will first seek an explanation from the taxpayer regarding why such adjustments should not be made. This allows the taxpayer to provide a valid reason why their refund should not be adjusted, such as evidence that they have already paid their taxes in full.

Notice under Section 131 – Response on the Summon issued

A Notice under Section 131 of the Income Tax Act, 1961 is a significant and powerful tool used by the Income Tax Department in India. This section gives the tax authorities the same powers as those vested in a court under the Code of Civil Procedure, 1908, when summoning individuals their attendance of persons, examining them under oath, compelling the production of books of account and other documents, and issuing commissions.

Notice under Section 150 – No Time limit for issuance of notice under Sec 148

As per the provisions of the Income Tax Act, a notice under Section 148 can be issued by the assessing officer at any time to make an assessment or reassessment recomputation.

This may be done in consequence of or to give effect to the finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference, or revision or by a court in any proceeding under any other law. In simpler terms, this means that the assessing officer can initiate a reassessment or recomputation if there has been a change in the order or direction passed by any authority or court.

Notice under Section 149 (3) – Time Limit for the issue of notice under Sec 148 to the agent of Non-Resident

As per Section 148 of the Income Tax Act, no notice shall be issued on the agent of a non-resident after the expiry of 6 years from the end of the relevant assessment year.

This means that if a non-resident has an agent responsible for filing income tax returns on their behalf, then the tax authorities cannot issue a notice to the agent after the completion of 6 years from the end of the relevant assessment year. Both non-residents and their agents must know this provision to avoid any unnecessary legal complications.

Notice under Section 153(2) - Order of assessment/ reassessment or recomputation u/s 147

As per the Income Tax Act, no order of assessment, reassessment, or recomputation under section 147 shall be made after the expiry of 9 months from the end of the financial year in which the assessee's notice under section 148 was served.

This provision has been implemented to ensure that the assessment process is completed within a reasonable time frame and the taxpayer is not subjected to undue harassment. Therefore, taxpayers need to keep track of the timelines and promptly respond to any notice from the Income Tax Department to avoid unnecessary complications.

Notice under Section 154 – Rectification of Mistake

ANo order of rectification shall be passed after the expiry of 4 years from the end of the financial year in which the order sought to be amended was passed. Income Tax Authority referred to in Sec 116 may amend any order passed by it, any intimation or deemed intimation u/s 143(1) or amend any intimation passed u/s 200A or u/s 206CB.

Where an application for rectification is made by the assessee to the Income Tax Authority, then the authority shall pass an order within 6 months from the end of the month the application is received. If an order is not passed within 6 months, then the rectification application shall be deemed allowed in favour of the assessee.

Notice under Section 153(3) - Time limit for completion of Fresh assessment in pursuance of an order u/s 254, 263 or 264 setting aside or cancelling an assessment order

As per the provisions of the Income Tax Act, if an order is received under section 254 or passed under section 263 or 264, the taxpayer has a prescribed time limit to file an appeal against it. Generally, the time limit is 9 months from the end of the financial year in which the order is received or passed.

However, from 1st April 2019 onwards, if the order is received under section 254 or passed under section 263 or 264, the prescribed time limit for filing an appeal has been increased to 12 months instead of 9 months. This means that the taxpayer will have an additional 3 months to file an appeal against the order. It is important to note that this extended time limit applies only to the orders received or passed on or after 1st April 2019.

Notice under Section 153B - Time limit for completion of assessment u/s 153A

As per the provisions of the Income Tax Act, the Assessing Officer (AO) is required to make an order of assessment or reassessment within a specific period. In case of a search conducted under Section 132 of the Act, the AO is required to make the assessment in respect of the assessment year relevant to the previous year in which the search was conducted, within 21 months from the end of the financial year in which the search was completed.

Similarly, in case of a search conducted under Section 153A, the AO is required to make an assessment in respect of each assessment year falling within 6 assessment years referred to in clause (b) of Section 153A, within 21 months from the end of the financial year in which the search was completed. Taxpayers must be aware of these timelines to avoid penalties or legal consequences.

Notice under Sec 245D (4A) Time limit for passing the Order of Settlement Commission

As per the provisions of the Incom Tax Act, 1961, the Settlement Commission must pass an order of Settlement under section 245D(4) within 18 months from the end of the month the application was made. If you have applied to a settlement with the Settlement Commission, you can expect to receive the order within 18 months from the end of the month you filed your application.

However, if the Settlement Commission fails to pass an order within 18 months, the proceedings shall abate under section 245HA. This means that the settlement application will be deemed void, and you will not be able to take advantage of the settlement provisions of the Income Tax Act. Therefore, it is essential to keep track of the time frame and follow up with the Settlement Committee, which is still waiting if you do not receive an order within the prescribed time.

Notice under Sec 245D(6B) - Rectification of Mistake apparent from the record by Settlement CoSupposeission

Suppose you have applied to the settlement with the Settlement Commission under the provisions of the Income Tax. In that case, act 1961, it is essential to note that the Commission must pass an order of Settlement within a period.

As per the Act, the Settlement is required to pass the order of Settlement under section 245D(4) within 18 months from the application's end. If you have applied for settlement with the Settlement Commission, you can expect to receive the order within 18 months from the end of the month in which you filed your application. Remembering this timeline while planning your finances and other related aspects is advisable.

Notice under section 245D(7) Revival of proceedings, when Settlement becomes Void

The Settlement Commission, a quasi-judicial body, can amend any order passed to rectify any mistake apparent from the record. However, such an amendment can only be made within six months from the date of the original order. It is important to note that if the amendment has the effect of modifying the applicant's liability, then the applicant and the Commissioner must be allowed to be heard before the amendment order is passed. This ensures that the applicant's interests are protected and that the Commissioner's decision is fair and justifiable.

In summary, the Settlement Commission has the authority to correct any mistakes in its orders within a specific time frame, but it must also ensure that the applicant and Commissioner are given adequate opportunity to present their views before any consequential changes are made to the order.

Notice under Sec 245D (4A) Time limit for passing the Order of Settlement Commission

As per the provisions of the Incom Tax Act, 1961, the Settlement Commission must pass an order of Settlement under section 245D(4) within 18 months from the end of the month the application was made. If you have applied to a settlement with the Settlement Commission, you can expect to receive the order within 18 months from the end of the month you filed your application.

However, if the Settlement Commission fails to pass an order within 18 months, the proceedings shall abate under section 245HA. This means that the settlement application will be deemed void, and you will not be able to take advantage of the settlement provisions of the Income Tax Act. Therefore, it is essential to keep track of the time frame and follow up with the Settlement Committee, which is still waiting if you do not receive an order within the prescribed time.

Notice under Sec 249 - Time limit for filing an appeal to CIT(A)

As per the relevant tax laws, if any person wants to file an appeal, they must do so within 30 days of a specific date. The date varies depending on the type of appeal. If the appeal is filed under section 248, then the date of tax payment is considered for filing the appeal. If the appeal relates to an assessment or penalty, then the date of the notice of demand relating to the assessment or penalty is considered for filing the appeal.

In any other case, the date when the order sought to be appealed is served shall be considered. However, in case of a delay in filing the appeal, the delay can be condoned, failing which the remedy available is Section 264 as prescribed by the Chief Income Tax Officer.

Sec 250 Time limit for issue of Order by CIT(A)

As per Section 246A of the Income Tax Act, if an appeal is filed before the Commissioner of Income Tax (Appeals) or CIT(A), they may strive to hear and decide the appeal within a year from the end of the financial year in which the appeal is filed.

However, it is important to note that this is not a mandatory requirement, but rather a directory provision for CIT(A). Furthermore, it is not within the powers of the CIT(A) to set aside an assessment and ask the Assessing Officer (AO) to make a fresh assessment. The CIT(A) is only authorised to determine the appeal on its merits and either confirm, modify or annul the assessment order passed by the AO.

Sec 253 Time limit for filing an appeal to ITAT

Whenever a taxpayer or the Commissioner of Income Tax (CIT) wishes to challenge an order issued by the Income Tax department, they can file an appeal to the Income Tax Appellate Tribunal (ITAT).

However, it's important to note that such an appeal must be filed within 60 days from the date the order to be appealed against is communicated to the taxpayer or the CIT, as the case may be. This time limit is crucial and must be strictly adhered to, as any delay in filing the appeal can lead to its rejection by the ITAT.

Sec 260A Appeal to High Court

If the CIT or the assessee is not satisfied with the decision made by the Appellate Tribunal, they have the right to file an appeal to the High Court. Such an appeal must be filed within 120 days from the date the order appealed against is received by the CIT or the assessee. The appeal should be based on a substantial question of law. However, if there is a delay in filing the appeal, it may be condoned on sufficient cause.

Sec 263 Revision Order by CIT u/s 263

According to section 263, an order cannot be revised after two years from the end of the financial year in which the order was initially passed. However, if the revision is necessary to implement the findings or directions mentioned in an Appellate Tribunal, National Tax Tribunal, High Court, or Supreme Court order, then it can be done at any time. In case of an order passed under section 263, an appeal can be filed to the Income Tax Appellate Tribunal (ITAT).

Sec 264 Revision application u/s 264

As per the Income Tax Act, the Principal Commissioner or commissioner cannot revise any order if the order has been made more than 1 year previously. If the assessee wishes to make an application for revision, it must be done within 1 year from the date of communication of the order.

The CIT shall not revise the order if an appeal against the order lies to the CIT(A) but has not been made yet and either the time within which such an appeal may be made has not expired or the assessee has not waived his right of appeal. Furthermore, if the order is pending on appeal before the Deputy Commissioner (Appeals), or the order has been made the subject of an appeal to the CIT(A) or Appellate tribunal, then the CIT cannot revise the order.

Sec 264 Revision Order by CIT u/s 264

As per the Income Tax Act, if an assessee is not satisfied with the assessment order passed by the Assessing Officer, they can file a revision application u/s 264 to the Commissioner of Income Tax (CIT).

Upon receipt of the revision application, the CIT is obligated to pass an order within 1 year from the end of the financial year in which such application is made by the assessee. This provision ensures that the revision application is disposed of in a timely manner and the assessee does not face undue delay in seeking redressal of their grievance.

Sec 92CA Reference to Transfer Pricing Officer

Under the Income Tax Act, Section 92CA provides for reference to the Transfer Pricing Officer (TPO) in case of any international transaction or specified domestic transaction. If such reference has been made under sub-section (1) of Section 92CA, the TPO may pass an order under sub-section (3) at any time before 60 days from the date on which the period of limitation referred to in Section 153 or 153B expires.

This provision ensures that the TPO has sufficient time to examine and determine the arm's length price of the transaction in question, while still being subject to the overall time limit for completion of assessments or reassessments under the Act.

Sec 92CC Advance Pricing Agreement —Time limit if agreement becomes Void

If this agreement was obtained through fraud or misrepresenting facts, it will no longer be valid. In case the time period between the date of the agreement and the date of it being declared void is less than 60 days, the remaining period will be extended to 60 days. The Advance Pricing Agreement is legally binding for a maximum of 5 consecutive years.

Sec 92CD Time limit for completion of assessment in case APA is applicable for the years for which Returns were already filed

In spite of anything mentioned in Section 153, 153B, or Section 144C, the following rules apply:

(a) The assessment, reassessment, or recomputation of total income under Section 92CD must be completed within one year from the end of the financial year in which the modified return is furnished under Section 92CD(1).

(b) The period of limitation provided in Section 153, 153B, or Section 144C for completing pending assessment or reassessment proceedings mentioned in sub-section (4) shall be extended by a period of 12 months.

Sec 144C Dispute Resolution Panel

The AO (Assessing Officer) needs to issue the assessment order under section 143(3) within one month from the end of the month in which either the acceptance is received or the period of filing objections under section 143(2) expires, i.e. within 30 days of receipt of draft order. If the AO proposes any variation in the income or loss returned that can harm the interest of the assessee, he must send the proposed order of assessment to the eligible assessee.

Sec 144C Issue of directions to AO, on receipt of Objections from the eligible assessee

No direction can be issued after 9 months from the end of the month in which the draft order is sent to the eligible assessee. However, a direction can be issued if the assessee and AO are given an opportunity to be heard, where such directions are prejudicial to the interests of the assessee or revenue, respectively.

Sec 144C Time limit for completion of assessment on receipt of Directions from Dispute Resolution Panel

Upon receiving directions, the Assessing Officer (AO) must complete the assessment in accordance with those directions. The assessee will not be given any further opportunity to be heard. This must be done within one month from the end of the month in which the directions were received. If the assessee wishes to appeal against the order, it can be done to the Income Tax Appellate Tribunal (ITAT).

Receiving a notice from the Income Tax Department can be daunting, but understanding the purpose of the notice can help in addressing the issues efficiently. Taxpayers need to respond promptly and adequately to any notices received, preferably with the assistance of a tax professional like www.cfoangle.com, to ensure that all legal avenues are appropriately navigated.

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