Top Reasons Why You Can Get An Income Tax Notice

14 November 2022
6 min read

An Income Tax Notice is a written communication from the Income Tax Department to a taxpayer informing him of a problem with his tax account.

The notice can be issued for various reasons, such as failing to file an income tax return, making an assessment, or requesting specific information.

You might become anxious if you receive a notice from the income tax department. An IT notice may arrive for a variety of reasons. These might include making calculation errors, failing to report income accurately, or even making exorbitant loss claims.

Let us examine these scenarios in greater detail and consider how to prevent them. We have compiled a list of the top reasons you might receive an Income Tax Department Notice in this blog, along with steps to avoid it.

Reasons For Which You Can Receive an Income Tax Notice:

You have already paid your entire tax bill. You have faithfully filed your tax returns. Even so, what should you do if you receive an Income Tax Notice? Do not worry; we will discuss the same in this section.

Let's see for which reasons you might receive an IT notice-

1) Inaccurate Information on Assets or Income in The Income Tax Return

The Income Tax Department has been taking a series of actions to obstruct as much black money as possible. You might receive a notice requiring you to disclose all your income and asset information inside and outside India.

Additionally, you should carefully complete your income tax return document by entering accurate information such as your name, address, and PAN. You will receive a notification if any of these details are incorrect.

2) Discrepancies in Disclosure of Actual Income & Declared Income

You will receive a notice for non-reportage if the income tax authorities suspect that not all your income from various sources has been reported.

You should gather all your financial documents and proof of all your income sources, such as paycheck stubs, bank statements, invoices, etc., to prevent instances of income non-disclosure when filing your income tax return.

3) Unexpected Alters in Investment Amounts, Elevated Transactions or Income

The tax department will be on a constant lookout in the event of a sudden substantial decrease in income or a steep increase in income levels.

The income tax division may become keen to know and send you a notice if you have acquired real estate, assets, or real estate of a very high value or if your bank account has a lot of high-value transactions. If you place excessive investments in your spouse's or child's name, your income will be your own. Therefore, it should be considered when determining your overall taxable income.

You might receive a notice if this income is not reported on your tax returns.

4) Unexpected TDS Inconsistencies When Your TDS Claim Is Incorrect

Your TDS, as of when you filed your ITR, should correspond to the TDS listed on Forms 26AS and 16 or 16A. A notice under Section 143 (1) will be issued if a discrepancy is discovered.

The employer, the bank that holds your fixed deposits, or a bond issuer from whom you have purchased bonds can all deposit TDS. Thus, you will likely receive a notice from the tax department if there are any errors in the TDS deducted and the income and interest you have earned.

5) For Review & Evaluation

You may be served with a notice under Section 143 (2) if the tax authorities have scrutinized the ITR you filedscrutiny can be triggered by discrepancies to incorrect reporting, among other things.

You should also be conscious that the Income Tax Department may penalize you, so respond to the notice as soon as possible.

6) Delayed Income Tax Return Filing

You must submit your tax return by the deadline for each assessment year. You will get a nudge to file your returns if the ITR filing deadline is approaching and you have not yet.

Under Section 142(1)(i) of the Income Tax Act, which mandates that you furnish the return, notice may be issued. Tax filing and tax payment are two distinct processes. Before; therefore, the tax department may send you an ITR notice if you have only paid the tax and not filed any returns.

You must submit tax returns, even if your business experienced a loss for the fiscal year. Others merely submit their returns online. The process is not over at that point. After uploading the returns, you have 120 days to submit the ITR. A few people submit their tax returns after the deadline. Penalties may result from delays. You may receive a notice from the IT division in such circumstances.

7) Payment of Refunds Against Any Outstanding Debts & Taxes Owed by You

Unintentionally, you may have failed to include some interest income that you have accrued; however, since the interest is credited to your bank account or reinvested in your assets, the department can quickly identify you as the source of the overstatement. You may receive a notice for failure to pay taxes.

The assessing officer might send you a notice informing you that the dues will be subtracted from any refunds you have received for income taxes if you requested one.

8) For Prior Years of Tax Evasion

The Income Tax Act empowers the Internal Revenue Service to re-evaluate prior filed tax returns. The department may issue a notice to the taxpayer under section 147 of the Income Tax Act. Based on predefined criteria, an Assessing Officer can select tax returns for reassessment.

Only when the tax officer seems to have reason to suspect that income accountable to tax has escaped assessment is a notice for reassessment issued.

You May Also Want to Know Why is it Important to File Tax Returns

Things To Do After Receiving an Income Tax Notice

The following actions should be taken in case you receive a notice concerning one of the above-stated reasons-

  • Determine the reason for sending the notice, and carefully read it.
  • Find out if a significant difference in your income tax return led to the notice being served.
  • Verify the notice's essential information to make sure it is for you. For example, to prove that it was sent to you, the notice needs to include your exact name, PAN Card number, mobile number, email address, etc.
  • To avoid fines and legal action, you must respond to the notice within the allotted time frame.

Conclusion

You should not freak out if you receive an ITR notice. Instead, you should determine the cause of the notice and take the necessary action to address it.

You have two options: submit the required paperwork or file the returns after making the necessary adjustments. When filing returns, if you are asked to appear in person before a tax official, you should do so or designate a tax professional to handle the situation.

Receiving income tax notices can be annoying and add needless time to an already tiresome process. Therefore, always make sure that all disclosures and declarations are made when filing your ITR.

You May Also Be Interested to Know-

1.

Basics of Income Tax for Beginners

2.

Penalties on Late Filing of Income Tax Returns (ITR) After Due Date

3.

Tax Loss Harvesting - Everything You Should Know

4.

What is a Tax Haven

5.

How to Save Tax in India?
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