With tax filing being simplified, income tax authorities have become more vigilant; here are I-T notices to be aware of

Introduction of technology has played a pivotal role in automating various processes in the Income Tax database. Right from the advent of requiring PAN while undertaking significant transactions, mandating the filing of income tax returns electronically, linking of PAN with Aadhaar and till recently wherein all the information relating to any income earned from various sources and required to be taxed for the relevant financial year such as interest income on saving account, interest on fixed deposits, dividend income, capital gain arising on sale of mutual funds, sale of immovable properties etc. being available as a central repository by way of ‘Annual Information Statement’.  

Further, it is important to note that it has now become incumbent for every resident taxpayer holding any asset (including financial interest) or having income from any source outside India, to make adequate disclosures as regards foreign depository accounts, equity, immovable property, income etc. in the return of income to be furnished every year.  

With all the above processes in place and to ensure that the taxable income has duly been filed and reported in the income tax returns by the taxpayers, the tax authorities have now become more vigilant and have been identifying significant transactions, scrutinising the same against the income tax returns filed and reconciling in case of any mismatch found for which various notices are issued to the individual taxpayers.  

A few of the commonly issued notices issued by the tax authorities to the individual taxpayers are:  

I. Notice issued u/s 142(1) of the Income Tax Act, 1961(‘Act’)  

Notices can be issued to the taxpayers in terms of Section 142 (1) of the Act seeking clarification as regards the non-filing of return of income and requiring the Taxpayer to file the return of income.   

II. Intimation issued in terms of Section 143(1) of the Income Tax Act, 1961(‘Act’)  for processing of income tax return filed for relevant year: 

The income tax returns filed electronically are further processed and reconciled with the information available in the income tax database. In case the income reported in the income tax return is duly matched with the information available along with the TDS credit available as per Form 26AS, then refund claimed as per return of income filed is determined and processed. However, in case any mismatch identified in term of income disclosed in the return of income vis- a-vis the income reflected in Form 26AS, then an intimation is issued computing  demand payable by the Taxpayer.  

III. Notice issued under section 143(2) of the Act for regular assessment  

In cases, while processing of income tax returns, certain transactions like substantial losses, refunds, deductions claimed etc. are identified or which fall under the internal parameters for selection of case under scrutiny, then it is plausible that in such cases, notice may be issued to the Taxpayers intimating the selection of the case for detailed scrutiny.  

IV. Notice issued under section 148A of the Act for re-assessment  

In cases, wherein the tax authorities are in receipt of certain information which suggests that the income chargeable to tax has escaped assessment, then notice u/s 148A is issued to the taxpayers for conducting inquiry and providing opportunity before issuing the notice u/s 148 for reopening of the matters which may go back to 10 preceding years subject to satisfaction of various conditions prescribed.  

V. Summon notices for inquiry/investigation u/s 131 of the Act  

For the purpose of making an inquiry/investigation, the tax authorities may issue summon notices requiring discovery and inspection, enforcing attendance, producing documents, books of accounts etc.  

Furthermore, depending upon the outcome of the regular assessment and reassessment proceedings as regards assessed income and additions/disallowances considered therein, notice may also be issued initiating penalty proceedings in terms of Section 270A of the Act.   

Thus, considering the above, it would be worthwhile for the individual taxpayers to thoroughly check the information available from AIS/TIS/Form 26AS and disclose all the income required to be considered and pay applicable taxes thereon and timely file the tax returns. Further, it may also be ensured that all the requisite disclosures as regards income and assets (including offshore income and assets) have been adequately made while filing the return of income.  

In case of any taxable income which has been left to be considered in the preceding years then an option is available with the taxpayers now to file an updated return for preceding two assessment years by payment of additional tax liability as prescribed under the law.  

In case the matter has been selected for scrutiny then, the taxpayers should ensure timely compliance by filing timely response, furnishing requisite details/documents asked for so as to mitigate the risk of best judgement assessment passed by the tax authorities based on the information available leading to huge demands and prolonged litigation thereby causing undue hardship to the taxpayers.  

Views are personal. The author is Executive Director, Nangia Andersen India 

(With inputs from Bhimanshu Kansal, Manager).