Income tax notices and how to reply to them

What is an Income Tax Notice?

Income tax notices are official communications from the Income Tax Department to a taxpayer, highlighting issues or actions related to their tax filings. Receiving such a notice doesn’t always indicate wrongdoing; it may simply request additional information or clarification.

Types of Income Tax Notices

Section	Purpose	Description
139(9)	Defective Return Notice	Issued when the filed return is found defective or has discrepancies. Taxpayers are required to rectify the defects within a specified timeframe.
142(1)	Inquiry Before Assessment	Sent when the Assessing Officer requires additional information or documents to complete the assessment process.
143(1)	Intimation Notice	An intimation after processing your return, indicating any discrepancies or confirming that the return has been accepted as filed.
143(2)	Scrutiny Notice	Issued if the department selects your return for detailed scrutiny to verify the correctness of the declared income and claimed deductions.
148	Income Escaping Assessment	Sent when the department believes that some income has escaped assessment, requiring the taxpayer to file a revised return.
156	Notice of Demand	Issued when any tax, interest, penalty, or other sum is payable, specifying the amount due.
245	Set Off Refunds Against Tax Remaining Payable	Informs the taxpayer that their refund is being adjusted against existing tax liabilities

Notice u/s 139(9) – Defective Income Tax Return 

In this case, if the Assessing Officer is of the opinion that the ITR filed by the assessee is defective then he may issue notice u/s 139(9). The Assessing Officer also shares the proper error description along with the probable solution to rectify the same. The defect u/s 139(9) can be because of the wrong ITR filed, wrong or non-declaration of Income as per Form 26AS, missing information, incomplete return, etc. 

The Assessing Officer gives the Assessee an opportunity to respond within 15 days from the date of intimation. If the Assessee fails to respond within the stipulated time, the Assessing Officer considers the return invalid and proceeds with the assessment.

Assessee may agree or disagree with the observation of the Assessing Officer. If you can agree, you can file a return after rectifying the defect in the return.

Notice u/s 142(1) – Inquiry Before Assessment

The purpose of this notice is to request additional information and documentation from the taxpayer to complete the processing of their filed return. The authorities will also send this notice to compel the taxpayer to furnish additional documents and details. Also, if the Assessee has not filed their return on time, they will receive a notice for a preliminary inquiry u/s 142(1). The time limit to serve the notice u/s 142(1) is before the end of the relevant assessment year. 

Notice u/s 143(1) – Intimation

Notice u/s 143(1) is one of the most common income tax notices that is frequently received by taxpayers from the income tax department, it requires a response to rectify errors, incorrect claims, or inconsistencies in a filed income tax return. If an individual receives this notice and wishes to amend their return, they have a 15-day window to do so. Otherwise, the authorities will process the tax return after incorporating the necessary adjustments specified in the notice.

Notice u/s 143(2) – Scrutiny

If the Assessing Officer deems the Assessee’s response to the Income Tax Notice u/s 142(1) unsatisfactory or if the Assessee fails to provide the requested documents, the officer issues a notice u/s 143(2).

There can be 3 types of following notices under Section 143(2): 

Limited Scrutiny: Under Limited Scrutiny, the system selects cases through Computer-Assisted Scrutiny Selection (CASS) based on set parameters. The scrutiny focuses solely on the specific area of the return mentioned in the notice. An example of this scrutiny can be a mismatch in tax credits, inaccurate information, etc.

Complete Scrutiny: The authorities conduct a complete scrutiny of the filed return along with all supporting documents. The system flags cases based on CASS, and the scope of scrutiny extends beyond these types of notices. However, the assessing officer cannot verify documents beyond the particular assessment year. 

Manual Scrutiny: Cases are selected for complete scrutiny based on the criteria defined by the Central Board of Direct Taxes; the criteria may vary every year.

Taxpayers who receive notice under Section 143(2) will have to submit additional information. The Assessee or their authorized representative may file a reply through the portal, as physical submissions are no longer required. The process will be conducted exclusively through E-Assessment.

Notice u/s 148 – Income Escaped Assessment

In such cases, the assessing officer has the authority to assess or reassess the income. Before proceeding with the assessment or reassessment, the officer must serve a notice to the assessee requesting them to provide their income return. This notice is issued under Section 148 of the income tax provisions.

Notice u/s 156 – Demand Notice

If any penalty, tax, fine, or other amount is due from the taxpayer to the Income Tax Department, the authorities will serve an Income Tax notice u/s 156. This notice is typically issued after the assessment of the ITR. The taxpayer must deposit the amount payable within 30 days from the date of the notice. There is no specific time limit to serve this notice. Income Tax notices u/s 143(1) and 200A are also referred to as Notice of Demand.

Notice u/s 245 – Refund Adjusted against the Tax Demand

It is basically an Intimation from the Income Tax Department. The authorities issue this notice when they adjust a tax refund (full or partial) for an assessment year against the tax demand due from the taxpayer. If the assessing officer suspects tax evasion in previous years and decides to offset the current year’s refund against the outstanding demand, they may issue a notice u/s 245.

The authorities can make such an adjustment only after giving the individual proper notice and an opportunity to be heard. The notice recipient must respond within 30 days of receiving it. If they fail to respond, the assessing officer may treat it as implied consent and initiate the assessment process accordingly. Therefore, it is advisable to respond to the notice promptly.

The assessment year of refund and tax demand can be different. There is no time limit to serve or send Income Tax Notice / Intimation u/s 245.

How to resolve such notices

Type of Notice	Steps to Resolve
Section 143(1) – Intimation Notice	– Verify the details mentioned in the notice. – If no errors, no action is required. – If discrepancies exist, respond to the notice within 30 days.
Section 139(9) – Defective Return Notice	– Review the defects mentioned. – Correct the return and re-submit it within the specified period.
Section 142(1) – Inquiry Before Assessment	– Provide the requested documents/information within the time frame. – Seek an extension if required.
Section 143(2) – Scrutiny Notice	– Respond with the requested documents and explanation. – Co-operate with the assessing officer. – If needed, seek professional help for complex cases.
Section 148 – Income Escaping Assessment	– Review the notice and reasons for reassessment. – File the revised return or provide clarification within the deadline. – Seek professional advice if needed.
Section 156 – Notice of Demand	– Pay the demanded tax within the specified time or file an appeal if there is a dispute. – If unable to pay, request for instalment payment.
Section 245 – Set Off Refunds Against Tax Due	– Ensure all tax dues are cleared. – Check if any refunds due are being adjusted. – Respond to the notice, if necessary, for any discrepancies.

General Tips for Resolving Income Tax Notices:

• Read the Notice Carefully: Understand the reason for the notice and the required action.
• File Responses on Time: Missing deadlines can lead to penalties.
• Seek Professional Help: If the case is complex, it is advisable to consult a tax professional or CA.
• Maintain Proper Documentation: Always have the necessary documents ready, such as tax returns, receipts, and other supporting documents.

How to Check Notices on the Income Tax Portal

Follow the steps mentioned below to reply to different income tax notices:

• Step 1: Visit the income tax E-Filing Portal
• Step 2: Log in to the E-Filing portal using your user ID and password.
• Step 3: Go to the ‘e-File’ menu and Check for any notices in your account.
• Step 4: On your Dashboard, click Pending Actions > e-Proceedings.
• Step 5: On the e-Proceedings page, click Self.

Steps to Reply to Income Tax Notices:

Read the Notice Carefully:

• Understand the nature of the notice, such as whether it is for an inquiry, scrutiny, demand, or any other reason.

• Check the due date for response and other specific instructions in the notice.

Collect Required Documents:

• Gather all relevant documents that may support your claim or rectify any errors in your filed return. These could include:

• Previous year’s tax returns
• Income proof (salary slips, bank statements, etc.)
• Expense documents (bills, receipts, etc.)
• Tax payment receipts
• Any communication from the tax department (if applicable)

Prepare a Response:

• For Defective Return Notices (Section 139(9)): Correct the errors in the return and submit the revised return.

• For Scrutiny Notices (Section 143(2)): Submit the documents asked for (e.g., income details, supporting evidence for deductions, etc.) along with an explanation.
• For Income Escaping Assessment (Section 148): Provide clarification or submit a revised return if applicable.
• For Demand Notices (Section 156): If the demand is valid, make the payment or file an appeal if there is a dispute. If you cannot pay the full amount, request for instalment payment options.

Draft a Reply Letter (if applicable):

• Write a formal letter to the Income Tax Department, explaining your position and attaching the required documents. Use a clear and concise format.

• Include your PAN, assessment year, and other details as mentioned in the notice to ensure the department can link the response with the correct case.

• If you’re filing an appeal or requesting additional time, mention that in the letter.

File the Response Online (if applicable):

• For many types of notices, you can file the response directly through the Income Tax Department’s e-filing portal.

• Go to the “e-File” section.
• Choose the appropriate form (e.g., “Response to Notices”).
• Upload the required documents and submit.

• For physical submission, send the response to the local Income Tax office that issued the notice.

Pay Tax or Penalty (if applicable):

• If the notice demands payment of tax, ensure that you pay the demanded amount before the deadline to avoid penalties and interest.
• You can pay through the Income Tax Department’s online payment portal or using challan forms (ITNS 280).

Acknowledge Receipt of Notice:

• If replying in person, make sure to get an acknowledgment for the documents submitted.
• If submitting online, keep a record of the submission confirmation and a copy of the documents uploaded.

Follow-Up (if necessary):

• Follow up with the tax office if you do not receive a response or if further clarification is needed.
• Monitor the status of your case through the e-filing portal or contact the department directly.

At Counselvise we have designed NoticeBoard to help you keep track of all your client’s notices . It helps you-

• Automate notice retrieval from Income Tax & GST portals
• Centralize all notices in one dashboard
• Track deadlines & receive timely reminders
• Use AI-powered suggestions for easy responses