Saturday, 10 October 2015

Notices under the Indian Income Tax Act 1961



In a layman’s term any communication received from the Income Tax Department is commonly referred to as “Notice”. It is a word that sometimes creates nervousness and fear among the taxpayers. With the government focusing on increasing compliance and zero in on the tax evaders, it is highly likely that salaried classes will be receiving notices, intimation under various section of the Income Tax Act, 1961.
Mentioned below are various notices, intimations that are received by salaried individuals:
INTIMATION RECEIVED UNDER SEC. 143(1) -
  • This is the intimation that is usually received by the taxpayers as information which states their computation based on the data available with the tax department and the one furnished by the taxpayers.
  • This intimation sometimes creates demand and therefore it is also a notice of demand under section 156 of the Act. If the demand is sustainable then it is ought to be paid and in case there is any discrepancy on the part of the department, the taxpayer may seek correction on the part of department by filing a rectification request.
  • In case there is any discrepancy on the part of taxpayer due to wrong information entered, the taxpayer may revise the return [Revision allowed only on receipt of this intimation].
SCRUTINY NOTICE UNDER SEC. 143(2) -
  • A very common notice that is served on the taxpayers, individuals as well as corporate / HUF / Firms and other taxpayers.
  • This notice is served only if a return of income has been made.
  • The department calls for the documents and other necessary information that will enable them to check the authenticity of the income, expenditure and deductions and other claims made by the taxpayer in their return of income.
  • The Assessing Officer may or may not allow the claims made and ask the taxpayer to revise the return or make a fresh demand. The decision made by the Assessing Officer can be contested by filing an appeal to the higher authorities in the department.
  • Once a scrutiny under this section is done, the taxpayer receives an Assessment Order under sec. 143(3) is received which states that assessment of income in respect of that particular year has been done.
INQUIRY BEFORE ASSESSMENT UNDER SEC. 142(1) -
  • This is a notice that is served on the taxpayer calling for information.
  • This notice can be served in the event of non – filing of return as well requiring the taxpayer to furnish return of income.
  • Usually a notice under this section is served in conjunction with notice under section 143(2).
BEST JUDJEMENT ASSESSMENT UNDER SEC. 144 -
  • This is not a notice but kind of a decision (assessment) by the tax authorities.
  • The assessment under this section is done only in case when the assessee has not complied or replied to the statutory notices under sec. 143(2) or 142(1) or if the return has not been filed.
  • However, the tax authorities will give an opportunity of being heard to the taxpayer before passing any assessment under this section.
  • An appeal can be filed in response to this assessment to the higher authorities.
NOTICE UNDER SEC. 147 READ WITH SEC. 148 -
  • This notice is sent to the taxpayer if the department has a reason to believe that the taxpayer has concealed any income or any income has escaped any assessment.
  • Normally, they collect data from various sources including financial institutions, municipal authorities etc. in respect of incomes, sales and purchase of property, shares and securities etc.
  • The tax authorities can also invoke penal provisions.
There are also search, seizure and survey provisions that grants power to the Assessing officer to collect information, seize documents and other valuables, if it is proved that doing so is in the interest of the revenue.

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