Responses to Departmental Notices

  • Notice u/s 143(2)
  • Notice u/s 144
  • Notice u/s 148/147
  • Notice u/s 153A/153C
  • SCN - Proposed addition in assessment
  • SCN - Valuation of asset etc u/s 142A
  • SCN - books of account audited u/s 142(2A)
  • Reply to Notice u/s 133(6)
  • Reply to Summons u/s 131
  • Notice u/s 220 and 221(1)
  • Penalty notice u/s 271(1)(c) / 271(1)(b)
  • Penalty notice under any other sections
  • Prosecution notice u/s 279
  • Compounding of Prosecution
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Online Notices
Digitization changes everything !

So as Income tax Department in addition to e-returns has launched e-proceeding facilities as a part of e-governance initiative with a view of e-communication between the department and the person i.e the notices from the department are e-served on the persons' via e-mail for which e-submissions are made in the assessee's e-filing portal account.

These e-notices are need to be handled vigilantly within stipulated time, if necessary with professional / expert advice. E-notices may be instructive / uninformative or non instructive / informative. Thus, one need to go through the e-notice comprehensively in order to seek the purpose of e-notice.

Notices under section 143(2) of the Income tax Act, 1961

After the Return of Income is filed by the person, if the Income tax officer consider it necessary to ensure that the person has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall sent Notice under section 143(2) of the Income tax Act, 1961, in response to which the person is required to attend the office of the Income tax Officer or produce details / documents as required, preferably through Authorized representative / Chartered Accountant on the date & time mentioned on the said notice.

Ignoring the above notice may escort to adverse consequences along with imposition / levy of fines and penalties.

Notices under section 144 of the Income tax Act, 1961

Where the person does not file the return of income, if required to be filed or does not comply with the notices issued / sent [ u/s 143(2)/142(1) /142(2A) ] to the person for the purpose of assessment / scrutiny of particular year, then the Income tax Officer proceed to assess the total income of the person to the best of his judgment after taking into account all relevant material which the Officer possessed / has gathered and determine the sum / tax payable by the person on the basis of such assessment / estimation. But before computing such sum / tax payable, the Income tax Officer issue / sent final show cause notice under section 144 of the Income tax Act, 1961 as last opportunity of being heard to explain his / her case, in response to which the person is required to attend the office of the Income tax Officer with details / documents as required, preferably through Authorized representative / Chartered Accountant on the date & time specified in the notice.

Ignoring the above notice may escort to adverse consequences along with imposition / levy of fines and penalties.

Notices under section 148 / 147 of the Income tax Act, 1961

Where the Income tax officer is in the possession of any document / information of any person (which he may get from any other government/ private department) on the basis of which he believes that the said income / amount has not been offered for taxation , then the Income tax Officer opens / reopens the case of the related person under section 147 of the Income tax Act, 1961 to assess that person; first step taken by the officer in this regard is issue of notice under section 148 of the Income tax Act, 1961 to file the return of income of the year mentioned in the notice, in response to which the person is required to attend the office of the Income tax Officer with details / documents as required, preferably through Authorized representative / Chartered Accountant on the date & time specified in the notice.

Ignoring the above notice may escort to adverse consequences along with imposition / levy of fines and penalties.

Notices under section 153A/153C of the Income tax Act, 1961

In the case of a person where a search is completed by the Income tax department or books of account, other documents or any assets are requisitioned by the Income tax department, at the beginning the Income tax Officer in such case will issue a notice to such person requiring him to file the return of income in respect of each assessment year mentioned in the said notice, in response to which the person is required to attend the office of the Income tax Officer with details / documents as required, preferably through Authorized representative / Chartered Accountant on the date & time specified in the notice.

Ignoring the above notice may escort to adverse consequences along with imposition / levy of harsh fines and penalties.

Show Cause Notice - Proposed addition in assessment

Where the Income tax officer is proposing any addition of income in the case of any person in assessment / reassessment under different provisions of the Income tax Act, 1961 on which tax liability will arise, then before making such addition the Income tax Officer gives an opportunity to the person to show the reason why such addition should not be made to income of the person. It is to be noted that it is the last opportunity where the person can defend himself at lower levels, preferably through Authorized representative / Chartered Accountant on the date & time specified in the notice.

If this notice is not complied with then the Income tax Officer takes adverse actions / determines the Income of the person on the basis of documents available , then we need to go to the higher authorities which double the burden of the person.

Sometimes, the initial notices / preliminary notices may get neglected / ignored / unattended, then also before taking adverse action the Income tax Officer compulsorily issue show cause notice to the person. Thus this notice, must be attended by the person preferably through Authorized representative / Chartered Accountant otherwise it may escort to adverse consequences along with imposition / levy of harsh fines and penalties.

Show Cause Notice - Valuation of Asset etc under section 142A

During the Income tax case of any person the Income tax Officer may ask the Valuation Officer to estimate the value, including fair market value, of any asset, property or investment of such person and submit a copy of report to him. The valuation officer in return issue notice(s) under section 142A to the said person for taking information about that asset, property or investment or it can be said that the valuation officer gives opportunity to the person to submit his / her point, afterwards on receipt of valuation report by Income tax Officer from valuation officer, the notice under section 142A is also issued by the Income tax Officer to the person to put forth his contentions before him.

Show Cause Notice - Books of account audited under section 142(2A)

During the Income tax case proceedings, if the Income tax Officer doubts the correctness of the accounts due to nature and complexity of the accounts, volume of the accounts , multiplicity of transactions in the accounts or specialized nature of business activity of the person, than the Income tax officer directs the person to get its account audited under section 142(2A) of the Income tax Act, 1961 commonly referred as Special Audit, done be specified Chartered Accountants, who in turn will submit a Report with the Officer in a specified Form.

Before issuing directions to the person to get his accounts audited, the Income tax officer gives opportunity to the person by issuing notice to show the reason that why the accounts should not be referred for Special Audit.

Reply to Notice under section 133(6) of the Income tax Act, 1961

If the Income tax Officer feels that during the Income tax proceedings / enquiries of any person, information / documents useful or relevant to the ongoing Income tax proceedings / enquiries is required in respect of any other person, than the Income tax officer can issue Notice to such any other person including a banking company or any officer thereof under section 133(6) of the Income tax Act, 1961 for calling information / documents in relation to points mentioned in the said notice.

Reply to Summon under section 131 of the Income tax Act, 1961

If the Income tax Officer feels that during the Income tax proceedings / enquiries of any person, it is necessary to examine any other person or to examine witnesses related to them, then the Income tax Officer can take help of section 131 for making inquiries in case of pending proceedings and call a third party / other person under this section to verify facts stated before him by the person in respect of whom the proceedings are pending. The Income tax Officer may ask the other person to give statements on issues relevant to the ongoing Income tax proceedings / enquiries. The objective of this provision is to enable the officers discover the truth and to have equal opportunities for both the Income tax Department and the assessee.

These summons are addressed to a person which makes him mandatory to appear personally before the concerned officer. He cannot appear through a representative or a lawyer, however before appearing, the person must take consultancies from legal consultants / Chartered Accountants. Non-compliance of any summons or notice issued as per the provisions of section 131 results in levy of penalty amounting up to a sum of Rs.10,000/-.

Notice under section 220 and 221(1) of the Income tax Act, 1961

If any person does not remit outstanding tax money, penalty, fine or interest within the specified time period than the assessee is deemed to be an assessee in default and liable to pay Interest under section 220 of the Income tax Act 1961 @ 1% p.m. or part of month and Penalty may also be levied under section 221 of the Income tax Act 1961 in case of continuing default, both the said Interest and penalty are over and above the outstanding dues. Accordingly, Notice under the said sections 220 of the Income tax Act, 1961 is issued to the person for the payment of Interest and if the Income tax Officer is satisfied that penalty under section 221 should also be levied than before levying said penalty, notice under section 221(1) will be issued to the person to submit the default of payment of outstanding dues was for good and sufficient reasons.

Penalty Notice under section 271(1)(c) / 271(1)(b)

If the Income tax Officer is satisfied that any person has failed to comply with the notice of Income tax Assessments [143(2) & 142(1)] / Fringe Benefit Returns / direction issued for Special Audit under section 142(2A) of the Income tax Act, 1961, than in addition to tax, if any, payable by him, penalty for a sum of ten thousand rupees for each such failure may be levied by the Income tax Officer. However, before levying said penalty, notice will be issued to the person to show as to why the penalty under section 271(1)(b) should not be imposed.

On the other hand, if the Income tax Officer is satisfied that any person has concealed / hide any of his income or has furnished / submitted inaccurate / wrong particulars of his income than in addition to tax, if any, payable by him, penalty under section 271(1)(c) of the Income tax Act, 1961 may be levied, where the penalty amount will not be less than the amount of tax sought to be evaded and it may goes up to three times of the amount sought to be evaded. However, before levying said penalties, notice under section 271 will be issued to the person to show reason as to why the penalty under section 271(1)(b) / 271(1)(c) should not be levied on the person.

Penalty notice under any other sections

There are various sections in the Income tax Act, 1961 where penalty is imposable on different grounds for the defaults committed by the assessee / person. However, before levying said penalties, the Income tax Officer issues notices to the concerned person to show reason as to why the penalty under the section as specified in the notice should not be levied on the person.

If these notice are not complied with then the Income tax Officer takes adverse actions / imposes penalty on the basis of details / documents available, which increases the burden of the person. Thus, correct steps need to be taken at right time / correct stage to avoid harsh implications.

Prosecution notice under section 279

Where, the assessee has committed defaults in complying with different provisions of the law / Act, than the person is deemed to be assessee in default and liable to be prosecuted under the provisions of the Income tax Act, 1961. However, before granting sanction for launching prosecution proceedings against the person, show cause notice under section 279 of the Income Tax Act, 1961 was issued to show the reason as to why the necessary sanction of launching prosecution proceedings be not granted.

If the said notice is not complied with then the Income tax Officer may grant sanction for launching prosecution proceedings which will increases the burden of the person and may lead to imprisonment along with fines. Defaults for which prosecution proceedings may be launched are laid down as under in brief:

  • Failure to make payment or deliver returns or statements or allow inspection.
  • Failure to pay tax deducted at source or tax payable under section 115 —0 or 2nd proviso to section 194B to the credit of the Central Government
  • Failure to pay the tax collected at source
  • Failure to comply with the provisions of section 269SS (accepting loan exceeding Rs 20000 otherwise than by account payee cheque / account payee bank draft)
  • Failure to comply with the provisions of section 269 T (repayment of loan exceeding Rs 20000 otherwise than by account payee cheque / account payee bank draft)
  • False statement in verification etc.
  • Abetment of false return etc
  • Contravention of order made u/s 132 in case of search and seizure
  • Failure to comply with the provisions of Section 132(1)(iib) related to search and seizure
  • Removal, concealment, transfer or delivery of property to thwart tax recovery
  • Failure to comply with the provision of sections 178 (1) and 178 (3) in relation to company in liquidation
  • Failure to comply with the provisions of section 269 AB in relation to registration of certain transactions or section 269 I in relation to Vesting of Property in Central Government .
  • Failure to comply with the provisions of sections 269UC, 269UE and 269UL in relation to transfer of Immovable property
  • Wilful attempt to evade tax etc
  • Wilful attempt to evade payment of taxes etc
  • Failure to furnish returns of Income
  • Failure to furnish returns of income in search cases in block assessment scheme
  • Failure to produce accounts and documents
  • False statement in verification etc.
  • Falsification of books of account or documents etc.
  • Abetment of false return etc.
Compounding of Prosecution

Various Offences committed by the person under the provisions of the law / Act which are liable to be prosecuted as per Act / guidelines specified by the Department, the said offence can be compounded at any stage of legal / Income tax proceedings by following a procedure prescribed under the Income tax Act, 1961 and by paying compounding charges as determined by the Competent Authority.