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In the event of receipt of notice from income tax department, it is necessary to understand under which section notice is issued and then take action as required.

Notice Under Section 131: Power regarding discovery, production of evidence, etc.

Section 131  of the Income Tax Act 1961 gives power to tax authority to issue summons or to force attendance of any person for being examined on oath or to compel production of books of accounts and other documents if any proceeding is pending however notice under section 131(1A) can be issued even if no proceeding is pending.

Section 131 is comprised of two sub sections relating to two different class of officers. Sections to 131 (1) empowers the jurisdictional assessing officer to issue summons whereas Section 131 (1A) empowers officers of Investigation wing to issue summons.

In case personal appearance is required as witness, witness has no right of being represented by authorised representative. However in other cases (i.e. appearance as other than witness) he may be represented by authorised representative.

Notice Under Section 139 (9): Defective return

A return is called defective return when it does not contains required information as per the Income tax act, 1961. In such case the assessing officer will issue notice and give opportunity to assessee to rectify the return. If return is not rectified within the prescribed time, the return shall be considered invalid and it will be deemed that no return is filed.

 Notice Under Section 142(1): Inquiry before assessment.

Notice u/s 142(1) is issued to call for document and other information to form basis of initiating assessment proceeding.

Following information is usually asked in notice u/s 142(1):

  1. To file income tax return (if income tax return is not filed by the assessee)
  2. To produce other accounts or documents which assessing officer may require.
  3. To furnish any information in matter including statement of the assessee.

Assessing officer may or may not start assessment proceeding after compliance of the notice based on facts of the case.

Compliance of the notice is mandatory to avoid following actions by department:

  1. Best Judgement Assessment u/s 144 (i.e. Assessing officer will complete the assessment based on best of his knowledge, judgement and information available with him)
  2. Penalty under section 271(1)(b) (in addition to tax penalty of Rs. 10,000 on each failure)
  3. Prosecution u/s 276D which may be extend up to one year with or without fine.

 

Intimation Under Section 143(1): Intimation Letter

Nowadays it is very usual to receive intimation letter from income tax department. If you have filed the return of income and received intimation from department don’t panic. It is for intimating whether you had paid correct sum of tax or more than the required or less than the required sum of tax. In this letter two comparative columns are presented one stating information filled by assessee in his income tax return and other stating computation by assessing officer.

Notice Under Section 143(2): Scrutiny Notice

If assessing officer is not satisfied by the information called by him u/s 142(1), he will issue notice u/s 143(2) which means assessee is selected for detailed scrutiny. Notice u/s 143(2) can be issued within 6 months form the end of financial year in which return is filed.   

After issuing notice u/s 143(2) detailed scrutiny is done by assessing officer which required submission of detailed documents such as bank statements, financials statements, documents substantiating income, expenses, deductions and exemptions.

In the event of noncompliance of the notice department my resort to following actions:

  1. Best Judgement Assessment u/s 144 (i.e. Assessing officer will complete the assessment based on best of his knowledge, judgement and information available with him)
  2. Penalty under section 271(1)(b) (in addition to tax penalty of Rs. 10,000 on each failure)
  3. Prosecution u/s 276D which may be extend up to one year with or without fine.

 

Notice Under Section 148: Income escaping assessment

Notice u/s 148 is issued if assessing officer believe that any income chargeable to tax has escaped assessment. To initiate proceedings u/s 147 the assessing officer is required to record the reason and onus           of stating the reason is on assessing officer.

Assessment u/s 147 can’t made in respect of income involving matters which are subject matter of any appeal, reference or revision.  

 

Notice Under Section 156: Notice of demand

If any tax, interest, penalty, fine or any other sum of money is payable by assessee, the assessing officer shall serve upon him notice of demand u/s 156. It is usually served after completion of assessment and any sum payable under the notice generally payable with 30 days of service of notice.

In the event of non-payment assessee shall be liable to pay penalty u/s 220(1) and simple interest @1% per month or part thereof u/s 220 (2).   

 

Notice Under Section 245: Set off of refunds against tax remaining payable

Where a refund is payable to any person in lieu of payment of the refund, assessing officer can set off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable by the person to whom the refund is due, after giving an intimation in writing to such person.

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