Income Tax Notices in India – Meaning, Types, Reasons, and How to Respond

An Income Tax Notice is a formal communication issued by the Income Tax Department of India to a taxpayer seeking information, clarification, compliance, or corrective action under the Income-tax Act, 1961. Receipt of a notice does not automatically imply tax evasion or wrongdoing; in many cases, it is triggered due to mismatch of data, non-filing of returns, or routine scrutiny.

With increased digitization, data analytics, and information sharing (AIS, TIS, Form 26AS), the issuance of income tax notices has become more frequent and system-driven. Hence, understanding the nature of notices and the correct manner of response is critical for taxpayers.

1. Common Reasons for Receiving an Income Tax Notice

An income tax notice may be issued for one or more of the following reasons:

• Non-filing or late filing of Income Tax Return (ITR)
• Mismatch between income declared in ITR and data available with the department (Form 26AS, AIS, TIS)
• Claim of excessive deductions or exemptions
• High-value transactions (property purchase, share trading, foreign assets, cash deposits)
• Incorrect PAN–Aadhaar linkage
• Refund claimed but return selected for verification
• Arithmetical or clerical errors in return
• Selection of case for scrutiny or reassessment

2. Types of Income Tax Notices

2.1 Notice under Section 139(9) – Defective Return

Issued when the return filed is considered defective due to missing information, incorrect forms, or non-payment of self-assessment tax.

Time limit to respond: 15 days (or extended period if allowed).

2.2 Notice under Section 142(1) – Inquiry Before Assessment

Issued to seek additional information, documents, or clarification, or to require filing of return if not filed earlier.

2.3 Notice under Section 143(1) – Intimation

This is not strictly a notice but an intimation after processing of return, highlighting:

• Tax payable or refundable
• Adjustments due to arithmetical errors
• Incorrect claims apparent from records

2.4 Notice under Section 143(2) – Scrutiny Assessment

Issued when the case is selected for detailed scrutiny to verify correctness of income, deductions, or claims.

Important: This notice must be issued within prescribed statutory timelines.

2.5 Notice under Section 148 – Income Escaping Assessment

Issued when the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. Post Finance Act, 2021, this is preceded by a notice under Section 148A.

2.6 Notice under Section 148A – Show Cause Notice

Issued before reopening assessment, providing the taxpayer an opportunity of being heard.

2.7 Notice under Section 156 – Demand Notice

Issued when any tax, interest, penalty, or other sum is payable by the taxpayer.

2.8 Notice under Section 245 – Adjustment of Refund

Issued when refund due is proposed to be adjusted against outstanding tax demand.

3. Mode of Service of Income Tax Notices

Income tax notices are generally served through:

• Registered e-mail ID on income tax portal
• E-filing portal (https://www.incometax.gov.in)
• SMS alerts on registered mobile number

Physical notices are now rare and issued only in exceptional cases.

4. How to Check Income Tax Notices Online

1. Log in to the Income Tax e-filing portal
2. Navigate to Pending Actions → e-Proceedings / Compliance
3. Select the relevant notice
4. Download and review the notice carefully

5. How to Respond to an Income Tax Notice

• Read the notice carefully to understand the section, reason, and deadline
• Collect and verify supporting documents
• Prepare a clear, factual, and concise reply
• Respond online through the e-filing portal
• Ensure response is filed within the stipulated time
• Seek professional assistance in complex matters (scrutiny, reassessment, foreign income)

6. Consequences of Ignoring an Income Tax Notice

Failure to respond may lead to:

• Best judgment assessment
• Levy of penalties and interest
• Disallowance of deductions or exemptions
• Recovery proceedings
• Prosecution in extreme cases

7. Rights of the Taxpayer

Taxpayers have the following rights:

• Right to be heard
• Right to receive reasoned orders
• Right to seek adjournment (where justified)
• Right to appeal against adverse orders

8. Best Practices to Avoid Income Tax Notices

• File ITR accurately and on time
• Reconcile income with AIS, TIS, and Form 26AS
• Disclose foreign assets and income correctly
• Maintain proper documentation
• Avoid aggressive or incorrect tax positions

Conclusion

Income tax notices are a part of the compliance ecosystem and should be dealt with promptly and professionally. With increased automation and data analytics, taxpayers must ensure accuracy, transparency, and timely compliance to avoid unnecessary litigation. Proper understanding and timely response can effectively resolve most notices without adverse consequences.

Taxcellent assists you in filing a response to notices issued by the Income Tax Department