Introduction

In India, the Income Tax Department sends various types of notices to taxpayers for different reasons, ranging from routine information requests to serious tax discrepancies. Receiving an Income Tax notice can often cause panic, but not all notices are issued due to default or mistakes. These notices can be for simple verification, assessment of your income, or reminders for non-compliance.

Understanding the nature of the notice, its purpose, and how to respond is crucial to avoid legal complications and ensure smooth communication with the tax authorities. This guide will help you understand different types of Income Tax notices, why they are issued, and the appropriate actions to take upon receiving them.

Here are the main types of income tax notices, along with the relevant sections and reasons:

Section 139(9) - Defective Return Notice

The Income Tax Department issues a Section 139(9) notice when a filed Income Tax Return (ITR) is considered defective or incomplete due to missing or incorrect information. This notice allows taxpayers to rectify the defects within a specified time to avoid rejection of the return.

Reasons for Receiving Section 139(9) Defective Return Notice

A return is considered defective if:

• Mandatory details like PAN, income details, or tax payments are missing
• Mismatch between declared income and tax payments
• Incomplete return filing without submitting essential schedules
• Filing ITR-1 or ITR-4 despite having income not allowed under these forms
• Claimed deductions without providing income details
• Not attaching audit reports (if applicable)
• Errors in TDS or advance tax claims
• Incorrect bank details for refund

Action: The taxpayer must rectify the defect within a specified time frame.

Time Limit to Respond

You need to respond to the defective return notice within 15 days from the date of receiving the notice. However, the Assessing Officer may grant an extension if requested.

What Happens If You Don't Respond?

If you fail to rectify the defect within the given time, your ITR will be treated as invalid, meaning it will be considered as if you never filed it. This can result in:

• Loss of tax refunds
• Late filing penalties
• Interest under Section 234A, 234B, and 234

Section 143(1) - Intimation Notice

The Section 143(1) Intimation Notice is one of the most common notices issued by the Income Tax Department after processing your Income Tax Return (ITR). This notice is not always a cause for concern but serves as a communication regarding the preliminary assessment of your return. It informs you whether your return has been accepted as it is, or if there are any discrepancies in the tax calculation.

Reason for Receiving Section 143(1) Intimation Notice

The notice is issued after the Income Tax Department automatically processes your return through its Centralized Processing Centre (CPC). The reasons for this notice can be:

• Confirmation that the return is accepted without any discrepancies
• Mismatch between the income declared by the taxpayer and the department's calculation
• Error in claiming deductions or exemptions
• Discrepancy in TDS or Advance Tax payments
• Excess or shortfall of tax payments
• Mathematical errors or incorrect reporting of income

Action:

Review the Notice

Download and carefully review the notice. Check the comparison between the department's calculation and your return.

Choose the Correct Response

If you agree with the demand, pay the outstanding tax amount online.

If you disagree, file a Rectification Request under Section 154 by providing supporting documents.

Time Limit to Respond

You must respond to the notice within 30 days from the date of receiving the intimation. If no response is submitted, the department assumes you agree with the demand and initiates recovery proceedings

What Happens If You Ignore the Notice?

Missing the deadline may lead to:

• Automatic adjustment of refund (if any) against the demand
• Penalty and interest on the pending tax amount
• Legal action or tax recovery proceedings

Section 142(1) - Notice for Filing Income Tax Return

The Section 142(1) Notice is issued by the Income Tax Department to taxpayers to ensure timely filing of Income Tax Returns (ITR) or to gather additional information for an ongoing assessment. This notice is typically sent when the taxpayer has either not filed their return or if further details are required to complete the assessment process. It is important to respond to this notice promptly to avoid legal consequences.

Reason for Receiving Section 142(1) Notice

The Income Tax Officer can issue a Section 142(1) Notice under the following circumstances:

1. Non-Filing of ITR: When a taxpayer has not filed their ITR within the due date, despite having taxable income.
2. Preliminary Inquiry Before Assessment: If the department requires additional information, documents, or explanations to verify the details in the return already filed.
3. Mismatch in Reported Income: When the department suspects under-reporting of income or non-disclosure of certain income sources.
4. High-Value Transactions: If the taxpayer is involved in high-value transactions (such as property purchase, large cash deposits, or investments) without filing an ITR.

What Action Should You Take?

Download and Read the Notice Carefully

Understand the exact reason mentioned in the notice and the details requested by the Assessing Officer.

File the Income Tax Return (if not filed)

If the notice is for non-filing of ITR, immediately file your return along with the late fee and interest applicable under Section 234F and Section 234A/B/C.

Submit Information (if requested)

If the notice requires additional documents (like bank statements, property purchase deeds, or expense details), upload scanned copies of the required documents online.

Time Limit to Respond

The response to the Section 142(1) notice must be submitted within the time specified in the notice (usually 15 to 30 days). If more time is needed, the taxpayer can request an extension from the Assessing Officer.

What Happens If You Ignore the Notice?

Ignoring the notice can result in:

• Best Judgment Assessment under Section 144
• Penalties under Section 271(1)(b) (₹10,000 for each failure)
• Prosecution under Section 276CC (if taxable income exceeds ₹25 lakh)

Section 143(2) - Scrutiny Assessment Notice

The Section 143(2) Notice is issued by the Income Tax Department to select taxpayers whose returns have been chosen for detailed scrutiny or verification. This notice is part of the assessment process where the department suspects discrepancies or wants to verify the correctness of income declared by the taxpayer.

Unlike routine notices, this notice requires in-depth investigation of your income, expenses, deductions, and other claims made in your Income Tax Return (ITR).

Reason for Receiving Section 143(2) Notice

The primary reason for issuing this notice is to verify:

• Under-reported or undisclosed income
• Excessive deductions claimed under various sections
• Large cash deposits or high-value transactions
• Mismatch in income and TDS details
• Suspicious foreign transactions
• Frequent losses claimed under business income

Important Note:

Receiving this notice doesn’t always mean there’s a problem — sometimes, returns are selected randomly for scrutiny.

Types of Scrutiny under Section 143(2)

What Action Should You Take?

Prepare Documents

Depending on the type of scrutiny, prepare the following:

• Income proofs (Salary slips, Rental agreements, etc.)
• Bank statements
• Investment proofs
• Property sale/purchase documents
• Expense bills for business claims

Upload Documents and Submit Response

Submit the requested documents and explanations through the portal within the specified timeline.

Time Limit to Respond

You must respond within the time mentioned in the notice (usually 15-30 days). If more time is needed, you can request an extension through the portal.

What Happens If You Ignore the Notice?

Ignoring this notice can lead to:

• Penalty for non-compliance under Section 271(1)(b) (₹10,000 for each failure)
• Best Judgment Assessment under Section 144 (Tax officer will finalize your tax liability based on available information)
• Prosecution in serious cases of tax evasion

Section 148 - Notice for Reassessment

The Section 148 Notice is issued by the Income Tax Department when the Assessing Officer (AO) believes that the taxpayer has escaped income assessment — meaning certain income has not been disclosed or taxed in previous Income Tax Returns. This notice is part of the Income Reassessment Process under Section 147 of the Income Tax Act, which allows the department to reopen past assessments and reassess the taxpayer’s income.

Reason for Receiving Section 148 Notice

The notice is issued if the department suspects that:

• Income has been under-reported or not disclosed in the original return
• High-value cash deposits, property transactions, or foreign income were not reported
• Large investments or expenses have no matching income declared
• Information from third parties (like banks, property registrars, or GST authorities) suggests hidden income
• Income from cryptocurrency or foreign assets has not been declared

Time Limit for Issuing Section 148 Notice

What Action Should You Take?

File Your Reply

You need to confirm whether you agree to reopen your assessment or not.

• If you agree, file your Income Tax Return in response to Section 148 within the time mentioned in the notice (usually 30 days).
• If you disagree, provide a written explanation with supporting documents to challenge the notice.

Submit Documents

If asked, submit income proofs, bank statements, or any supporting documents that justify your income details.

What Happens If You Ignore the Notice?

Ignoring the notice can result in:

• Best Judgment Assessment under Section 144
• Penalties for non-compliance under Section 271(1)(b) (₹10,000 per failure)
• Prosecution under Section 276CC if taxable income exceeds ₹25 lakh

Section 156 - Demand Notice

A Section 156 Demand Notice is issued by the Income Tax Department when a taxpayer is required to pay any outstanding tax, interest, penalty, or any other sum due as per the Income Tax Act. This notice is typically issued after the completion of an income tax assessment or reassessment when the department determines that the taxpayer owes additional tax.

Reason for Receiving Section 156 Demand Notice

This notice is issued due to the following principal causes:

• Additional tax liability determined after scrutiny assessment (Section 143(3))
• Tax payable after reassessment under Section 147 or 148
• Tax demand arising from rectification orders under Section 154
• Penalty imposed by the Assessing Officer
• Interest payable under Section 234A, 234B, or 234C
• Tax demand raised due to non-payment or short payment of self-assessment tax
• Adjustments made in ITR processing under Section 143(1)

What Action Should You Take?

Review the Notice

Carefully review the reason for the demand, along with the tax amount, interest, and penalty mentioned.

Submit Response Online

Once your response is ready, submit it under the Outstanding Demand Section on the portal.

Time Limit to Respond

You should respond within 30 days from the date of receiving the notice. If no response is submitted, the department assumes that the taxpayer agrees with the demand and can initiate recovery proceedings.

What Happens If You Ignore the Notice?

Failure to respond or pay the demand amount may result in:

• Adjustment of the demand amount against your future tax refunds
• Levy of additional interest under Section 220(2)
• Attachment of your bank accounts, properties, or salary
• Initiation of recovery proceedings under Section 222

Section 245 - Notice of Adjustment

A Section 245 Notice is issued by the Income Tax Department when the department intends to adjust a taxpayer's refund against any outstanding tax demand from previous years. This notice informs the taxpayer about the proposed adjustment and gives them an opportunity to respond before the adjustment is made.

Reason for Receiving Section 245 Notice

The primary reason for issuing this notice is to recover any pending tax dues from the taxpayer's eligible refund amount. The notice is issued when:

• The taxpayer has claimed a refund in the current year's Income Tax Return.
• There is an outstanding tax demand from previous assessment years.
• The department wants to adjust the refund amount against the pending tax demand before processing the refund.

What Action Should You Take?

Review the Notice Details

Carefully check the assessment year, demand amount, and reason for the outstanding demand.

Respond to the Notice

You have two options:

Submit Response Online

Upload your response and supporting documents through the portal.

Time Limit to Respond

You must respond to the notice within 30 days from the date of receiving the notice. If no response is submitted, the department will automatically adjust the refund against the demand without further intimation.

What Happens If You Ignore the Notice?

If you ignore the notice:

• The refund will be adjusted automatically.
• No further opportunity will be given to dispute the demand.
• Interest may be charged on the pending demand amount.

Section 131 - Summons Notice

A Section 131 Summons Notice is issued by the Income Tax Department when the Assessing Officer (AO) or any authorized tax authority requires a taxpayer to appear before them, provide information, or submit documents for investigation. This notice is usually issued during scrutiny assessments, investigations, or when there is suspicion of tax evasion.

Reason for Receiving Section 131 Notice

The primary reasons for issuing this notice are:

• To gather additional information or documents during Scrutiny Assessments or Reassessments
• Suspicion of undisclosed income or tax evasion
• Verification of high-value transactions like property purchases, foreign remittances, or cash deposits
• Investigation based on third-party information from banks, property registrars, or GST authorities
• Cross-examination of statements given by other taxpayers or associates
• Non-cooperation in previous tax proceedings
• What Can the Income Tax Officer Ask for in the Summons Notice?
• Personal appearance for statement recording
• Submission of bank statements, property purchase agreements, investment proofs, or business books of accounts
• Any information relevant to the taxpayer’s income or expenditure
• Explanation of specific transactions

What Action Should You Take?

1. Read the Notice Carefully

Check the date, time, and place of appearance along with the documents requested in the notice.

2. Prepare the Documents

Gather all the documents requested in the notice, such as:

• Bank Statements
• Property Sale or Purchase Agreements
• Income Proofs (Salary Slips, Rent Agreements, etc.)
• Business Books of Accounts
• Investment Proofs

3. Consult a Tax Professional

If the notice involves complex transactions or business income, seek help from a Chartered Accountant (CA) or Tax Consultant to prepare your response.

4. Attend the Hearing Personally or through an Authorized Representative

You can attend the hearing yourself or authorize your tax consultant to appear on your behalf with a proper Power of Attorney

5. Submit Documents and Explanation

Submit all requested documents along with a covering letter explaining your position.

What Happens If You Ignore the Notice?

Ignoring a Section 131 Notice can have serious consequences:

• The officer can issue a penalty under Section 272A of ₹10,000 for each failure to comply
• The case can be escalated to Search & Seizure proceedings under Section 132
• The officer may proceed with a Best Judgment Assessment
• Non-compliance can lead to prosecution under Section 277 in cases of willful tax evasion

Section 133A - Survey Notice

A Section 133A Survey Notice is issued by the Income Tax Department to conduct a survey at business premises to verify the correctness of the taxpayer's income records, cash, stock, or other valuable assets. This survey is typically conducted to detect undisclosed income or irregularities in business transactions.

Unlike search and seizure operations under Section 132, a survey under Section 133A is limited to the business premises and cannot be conducted at the taxpayer's residence unless business activities are carried out there.

Reason for Receiving Section 133A Survey Notice

The primary reasons for conducting a survey are:

• Verification of cash in hand, stock, or books of accounts
• Suspicion of unaccounted income or cash transactions
• To collect information about the business for future assessments
• Follow-up on information received from GST authorities, banks, or third-party sources
• Investigation of bogus bills, fake expenses, or false claims
• Detection of non-disclosure of income from business activities

What Happens During the Survey?

During the survey, the Income Tax Officers can:

What Action Should You Take?

1. Cooperate Fully

Stay calm and provide full cooperation to the officers during the survey.

2. Provide Documents

Submit requested documents like:

• Books of Accounts
• Cash Book
• GST Returns
• Purchase & Sale Invoices
• Stock Register

3. Give Accurate Statements

If the officer records your statement, ensure that you give truthful and consistent answers. False statements can result in penalties or prosecution under Section 277.

4. Do Not Hide Information

Hiding cash, stock, or documents can result in penalties under Section 271(1)(c) for concealment of income.

5. Consult a Tax Professional

Immediately contact your Chartered Accountant (CA) or Tax Consultant to guide you during the survey and ensure your rights are protected.

Penalty for Non-Compliance

Failure to cooperate during the survey or providing false information can lead to:

Section 271 - Penalty Notice

A Section 271 Penalty Notice is issued by the Income Tax Department when a taxpayer has failed to comply with certain provisions of the Income Tax Act, resulting in misreporting, underreporting, or non-disclosure of income. This notice is issued to levy penalties for various defaults committed by the taxpayer.

Reason for Receiving Section 271 Penalty Notice

The notice can be issued under different subsections of Section 271 based on the type of default, such as:

What Action Should You Take?

1. Review the Notice Carefully

Verify the following details:

• Assessment year
• Reason for penalty
• Amount of penalty
• Supporting documents required

2. Respond to the Notice

You have two options:

3. File an Appeal

If you disagree with the penalty, you can:

• File an appeal with the Commissioner of Income Tax (Appeals) under Section 246A
• Appeal further to the Income Tax Appellate Tribunal (ITAT) if not satisfied with the decision

Time Limit to Respond

You must respond to the notice within 30 days from the date of issue. If no response is submitted, the department will assume you agree with the penalty and initiate recovery proceedings.

What Happens If You Ignore the Notice?

Ignoring the notice may result in:

• Adjustment of the penalty amount against your future tax refunds
• Additional penalties under Section 221 for default in payment
• Attachment of bank accounts or property under Section 222
• Prosecution in serious cases under Section 276C

Section 251 - Appeal Notice

A Section 251 Appeal Notice is issued when a taxpayer files an appeal against an Income Tax order before the Commissioner of Income Tax (Appeals) [CIT(A)]. This notice informs the taxpayer that their appeal has been admitted and that the appeal proceedings are initiated.

The appeal under Section 246A is filed when a taxpayer disagrees with the assessment order, penalty order, or any demand raised by the Income Tax Department. The CIT(A) reviews the appeal under Section 251 and may confirm, reduce, enhance, or annul the assessment or penalty.

Reason for Receiving Section 251 Appeal Notice

You may receive this notice if:

• You have filed an appeal against an assessment order under Section 143(3) (Scrutiny Assessment)
• You have filed an appeal against reassessment orders under Section 147
• You have disputed penalties imposed under Sections 271, 270A, or 271AAB
• You disagree with the demand notice issued under Section 156
• You have appealed against an order of rectification under Section 154
• Any other order against which an appeal is allowed under Section 246A

What Action Should You Take?

1. Review the Notice Details

The notice will mention:

• The appeal reference number
• The assessment year in question
• The issues under dispute
• The date of the hearing (if any)

2. Prepare Your Reply and Documents

Submit a detailed reply along with supporting documents such as:

• Assessment Order
• Grounds of Appeal
• Tax Computation Sheet
• Proof of payment of disputed tax (if any)
• Books of Accounts, Bank Statements, or any other evidence to support your claim

3. Attend the Hearing (if required)

If a personal hearing is scheduled, attend the hearing yourself or authorize your Tax Consultant/Chartered Accountant to represent you before the CIT(A).

Time Limit for Filing Appeal

The appeal must be filed within 30 days from the date of receiving the assessment order. However, the CIT(A) may condone the delay if valid reasons are provided.

What Happens If You Ignore the Notice?

If you do not respond to the notice or attend the hearing:

• The CIT(A) can decide the appeal ex-parte based on available documents
• The existing tax demand will be upheld
• The penalty and interest may continue to accrue

These notices can also be issued for various other reasons, such as inquiries about TDS (Tax Deducted at Source), mismatch of tax payments, or any other discrepancies noticed by the department. It’s always important to respond to such notices in a timely and correct manner to avoid penalties or legal action.

If you require assistance with Income Tax Demand/Notices, Manthan Experts can be your trusted advisor. Contact them at info@manthanexperts.com.to discuss your specific needs and explore how their expertise can benefit your business.